ORMAT TECHNOLOGIES, INC. (Form: S-1, Received: 07/21/2004 06:13:19)

Underwriter

Number of Shares

Lehman Brothers Inc.

As filed with the Securities and Exchange Commission on July 20, 2004

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

ORMAT TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or Other Jurisdiction of Incorporation of Organization)	4911 (Primary Standard Industrial Classification Code Number)	88-0326081 (I.R.S. Employer Identification Number)

980 Greg Street, Sparks, Nevada 89431
(775) 356-9029

(Address, including zip code, and telephone number including
area code, of registrant's principal executive offices)

Connie Stechman
Ormat Technologies, Inc.
980 Greg Street, Sparks, Nevada 89431
(775) 356-9029

(Name, address, including zip code, and telephone number including area code, of agent for service)

Copies to:


Philip L. Colbran, Esq. J. Allen Miller, Esq. Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 (212) 408-5100	Noam Ayali, Esq. Chadbourne & Parke LLP 1200 New Hampshire Avenue, N.W. Washington, District of Columbia 20036 (202) 974-5600	Joshua G. Kiernan, Esq. Arthur A. Scavone, Esq. White & Case LLP 1155 Avenue of the Americas New York, New York 10036 (212) 819-8200

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act") check the following box.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.

CALCULATION OF REGISTRATION FEE


Title of each class of securities to be registered	Proposed maximum aggregate offering price(1)(2)		Amount of registration fee
Common Stock, par value $0.001 per share	$	115,000,000	$	14,571

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) of the Securities Act.

(2) Includes shares which the underwriters have the option to purchase to cover over-allotments, if any.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated July 20, 2004

PROSPECTUS

Ormat Technologies, Inc.

Common Stock

We are offering shares of our common stock in this initial public offering. No public market currently exists for our common stock.

We intend to list our common stock on the New York Stock Exchange under the symbol "ORA." We anticipate that the initial public offering price will be between $ and $ per share.

Investing in our common stock involves risks. See "Risk Factors" beginning on page 16.


	Per Share	Total
Public offering price	$
Underwriting discount	$
Proceeds to Ormat Technologies, Inc. (before expenses).	$

We have granted the underwriters a 30-day option to purchase up to additional shares of common stock at the public offering price less the underwriting discount to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Lehman Brothers, on behalf of the underwriters, expects to deliver the shares on or about , 2004.

LEHMAN BROTHERS

, 2004

TABLE OF CONTENTS


	Page
Prospectus Summary		1
Risk Factors		16
Special Note Regarding Forward-Looking Statements		33
Use of Proceeds		34
Dividend Policy		35
Capitalization		36
Dilution		37
Selected Consolidated Financial and Other Data		38
Unaudited Pro Forma Condensed Combined Financial Data		40
Management's Discussion and Analysis of Financial Condition and Results of Operations		46
Business		74
Management		102
Certain Relationships and Related Transactions		110
Description of Certain Material Agreements		113
Principal Stockholders		126
Description of Capital Stock		128
Shares Eligible for Future Sale		131
United States Federal Income Tax Consequences to Non-U.S. Holders		133
Underwriting		136
Validity of Common Stock		140
Expert		141
Where You Can Find More Information		142
Index To Financial Statements		F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. This prospectus is not an offer to sell or a solicitation of an offer to buy shares of our common stock in any jurisdiction where such offer or any sale of shares of our common stock would be unlawful. The information in this prospectus is complete and accurate only as of the date on the front cover regardless of the time of delivery of this prospectus or of any sale of shares of our common stock.

We use market data and industry forecasts and projections throughout this prospectus, which we have obtained from market research, publicly available information and industry publications and surveys. These sources generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information are not guaranteed. The forecasts and projections are based on industry surveys and the preparers' experience in the industry and there is no assurance that any of the projected amounts will be achieved. Similarly, we believe that the surveys and market research others have performed are reliable, but we have not independently verified this information.

This prospectus refers to brand names, trademarks, service marks and trade names of other companies and organizations, and these brand names, trademarks, service marks and trade names are the property of their respective holders.

Until , 2004 (25 days after the commencement of this offering), all dealers that effect transactions in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. We urge you to read this entire prospectus carefully, including the more detailed information about us and about the shares of our common stock being sold in this offering and our consolidated financial statements and related notes appearing elsewhere in this prospectus, the "Risk Factors" section, and the documents to which we refer, before making an investment decision. All references in this prospectus to "Ormat," "the Company," "we," "us," "our company" or "our" refer to Ormat Technologies, Inc. and its consolidated subsidiaries, except where it is clear that such terms refer to Ormat Technologies, Inc. only; "Ormat Industries" refers to ORMAT Industries Ltd., the parent company of Ormat Technologies, Inc.; "Ormat International" refers to Ormat International, Inc.; "Ormat Holding" refers to Ormat Holding Corp.; "Ormat Funding" refers to "Ormat Funding Corp."; and "Ormat Systems" refers to Ormat Systems Ltd. Ormat International, Ormat Holding, Ormat Funding and Ormat Systems are all wholly owned subsidiaries of ours. Unless the context otherwise requires, "plants" refers to the various power generating plants owned and/or operated or built by Ormat and "units" refer to particular power generating units at those plants or at remote sites. We refer to a plant or a group of plants and the geothermal resources associated with them in a certain geographic area as a "project." References to generating capacity refer to the net amount of electrical energy available for sale to the power purchaser, in the case of all of our existing domestic projects and the Momotombo and Olkaria III projects (two of our foreign projects), and to the generating capacity that is subject to the "take or pay" power purchase agreements in the case of the Leyte and Zunil projects (another two of our foreign projects). In the case of projects under construction or enhancement, references to generating capacity refer to the net amount of electrical energy that we expect will be available for sale to the relevant power purchasers. As used in this prospectus, "pro forma" information is information presented giving effect to the acquisition of the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project that was consummated on December 18, 2003 and the acquisition of the Puna project that was consummated on June 3, 2004, as if such acquisitions were consummated on January 1, 2003, but not including the acquisitions of the Steamboat 2/3 project and the Steamboat Hills project that were consummated on February 13 and May 20, 2004, respectively.

The Company

We are a leading vertically integrated company engaged in the geothermal and recovered energy power business. We design, develop, build, own and operate clean, environmentally friendly geothermal power plants, and we also design, develop and build, and plan to own and operate, recovered energy-based power plants, in each case, using equipment that we design and manufacture. We conduct our business activities in two business segments. We develop, build, own and operate geothermal power plants in the United States and other countries around the world and sell the electricity they generate. In addition, we design, manufacture and sell equipment for geothermal and recovered energy-based electricity generation and other power generating units and provide services relating to the engineering, procurement, construction, operation and maintenance of geothermal and recovered energy power plants.

All of the projects that we currently own or operate produce electricity from geothermal energy sources. Geothermal energy is a clean, renewable and generally sustainable form of energy derived from the natural heat of the earth. Unlike electricity produced by burning fossil fuels, electricity produced from geothermal energy sources is produced without emissions of certain pollutants such as nitrogen oxide, and with far lower emissions of other pollutants such as carbon dioxide. Therefore, electricity produced from geothermal energy sources contributes significantly less to local and regional incidences of acid rain and global warming than energy produced by burning fossil fuels. Geothermal energy is also an attractive alternative to other sources of energy as part of a national diversification strategy to avoid dependence on any one energy source or politically sensitive supply sources.

In addition to our geothermal energy power generation business, we have developed and continue to develop products that produce electricity from recovered energy or so-called "waste heat." Recovered energy or waste heat represents residual heat that is generated as a by-product of gas turbine-driven compressor stations and in a variety of industrial processes such as cement manufacturing, and is not otherwise used for any purpose. Such residual heat, that would otherwise be wasted, is captured in the recovery process and is used by recovered energy power plants to generate electricity without burning additional fuel and without emissions.

Our Power Generation Business

We are the fastest growing geothermal power generation company in the United States measured by growth in generating capacity. We also own and operate or control and operate geothermal projects in Guatemala, Kenya, Nicaragua and the Philippines and continue to pursue opportunities to acquire and develop similar projects elsewhere in the world, including in the United States. Most of our projects are located in regions where there is, or is expected to be, demand for additional generating capacity.

In 2003, pro forma revenues from the sale of electricity by our domestic projects were $128.7 million, constituting approximately 79.1% of our total pro forma revenues from the sale of electricity, and pro forma revenues from the sale of electricity by our foreign projects were $33.9 million, constituting approximately 20.9% of our total pro forma revenues from the sale of electricity. In 2003, our actual revenues from the sale of electricity by our domestic projects were $43.8 million and by our foreign projects were $34.0 million, respectively. Pro forma revenues from the sale of electricity constituted approximately 79.6% of our total pro forma revenues in 2003. As noted previously, such pro forma revenues do not include revenues generated from the Steamboat 2/3 project and Steamboat Hills project, two additional domestic projects that were acquired this year.

Our Projects . The table below summarizes key information relating to our projects that are currently in operation, under construction and subject to enhancement.


Project	Location	Ownership ⁽¹⁾			Commercial Operation Date	Generating Capacity in MW ⁽²⁾			Power Purchaser	Contract Expiration
Projects in Operation
Domestic
Ormesa	East Mesa, California		100	%	1986/1987		52		Southern California Edison Company	2016/2017
Heber 1	Heber, California		100	%	1985		38		Southern California Edison Company	2015
Heber 2	Heber, California		100	%	1993		38		Southern California Edison Company	2023
Steamboat ⁽³⁾	Steamboat, Nevada		100	%	1986/1988/1992		34		Sierra Pacific Power Company	2006/2018/2022
Mammoth	Mammoth Lakes, California		50	%	1984/1990		26		Southern California Edison Company	2014/2020
Puna	Puna, Hawaii		100	%	1993		25		Hawaii Electric Light Company	2027
Brady	Churchill County, Nevada		100	%	1985/1992		20		Sierra Pacific Power Company	2022
Steamboat Hills	Steamboat Hills, Nevada		100	%	1988		7		Sierra Pacific Power Company	2018
Total Domestic Projects in Operation :							240
Foreign
Leyte	Philippines		80	%	1997		49		PNOC - Energy Development Corporation	2007
Momotombo	Nicaragua		100	%	mid 1980's		28		DISNORTE/DISSUR	2014
Zunil	Guatemala		21	%	1999		24		Instituto Nacional de Electrification	2019
Olkaria III	Kenya		100	%	2000		13		Kenya Power & Lighting Co. Ltd.	2020 ⁽⁴⁾
Total Foreign Projects in Operation :							113
Total Projects in Operation :							353
Projects under Construction
Desert Peak 2	Churchill County, Nevada		100	%	2006 ⁽⁵⁾		15		Nevada Power Company	n/a ⁽⁷⁾
Galena	Steamboat Hills, Nevada		100	%	2005 ⁽⁵⁾		13	⁽⁶⁾	Sierra Pacific Power Company	n/a ⁽⁷⁾
Amatitlan	Guatemala		100	%	2006 ⁽⁵⁾		20		Instituto Nacional de Electrification	n/a ⁽⁸⁾
Total Projects under Construction :							48


Project	Location	Ownership ⁽¹⁾			Commercial Operation Date	Generating Capacity in MW ⁽²⁾			Power Purchaser	Contract Expiration
Projects under Enhancement
Heber 1 and 2 Enhancement	Heber, California		100	%			18	⁽⁹⁾
Puna Enhancement ⁽¹⁰⁾	Puna, Hawaii		100	%			9	⁽¹¹⁾
Steamboat Hills Enhancement ⁽¹⁰⁾	Steamboat Hills, Nevada		100	%			7
Mammoth Enhancement ⁽¹⁰⁾	Mammoth Lakes, California		50	%			4
Total Projects under Enhancement :							38
Total Projects under Construction or Enhancement :							86


⁽¹⁾	We own and operate all of our projects, except the Momotombo project in Nicaragua, which we do not own but which we control and operate through a concession arrangement with the Nicaraguan government, and three of our other projects, in which we have less than full ownership.


⁽²⁾	This column represents the net generating capacity of the project, not our net ownership in such generating capacity. Such net generating capacity is based on either (i) operational data for the previous 12 months or (ii) if operational data for the previous 12 months is not available but is available for a shorter period, such available data on an annualized basis.


⁽³⁾	This reference includes the Steamboat 1/1A project and Steamboat 2/3 project.


⁽⁴⁾	The power purchase agreement for the Olkaria III project will expire in 2020 or, if Phase II of the project is constructed and completed, 20 years from the completion of such Phase II. Phase II of this project involves a proposed construction of additional facilities that would add approximately 35 MW of generating capacity to this project.


⁽⁵⁾	Projected.


⁽⁶⁾	Incremental to the Steamboat complex.


⁽⁷⁾	The power purchase agreement will expire 20 years from the January 1 immediately following the commercial operation date.


⁽⁸⁾	The power purchase agreement will expire at the later of 20 years from the commencement of commercial operations and 23 years from the commencement of construction works.


⁽⁹⁾	We are currently in discussions with Southern California Edison Company, the power purchaser for this project, regarding these proposed enhancements.


⁽¹⁰⁾	These enhancements are in their early engineering stage.


⁽¹¹⁾	The enhancement will result in an additional 3 MW that can be sold under the existing power purchase agreement and another 6 MW is subject to negotiation of offtake arrangements with the existing power purchaser.

All of the revenues that we derive from the sale of electricity are from fully-contracted payments under long-term power purchase agreements. In the United States, the power purchasers under such agreements are all investor-owned electric utilities. More than 80% of our total pro forma revenues for 2003 from the sale of electricity by our domestic projects were derived from power purchasers that currently have investment grade credit rating. The purchasers of electricity from our foreign projects are either state-owned entities or recently privatized state-owned entities. We have obtained political risk insurance from the Multilateral Investment Guarantee Agency of the World Bank group for all of our foreign projects (other than the Leyte project) in order to cover a portion of any loss that we may suffer upon the occurrence of certain political events covered by such insurance.

Development, Construction, and Acquisition. We have experienced significant growth in recent years, principally through the acquisition of geothermal power plants from third parties and the expansion and enhancement of our existing projects. In December 2003, we acquired the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project, in February 2004, we acquired the Steamboat 2/3 project, in May 2004, we acquired the Steamboat Hills project and in June 2004, we acquired the Puna project. In total, we have increased our net ownership interest in generating capacity from 94 MW as of December 31, 2001 to 312 MW as of June 30, 2004. We currently expect to continue growing our power generation business through:


•	the development and construction of new geothermal and recovered energy-based power plants;


•	the expansion and enhancement of our existing projects; and


•	the acquisition of additional geothermal and other renewable assets from third parties.

As part of these efforts, we regularly monitor requests for proposals from, and submit bids to, investor-owned electric utilities in the United States to provide additional generating capacity, primarily in the western United States where geothermal resources are generally concentrated. We also respond to international tenders issued by foreign state-owned electric utilities for the development, construction and operation of new geothermal power plants. In addition, we apply our technological expertise to upgrade the facilities of our existing geothermal power plants and to continuously monitor and manage our existing geothermal resources in order to increase the efficiency and generating capacity of such facilities.

We are currently in varying stages of development or construction of new projects and enhancement of existing projects. Based on our current development and construction schedule, which is subject to change at any time and which we may not achieve, we expect to have approximately 66 additional MW in generating capacity in the United States by the end of 2006 and approximately 20 additional MW in Guatemala by June 2006. In addition, we have obtained exclusive rights to develop the geothermal resources of a project in China, which, if implemented, is expected to produce approximately 50 MW in generating capacity. We are also currently in discussions with the Kenyan government and Kenya Power & Lighting Co. Ltd. regarding, among other things, the construction of Phase II of the Olkaria III project in Kenya and the provision of certain collateral and government support. If implemented, Phase II would add approximately 35 MW in generating capacity to the current Olkaria III project. We are also in the early development stage of two new projects in El Salvador. We intend to pursue these opportunities to the extent they continue to meet our investment criteria and business strategy.

Our Products Business

We design, manufacture and sell the following products for electricity generation and provide the following services:

Engineering, Procurement and Construction of Power Plants. We engineer, procure and construct (EPC), as an EPC contractor, geothermal and recovered energy power plants on a turnkey basis, using power units we design and manufacture. Our customers are geothermal power plant owners as well as the same customers described above that we target for the sale of our power units for recovered energy-based power generation. Unlike many other companies that provide EPC services, we have an advantage in that we are using our own manufactured equipment and thus have better control over the timing and delivery of required equipment and its costs.

Operation and Maintenance of Power Plants. We provide operation and maintenance services for geothermal power plants owned by us and by third parties.

In 2003, our actual revenues from our products business were $41.7 million, constituting approximately 20.4% of our total pro forma revenues and approximately 34.9% of our actual revenues.

Market Opportunity

The geothermal energy industry in the United States experienced significant growth in the 1970s and 1980s, followed by a period of consolidation of owners and operators of geothermal assets in the 1990s. The industry, once dominated by large oil companies and investor-owned electric utilities, now includes several independent power producers. During the 1990s, growth and development in the geothermal energy industry occurred primarily in foreign markets, and only minimal growth and development occurred in the United States. Since 2001, there has been renewed interest in geothermal energy in the United States as production costs for electricity generated from geothermal resources have become more competitive relative to fossil fuel-based electricity generation, due to the increasing cost of natural gas, and as legislative and regulatory incentives, such as state renewable portfolio standards, have become more prevalent.

Electricity generation from geothermal resources in the United States constitutes a $1 billion-a-year industry (in terms of revenues) and accounts for almost 20% of all non-hydropower renewable energy-based electricity generation in the United States (according to the Energy Information Administration, Annual Energy Outlook 2004). Although electricity generation from geothermal resources is currently concentrated in California, Nevada, Hawaii and Utah, there are opportunities for development in other states such as Alaska, Arizona, Idaho, New Mexico and Oregon due to the availability of geothermal resources and, in some cases, a favorable regulatory environment in such states.

A recent forecast of the U.S. Department of Energy projects the addition of geothermal installations with generating capacity totaling 6,800 MW by 2025, based on the assumption that natural gas prices will remain relatively stable at current levels. This forecast is based on existing, known geothermal resources and does not take into account any positive effects on generating capacity resulting from new technology, such as enhanced utilization of existing geothermal bases and engineered geothermal systems (according to the Energy Information Administration, Annual Energy Outlook 2004).

Much of this growth potential stems from growing global concerns about the environment. Power plants that use fossil fuels generate higher levels of air pollution and their emissions have been linked to acid rain and global warming. In response to an increasing demand for "green" energy, many countries have adopted legislation requiring, and providing incentives for, electric utilities to sell electricity generated from renewable energy sources. In the United States, Arizona, California, Connecticut, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, Pennsylvania, Rhode Island, Texas, and Wisconsin have all adopted renewable portfolio standards, renewable portfolio goals, or other similar laws requiring or encouraging electric utilities in such states to generate or buy a certain percentage of their electricity from renewable energy sources or recovered heat sources. Eleven of these seventeen states (including California, Nevada and Hawaii, where we have been the most active in our geothermal energy development and in which all of our U.S. projects are located) define geothermal resources as "renewables." Several other states are also considering the adoption of renewable portfolio standards, renewable portfolio goals or similar legislation.

We believe that these legislative measures and initiatives present a significant market opportunity for us. For example, California generally requires that the electricity supplied by its investor-owned electric utility companies operating within the state must be increased by at least 1% every year until it reaches 20% by 2017. Presently, 9% of the electricity supplied by the three main electric utility companies in California is derived from renewable resources. Nevada's renewable portfolio standard requires each Nevada electric utility to obtain 5% of its annual energy requirements from renewable energy sources in 2004, which requirement increases to 7% in 2005 and thereafter increases by 2% every two years until 2013, when 15% of such annual energy requirements must be provided from renewable energy sources. Hawaii's renewable portfolio standard requires each Hawaiian electric utility to obtain 8% of its net electricity sales from renewable energy sources by December 31, 2005 and 10% by December 31, 2010 and 20% by December 31, 2020.

In addition, in some states an entity generating electricity from renewable resources, such as geothermal energy, is awarded renewable energy credits, which we refer to as RECs, that can be sold for cash. RECs have been sold in the market for 0.5 cents to 2 cents a kWh during the past year.

Outside of the United States, the majority of power generating capacity has historically been owned and controlled by governments. During the past decade, however, many foreign governments have privatized their power generation industries through sales to third parties and have encouraged new capacity development and/or refurbishment of existing assets by independent power developers. These foreign governments have taken a variety of approaches to encourage the development of competitive power markets, including awarding long-term contracts for energy and capacity to independent power generators and creating competitive wholesale markets for selling and trading energy, capacity and related products. Different countries have also adopted active governmental programs designed to encourage clean renewable energy power generation. For example, China, where we are currently developing a project, has in place a five-year Plan for New and Renewable Energy Commercialization Development. The plan's goals include increasing production of geothermal energy as well as providing electricity in remote areas. Several Latin American countries have rural electrification programs and renewable energy programs. For example, Nicaragua, where we operate the Momotombo project, is currently developing a national rural electrification plan with the support of the World Bank. One of the plan's primary goals is the reduction of market barriers to renewable energy technologies useful for remote areas not connected to the main electricity grid. Nicaragua also has a national master plan for geothermal energy, which is intended to facilitate the awarding of concessions for geothermal exploration and development in the country. Guatemala, another country in which we have ongoing operations (the Zunil project) and development activities (the Amatitlan project), recently approved a law which creates incentives for power generation from renewable energy sources by, among other things, providing economic and fiscal incentives such as exemptions from taxes on the importation of relevant equipment and various tax exemptions for companies implementing renewable energy projects. We believe that these developments and governmental plans

will create opportunities for us to acquire and develop geothermal power generation facilities internationally as well as create additional opportunities for us to sell our remote power units and other products.

In addition to our geothermal power generation activities, we have also identified recovered energy power generation as a significant market opportunity for us in the United States and internationally. We are initially targeting the North American market, where we expect that recovered energy-based power generation will be derived principally from compressor stations along interstate pipelines, from midstream gas processing facilities, and from processing industries in general. Several states, as well as the federal government, have recognized the environmental benefits of recovered energy-based power generation. For example, Nevada and Hawaii allow electric utilities to include recovered energy-based power generation in calculating their compliance with the state's renewable portfolio standards. In addition, North Dakota, South Dakota and the Department of Agriculture (through the Rural Electricity Service) have certified recovered energy-based power generation as "green" energy, which qualifies recovered energy-based power generators (whether in those two states or elsewhere in the United States) for federally subsidized, low cost funding. We believe that the European market has similar potential and we expect to leverage our early success in North America in order to expand into such market and other markets worldwide. In North America alone, we estimate the potential total market for recovered energy-based generation to be approximately 1000 MW.

Competitive Strengths

Competitive Assets. Our assets are highly competitive:


•	Contracted Generation . All of the electricity generated by our geothermal power plants is currently sold pursuant to long-term power purchase agreements, providing generally predictable cash flows.

•

Baseload Generation . All of our geothermal power plants supply a part of the baseload capacity of the electric system in their respective markets, meaning that they operate to serve all or a part of the minimum power requirements of the electric system in such market on an around-the-clock basis. Because our projects supply a part of the baseload needs of the respective electric system and are marginally weather dependent, we have a competitive advantage over other renewable energy sources, such as wind power, solar power, or hydro-electric power (to the extent dependent on rainfall), which compete with us to meet electric utilities' renewable portfolio requirements but which cannot serve baseload capacity because of the weather dependence and thus intermittent nature of these other renewable energy sources.


•	Competitive Pricing . Geothermal power plants, while site specific, are economically feasible to develop, construct, own and operate in many locations, and the electricity they generate is generally price competitive as compared to electricity generated from fossil fuels or other renewable sources under existing economic conditions and existing tax and regulatory regimes.

Growing Legislative Demand for Environmentally-Friendly Renewable Resource Assets. All of our existing projects produce electricity from geothermal energy sources. Geothermal energy is a clean, renewable and generally sustainable energy source. Unlike electricity produced by burning fossil fuels, electricity produced from geothermal energy sources is produced without emissions of certain pollutants such as nitrogen oxide, and with far lower emissions of other pollutants such as carbon dioxide. The characteristics of geothermal energy give us a competitive advantage over fossil fuel-based electricity generation as countries increasingly seek to balance environmental concerns with demands for reliable sources of electricity.

High Efficiency from Vertical Integration. Unlike any of our competitors in the geothermal industry, we are a fully-integrated geothermal equipment, services and power provider. We design,

develop and manufacture most of the equipment we use in our geothermal power plants. Our intimate knowledge of the equipment that we use in our operations allows us to operate and maintain our projects efficiently and to respond to operational issues in a timely and cost efficient manner. Moreover, given the efficient communications among our subsidiary that designs and manufactures the products we use in our operations and our subsidiaries that own and operate our projects, we are able to quickly and in a cost-effective manner identify and repair mechanical issues and to have technical assistance and replacement parts available to us as and when needed.

Highly Experienced Management Team. We have a highly qualified senior management team with extensive experience in the geothermal power sector. The key members of our senior management team have worked in the power industry for most of their careers and average over 20 years of industry experience.

Technological Innovation. We own or have rights to use more than 70 patents relating to various processes and renewable resource technologies. Our ability to draw upon internal resources from various disciplines related to the geothermal power sector, such as geological expertise relating to reservoir management and equipment engineering relating to power units, allows us to be innovative in creating new technologies and technological solutions.

No Exposure to Fuel Price Risk. A geothermal power plant does not need to purchase fuel (such as coal, natural gas, or fuel oil) in order to generate electricity. Thus, once the geothermal reservoir has been identified and estimated to be sufficient for use in a geothermal power plant and the drilling of wells is complete, the plant is not exposed to fuel price or fuel delivery risk.

Business Strategy

Our strategy is to continue building a geographically balanced portfolio of geothermal and recovered energy assets, and to continue to be a leading manufacturer and provider of products and services related to renewable energy. We intend to implement this strategy through:


•	Development and Construction of New Projects — continuously seeking out commercially exploitable geothermal resources and developing and constructing new geothermal and recovered energy-based power projects in jurisdictions where the regulatory, tax and business environments encourage or provide incentives for such development and which meet our investment criteria;


•	Increasing Output from Our Existing Projects — increasing output from our existing geothermal power projects by adding additional generating capacity, upgrading plant technology, and improving geothermal reservoir operations, including improving methods of heat source supply and delivery;


•	Acquisition of New Assets — acquiring from third parties additional geothermal and other renewable assets that meet our investment criteria;


•	Technological Expertise — investing in research and development of renewable energy technologies and leveraging our technological expertise to continuously improve power plant components, reduce operations and maintenance costs, develop competitive and environmentally friendly products for electricity generation and target new service opportunities;


•	Developing Recovered Energy — establishing a first-to-market leadership position in recovered energy projects in North America and building on that experience to expand into other markets worldwide; and


•	Long-term Contracts — entering into long-term contracts with energy purchasers that will provide stable cash flows.

History

Ormat Industries is our parent company. Ormat Industries is an international power systems company whose predecessor, Ormat Turbines Ltd., was founded in 1965 by Lucien and Yehudit Bronicki for the principal purpose of developing equipment for the production of clean, renewable energy. Lucien and Yehudit Bronicki continue to be Ormat Industries' controlling shareholders. Ormat Industries and its subsidiaries have developed geothermal power plants, remote power units, industrial recovered energy systems and solar energy plants worldwide. At December 31, 2003, Ormat Industries and its subsidiaries had more than 600 employees worldwide, and had revenues of approximately $119.8 million. Ormat Industries is listed on the Tel Aviv Stock Exchange under the symbol "ORMT." Ormat Industries and its subsidiaries have supplied, developed, constructed or rehabilitated over 700 MW of geothermal power plants in 22 countries, constituting approximately 10% of geothermal installed capacity worldwide.

We were formed by Ormat Industries in 1994 for the purpose of investing and holding ownership interests in power projects, as well as constructing and operating power plants owned by us and by third parties. We have served as the holding company for all of Ormat Industries' geothermal power projects. In December 2003, we acquired the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project, in February 2004, we acquired the Steamboat 2/3 project, in May 2004, we acquired the Steamboat Hills project and in June 2004, we acquired the Puna project. On February 13, 2004, Ormat Funding, our wholly owned subsidiary, completed an offering of senior secured notes that raised gross proceeds of $190 million. Pursuant to the terms of such offering, Ormat Funding is required to exchange the senior secured notes it issued thereunder for senior secured notes registered under the Securities Act of 1933, as amended, no later than January 2005. Effective as of July 1, 2004, Ormat Industries sold to us its business relating to the manufacturing and sale of energy-related equipment and services, which is based in Israel. Following this sale, we now hold all of Ormat Industries' power generation products business, and had, as of July 1, 2004, 676 employees. Upon completion of this offering, Ormat Industries will own % of our outstanding common stock.

Corporate Structure

A summary chart of our corporate structure showing our main subsidiaries and assets following the completion of this offering is depicted below.

The Offering


Issuer		Ormat Technologies, Inc.


Common stock offered by Ormat Technologies, Inc.		shares


Underwriters' option to purchase additional shares		shares


Common stock outstanding after giving effect to this offering		shares


Use of proceeds		We estimate that the net proceeds we will receive from this offering will be approximately $ million, or approximately $ million if the underwriters exercise their over-allotment option in full, in each case, after deducting the underwriting discounts and commissions and estimated expenses of this offering payable by us. We expect to use the net proceeds from this offering to finance the continued growth of our business and for general corporate purposes, including for purposes of making investments or acquisitions. However, we have no present understanding or agreement relating to any specific acquisition. Accordingly, management will have significant flexibility in applying the net proceeds of the offering. Pending the use of such proceeds as described above, we intend to invest such proceeds in interest-bearing instruments. See "Use of Proceeds."


Proposed New York Stock Exchange symbol		ORA

Except as otherwise indicated, all common stock information in this prospectus is based on the number of shares of common stock outstanding on and:


•	assumes an initial public offering price of $ per share;


•	excludes shares of common stock subject to outstanding stock options with a weighted average exercise price of $ per share;


•	excludes shares of common stock available for future grant or issuance under our 2004 Incentive Compensation Plan; and


•	excludes the shares of common stock subject to the option granted to the underwriters to purchase additional shares of common stock in this offering to cover over-allotments.


Dividend Policy		We have adopted a dividend policy pursuant to which we currently expect, commencing with the first full fiscal quarter following the consummation of this offering, to distribute at least 20% of our annual profits available for distribution by way of quarterly dividends. Notwithstanding this policy, dividends will be paid only when, as and if determined by our board of directors out of funds legally


		available therefor. Our board of directors may, from time to time, examine our dividend policy and may, in their absolute discretion, change such policy.

Risk Factors

Investing in our common stock involves a number of material risks. For a discussion of certain risk factors that should be considered in connection with your investment in our common stock, see "Risk Factors" beginning on page 16.

Corporate Information

Our principal executive offices are located at 980 Greg Street, Sparks, Nevada 89431. Our telephone number is (775) 356-9029. The majority of our senior management and all of our production and manufacturing facilities are located in Yavne, Israel.

Summary Historical and Unaudited Pro Forma Condensed Consolidated Financial Data

The following table sets forth our summary historical and unaudited pro forma condensed consolidated financial data for the periods ended and at the dates indicated in such table. We have derived the historical consolidated financial data as of and for the periods ended December 31, 2001, 2002 and 2003 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the historical consolidated financial data as of and for the three months ended March 31, 2003 and March 31, 2004 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. In the opinion of our management, our unaudited historical condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial position, results of operations and cash flows. The results of operations for the three-month periods ended March 31, 2003 and March 31, 2004 are not necessarily indicative of the operating results to be expected for the full fiscal years encompassing such periods. The pro forma data as of and for the fiscal year ended December 31, 2003 is derived from the unaudited pro forma condensed financial statements included elsewhere in this prospectus and gives effect to the acquisition of the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project that was consummated on December 18, 2003 and the acquisition of the Puna project that was consummated on June 3, 2004, as if such acquisitions were consummated on January 1, 2003, but not including the acquisitions of the Steamboat 1/1A project, Steamboat 2/3 project and the Steamboat Hills project that were consummated on June 30, 2003, February 13, 2004 and May 20, 2004, respectively.

The information set forth below should be read in conjunction with "Unaudited Pro Forma Condensed Financial Data", "Selected Historical Financial Data", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the financial statements relating to the Heber 1, Heber 2, Mammoth and Puna projects included elsewhere in this prospectus.

Summary Historical and Unaudited Pro Forma Condensed Consolidated Financial Data


	Year Ended December 31,												Three Months Ended March 31,
										Pro Forma									Pro Forma
	2001			2002			2003			2003			2003			2004			2004
										(Unaudited)			(Unaudited)						(Unaudited)
Statement of Operations Data:
Revenues:
Electricity Segment	$	33,956		$	65,491		$	77,752		$	162,620		$	17,604		$	33,459		$	39,062
Products Segment		13,959			20,138			41,688			41,688			7,812			14,146			14,146
		47,915			85,629			119,440			204,308			25,416			47,605			53,208
Cost of Revenues:
Electricity Segment		12,536			33,482			46,726			98,901			10,148			19,390			22,359
Products Segment		17,454			17,293			29,494			29,494			6,317			11,328			11,328
		29,990			50,775			76,220			128,395			16,465			30,718			33,687
Gross margin		17,925			34,854			43,220			75,913			8,951			16,887			19,521
Operating income		4,217			20,227			25,490			56,549			5,088			12,399			14,514
Interest expense		(4,451	)		(6,889	)		(8,055	)		(40,343	)		(1,720	)		(8,523	)		(12,283	)
Income (loss) from continuing operations		(1,732	)		8,514			15,659			46,123			1,987			2,737			2,917
Discontinued operations		(4,681	)		(9,558	)		—			—			—			—			—
Net income (loss)	$	(6,413	)	$	(1,044	)	$	15,454		$	34,570		$	1,782		$	2,737		$	1,762
Basic and diluted income (loss) per share	$	(0.21	)	$	(0.03	)	$	0.50		$	1.12		$	0.05		$	0.09		$	0.06
Income (loss) from continuing operations	$	(0.06	)	$	0.28		$	0.51		$	1.12		$	0.06		$	0.09		$	0.06
Loss from discontinued operations		(0.15	)		(0.31	)		—			—			—			—
Net income (loss)		(0.21	)		(0.03	)		0.50			1.12			0.05			0.09			0.06
Weighted average number of shares outstanding		30,769,230			30,769,230			30,769,230			30,769,230			30,769,230			30,769,230			30,769,230


	March 31, 2004
	Actual		Pro Forma
	(Unaudited)
Balance Sheet Data:
Cash and cash equivalents	$	28,901	$	28,901
Working capital		24,239		25,839
Property, plant and equipment, net		398,630		465,389
Total assets		697,884		772,796
Long-term debt		427,576		427,576
Notes payable to Parent		150,504		223,335
Stockholder's equity		44,271		44,271

RISK FACTORS

You should carefully consider the risks described below together with the other information included in this Prospectus before deciding to invest in our common stock. Our business, financial condition, or results of operations could be adversely affected by any of these risks. If any of these risks occur, the value of our common stock could decline and you might lose all or part of your investment.

Risks Relating to Our Business and Industry

Our financial performance depends on the successful operation of our geothermal power plants which is subject to various operational risks.

We derive a significant portion of our revenues from, and we depend upon the successful operation of, our subsidiaries' geothermal power plants. The cost of operation and maintenance and the operating performance of geothermal power plants may be adversely affected by a variety of factors, including some which are discussed elsewhere in these risk factors and the following:


•	regular and unexpected maintenance and replacement expenditures;


•	shutdowns due to the breakdown or failure of our equipment or the equipment of the transmission serving utility;


•	labor disputes;


•	the presence of hazardous materials on our project sites; and


•	catastrophic events such as fires, explosions, earthquakes, floods, releases of hazardous materials, severe storms or similar occurrences affecting our projects or any of the power purchasers or other third parties providing services to our projects.

Any of these events could significantly increase the expenses incurred by our projects or reduce the overall generating capacity of our projects and could significantly reduce or entirely eliminate the revenues generated by one or more of our projects, which in turn would reduce our net income and could materially and adversely affect our business, financial condition, future results and cash flow.

Our exploration, development, and operation of geothermal energy resources is subject to geological risks and uncertainties which may result in decreased performance or increased costs for our projects.

Our business involves the exploration, development and operation of geothermal energy resources. These activities are subject to uncertainties, which vary among different geothermal reservoirs and are in some respects similar to those typically associated with oil and gas exploration and development, such as dry holes, uncontrolled releases and pressure and temperature decline, all of which can increase our operating costs, capital expenditures or the efficiency of our power plants. Prior to our acquisition of the Steamboat Hills project, one of the wells related to such project experienced an uncontrolled release. In addition, the high temperature and high pressure in the Puna project's geothermal energy resource requires special reservoir management and monitoring. Further, the temperature of the geothermal resource at our Heber 1 project has declined since the project commenced operations and, as a result, the project currently operates at a level that is close to the minimum performance requirements set forth in the project's power purchase agreement. Because geothermal reservoirs are complex geological structures, we can only estimate their geographic area and sustainable output. The viability of geothermal projects depends on different factors directly related to the geothermal resource, such as the heat content (the relevant composition of temperature and pressure) of the geothermal reservoir, the useful life (commercially exploitable life) of the reservoir and operational factors relating to the extraction of geothermal fluids. Our geothermal energy projects may suffer an unexpected decline in the capacity of their respective geothermal wells and are exposed to a risk of geothermal reservoirs not being sufficient for sustained generation of the electrical power capacity desired over time. In addition, we may fail to find commercially viable geothermal resources in the expected quantities and temperatures which would adversely affect our development of geothermal power projects.

Additionally, geothermally active areas, such as the areas in which our projects are located, are subject to frequent low-level seismic disturbances. Serious seismic disturbances are possible and could result in damage to our projects or equipment or degrade the quality of our geothermal resources to such an extent that we could not perform under the power purchase agreement for the affected project, which in turn could reduce our net income and materially and adversely affect our business, financial condition, future results and cash flow. If we suffer a serious seismic disturbance, our business interruption and property damage insurance may not be adequate to cover all losses sustained as a result thereof. In addition, insurance coverage may not continue to be available in the future in amounts adequate to insure against such seismic disturbances.

Our business development activities may not be successful and our projects under construction may not commence operation as scheduled despite the expenditure of significant amounts of capital.

We are currently in the process of developing and constructing a number of new power plants. Our success in developing a particular project is contingent upon, among other things, negotiation of satisfactory engineering and construction agreements and power purchase agreements, receipt of required governmental permits, obtaining adequate financing, and the timely implementation and satisfactory completion of construction. We may be unsuccessful in accomplishing any of these matters or doing so on a timely basis. Although we may attempt to minimize the financial risks attributable to the development of a project by securing a favorable power purchase agreement, obtaining all required governmental permits and approvals and arranging adequate financing prior to the commencement of construction, the development of a power project may require us to incur significant expenses for preliminary engineering, permitting and legal and other expenses before we can determine whether a project is feasible, economically attractive or capable of being financed.

Currently, we have power plants under development or construction in the United States, Kenya, Guatemala, China and El Salvador, and we intend to pursue the expansion of some of our existing plants and the development of other new plants. Our completion of these facilities is subject to substantial risks, including:


•	unanticipated cost increases;


•	shortages and inconsistent qualities of equipment, material and labor;


•	work stoppages;


•	inability to obtain permits and other regulatory matters;


•	failure by key contractors and vendors to timely and properly perform;


•	adverse environmental and geological conditions (including inclement weather conditions); and


•	our attention to other projects,

any one of which could give rise to delays, cost overruns, the termination of the plant expansion, construction or development or the loss (total or partial) of our interest in the project under development, construction or expansion.

We may be unable to obtain the financing we need to pursue our growth strategy and any future financing we receive may be less favorable to us than our current financing arrangements, either of which may adversely affect our ability to expand our operations.

Our geothermal power plants generally have been financed using leveraged financing structures, consisting of non-recourse or limited recourse debt obligations. As of March 31, 2004, we had approximately $427.6 million of total consolidated indebtedness, of which approximately 88.5% represented non-recourse debt and limited recourse debt held by our subsidiaries. Each of our projects under development or construction and those projects and businesses we may seek to acquire or construct will require substantial capital investment. Our continued access to capital with acceptable terms is necessary for the success of our growth strategy. Our attempts to obtain future financings may not be successful or on favorable terms.

Market conditions and other factors may not permit future project and acquisition financings on terms similar to those our subsidiaries have previously received. Our ability to arrange for financing on a substantially non-recourse or limited recourse basis and the costs of such capital are dependent on numerous factors, including general economic and capital market conditions, credit availability from banks, investor confidence, the continued success of current projects, the credit quality of the projects being financed, the political situation in the country where the project is located and the continued existence of tax and securities laws which are conducive to raising capital. If we are not able to obtain financing for our projects on a substantially non-recourse or limited recourse basis, we may have to finance them using recourse capital such as direct equity investments, parent company loans or the incurrence of additional debt by us.

Also, in the absence of favorable financing options, we may decide not to build new plants or acquire facilities from third parties. Any of these alternatives could have a material adverse effect on our growth prospects.

Our foreign projects expose us to risks related to the application of foreign laws, taxes, economic conditions, labor supply and relations, political conditions and policies of foreign governments which risks may delay or reduce our ability to profit from such projects.

We have substantial operations outside of the United States. Our foreign operations are subject to regulation by various foreign governments and regulatory authorities and are subject to the application of foreign laws. Such foreign laws or regulations may not provide for the same type of legal certainty and rights, in connection with our contractual relationships in such countries, as are afforded to our projects in the United States, which may adversely affect our ability to receive revenues or enforce our rights in connection with such foreign operations. In addition, the laws and regulations of some countries may limit our ability to hold a majority interest in some of the projects that we may develop or acquire, thus limiting our ability to control the development, construction and operation of such projects. Our foreign operations are also subject to significant political, economic and financial risks, which vary by country, and include:


•	changes in government policies or personnel;


•	changes in general economic conditions;


•	restrictions on currency transfer or convertibility;


•	changes in labor relations;


•	political instability and civil unrest;


•	changes in the local electricity market;


•	breach or repudiation of important contractual undertakings by governmental entities; and


•	expropriation and confiscation of assets and facilities.

In particular, the Philippines is in the midst of an ongoing privatization of the electric industry, and in Guatemala the electricity sector was partially privatized and it is currently unclear whether further privatization will occur in the future. Such developments may affect our existing Leyte and Zunil projects and the Amatitlan project currently under construction if, for example, they result in changes to the prevailing tariff regime or in the identity and creditworthiness of our power purchasers. In Nicaragua, there is potential labor unrest and strengthening of labor unions, which may adversely affect our Momotombo project. In Kenya, the new government that was elected in 2002 is making an effort to deliver on campaign promises to reduce the price for electricity and is applying pressure on independent power producers, such as our Olkaria III project, to lower their tariffs. In addition, Kenya's new government is considering a further restructuring and privatization of the electricity industry in Kenya and may divide Kenya Power & Lighting Co. Ltd., the power purchaser for our Olkaria III project, into separate entities and then privatize one or more of such resulting entities. A material tariff reduction or any break-up and potential privatization of Kenya Power & Lighting Co. Ltd. may adversely affect our Olkaria III project. We are also currently in discussions with the Kenyan

government and Kenya Power & Lighting Co. Ltd. regarding, among other things, the construction of Phase II of the Olkaria III project in Kenya and the provision of certain collateral and government support. We must notify Kenya Power & Lighting Co. Ltd., by April 17, 2005, whether we will proceed to construct Phase II of the Olkaria III project and, if we notify Kenya Power & Lighting Co. Ltd. that we will not proceed with such construction, then the portion of the current power purchase agreement applicable to Phase II of the Olkaria III project will be terminated (but the current portion applicable to Phase I will be unaffected). If we fail to provide such notification we will be required to construct Phase II and reach commercial operations by May 31, 2007 in order to avoid the application of financial penalties, or at the latest by April 17, 2008 in order to avoid termination of the entire power purchase agreement. In addition, if we do not proceed with the construction of Phase II, we may lose some or all of our investment relating to Phase II, which is approximately $22.2 million.

Although we generally obtain political risk insurance in connection with our foreign projects, such political risk insurance does not mitigate all of the above-mentioned risks. In addition, insurance proceeds received pursuant to our political risk insurance policies, where applicable, may not be adequate to cover all losses sustained as a result of any covered risks and may at times be pledged in favor of the lenders to a project as collateral. Also, insurance may not be available in the future with the scope of coverage and in amounts of coverage adequate to insure against such risks and disturbances.

Our foreign projects and foreign manufacturing operations expose us to risks related to fluctuations in currency rates, which may reduce our profits from such projects and operations.

Risks attributable to fluctuations in currency exchange rates can arise when any of our foreign subsidiaries borrow funds or incur operating or other expenses in one type of currency but receive revenues in another. In such cases, an adverse change in exchange rates can reduce such subsidiary's ability to meet its debt service obligations, reduce the amount of cash and income we receive from such foreign subsidiary or increase such subsidiary's overall expenses. In addition, the imposition by foreign governments of restrictions on the transfer of foreign currency abroad or restrictions on the conversion of local currency into foreign currency would have an adverse effect on the operations of our foreign projects and foreign manufacturing operations and may limit or diminish the amount of cash and income that we receive from such foreign projects and operations.

A significant portion of our net revenue is attributed to payments made by power purchasers under power purchase agreements. The failure of any such power purchaser to perform its obligations under the relevant power purchase agreement or the loss of a power purchase agreement due to a default would reduce our net income and could materially and adversely affect our business, financial condition, future results and cash flow.

A significant portion of our net revenue is attributed to revenues derived from power purchasers under the relevant power purchase agreements. Southern California Edison Company, Hawaii Electric Light Company, PNOC-Energy Development Corporation and Sierra Pacific Power Company have accounted for 48.3%, 9.2%, 6.2% and 5.6% of our pro forma revenues, respectively, for the fiscal year ended December 31, 2003. Based on publicly available information, as of June 30, 2004, the issuer ratings of Southern California Edison Company, Sierra Pacific Power Company and Nevada Power Company (a potential power purchaser for the Desert Peak 2 and Desert Peak 3 projects) were Baa3 (under review), B1 (negative outlook) and B1 (negative outlook), respectively, from Moody's Investors Services and BBB (stable outlook), B+ (negative outlook), and B+ (negative outlook), respectively, from Standard & Poor's Ratings Services and the issuer rating of Hawaii Electric Light Company was BBB+ (stable outlook) by Standard & Poor's Ratings Services. The credit ratings of any power purchaser may decrease from time to time. There is no publicly available information with respect to the credit ratings or stability of the power purchasers under the power purchase agreements for our foreign projects.

Neither we nor any of our affiliates make any representations as to the financial condition or creditworthiness of any purchaser under a power purchase agreement and nothing in this prospectus should be construed as such a representation.

There is a risk that any one or more of the power purchasers may not fulfill their respective payment obligations under their power purchase agreements. For example, as a result of the energy crisis in California, Southern California Edison Company withheld payments it owed under various of its power purchase agreements with a number of power generators (such as the Ormesa, Heber 1, Heber 2, and Mammoth projects) payable for certain energy delivered between November 2000 and March 2001 under such power purchase agreements until March 2002. In the case of our Ormesa project (which we acquired in April 2002), the payment withheld by Southern California Edison Company totaled $21.2 million. If any of the power purchasers fails to meet its payment obligations under its power purchase agreements, it could materially and adversely affect our business, financial condition, future results and cash flow.

In connection with the power purchase agreements for the Ormesa project, Southern California Edison Company has raised an issue regarding a potential breach by the Ormesa project of such power purchase agreements as a result of the use of power from the GEM 2 and GEM 3 plants by the Ormesa project for auxiliary purposes. The loss of a power purchase agreement as a result of a default would materially and adversely affect our business, financial condition, future results and cash flow.

Seasonal variations may cause significant fluctuations in our cash flows, which may cause the market price of our common stock to fall in certain periods.

Our results of operations are subject to seasonal variations. This is primarily because some of our domestic projects receive higher capacity payments under the power purchase agreements during the summer months and due to the generally higher short run avoided costs in effect during the summer months. Some of our other projects may experience reduced generation during warm periods due to the lower heat differential between the geothermal fluid and the ambient surroundings. Such seasonal variations could materially and adversely affect our business, financial condition, future results and cash flow. If our operating results fall below the public's or analysts' expectations in some future period or periods, the market price of our common stock will likely fall in such period or periods.

Pursuant to the terms of some of our power purchase agreements with investor-owned electric utilities in states that have renewable portfolio standards, the failure to supply the contracted capacity thereunder may result in the imposition of penalties.

Pursuant to the terms of certain of the power purchase agreements that we have entered into and under which we will sell electricity from certain projects that are currently under development and construction, we may be required to make payments to the relevant power purchaser in an amount equal to such purchaser's replacement costs for renewable energy relating to any shortfall amount of renewable energy that we do not provide as required under the power purchase agreement and which such power purchaser is forced to obtain from an alternate source. In addition, we may be required to make payments to the relevant power purchaser in an amount equal to its replacement costs relating to any renewable energy credits we do not provide as required under the relevant power purchase agreement. We may also be required to pay liquidated damages if certain minimum performance requirements are not met under certain of our power purchase agreements, all of which could materially and adversely affect our business, financial condition, future results and cash flow. Our Puna project was not in compliance with the minimum performance requirements of its power purchase agreement at the time we acquired such project and is currently not in compliance with such requirements. Such non-compliance has resulted in the imposition of sanctions that have reduced, and as long as such non-compliance continues to exist, will continue to reduce, the aggregate amount of revenues payable to us from the power purchaser. Further, the temperature of the geothermal resource at our Heber 1 project has declined from the date on which the project has commenced operations and, as a result, the project currently operates at a level that is close to the minimum performance requirements set forth in such project's power purchase agreement.

The short run avoided cost for our power purchasers may decline, which would reduce our project revenues and could materially and adversely affect our business, financial condition, future results and cash flow.

Under the power purchase agreements for our projects in California, the price that Southern California Edison Company pays for energy is based upon its short run avoided costs, which are the incremental costs that it would have incurred had it generated the relevant electrical energy itself or purchased such energy from others. Under settlement agreements between Southern California Edison Company and a number of Qualifying Facility power generators in California, including our subsidiaries, the energy price component payable by Southern California Edison Company has been fixed through April 2007, and thereafter will be based on Southern California Edison Company's short run avoided costs, as determined by the California Public Utilities Commission, which we refer to as CPUC. These short run avoided costs are made available by Southern California Edison Company to the public and may vary substantially on a monthly basis, based primarily on gas prices and other factors. The levels of short run avoided cost prices paid by Southern California Edison Company may decline following the expiration date of the settlement agreements, which in turn would reduce our project revenues derived from Southern California Edison Company under our power purchase agreements with it and could materially and adversely affect our business, financial condition, future results and cash flow.

In addition, under certain of the power purchase agreements for our projects in Nevada, the price that Sierra Pacific Power Company pays for energy and capacity is based upon its short run avoided costs. These short run avoided costs, and in turn the rates payable by Sierra Pacific Power Company, may decline, which in turn would reduce the aggregate amount of project revenues recovered by our Nevada projects pursuant to the relevant Nevada project power purchase agreements. Such a decrease in project revenues could adversely affect our business, financial condition, future results and cash flow.

In response to an order issued by a California State Court of Appeal, the CPUC has commenced an administrative proceeding in order to address short run avoided cost pricing for Qualifying Facilities for the period spanning from December 2000 to March 2001. The court directed the CPUC to modify short run avoided cost pricing on a retroactive basis to the extent that the CPUC determined that short run avoided cost prices were not sufficiently "accurate" or "correct." If the short run avoided cost prices charged during the period in question were determined by the CPUC not to be "accurate" or "correct," retroactive price adjustments could be required for any of our Qualifying Facilities in California whose payments are tied to short run avoided cost pricing, including the Heber 1, Mammoth and Ormesa projects. Currently, it is not possible to predict the outcome of such proceeding, however, any retroactive price adjustment required to be made in relation to any of our projects may require such projects to make refund payments or charge less for future sales, which could materially and adversely affect our business, financial condition, future results and cash flow.

If any of our domestic projects loses its Qualifying Facility status under PURPA, or if amendments to PURPA are enacted that substantially reduce the benefits currently afforded to our Qualifying Facilities, our domestic operations could be adversely affected.

The operations of most of our domestic projects are subject to, and benefit from, the Public Utility Regulatory Policies Act of 1978, as amended, which we refer to as PURPA, are subject to limited provisions of the Federal Power Act, which we refer to as FPA, and are potentially subject to the provisions of various other energy laws and regulations, including the Public Utility Holding Company Act of 1935, as amended, which we refer to as PUHCA, other provisions of the FPA and certain state and local laws and regulations regarding rates and financial and organizational requirements for electric utilities.

Qualifying Facility status under PURPA exempts our projects from PUHCA, most of the provisions of the FPA, and certain state laws concerning rates and the financial and organizational regulation of electric utilities. If any of our domestic projects in which we have an interest loses its

Qualifying Facility status and no regulatory exemptions apply or if amendments to PURPA are enacted that substantially reduce the benefits currently afforded Qualifying Facilities, our operations could be adversely affected.

In the event that one of our domestic projects loses its Qualifying Facility status, such project and we would become subject to PUHCA and such project would become subject to the full scope of the FPA and applicable state regulations unless an exemption or waiver applies, such as "exempt wholesale generator" ("EWG", as defined under PUHCA) status or "utility geothermal small power production facility" (as defined under PURPA regulations) status, for such project. The application of PUHCA and such other regulations to our projects would require our operations to comply with an increasingly complex regulatory regime that may be costly and greatly reduce our operational flexibility. In the unlikely event that none of the PUHCA exemptions or waivers are available, we could become a public utility holding company under PUHCA, which could be deemed to occur prospectively or retroactively to the date that any of our projects lost its Qualifying Facility status. In addition, our other domestic projects could lose Qualifying Facility status because our interests in such projects could be considered to be electric utility holding company interests for purposes of the 50% limit on ownership of Qualifying Facilities by electric utilities or electric utility holding companies. As a result of such loss of Qualifying Facility status and in the absence of an applicable exemption or waiver, the Federal Energy Regulatory Commission, which we refer to as FERC, or relevant state regulators, whichever had jurisdiction, may order partial refunds of past amounts paid by the relevant power purchaser or order a reduction of the rate pursuant to the power purchase agreement prospectively, or both, and thus could cause the loss of some or all of our revenues payable pursuant to the related power purchase agreement, result in significant liability for refunds of past amounts paid, or otherwise impair the value of our projects.

A loss of Qualifying Facility status also could permit the power purchaser, pursuant to the terms of the particular power purchase agreement, to cease taking and paying for electricity from the relevant project or, consistent with FERC precedent, to seek refunds of past amounts paid. This could cause the loss of some or all of our revenues payable pursuant to the related power purchase agreement, result in significant liability for refunds of past amounts paid, or otherwise impair the value of our project. If a power purchaser were to cease taking and paying for electricity or seek to obtain refunds of past amounts paid, there can be no assurance that the costs incurred in connection with the project could be recovered through sales to other purchasers or that we would have sufficient funds to make such payments. In addition, the loss of Qualifying Facility status would be an event of default under the financing arrangements currently in place for some of our projects, which would enable the lenders to exercise their remedies and enforce the liens on the relevant project.

The United States Congress is considering proposed legislation that would amend PURPA by limiting the mandatory purchase obligations of power purchasers under new power purchase agreements. The enactment of such legislation could adversely affect our new projects or enhancements of existing projects that do not have a current power purchase agreement.

An adverse FERC ruling related to the use by the Ormesa project of power generated from another Qualifying Facility for auxiliary purposes may adversely affect our operations and financial results.

Our Ormesa project uses electricity generated by two of our power plants for pumps that help reinject its geothermal brine after it has been used for power generation. According to a recent FERC decision involving such project, a geothermal Qualifying Facility that obtains electricity for the operation of its reinjection pumps from an electric utility must reduce its net capacity available for sale by an equivalent amount, unless such electricity is obtained from another Qualifying Facility. FERC has recently granted a rehearing of its decision for further consideration. If FERC were to reverse its ruling regarding electricity provided by another Qualifying Facility for reinjection pumps, our Ormesa project would be required to reduce its capacity for sale by the amount of power used for such purposes. Such a reversal by FERC could have an adverse effect on the revenues that our Ormesa project receives from its power sales and may impact the operations at some of our other projects.

Our Heber 1 and Mammoth projects purchase electricity for their reinjection pumps from Southern California Edison Company. If FERC were to uphold its ruling that electricity obtained from third parties that are not Qualifying Facilities for use by reinjection pumps must be subtracted from geothermal projects' net capacity, and if such ruling was to be sustained on appeal, this could have an adverse effect on the revenues that our Heber 1 and Mammoth projects receive from their power sales. Although FERC has not previously applied rulings such as these retroactively in similar cases, if FERC were to apply such rulings retroactively, our subsidiaries may owe Southern California Edison Company a refund for prior sales of electricity in amounts that correspond to the historical power purchases for reinjection pumping.

Our financial performance is significantly dependent on the successful operation of our projects which is subject to changes in the legal and regulatory environment affecting our projects.

All of our projects are subject to extensive regulation and therefore changes in applicable laws or regulations, or interpretations of those laws and regulations, could result in increased compliance costs, the need for additional capital expenditures or the reduction of certain benefits currently available to our projects. The structure of federal and state energy regulation is currently, and may continue to be, subject to challenges, modifications, the imposition of additional regulatory requirements, and restructuring proposals. We and our power purchasers may not be able to obtain all regulatory approvals that may be required in the future, or any necessary modifications to existing regulatory approvals, or maintain all required regulatory approvals. In addition, the cost of operation and maintenance and the operating performance of geothermal power plants may be adversely affected by changes in certain laws and regulations, including tax laws.

The federal government also encourages production of electricity from geothermal resources through certain tax subsidies. We are permitted to claim in our consolidated federal tax returns approximately 10% of the construction cost of each new geothermal power plant as a credit against our consolidated federal income taxes. We are also permitted to deduct, as a depreciation expense on our consolidated federal tax returns, up to 95% of the cost of the power plant over five years on an accelerated basis, which results in more of the cost being deducted in the first few years than during the remainder of the depreciation period. In addition, we have the ability to obtain value from these tax incentives through lease financing transactions even when we are not in a position to use them directly. Any reduction in such tax incentives or any restrictions on such lease financing transactions would materially and adversely affect our business, financial condition, future results and cash flow.

Any such changes could significantly increase the regulatory-related compliance and other expenses incurred by the projects and could significantly reduce or entirely eliminate the revenues generated by one or more of the projects, which in turn would reduce our net income and could materially and adversely affect our business, financial condition, future results and cash flow.

The costs of compliance with environmental laws, which currently are significant, may increase in the future and could materially and adversely affect our business, financial condition, future results and cash flow and any non-compliance with such laws or regulations may result in the imposition of liabilities which could materially and adversely affect our business, financial condition, future results and cash flow.

Our projects are required to comply with numerous domestic and foreign federal, regional, state and local statutory and regulatory environmental standards and to maintain numerous environmental permits and governmental approvals required for construction and/or operation. Some of the environmental permits and governmental approvals that have been issued to the projects contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms. If we fail to satisfy these conditions or comply with these restrictions, or with any statutory or regulatory environmental standards, we may become subject to regulatory enforcement action and the operation of the projects could be adversely affected or be subject to fines, penalties or additional costs. In addition, we may not be able to renew, maintain or obtain all environmental permits and governmental approvals required for the continued operation or further development of the projects, as a result of which the operation of the projects may be

limited or suspended. Environmental laws, ordinances and regulations affecting us can be subject to change and such change could result in increased compliance costs, the need for additional capital expenditures, or otherwise adversely affect us.

We could be exposed to significant liability for violations of hazardous substances laws because of the use or presence of such substances at our projects.

Our projects are subject to numerous domestic and foreign federal, regional, state and local statutory and regulatory standards relating to the use, storage and disposal of hazardous substances. We use isobutane, isopentane, industrial lubricants and other substances at our projects which are or could become classified as hazardous substances. If any hazardous substances are found to have been released into the environment at or by the projects, we could become liable for the investigation and removal of those substances, regardless of their source and time of release. If we fail to comply with these laws, ordinances or regulations (or any change thereto), we could be subject to civil or criminal liability, the imposition of liens or fines, and large expenditures to bring the projects into compliance. Furthermore, in the United States, we can be held liable for the cleanup of releases of hazardous substances at other locations where we arranged for disposal of those substances, even if we did not cause the release at that location. The cost of any remediation activities in connection with a spill or other release of such substances could be significant.

We believe that there may have at one time been a gas station located on the Mammoth project site, but because of significant surface disturbance and construction since that time further physical evaluation of the former gas station site has been impractical. There may be soil or groundwater contamination and related liability exposure of which we are unaware related to this site which may be significant and may adversely and materially affect our operations and revenues.

We may not be able to successfully integrate companies that we have acquired or which we may acquire in the future, which could materially and adversely affect our business, financial condition, future results and cash flow.

We recently acquired our Heber 1, Heber 2, Mammoth, Steamboat 2/3, Steamboat Hills and Puna projects. Our strategy is to continue to expand in the future, including through acquisitions. Integrating acquisitions is often costly, and we may not be able to successfully integrate our acquired companies with our existing operations without substantial costs, delays or other adverse operational or financial consequences. Integrating our acquired companies involves a number of risks that could materially and adversely affect our business, including:


•	failure of the acquired companies to achieve the results we expect;


•	inability to retain key personnel of the acquired companies;


•	risks associated with unanticipated events or liabilities; and


•	the difficulty of establishing and maintaining uniform standards, controls, procedures and policies, including accounting controls and procedures.

If any of our acquired companies suffers customer dissatisfaction or performance problems, the same could adversely affect the reputation of our group of companies and could materially and adversely affect our business, financial condition, future results and cash flow.

The power generation industry is characterized by intense competition, and we encounter competition from electric utilities, other power producers, and power marketers that could materially and adversely affect our business, financial condition, future results and cash flow.

The power generation industry is characterized by intense competition from electric utilities, other power producers and power marketers. In recent years, there has been increasing competition in the sale of electricity, in part due to excess capacity in a number of U.S. markets and an emphasis on short-term or "spot" markets, and competition has contributed to a reduction in electricity prices. For the most part, we expect that power purchasers interested in long-term arrangements with a capacity

price component will engage in "competitive bid" solicitations to satisfy new capacity demands. This competition could adversely affect our ability to obtain power purchase agreements and the price paid for electricity by the relevant power purchasers. There is also increasing competition between electric utilities, particularly in California where the CPUC has launched an initiative designed to give all electricity consumers the ability to choose between competing suppliers of electricity. This competition has put pressure on electric utilities to lower their costs, including the cost of purchased electricity, and increasing competition in the future will put further pressure on power purchasers to reduce the prices at which they purchase electricity from us.

The existence of a prolonged force majeure event or a forced outage affecting a project could reduce our net income and materially and adversely affect our business, financial condition, future results and cash flow.

If a project experiences a force majeure event, our subsidiary owning that project would be excused from its obligations under the relevant power purchase agreement. However, the relevant power purchaser may not be required to make any capacity and/or energy payments with respect to the affected project or plant so long as the force majeure event continues and, pursuant to certain of our power purchase agreements, will have the right to prematurely terminate the power purchase agreement. Additionally, to the extent that a forced outage has occurred, the relevant power purchaser may not be required to make any capacity and/or energy payments to such project and if as a result the project fails to attain certain performance requirements under certain of our power purchase agreements, the purchaser may have the right to permanently reduce the contract capacity (and, correspondingly, the amount of capacity payments due pursuant to such agreements in the future), seek refunds of certain past capacity payments, and/or prematurely terminate the power purchase agreement. As a consequence, we may not receive any net revenues from the affected project or plant other than the proceeds from any business interruption insurance that applies to the force majeure event or forced outage after the relevant waiting period and may incur significant liabilities in respect of past amounts required to be refunded. Accordingly, our business, financial condition, future results and cash flows could be materially and adversely affected.

The existence of a force majeure event or a forced outage affecting the transmission system of the Imperial Irrigation District could reduce our net income and materially and adversely affect our business, financial condition, future results and cash flow.

If the transmission system of the Imperial Irrigation District experiences a force majeure event or a forced outage which prevents it from transmitting the electricity from certain of our projects to the relevant power purchaser, the relevant power purchaser would not be required to make energy payments for such non-delivered electricity and may not be required to make any capacity payments with respect to the affected project so long as such force majeure event or forced outage continues, thus reducing or eliminating the revenues of such project.

Some of our leases will terminate if we do not extract geothermal resources in "commercial quantities," thus requiring us to enter into new leases or secure rights to alternate geothermal resources, none of which may be available on terms as favorable to us as any such terminated lease, if at all.

Most of our geothermal resource leases are for a fixed primary term, and then continue for so long as geothermal resources are extracted in "commercial quantities" or pursuant to other terms of extension. The land covered by some of our leases is undeveloped and has not yet produced geothermal resources in "commercial quantities." Leases that cover land which remains undeveloped and does not produce, or does not continue to produce, geothermal resources in commercial quantities or leases that we allow to expire, will terminate. In the event that a lease is terminated and we determine that we will need that lease once the applicable project is operating, we would need to enter into one or more new leases with the owner(s) of the premises that are the subject of the terminated lease(s) in order to develop geothermal resources from or inject geothermal resources into such premises or secure rights to alternate geothermal resources or lands suitable for injection, all of which may not be possible or could result in increased cost to us which could materially and adversely affect our business, financial condition, future results and cash flow.

Our Bureau of Land Management leases may be terminated if we fail to comply with any of the provisions of the Geothermal Steam Act of 1970 or if we fail to comply with the terms or stipulations of such leases, which may materially and adversely affect our business and operations.

Pursuant to the terms of our Bureau of Land Management (which we refer to as BLM) leases, we are required to conduct our operations on BLM-leased land in a workmanlike manner and in accordance with all applicable laws and BLM directives and to take all mitigating actions required by the BLM to protect the surface of and the environment surrounding the relevant land. Additionally, certain BLM leases contain additional requirements, some of which relate to the mitigation or avoidance of disturbance of any antiquities, cultural values or threatened or endangered plants or animals, the payment of royalties for timber and the imposition of certain restrictions on residential development on the leased land. In the event of a default under any BLM lease, or the failure to comply with such requirements, or any non-compliance with any of the provisions of the Geothermal Steam Act of 1970 or regulations issued thereunder, the BLM may, 30 days after notice of default is provided to our relevant project subsidiary, suspend operations until the requested action is taken or terminate the lease, either of which could materially and adversely affect our business, financial condition, future results and cash flows.

Some of our leases (or subleases) could terminate if the lessor (or sublessor) under any such lease (or sublease) defaults on any debt secured by the relevant property, thus terminating our rights to access the underlying geothermal resources at that location.

The fee interest in the land which is the subject of each of our leases (or subleases) may currently be or may become subject to encumbrances securing loans from third party lenders to the lessor (or sublessor). Our rights as lessee (or sublessee) under such leases (or subleases) are or may be subject and subordinate to the rights of any such lender. Accordingly, a default by the lessor (or sublessor) under any such loan could result in a foreclosure on the underlying fee interest in the property and thereby terminate our leasehold interest and result in the shutdown of the project located on the relevant property and/or terminate our right of access to the underlying geothermal resources required for our operations.

In addition, a default by a sublessor under its lease with the owner of the property which is the subject of our sublease could result in the termination of such lease and thereby terminate our sublease interest and our right to access the underlying geothermal resources required for our operations.

We depend on key personnel for the success of our business.

Our success is largely dependent on the skills, experience and efforts of our senior management team and other key personnel. In particular, our success depends on the continued efforts of Lucien Bronicki, Yehudit Bronicki, Hezy Ram, Nadav Amir and other key employees. The loss of the services of any key employee could materially harm our business, financial condition, future results and cash flow. Although we have been, to date, successful in retaining the services of senior management, we may not be able to locate or employ on acceptable terms qualified replacements for our senior management or key employees if their services were no longer available.

Our projects have generally been financed through a combination of parent company loans and limited- or non-recourse project finance debt. If our project subsidiaries default on their obligations under such limited- or non-recourse debt, we may be required to make certain payments to the relevant debt holders and if the collateral supporting such leveraged financing structures is foreclosed upon, we may lose certain of our projects.

Our projects have generally been financed using a combination of parent company loans and limited- or non-recourse project finance debt. Non-recourse project finance debt refers to debt that is repaid solely from the project's revenues and is secured by the project's physical assets, major contracts, cash accounts and, in many cases, our ownership interest in the project subsidiary. Limited recourse project finance debt refers to our additional agreement, as part of the financing of a project,

to provide limited financial support for the project subsidiary in the form of limited guarantees, indemnities, capital contributions and agreements to pay certain debt service deficiencies. If our project subsidiaries default on their obligations under the relevant debt documents, creditors of a limited recourse project financing will have direct recourse to us, to the extent of our limited recourse obligations, which may require us to use distributions received by us from other projects, as well as other sources of cash available to us, in order to satisfy such obligations. In addition, if our project subsidiaries default on their obligations under the relevant debt documents and the creditors foreclose on the relevant collateral, we may lose our ownership interest in the relevant project subsidiary or our project subsidiary owning the project would only retain an interest in the physical assets, if any, remaining after all debts and obligations were paid in full.

Changes in costs and technology may significantly impact our business by making our power plants and products less competitive.

A basic premise of our business model is that generating baseload power at central geothermal power plants achieves economies of scale and produces electricity at a competitive price. However, traditional coal-fired systems and gas-fired systems may under certain economic conditions produce electricity at lower average prices than our geothermal plants. In addition, there are other technologies that can produce electricity, most notably fuel oil systems, hydroelectric systems, fuel cells, microturbines, windmills and photovoltaic (solar) cells. Some of these alternative technologies currently produce electricity at a higher average price than our geothermal plants, however research and development activities are ongoing to seek improvements in such alternate technologies and their cost of producing electricity is gradually declining. It is possible that advances will further reduce the cost of alternate methods of power generation to a level that is equal to or below that of most geothermal power generation technologies. If this were to happen, the competitive advantage of our projects may be significantly impaired.

Our expectations regarding the market potential for the development of recovered energy-based power generation may not materialize and as a result we may not derive any significant revenues from this line of business.

We have identified recovered energy-based power generation as a significant market opportunity for us. Demand for our recovered energy-based power generation units may not materialize or grow at the levels that we expect. We currently face competition in this market from manufacturers of conventional steam turbines and may face competition from other related technologies in the future. If this market does not materialize at the levels that we expect, such failure may materially and adversely affect our business, financial condition, future results and cash flow.

Our intellectual property rights may not be adequate to protect our business.

Our intellectual property rights may not be adequate to protect our business. While we occasionally file patent applications, such patents may not be issued on the basis of such applications or, if such patents are issued, they may not be sufficiently broad to protect our technology. In addition, any patents issued to us or for which we have use rights may be challenged, invalidated or circumvented.

In order to safeguard our unpatented proprietary know-how, trade secrets and technology, we rely primarily upon trade secret protection and non-disclosure provisions in agreements with employees and others having access to confidential information. These measures may not adequately protect us from disclosure or misappropriation of our proprietary information.

Even if we adequately protect our intellectual property rights, litigation may be necessary to enforce these rights, which could result in substantial costs to us and a substantial diversion of management attention. Also, while we have attempted to ensure that our technology and the operation of our business do not infringe other parties' patents and proprietary rights, our competitors or other parties may assert that certain aspects of our business or technology may be covered by patents held by them. Infringement or other intellectual property claims, regardless of merit or ultimate outcome, can be expensive and time-consuming and can divert management's attention from our core business.

We are subject to risks associated with a changing economic and political environment which may adversely affect our financial stability or the financial stability of our counterparties.

The risk of terrorist attacks in the United States or elsewhere continues to remain a potential source of disruption to the nation's economy and financial markets in general. The availability and cost of capital for our business and that of our competitors has been adversely affected by the bankruptcy of Enron Corp. and events related to the California electric market crisis. Additionally, the recent rise in fuel costs may make it more expensive for our customers to operate their businesses. These events could constrain the capital available to our industry and could adversely affect our financial stability and the financial stability of our counterparties in transactions.

Possible fluctuations in the cost of raw materials may materially and adversely affect our business, financial condition, future results and cash flow.

Our manufacturing operations are dependent on the supply of various raw materials including primarily steel and aluminum, and are also dependent on the supply of various industrial equipment components that we use. We currently obtain all such materials and equipment at prevailing market prices. Supply interruptions or future cost increases of such raw materials and equipment, to the extent not otherwise passed along to our customers, could adversely affect our profit margins.

Conditions in Israel, where the majority of our senior management and all of our production and manufacturing facilities are located, may adversely affect our operations and may limit our ability to produce and sell our products or manage our projects.

Operations in Israel accounted for approximately 61.3%, 56.3%, and 51.0% of our operating expenses in fiscal year 2001, fiscal year 2002 and fiscal year 2003, respectively. Political, economic and security conditions in Israel directly affect our operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors, and the continued state of hostility, varying in degree and intensity, has led to security and economic problems for Israel. Since October 2000, there has been a significant increase in violence, primarily in the West Bank and Gaza Strip, and more recently Israel has experienced a significant increase in terrorist incidents within its borders. As a result, negotiations between Israel and representatives of the Palestinian Authority have been sporadic and have failed to result in peace. We could be adversely affected by hostilities involving Israel, the interruption or curtailment of trade between Israel and its trading partners, or a significant downturn in the economic or financial condition of Israel. In addition, the sale of products manufactured in Israel may be adversely affected in certain countries by restrictive laws, policies or practices directed toward Israel or companies having operations in Israel.

In addition, some of our employees in Israel are subject to being called upon to perform military service in Israel, and their absence may have an adverse effect upon our operations. Generally, unless exempt, male adult citizens of Israel under the age of 41 are obligated to perform up to 36 days of military reserve duty annually. Additionally, all such citizens are subject to being called to active duty at any time under emergency circumstances.

These events and conditions could disrupt our operations in Israel, which could materially harm our business, financial condition, future results and cash flow.

Failure to comply with certain conditions and restrictions associated with tax benefits provided to Ormat Systems by the Government of Israel as an "approved enterprise" may require us to refund such tax benefits and pay future taxes in Israel at higher rates.

Our subsidiary, Ormat Systems, has received "approved enterprise" status under Israel's Law for Encouragement of Capital Investments, 1959, with respect to two of its investment programs. As an approved enterprise, our subsidiary is exempt from Israeli income taxes with respect to revenues derived from the approved investment program for a period of two years commencing on the year it first generates profits from the approved investment program and, thereafter, such revenues are

subject to reduced Israeli income tax rates of 25% for an additional five years. These benefits are subject to certain conditions set forth in the certificate of approval from Israel's Investment Center, that include, among other things, a requirement that Ormat Systems comply with Israeli intellectual property law, that all transactions between Ormat Systems and our affiliates be at arms length, and that there will be no change in control of, on a cumulative basis, more than 49% of Ormat Systems' capital stock (including by way of a public or private offering) without the prior written approval of the Investment Center. If Ormat Systems does not comply with these conditions, in whole or in part, it would be required to refund the amount of tax benefits (as adjusted by the Israeli consumer price index and for accrued interest) and would no longer benefit from the reduced Israeli tax rates, which could have an adverse effect on our financial condition, future results and cash flow. If Ormat Systems distributes dividends out of revenues derived during the tax exemption period from the approved investment program, it will be subject, in the year in which such dividend is paid, to Israeli income tax on the distributed dividend.

If our parent defaults on its lease agreement with the Israel Land Administration, or is involved in a bankruptcy or similar proceeding, our rights and remedies under certain agreements pursuant to which we acquired our products business and pursuant to which we sublease our land and manufacturing facilities from our parent may be adversely affected.

We acquired our business relating to the manufacturing and sale of products for electricity generation and related services from our parent, Ormat Industries. In connection with that acquisition, we entered into a sublease with Ormat Industries for the lease of the land and facilities where our manufacturing and production operations are conducted and where our Israeli offices are located. Under the terms of our parent's lease agreement with the Israel Land Administration, any sublease for a period of more than five years may require the prior approval of the Israel Land Administration. As a result, the initial term of our sublease with Ormat Industries is for a period of four years and eleven months, extendable to twenty-five years (which includes the initial term) should our parent obtain the approval of the Israel Land Administration, to the extent necessary. If such an approval is required and our parent fails to obtain the Israel Land Administration's approval, our sublease will terminate on June 1, 2009, at which time we will have to renegotiate the terms of a new sublease. We may not be successful in reaching an agreement with our parent as to the terms of a new sublease or in obtaining such sublease on favorable terms, both of which circumstances will adversely affect our manufacturing activities and our financial position. Additionally, if our parent was to breach its obligations to the Israel Land Administration under its lease agreement, the Israel Land Administration may terminate the lease agreement and consequently, our sublease will terminate as well.

As part of the acquisition described in the preceding paragraph, we also entered into a patent license agreement with Ormat Industries, pursuant to which we were granted an exclusive license for certain patents and trademarks relating to certain technologies that are used in our business. If a bankruptcy case were commenced by or against our parent, it is possible that performance of all or part of the agreements entered into in connection with such acquisition (including the lease of land and facilities described above) could be stayed by the bankruptcy court in Israel or rejected by a liquidator appointed pursuant to the Bankruptcy Ordinance in Israel and thus not be enforceable. Any of these events could have a material and adverse effect on our business, financial condition, future results and cash flow.

We are a holding company and our revenues depend substantially on the performance of our subsidiaries and the projects they operate, most of which are subject to restrictions and taxation on dividends and distributions.

We are a holding company whose primary assets are our ownership of the equity interests in our subsidiaries. We conduct no other business and, as a result, we depend entirely upon our subsidiaries' earnings and cash flow.

The agreements pursuant to which most of our subsidiaries have incurred debt restrict the ability of these subsidiaries to pay dividends, make distributions or otherwise transfer funds to us prior to the

satisfaction of other obligations, including the payment of operating expenses, debt service and replenishment or maintenance of cash reserves. In the case of some of our projects, such as the Mammoth project, there may be certain additional restrictions on dividend distributions pursuant to our agreements with our partners. Further, if we elect to receive distributions of earnings from our foreign operations, we may incur United States taxes on account of such distributions, net of any available foreign tax credits. In all of the foreign countries where our existing projects are located, dividend payments to us are also subject to withholding taxes. Each of the events described above may reduce or eliminate the aggregate amount of revenues we can receive from our subsidiaries.

Risks Relating to this Offering

Our controlling stockholders may take actions that conflict with your interests.

Immediately following this offering, % of our common stock will be held by Ormat Industries, Ltd. ( % if the underwriters exercise their over-allotment option in full), which is controlled by Bronicki Investments Ltd. Bronicki Investments Ltd. is a privately held Israeli company and is controlled by Lucien and Yehudit Bronicki. Because of these holdings, our parent company and its controlling stockholders will be able to exercise control over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions, and they will have significant control over our management and policies. The directors elected by these stockholders will be able to significantly influence decisions affecting our capital structure. This control may have the effect of delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in their best interest. For example, our controlling stockholders will be able to control the sale or other disposition of our products business to another entity or the transfer of such business outside of the State of Israel, as such action requires the affirmative vote of at least 75% of our outstanding shares.

Some of our directors that also hold positions with our parent may have conflicts of interest with respect to matters involving both companies.

Two of our three directors are directors and/or officers of Ormat Industries. These directors will have fiduciary duties to both companies and may have conflicts of interest on matters affecting both us and our parent and in some circumstances may have interests adverse to our interests. Our Chairman, Director and Chief Technology Officer, Mr. Bronicki, will continue to be Chairman of our parent following the offering. In addition, our Chief Executive Officer and Director, Mrs. Bronicki, will continue to be the Chief Executive Officer of our parent following the offering.

There has been no prior market for our common stock and an active trading market may not develop.

Prior to this offering, there has been no public market for our common stock. An active trading market may not develop following the closing of this offering or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your shares of common stock at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value and increase the volatility of your shares of common stock. An inactive market may also impair our ability to raise capital by selling shares of common stock and may impair our ability to acquire other companies or technologies by using our shares of common stock as consideration.

The price of our common stock may fluctuate substantially and your investment may decline in value.

The initial public offering price for the shares of our common stock sold in this offering will be determined by negotiation between the representatives of the underwriters and us. This price may not reflect the market price of our common stock following this offering. In addition, the market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including:


•	actual or anticipated fluctuations in our results of operations including as a result of seasonal variations in our electricity-based revenues;


•	variance in our financial performance from the expectations of market analysts;


•	conditions and trends in the end markets we serve and changes in the estimation of the size and growth rate of these markets;


•	announcements of significant contracts by us or our competitors;


•	changes in our pricing policies or the pricing policies of our competitors;


•	loss of one or more of our significant customers;


•	legislation;


•	changes in market valuation or earnings of our competitors;


•	the trading volume of our common stock; and


•	general economic conditions.

In addition, the stock market in general, and the New York Stock Exchange and the market for energy companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies affected. These broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of management's attention and resources, which could materially harm our business, financial condition, future results and cash flow.

Our management team may invest or spend the proceeds of this offering in ways with which you may not agree or in ways that may not yield a positive return.

Presently, anticipated uses of the proceeds to us of this offering include funding business growth and expansion, providing additional working capital, and for other general corporate purposes. We cannot specify with certainty how we will use the net proceeds of this offering. Accordingly, our management will have considerable discretion in the application of these proceeds, and you will not have the opportunity to assess whether these proceeds are being used appropriately. These proceeds may be used for corporate purposes that do not increase our operating results or market value. Until the net proceeds are used, they may be placed in investments that do not produce income or that lose value.

Future sales of our common stock may depress our share price.

After this offering, we will have shares of common stock outstanding. The shares sold in this offering (or shares if the underwriters' over-allotment is exercised in full) will be freely tradable without restriction or further registration under federal securities laws unless purchased by our affiliates. The remaining shares of common stock outstanding after this offering are subject to lock-up agreements, will be available for sale in the public market beginning 180 days after the date of this prospectus, and will be subject to certain volume limitations under Rule 144 of the Securities Act of 1933, as amended. Lehman Brothers Inc. may waive the lock-up provisions in its sole discretion.

Sales of substantial amounts of our common stock in the public market following this offering, or the perception that these sales may occur, could cause the market price of our common stock to decline. At or prior to the closing of this offering, we will enter into a registration rights agreement with Ormat Industries. See "Certain Relationships and Related Transactions" for more information.

This offering will cause substantial dilution in the net tangible book value of your shares of common stock.

The initial public offering price of our common stock is considerably more than the net tangible book value per share of our outstanding common stock. Accordingly, investors purchasing shares of

common stock in this offering will contribute % of the total amount invested to fund our company, but will own only % of the shares of common stock outstanding after this offering. To the extent outstanding stock options are exercised, there will be further dilution to new investors. See "Dilution" for more information.

Provisions in our charter documents and Delaware law may delay or prevent acquisition of us, which could adversely affect the value of our common stock.

Our restated certificate of incorporation and our bylaws contain provisions that could make it harder for a third party to acquire us without the consent of our board of directors. These provisions do not permit actions by our stockholders by written consent. In addition, these provisions include procedural requirements relating to stockholder meetings and stockholder proposals that could make stockholder actions more difficult. Our board of directors will be classified into three classes of directors serving staggered, three-year terms and may be removed only for cause. Any vacancy on the board of directors may be filled only by the vote of the majority of directors then in office. Our board of directors has the right to issue preferred stock without stockholder approval, which could be used to institute a "poison pill" that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors. Delaware law also imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more for our outstanding common stock. Although we believe these provisions provide for an opportunity to receive a higher bid by requiring potential acquirers to negotiate with our board of directors, these provisions apply even if the offer may be considered beneficial by some stockholders.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements made in this prospectus are forward-looking statements. These forward looking statements are based upon our current expectations and projections about future events. When used in this prospectus, the words "believe", "anticipate", "intend", "estimate", "expect", will", "should", "may" and similar expressions, or the negative of such words and expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. The forward-looking statements in this prospectus are primarily located in the material set forth under the headings "Prospectus Summary", "Risk Factors", "Capitalization", "Management's Discussion and Analysis of Financial Condition and Results of Operations", and "Business", but are found in other locations as well. These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management's current estimates and projections of future results or trends. Although we believe that our plans and objectives reflected in or suggested by these forward-looking statements are reasonable, we may not achieve these plans or objectives. You should read this prospectus completely and with the understanding that actual future results may be materially different from what we expect. We will not update forward-looking statements even though our situation may change in the future.

Specific factors that might cause actual results to differ from our expectations or may affect the value of our common stock include, but are not limited to:


•	significant considerations and risks discussed in this prospectus;


•	operating risks, including equipment failures and the amounts and timing of revenues and expenses;


•	geothermal resource risk (such as the heat content of the reservoir, useful life and geological formation);


•	environmental constraints on operations and environmental liabilities arising out of past or present operations;


•	project delays or cancellations;


•	financial market conditions and the results of financing efforts;


•	political, legal, regulatory, governmental, administrative and economic conditions and developments in the United States and other countries in which we operate;


•	the enforceability of the long-term power purchase agreements for our projects;


•	contract counterparty risk;


•	weather and other natural phenomena;

•

impact of recent and future federal and state regulatory proceedings and changes, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, and incentives for the production of renewable energy, changes in environmental and other laws and regulations to which our company is subject, as well as changes in the application of existing laws and regulations;


•	current and future litigation;


•	our ability to successfully identify, integrate and complete acquisitions;


•	competition from other similar geothermal energy projects, including any such new geothermal energy projects developed in the future, and from alternative electricity producing technologies;


•	the effect of and changes in economic conditions in the areas in which we operate;


•	market or business conditions and fluctuations in demand for energy or capacity in the markets in which we operate; and


•	the direct or indirect impact on our company's business resulting from terrorist incidents or responses to such incidents, including the effect on the availability of and premiums on insurance.

USE OF PROCEEDS

We estimate that the net proceeds we will receive from this offering will be approximately $ million, or approximately $ million if the underwriters exercise their over-allotment option in full, in each case, after deducting the underwriting discounts and commissions and estimated expenses of this offering payable by us. We expect to use the net proceeds from this offering to finance the continued growth of our business and for general corporate purposes, including for purposes of making investments or acquisitions. However, we have no present understanding or agreement relating to any specific acquisition. Accordingly, management will have significant flexibility in applying the net proceeds of the offering. Pending the use of such proceeds as described above, we intend to invest such proceeds in interest-bearing instruments.

DIVIDEND POLICY

We have adopted a dividend policy pursuant to which we currently expect, commencing with the first full fiscal quarter following the consummation of this offering, to distribute at least 20% of our annual profits available for distribution by way of quarterly dividends. In determining whether there are profits available for distribution, our board of directors will take into account our business plan and current and expected obligations and no distribution will be made that in the judgment of our board of directors would prevent us from meeting such business plan or obligations.

Notwithstanding this policy, dividends will be paid only when, as and if approved by our board of directors out of funds legally available therefor. The actual amount and timing of dividend payments will depend upon our financial condition, results of operations, business prospects and such other matters as the board may deem relevant from time to time. Even if profits are available for the payment of dividends, the board of directors could determine that such profits should be retained for an extended period of time, used for working capital purposes, expansion or acquisition of businesses or any other appropriate purpose. As a holding company, we are dependent upon the earnings and cash flow of our subsidiaries in order to fund any dividend distributions, and, as a result, we may not be able to pay dividends in accordance with our policy. Our board of directors may, from time to time, examine our dividend policy and may, in its absolute discretion, change such policy.

CAPITALIZATION

The following table summarizes our capitalization as of March 31, 2004 on:


•	a historical basis; and


•	as adjusted to give effect to the completion of this offering, including the application of the estimated net proceeds to us from this offering as described under "Use of Proceeds."

You should read the following table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Capital Stock" and our consolidated financial statements and related notes appearing elsewhere in this prospectus.


	As of March 31, 2004
	Actual			Pro Forma Consolidated
	(unaudited)
	(in thousands)
Cash and cash equivalents	$	28,901		$
Debt:
Parent company loans		150,504
Long term debt		427,576
Total debt		578,080
Shareholders' equity:
Common stock, $0.001 par value; 200,000,000 shares authorized and 30,769,230 shares issued and outstanding, historical; shares authorized and shares issued and outstanding, pro forma consolidated		31
Additional paid-in capital		6,994
Unearned stock-based compensation		(76	)
Retained Earnings		37,322
Total shareholders' equity		44,271
Total capitalization	$	622,351		$

The discussion and tables above exclude shares of our common stock available for future grant or issuance under our stock option plan(s). See "Management—Stock Option Plan."

DILUTION

At March 31, 2004, the net tangible book value of our common stock was approximately $8.4 million, or approximately $0.27 per share of our common stock. After giving effect to the sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, and after deducting estimated underwriting discounts and commissions paid by us and the estimated offering expenses of this offering, the net tangible book value at March 31, 2004 attributable to common stockholders would have been approximately $ million, or approximately $ per share of our common stock. This represents an immediate increase in net tangible book value of $ per share, and an immediate dilution in net tangible book value of $ per share to new stockholders. The following table illustrates this per share dilution to new stockholders:


Assumed initial public offering price per share				$
Net tangible book value per share before the offering				$
Net increase in tangible book value per share attributable to new stockholders				$
Net tangible book value per share after the offering				$
Dilution in net tangible book value per share to new stockholders				$

The table below summarizes, as of , the differences for our existing stockholders and new stockholders in this offering, with respect to the number of shares of common stock purchased from us, the total consideration paid and the average price per share paid before deducting fees and expenses.

Shares Issued

Total Consideration

Average Price
Per Share

Number

Percentage

Amount

Percentage

(in thousands, except per share data)

Our existing stockholders

New stockholders in this offering

Total

The discussion and tables above exclude shares of our common stock available for future grant or issuance under our stock plans. See "Management—Stock Option Plans."

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth our selected consolidated financial and other data for the periods ended and at the dates indicated in such table. We have derived the selected consolidated financial and other data as of and for the periods ended December 31, 2001, 2002 and 2003 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the selected consolidated financial data as of and for the periods ended December 31, 1999 and 2000 from our unaudited consolidated financial statements not included in this prospectus. We have derived the selected consolidated financial and other data as of and for the three months ended March 31, 2003 and March 31, 2004 from our unaudited consolidated financial statements included elsewhere in this prospectus. In the opinion of our management, our unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial position, results of operations and cash flows. The results of operations for the three months ended March 31, 2003 and March 31, 2004 are not necessarily indicative of the operating results to be expected for the full fiscal years encompassing such periods.

The information set forth below should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements included elsewhere in this prospectus.


	Year Ended December 31,															Three Months Ended March 31,
	1999			2000			2001			2002			2003			2003			2004
	(unaudited)															(unaudited)
Statement of Operations Data:
Revenues:
Electricity	$	15,169		$	20,780		$	33,956		$	65,491		$	77,752		$	17,604		$	33,459
Products		64,388			27,780			13,959			20,138			41,688			7,812			14,146
		79,557			48,560			47,915			85,629			119,440			25,416			47,605
Cost of revenues:
Electricity		6,847			8,556			12,536			33,482			46,726			10,148			19,390
Products		40,644			22,709			17,454			17,293			29,494			6,317			11,328
		47,491			31,265			29,990			50,775			76,220			16,465			30,718
Gross margin		32,066			17,295			17,925			34,854			43,220			8,951			16,887
Operating Expenses:
Research and development expenses		3,289			2,260			1,729			1,503			1,391			439			302
Selling and marketing expenses		6,593			3,624			6,535			6,051			7,087			1,367			1,854
General and administrative expenses		7,614			6,632			5,444			7,073			9,252			2,057			2,332
Operating income		14,570			4,779			4,217			20,227			25,490			5,088			12,399
Other income (expense):
Interest income		982			1,606			1,441			1,319			542			109			244
Interest expense		(3,814	)		(3,807	)		(4,451	)		(6,889	)		(8,055	)		(1,720	)		(8,523	)
Foreign currency translation and transaction gain (loss)		(9	)		25			305			(323	)		(316	)		(114	)		(321	)
Equity in income investees		4			69			166			314			559			89			787
Other non-operating income		223			7,884			300			1,195			464			133			(24	)
Income from continuing operations before minority interest and income taxes		11,956			10,556			1,978			15,843			18,684			3,585			4,562
Minority interest in earnings of subsidiaries		277			550			645			1,194			519			201			108
Income from continuing operations before income taxes		11,679			10,006			1,333			14,649			18,165			3,384			4,454
Income tax provision		(2,786	)		(494	)		(3,065	)		(6,135	)		(2,506	)		(1,397	)		(1,717	)
Income (loss) from continuing operations		8,893			9,512			(1,732	)		8,514			15,659			1,987			2,737
Discontinued operations:
Loss from operations of discontinued activities in Kazakhstan		(3,374	)		(2,911	)		(4,681	)		(3,114	)		—			—			—
Loss on sale of Kazakhstan operations		—			—			—			(6,444	)		—			—			—
Income (loss) before cumulative effect of change in accounting principle		5,519			6,601			(6,413	)		(1,044	)		15,659			1,987			2,737


	Year Ended December 31,															Three Months Ended March 31,
	1999			2000			2001			2002			2003			2003			2004
	(unaudited)															(unaudited)
Cumulative effect of change in accounting principle (net of tax benefit of $125)		—			—			—			—			(205	)		(205	)		—

Net income (loss)	$	5,519		$	6,601		$	(6,413	)	$	(1,044	)	$	15,454		$	1,782		$	2,737

Basic and diluted income (loss) per share	$	0.18		$	0.21		$	(0.21	)	$	(0.03	)	$	0.50		$	0.05		$	0.09

Weighted average number of shares outstanding		30,769,230			30,769,230			30,769,230			30,769,230			30,769,230			30,769,230			30,769,230
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	7,803		$	10,071		$	17,669		$	36,684		$	8,873		$	23,573		$	28,901
Working capital (deficit)		(864	)		(18,676	)		(49,867	)		(81,659	)		7,226			(71,444	)		24,239
Property, plant and equipment, net		60,167			90,946			132,369			152,342			344,015			151,949			398,630
Total assets		139,266			167,940			219,390			287,378			547,536			268,440			697,884
Long-term debt		51,118			61,358			91,321			95,807			260,488			106,803			427,576
Notes payable to Parent		—			—			—			—			177,004			—			150,504
Stockholder's equity		26,849			33,450			25,904			26,031			41,524			27,823			44,271

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

Overview

The unaudited pro forma condensed combined balance sheet, as of March 31, 2004, is based on our consolidated financial statements and the financial statements of the Puna project, which was acquired by us on June 3, 2004, and adjusted to give effect to the acquisition of the Puna project as if it had occurred on March 31, 2004. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2003 and for the three months ended March 31, 2004 are based on our consolidated financial statements and the financial statements of the Puna, Heber 1, Heber 2 and Mammoth projects, which Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project were acquired on December 18, 2003, and adjusted to give effect to the acquisition thereof as if each had occurred at the beginning of the periods presented.

The unaudited pro forma condensed combined financial data gives effect to the acquisitions of the Puna, Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project, acquisitions which are accounted for using the purchase method of accounting. Pursuant to such method, the purchase price has been allocated to the principal categories of assets and liabilities in the accompanying pro forma financial data based on independent valuations related to the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project, and on preliminary estimates of fair value related to the Puna project acquisition. The actual fair value and allocation of the purchase price of the Puna project acquisition will be determined upon the completion of an independent valuation. The actual allocation of the purchase price and the resulting effect on income from operations may differ for the estimate included herein for the Puna project. It should be noted that because the acquisitions of the (i) Steamboat 1/1A project on June 30, 2003, (ii) Steamboat 2/3 Project on February 11, 2004, and (iii) Steamboat Hills project on May 20, 2004 are not material under applicable Securities Act rules, such transactions have not been included in the accompanying pro forma balance sheet or results of operations.

The unaudited pro forma condensed combined financial data also give effect to (i) Ormat Funding's issuance of 8¼% senior secured notes in the amount of $190 million, which offering was completed on February 13, 2004, and (ii) Orcal Geothermal's entering into a loan agreement with Beal Bank amounting to $154.5 million in connection with the acquisition of the Heber 1, Heber 2 and Mammoth projects.

The unaudited pro forma condensed combined financial data presented herein does not necessarily reflect what our actual results of operations or financial position would have been had the transactions occurred at the dates indicated, or project our results of operations or financial position for any future date or period.

The unaudited pro forma condensed combined financial data should be read in conjunction with our historical consolidated financial statements and the historical financial statements of the Heber 1, Heber 2, Mammoth and Puna projects included elsewhere in this prospectus.

Unaudited Pro Forma Condensed Combined Balance Sheet
March 31, 2004
(in thousands)


	Ormat Technologies Consolidated			Puna Project		Pro Forma Adjustments			Pro Forma Combined
Assets
Current assets:
Cash and cash equivalents	$	28,901		$	5,112	$	(5,112)	(a)	$	28,901
Restricted cash and cash equivalents		50,645			3,069		(3,069	)(a)		50,645
Receivables		29,683			1,881		(281	)(a)		31,283
Inventory		4,285			4,512		(4,512	)(a)		4,285
Costs and estimated earnings in excess of billings on uncompleted contracts		4,211			—					4,211
Prepaid expenses and other		2,446			77		(77	)(a)		2,446
Total current assets		120,171			14,651					121,771
Restricted cash and cash equivalents		25,800			—					25,800
Investments		52,210			—					52,210
Deposits and other		27,098			1,161		(1,161	)(a)		27,098
Property, plant and equipment, net		398,630			136,039		(69,280	)(b)		465,389
Construction-in-process		37,990			53					38,043
Intangible assets, net		35,985			—		6,500	(b)		42,485
Total assets	$	697,884		$	151,904				$	772,796
Liabilities and Stockholder's Equity
Current liabilities:
Short-term debt	$	—		$	3,024	$	(3,024)	(a)	$	—
Accounts payable, accrued expenses and other		36,236			1,975		(1,975	)(a)		36,236
Billings in excess of costs and estimated earnings on uncompleted contracts		6,301			—					6,301
Current portion of long-term debt		53,395			—					53,395
Total current liabilities		95,932			4,999					95,932
Long-term debt, net of current portion		374,181			40,295		(40,295	)(a)		374,181
Deferred income taxes		14,903			—					14,903
Note payable to Parent		150,504			—		72,831	(b)		223,335
Liabilities for severance pay and other		11,272			2,769		(2,769	)(a)		11,272
Asset retirement obligation		6,752			2,081					8,833
Total liabilities		653,544			50,144					728,456
Minority interest in net assets of subsidiaries		69			—					69
Stockholder's equity:
Common stock		31			—					31
Additional paid-in capital		6,994			—					6,994
Unearned stock-based compensation		(76	)		—					(76	)
Retained earnings		37,322			101,760		(101,760	)(a)		37,322
Total stockholder's equity		44,271			101,760					44,271
Total liabilities and stockholder's equity	$	697,884		$	151,904				$	772,796

Unaudited Pro Forma Condensed
Combined Statement of Operations
For the Three Months Ended March 31, 2004
(in thousands)


	Ormat Technologies Consolidated			Puna Project for the three months ended March 31, 2004			Pro Forma Adjustments			Pro Forma Combined
Revenues:
Electricity segment	$	33,459		$	5,603					$	39,062
Products segment		14,146			—						14,146
		47,605			5,603						53,208
Cost of revenues:
Electricity segment		19,390			3,655			(756	)(c)		22,359
								70	(d)
Products segment		11,328			—						11,328
		30,718			3,655						33,687
Gross margin		16,887			1,948						19,521
Operating expenses:
Selling, general and administrative		4,488			519						5,007
Operating income		12,399			1,429						14,514
Other income (expense):
Interest income		244			—						244
Interest expense		(8,523	)		(803	)		803	(e)		(12,283	)
								(2,798	)(f)
								(962	)(h)
Equity in income of investees		787			—						787
Foreign currency translation and transaction loss		(321	)		—						(321	)
Miscellaneous income		(24	)		—						(24	)
Income from continuing operations before minority interest and income taxes		4,562			626						2,917
Minority interest in earnings of subsidiaries		108			—						108
Income from continuing operations		4,454			626						2,809
Income tax provision		(1,717	)		(238	)		908	(j)		(1,047	)
Net income	$	2,737		$	388					$	1,762

Unaudited Pro Forma Condensed
Combined Statement of Operations
For the Year Ended December 31, 2003
(in thousands)


	Ormat Technologies Consolidated			Heber Projects for the period from January 1, 2003 to December 17, 2003			Puna Project			Pro Forma Adjustments			Pro Forma Combined
Revenues:
Electricity segment	$	77,752		$	66,131		$	18,737					$	162,620
Products segment		41,688			—			—						41,688
		119,440			66,131			18,737						204,308
Cost of revenues:
Electricity segment		46,726			37,483			14,735			(1,588	)(c)		98,901
											1,545	(d)
Products segment		29,494			—			—						29,494
		76,220			37,483			14,735						128,395
Gross margin		43,220			28,648			4,002						75,913
Operating expenses:
Selling, general and administrative		17,730			29			1,605						19,364
Operating income		25,490			28,619			2,397						56,549
Other income (expense):
Gain on discharge of liabilities subject to compromise		—			31,460			—						31,460
Reorganization costs		—			(4,029	)		—						(4,029	)
Interest income		542			99			45						686
Interest expense		(8,055	)		(1,794	)		(3,468	)		5,217	(e)		(40,343	)
											(16,785	)(f)
											(11,608	)(g)
											(3,850	)(h)
Equity in income of investees		559			—			—			1,612	(i)		2,171
Foreign currency translation and transaction loss		(316	)		—			—						(316	)
Miscellaneous income		464			—			—						464
Income from continuing operations before minority interest and income taxes		18,684			54,355			(1,026	)					46,642
Minority interest in earnings of subsidiaries		519			—			—						519
Income from continuing operations		18,165			54,355			(1,026	)					46,123
Income tax provision		(2,506	)		(20,655	)		390			10,148	(j)		(12,623	)
Income before cumulative effect of change in accounting principle	$	15,659		$	33,700		$	(636	)				$	33,500

Notes to Unaudited Pro Forma
Condensed Combined Financial Data

The following adjustments were applied to our historical financial statements and those of the Puna, Heber 1, Heber 2 and Mammoth projects in order to prepare the pro forma condensed combined financial data.

Balance Sheet Footnotes:

The unaudited pro forma condensed combined balance sheet at March 31, 2004 is based on our consolidated financial statements and the financial statements of the Puna project and adjusted to give effect to the acquisition of the Puna project as if it had occurred on March 31, 2004 by combining our balance sheet with the balance sheet of the Puna project at March 31, 2004.

(a) Reflects an adjustment to eliminate assets and liabilities not acquired by us, and to eliminate the former owners' equity in the Puna project.

(b) The preliminary allocation of the purchase price for the Puna project, assuming the acquisition occurred on March 31, 2004, is as follows (in thousands):


Cash purchase price	$	72,600
Acquisition costs		231
Total purchase price	$	72,831
Property, plant and equipment	$	66,812
Power purchase agreement		6,500
Accounts receivable, net		1,600
Asset retirement obligation		(2,081	)
Total purchase price allocation	$	72,831
Step-down of fixed assets included in net tangible assets	$	69,280
Step-up for power purchase agreement	$	6,500

Statements of Operations Footnotes:

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2003 and for the three months ended March 31, 2004 are based on our consolidated financial statements and the financial statements of the Puna, Heber 1, Heber 2 and Mammoth projects, and adjusted to give effect to the acquisitions as if they had occurred at the beginning of the periods presented by: (1) combining our results of operations for the year ended December 31, 2003 and the three months ended March 31, 2004, with (i) the Puna project's operations for the year ended December 31, 2003 and for the three months ended March 31, 2004, and (ii) the Heber 1 and Heber 2 projects' operations for the period from January 1, 2003 to December 17, 2003, and (2) recording our 50% equity in the income of the Mammoth project for the period from January 1, 2003 to December 17, 2003, with our results for the year ended December 31, 2003.

(c) Represents the recording of the change in depreciation resulting from the (step-down)/step-up in basis of $(69.3) million, and $110 million of property, plant and equipment to their respective fair values related to the acquisitions of the Puna, Heber 1, and Heber 2 projects, respectively. Property, plant and equipment are being depreciated using the straight-line method over the estimated service period of 15 to 23 years.

(d) Represents the recording of the change in amortization resulting from the step-up in basis of $6.5 million and $25.3 million of power purchase agreements to their respective fair values related to the acquisition of the Puna, Heber 1 and Heber 2 projects, respectively, using the straight-line method over the estimated contract periods of 15 to 23 years.

(e) Represents the elimination of interest expense related to the Puna, Heber 1, and Heber 2 projects related to project financing and capital leases that have been terminated as part of the acquisitions.

(f) Represents the recording of interest expense, prior to February 13, 2004, associated with the gross proceeds of $190 million pursuant to the issuance by Ormat Funding of the senior secured notes with an interest rate of 8.25%, including the amortization of debt issue costs.

(g) Represents the recording of interest expense associated with the gross proceeds of $154.5 million from Beal Bank with an interest rate of 7.125%, including the amortization of debt issue costs. Such debt was incurred for the acquisition of the Heber 1 and Heber 2 projects.

(h) Represents the recording of interest expense related to shareholder loans and short-term loans aggregating $72.8 million at an interest rate of 5.5% associated with the acquisition of the Puna project.

(i) Represents the recording of our 50% equity in the income of the Mammoth project, increased by the amortization of the equity basis difference, and has been presented as "Equity in income of investee." As the purchase price is less than the underlying net equity of the Mammoth project by $9.5 million, the equity basis will be amortized over the remaining useful life of the property, plant and equipment and the power purchase agreements, which is approximately 12 to 17 years.

Summarized statement of operations information of the Mammoth project for the period from January 1, 2003 to December 17, 2003 is as follows (in thousands):


Revenues	$	16,353
Gross margin		4,288
Net income		2,024
Company's equity in income of the Mammoth project:
50% of the Mammoth project net income	$	1,012
Plus amortization of the equity basis difference		600
	$	1,612

(j) Represents the recording of income tax expenses to reflect an effective tax rate of 40% on the pro forma adjustments, which is our expected effective tax rate.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our results of operations, financial condition and liquidity in conjunction with our consolidated financial statements and the related notes. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategies for our business, statements regarding the industry outlook, our expectations regarding the future performance of our business, and the other non-historical statements contained herein are forward-looking statements. See "Special Note Regarding Forward-Looking Statements." You should also review the "Risk Factors" section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described herein or implied by such forward-looking statements. Unless specifically stated otherwise, references to balances and results of operations in this section are to our continuing operations and do not include our discontinued operations discussed below. In addition, financial information presented herein for periods on and prior to March 31, 2004 does not reflect the acquisitions of the Puna project, the Steamboat 2/3 project (with respect to periods prior to February 11, 2004) and the Steamboat Hills project. For a discussion of the effect of our significant acquisitions, please see "Unaudited Pro Forma Condensed Combined Financial Data" included elsewhere in this prospectus, which does not include the acquisition of the Steamboat 2/3 project and Steamboat Hills project.

Overview

We are a leading vertically integrated company engaged in the geothermal and recovered energy power business. We design, develop, build, own and operate clean, environmentally friendly geothermal power plants, and we also design, develop and build, and plan to own and operate, recovered energy-based power plants, in each case, using equipment that we design and manufacture. In addition, we sell the equipment we design and manufacture for geothermal electricity generation, recovered energy-based electricity generation, and other equipment for electricity generation to third parties. Our operations consist of two principal business segments. The first consists of the sale of electricity from our power plants, which we refer to as the Electricity Segment, while the second consists of the design, manufacturing and sale of equipment for electricity generation, the installation thereof and the provision of related operation and maintenance services, which we refer to as the Products Segment.

Our Electricity Segment currently consists of our investment in power plants producing electricity from geothermal resources. It will also include our planned investment in power plants producing electricity from recovered energy resources. Our geothermal power plants include both power plants that we have built and power plants that we have acquired. Our Products Segment consists of the design, manufacture and sale of equipment that generates electricity, principally, from geothermal and recovered energy resources, but also using other fuel sources as well. Our Products Segment also includes, to the extent requested by our customers, the installation of our equipment and other related power plant installations and the provision of operation and maintenance services. For the three months ended March 31, 2004, our Electricity Segment represented approximately 70.3% of our total revenues, while our Products Segment represented approximately 29.7% of our total revenues during such period.

Our Electricity Segment operations are conducted in the United States and throughout the world. We are the fastest growing geothermal power generation company in the United States, measured by growth in generating capacity. Since January 1, 2001, we have completed various acquisitions of geothermal power plants in the United States with an aggregate acquisition cost, net of cash received, of $410.8 million. Such acquisitions have increased our net ownership in our generating capacity from 94 MW, as of December 31, 2001, to 312 MW, as of June 30, 2004. We also own (or control) and operate geothermal power plants in Guatemala, Kenya, Nicaragua and the Philippines. In 2003, pro forma revenues from the sale of electricity by our power plants were $162.6 million. Such revenues do not include any revenues attributable to our Steamboat 2/3 project and Steamboat Hills project that were acquired in 2004, which we estimate (based on, in the case of the Steamboat 2/3 project, $14.0

million of revenues generated by such project in 2003 and, in the case of the Steamboat Hills project, $3.0 million based on the current revenue generation of such project, computed on an annualized basis) to be approximately $17.0 million for the fiscal year ended December 31, 2004.

Our Products Segment operations are also conducted in the United States and throughout the world. For the fiscal year ended December 31, 2003, revenues attributable to our Products Segment were $41.7 million. Such revenues included approximately $5.0 million received from the construction of a recovered energy-based power plant in a gas processing plant in the United States. We expect that an important component of our Products Segment will be the design, manufacturing and sale of recovered energy products, which is a market opportunity we have identified that we expect will allow us (in our Electricity Segment) and potential customers (in our Products Segment) to utilize waste heat for the purpose of producing electricity.

Our Electricity Segment is characterized by relatively predictable revenues generated by our power plants pursuant to long-term power purchase agreements, with terms which are generally up to 20 years. By contrast, revenues attributable to our Products Segment, which are based on the sale of equipment and the provision of various services to our customers are far less predictable and may vary significantly from period to period. Our management assesses the performance of our two segments of operation differently. In the case of our Electricity Segment, when making decisions about potential acquisitions or the development of new projects, our management typically focuses on the internal rate of return of the relevant investment, relevant technical and geological matters and other relevant business considerations. Additionally, as part of our Electricity Segment, our management evaluates our operating projects based on the performance of such projects in terms of revenues and expenses in contrast to projects that are under development, which our management evaluates based on costs attributable to each such project. Our management evaluates the performance of our Products Segment based on the timely delivery of our products, performance quality of our products and costs actually incurred to complete customer orders as compared to the costs originally budgeted for such orders.

Recent Developments

In December 2003, we acquired our Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project for a total cost of approximately $256.8 million. The acquisition of our Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project was financed with a combination of parent company loans, project finance debt provided by Beal Bank and short-term loans. We accounted for such acquisition pursuant to the purchase method of accounting in accordance with Statement of Financial Accounting Standards (which we refer to as SFAS) No. 141.

In February 2004, we acquired the Steamboat 2/3 project for a total cost of approximately $82.8 million. The acquisition of the Steamboat 2/3 project was financed with a portion of the proceeds received from the issuance of the 8¼% senior secured notes by Ormat Funding. Such acquisition was accounted for pursuant to the purchase method of accounting in accordance with SFAS No. 141.

At the end of May 2004, we acquired the Steamboat Hills project for a total cost of approximately $20.2 million and in early June 2004, we acquired the Puna project for a total cost of approximately $72.8 million. The acquisition of the Steamboat Hills project was financed with internally generated cash while the acquisition of the Puna project was financed with parent company loans and short-term loans. We accounted for the acquisitions of both of the Puna and Steamboat Hills projects pursuant to the purchase method of accounting in accordance with SFAS No. 141.

As a result of our recent acquisitions, our results of operations for the various periods covered by our financial statements attached hereto may not be comparable with each other or indicative of future results.

Trends and Uncertainties

The geothermal industry in the United States has historically experienced significant growth followed by a consolidation of owners and operators of geothermal power plants. During the 1990s,

growth and development in the geothermal industry occurred primarily in foreign markets and only minimal growth and development occurred in the United States. Since 2001, there has been increased demand for energy generated from geothermal resources in the United States as production costs for electricity generated from geothermal resources have become more competitive relative to fossil fuel generation due to increasing gas prices and as a result of newly enacted legislative and regulatory incentives, such as state renewable portfolio standards. We see the increasing demand for energy generated from geothermal and other renewable resources in the United States and the further introduction of renewable portfolio standards as the most significant trends affecting our industry today and in the immediate future. Our operations and the trends that from time to time impact our operations are subject to market cycles.

Although other trends, factors and uncertainties may impact our operations and financial condition, including many that we do not or cannot foresee, we believe that our results of operations and financial condition for the foreseeable future will be affected by the following trends, factors and uncertainties:

•

We have experienced significant growth through the acquisition and enhancement of geothermal power plants. On a pro forma basis, the Heber 1 and Heber 2 projects and the Puna project accounted for 33.3% and 9.2% of our pro forma revenues, respectively, and 45.9% and 10.8% of our operating profits, respectively, for the fiscal year ended December 31, 2003. As a result of such acquisitions, we expect an increase in our revenues and operating profits for the current fiscal year, as compared to our consolidated revenues and operating profits for the fiscal year ended December 31, 2003. We also expect an increase in our revenues and operating profits for the current fiscal year as a result of the acquisition of the Steamboat 2/3 project and the Steamboat Hills project this year.

•

In the United States, we expect to continue to benefit from the increasing demand for renewable energy as a result of favorable legislation adopted by 17 states, including California, Nevada and Hawaii (where we have been the most active in our geothermal development and in which all of our U.S. projects are located). In each of these states, relevant legislation currently requires that an increasing percentage of the electricity supplied by electric utility companies operating in such states be derived from renewable energy resources until certain pre-established goals are met. We expect that the additional demand for renewable energy from utilities in such states will create additional opportunities for us to expand existing projects and build new power plants.

•

Outside of the United States, we expect that a variety of governmental initiatives, including the award of long-term contracts to independent power generators, the creation of competitive wholesale markets for selling and trading energy, capacity and related energy products and the adoption of programs designed to encourage "clean" renewable and sustainable energy sources, will create new opportunities for the development of new projects as well as create additional markets for our remote power units and other products.

•

We have identified recovered energy-based power generation as a significant market opportunity for us in the United States and throughout the world. We are initially targeting the North American market and, thereafter, we intend to leverage our success in such market in order to expand such operations throughout the world. If our expectations regarding the growth in demand for our recovered energy units are not met, we may not be able to generate the revenues we expect from such operations.


•	In the short term, we may experience a decline in our revenues attributable to our Products Segment as we currently do not have any new orders to replace large existing contracts.


•	We expect to continue to generate the majority of our revenues from the sale of electricity from our power plants. All of our current revenues from the sale of electricity are derived from fully-contracted payments under long-term power purchase agreements.


•	We expect that our financing expenses during the current fiscal year will increase, as compared to our financing expenses for the fiscal year ended December 31, 2003, as we financed the majority of our recent acquisitions with long-term non- and limited-recourse financing.

•

The viability of the geothermal resources utilized by our power plants that generate electricity depends on various factors such as the heat content of the geothermal reservoir, useful life of the reservoir (the term during which such geothermal reservoir has sufficient extractable fluids for our operations) and operational factors relating to the extraction of the geothermal fluids. Our geothermal power plants may experience an unexpected decline in the capacity of their respective geothermal wells. Such factors, together with the possibility that we may fail to find commercially viable geothermal resources in the future, represent significant uncertainties we face in connection with our operations.

•

Our foreign operations are subject to significant political, economic and financial risks, which vary by country. Such risks include the ongoing privatization of the electricity industry in the Philippines, the partial privatization of the electricity sector in Guatemala, labor unrest and strengthening of unions in Nicaragua and the political uncertainty currently prevailing in Kenya. Although we maintain political risk insurance as an attempt to mitigate such risks, such insurance does not provide complete coverage with respect to all such risks.


•	We do not expect the current low interest rate environment to continue in the foreseeable future. As a result, any increases in interest rates that impact our existing financings or future financings could increase the aggregate amount of our interest expenses and thus could have an adverse effect on our results of operations.


•	We have experienced recent increases in the cost of raw materials required for our equipment manufacturing activities, which we believe have resulted primarily from increased demand in the Chinese market for such raw materials and in the cost of transportation of our products. An increase in such costs may have an adverse effect on our financial condition and results of operations.

Revenues

We generate our revenues primarily from the sale of electricity from our geothermal power plants and the design, manufacturing and sale of equipment for electricity generation and the construction, installation and engineering of power plant equipment.

Revenues attributable to our Electricity Segment are relatively predictable as they are derived from the sale of electricity from our power plants pursuant to long-term power purchase agreements, however, such revenues are subject to seasonal variations, as more fully described below in the section entitled "Seasonality". Our power purchase agreements generally provide for the payment of capacity payments, energy payments, or both. Generally, capacity payments are payments calculated based on the amount of time that our power plants are available to generate electricity. Some of our power purchase agreements provide for bonus payments in the event that we are able to exceed certain target levels and the potential forfeiture of payments if we fail to meet minimum target levels. Energy payments, on the other hand, are payments calculated based on the amount of electrical energy delivered to the relevant power purchaser at a designated delivery point. The rates applicable to such payments are either fixed (subject, in certain cases, to certain adjustments) or are based on the relevant power purchaser's short run avoided costs (the incremental costs that the power purchaser avoids by not having to generate such electrical energy itself or purchase it from others).

Revenues attributable to our Products Segment are generally unpredictable because larger customer orders for our products are typically a result of our participating in, and winning, tenders issued by potential customers in connection with projects they are developing. Such projects often take a long time to design and develop and are often subject to various contingencies such as the customer's ability to raise the necessary financing for such project. As a result, we are generally unable to predict the timing of such orders for our products and may not be able to replace existing orders that we have completed with new ones. As a result, our revenues from our Products Segment fluctuate (and at times, extensively) from period to period.

The following table sets forth a breakdown of our revenues for the periods indicated:


	Revenues										% of revenues for period indicated
	(in thousands)
	Year ended December 31,						Three months ended March 31,				Year ended December 31,									Three months ended March 31,
	2001		2002		2003		2003		2004		2001			2002			2003			2003			2004
							(unaudited)													(unaudited)
Revenues
Electricity Segment	$	33,956	$	65,491	$	77,752	$	17,604	$	33,459		70.9	%		76.5	%		65.1	%		69.3	%		70.3	%
Products Segment		13,959		20,138		41,688		7,812		14,146		29.1			23.5			34.9			30.7			29.7
Total	$	47,915	$	85,629	$	119,440	$	25,416	$	47,605		100	%		100	%		100	%		100	%		100	%

Geographical breakdown

11.7%, 48.0% and 56.4% of the revenues attributable to our Electricity Segment were generated in the United States in 2001, 2002, and 2003, respectively. For the three months ended March 31, 2004, 74.7% of our revenues attributable to our Electricity Segment were generated in the United States, as compared to 50.9% for the same period in 2003. During the past three fiscal years, the percentage of our total revenues attributable to the sale of electricity in the United States has increased significantly, as compared to the percentage of our total revenues that is attributable to the sale of electricity by our foreign projects that has declined commensurately. Such increase is largely attributable to our recent acquisition of various projects in the United States. The following table sets forth the geographic breakdown of the revenues attributable to our Electricity Segment for the periods indicated:


	Year ended December 31,									Three Months ended March 31,
	2001			2002			2003			2003			2004
United States		11.7	%		48.0	%		56.4	%		50.9	%		74.7	%
Foreign		88.3	%		52.0	%		43.6	%		49.1	%		25.3	%

Historically, revenues attributable to our Products Segment, after giving effect to the elimination of intercompany balances, have been derived primarily from outside of the United States, which is reflective of the historical demand in the United States described elsewhere in this prospectus. Since 2003, we have begun to generate revenues attributable to our Products Segment in the United States as well. However, as a result of the volatility and unpredictability of the revenues attributable to our Products Segment and the impact that a few sales or EPC contracts can have on the geographic distribution of such revenues, the geographical distribution of such revenues may not be indicative of any developing trends and of our future results.

Seasonality

The demand for the electricity generated by our domestic projects and the prices paid for such electricity pursuant to our power purchase agreements are subject to seasonal variations. The demand for electricity from the Heber 1 project and Heber 2 project, the Mammoth project and the Ormesa project is the highest in the summer months of June through September, because the power purchaser for those projects, Southern California Edison Company, delivers more electricity to its California markets during such period in order to meet demand for air conditioning and other energy-intensive cooling systems utilized during such summer months. The demand for electricity from the Steamboat complex and the Brady project is more balanced, consisting of both summer and winter peaks that reflect the greater temperature variation in Nevada. Similarly, the demand for electricity from the Puna project is balanced due to the equatorial temperature in Hawaii (with less pronounced temperature variations during the year). In California, the capacity rates payable pursuant to the applicable power purchase agreement are higher in the summer months and as a result we receive higher revenues during such months. In contrast, there are no significant changes in prices during the year payable pursuant to our power purchase agreement for the Puna project and the Nevada

projects. In the winter, due principally to the lower ambient temperature, our power plants produce more energy and as a result we receive higher energy revenues. However, the higher capacity payments payable by the power purchaser in California in the summer months as a result of the increase in demand and in prices has a more significant impact on our revenues than that of the higher energy revenues generally generated in winter due to increased efficiency, and as a result our revenues are generally higher in the summer than in the winter.

Expenses

Electricity Segment

The principal expenses attributable to our operating projects include operation and maintenance expenses such as labor expenses, equipment expenses, cost of parts and chemicals, costs related to third-party services, lease expenses, royalties, startup and auxiliary electricity purchases, property taxes and insurance and, for the California projects, transmission charges, scheduling charges and purchases of sweet water for use in our plant cooling towers. Some of these expenses such as parts and third party services, are not incurred on a regular basis, which results in fluctuations in our expenses and our results of operations for individual projects from quarter to quarter.

Our partner in the Mammoth project reimburses us for 50% of the actual costs associated with the operation and maintenance of the project, plus certain general and administrative expenses.

Lease expenses are included as a component of operating expenses and principally consist of payments made to government agencies and private entities as compensation for the use of the relevant geothermal resources and site leases where plants are located.

Royalty payments are payments made as compensation for the right to use certain geothermal resources and are included as a component of operating expenses and are paid as a percentage of the revenues derived from the associated geothermal resources.

Products Segment

The principal expenses attributable to our Products Segment include materials, salaries and related employee benefits, expenses related to subcontracting activities, transportation expenses, and royalties pertaining to government participation in our research and development programs at a rate of 3.5% of the proceeds recovered from the sale of products which were developed pursuant to such research and development programs.

Some of the principal expenses attributable to our Products Segment, such as a portion of the costs related to labor, utilities and other support services, are fixed and, in order to maintain our current production and construction capability, must be incurred, notwithstanding the revenues attributable to our Products Segment. As a result, the cost of revenues attributable to our Products Segment, expressed as a percentage of total revenues, is often very volatile. To date, our management has made the strategic decision to maintain our production and construction capacity, and therefore maintain the fixed cost component of the total costs attributable to our Products Segment at the current level. Another reason for such volatility is that in responding to bids for our products, we price our products and services in relation to existing competition and other prevailing market conditions, which may vary substantially from order to order.

Critical Accounting Policies

Our critical accounting policies are more fully described in Note 1 to our audited consolidated financial statements. However, certain of our accounting policies are particularly important to the portrayal of our financial position and results of operations. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. Such estimates are based on management's historical experience, the terms of existing contracts, management's observance of trends in the geothermal industry, information provided by our customers and information available to management from other outside sources, as appropriate. Such estimates are subject to an inherent degree of uncertainty. Our critical accounting policies include:

•

Revenues . Revenues related to the sale of electricity from our geothermal power plants and capacity payments paid in connection with such sale are recorded based upon output delivered and capacity provided by such power plants at rates specified pursuant to the relevant power purchase agreements. Revenues generated from engineering and operating services and sales of products and parts are recorded once the service is provided or product delivery is made, as applicable. Revenues generated from the construction of geothermal power plant equipment, on behalf of third parties, is recognized on the percentage completion method, which is the relationship between costs actually incurred and total estimated costs to completion. Such cost estimate is made by management in part based on prior operations and in part based on specific project characteristics and designs. If management's estimates utilized with respect to our Products Segment of total estimated costs to completion are inaccurate, then the percentage of completion will also be inaccurate and thus lead management to over- or under-estimate the gross margins for our Products Segment. Selling, general and administrative costs are charged as and when incurred. Provisions for estimated losses relating to contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from the application of penalty provisions in relevant contracts and final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

•

Impairment of Long-lived Assets and Long-lived Assets to Be Disposed of . Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the relevant asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. We believe that no impairment exists for our long-lived assets, however future estimates as to the recoverability of such assets may change based on revised circumstances.

•

Obligations Associated with the Retirement of Long-Lived Assets . Effective January 1, 2003, we adopted SFAS No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets . Pursuant to SFAS No. 143, entities are required to record the fair market value of any legal liability related to the retirement of any of its assets in the period in which such liability is incurred. Our liabilities related to the retirement of our assets include our obligation to capping wells upon termination of our operating activities, the dismantling of our geothermal power plants upon cessation of our operations and the performance of certain remedial measures related to the land on which such operations were conducted. When a new liability for an asset retirement obligation is recorded, we capitalize the costs of such liability by increasing the carrying amount of the related long-lived asset. Such liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. At retirement, an entity either settles the obligation for its recorded amount or incurs a gain or a loss with respect thereto, as applicable. We estimate the costs related to such liabilities and if such estimates are incorrect, then the capitalized costs and carrying amount of the related long-lived asset will change and as a result may affect our financial condition.

•

Derivative Instruments. SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted by other related accounting literature, establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). SFAS No. 133 requires companies to record derivatives on their balance sheets as either assets or liabilities measured at their fair value unless such instruments are exempted from derivative treatment as a normal purchase and normal sale. All changes in the fair value of derivatives are recognized currently in earnings


	unless specific hedge criteria are met which requires a company to formally document, designate and assess the effectiveness of transactions that receive hedge accounting.

We maintain a risk management strategy that incorporates the use of interest rate swaps and interest rate caps to minimize significant fluctuation in cash flows and/or earnings that are caused by interest rate volatility. Gain or loss on contracts that initially qualify for cash flow hedge accounting is included as a component of other comprehensive income and are subsequently reclassified into earnings when interest on the related debt is paid. Gain or loss on contracts that are not designated to qualify as a cash flow hedge is included as a component of interest expense.

We were required to adopt and have become subject to the provisions of SFAS No. 133 Derivative Implementation Group ("DIG") Issue No. C15 (DIG Issue No. C15), Normal Purchases and Normal Sales Exception for Certain Option-Type Contracts and Forward Contracts in Electricity , which expands the requirements for the normal purchase and normal sales exception to include electricity contracts entered into by a utility company when certain criteria are met. Also, pursuant to DIG Issue No. C15, contracts that have a price adjustment clause based on an index that is not directly related to the electricity generated, as defined in SFAS No. 133, do not meet the requirements for the normal purchases and normal sales exception. We have power sales agreements that qualify as derivative instruments under DIG Issue No. C15 and do not meet the exception as they have a price adjustment clause based on an index that does not directly relate to the sources of the power used to generate the electricity. Our adoption of the provisions of DIG Issue No. C15 in 2002 did not have a material impact on our consolidated financial position and results of operations.

In June 2003, the FASB issued DIG Issue No. C20, Scope Exceptions: Interpretation of the Meaning of Not Clearly and Closely Related in Paragraph 10(b) regarding Contracts with a Price Adjustment Feature . DIG Issue No. C20 specified additional circumstances in which a price adjustment feature in a derivative contract would not be an impediment to qualifying for the normal purchases and normal sales scope exception under SFAS No. 133. DIG Issue No. C20 was effective as of the first day of the fiscal quarter beginning after July 10, 2003, or October 1, 2003 for us. DIG Issue No. C20 requires contracts that did not previously qualify for the normal purchases and normal sales scope exception, and do qualify for the exception under DIG Issue No. C20, to freeze the fair value of the contract as of the date of the initial application, and amortized such fair value over the remaining contract period. Upon our adoption of DIG Issue No. C20, we elected the normal purchase and normal sales scope exception under FAS No. 133 related to our power purchase agreements. Such adoption did not have a material impact on our consolidated financial position and results of operations.

•

Accounting for Income Taxes . As part of the process of preparing our consolidated financial statements, we are required to estimate our income tax in each of the jurisdictions in which we operate. This process requires us to estimate our actual current tax exposure and make an assessment of temporary differences resulting from differing treatment of items for tax and accounting purposes. Such differences result in deferred tax assets and liabilities which are included on our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that such recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase such allowance in a period, we must include an expense within the tax provision in our statement of operations. Management uses significant judgment in determining our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. In the event that we generate taxable income in a particular jurisdiction in which we operate and in which we have net operating loss carry-forwards for which a deferred tax valuation allowance has been established, we may be required to adjust our valuation allowance.


•	Stock Based Compensation . We account for stock-based compensation based on the provisions of Accounting Board Opinion No. 25, Accounting for Stock Issued to Employees ,

which we refer to as APB 25, which states that no compensation expense is required to be recorded for stock options or other stock-based awards to employees that are granted with an exercise price equal to or above the estimated fair value per share of common stock on the relevant grant date. In the event that stock options are granted at a price that is lower than the fair market value on the relevant date, the difference between the fair market value of the common stock and the exercise price of the stock options is recorded as unearned compensation. Unearned compensation is amortized to compensation expense over the vesting period applicable to the stock option. We have adopted the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation , as it relates to stock options granted to employees, which requires pro-forma net income to be disclosed based on the fair value of the options granted at the date of the relevant grant.


•	New Accounting Pronouncements

Consolidation of Variable Interest Entities

In January 2003, the Financial Accounting Statements Board, which we refer to as FASB, issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB 51 , which we refer to as FIN No. 46, as amended by FIN No. 46R in December 2003. Among other things, FIN No. 46R generally deferred the effective date of FIN No. 46 to the quarter ended March 31, 2004. The objectives of FIN No. 46R are to provide guidance on the identification of Variable Interest Entities, which we refer to as VIEs, for which control is achieved through means other than ownership of a majority of the voting interest of an entity, and how to determine which company (if any), as the primary beneficiary, should consolidate such VIE. A variable interest in a VIE, by definition, is an asset, liability, equity, contractual arrangement or other economic interest that absorbs the entity's economic variability.

Effective as of March 31, 2004, we adopted FIN No. 46R. In connection with the adoption of FIN No. 46R, we concluded that Ormat-Leyte Co. Ltd., in which we have an 80% ownership interest, should be deconsolidated. Ormat-Leyte Co. Ltd.'s operating results continue to be accounted for using the consolidated method of accounting for the three month period ending March 31, 2004 and, effective April 1, 2004, our ownership interest in Ormat-Leyte Co. Ltd. will be accounted for using the equity method of accounting.

Derivative Instruments and Hedging Activities

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities . SFAS No. 149 amends and clarifies the accounting and reporting treatment for derivative instruments, including certain derivatives embedded in other contracts, and hedging activities under SFAS No. 133. The amendments set forth in SFAS No. 149 require that contracts with comparable characteristics be accounted for as derivative instruments. SFAS No. 149 clarifies the circumstances under which a contract meets the characteristics of a derivative instrument according to SFAS No. 133 and clarifies when a derivative instrument contains a financing component that warrants special reporting in the statement of cash flows. The requirements of SFAS No. 149 are effective for contracts entered into or modified after June 30, 2003, and for hedging arrangements designated after June 30, 2003. We adopted the provisions of SFAS No. 149 effective July 1, 2003, which did not have a material impact on our consolidated results of operations and financial position as of December 31, 2003.

Accounting for Certain Financial Instruments with Characteristics of both Liability and Equity

effective for financial instruments entered into or modified after May 31, 2003, effective the first interim period beginning after June 15, 2003. For financial instruments created prior to the issuance date of SFAS No. 150, a transition is achieved by reporting the cumulative effect of a change in accounting principle. We adopted the provisions of SFAS No. 150 effective July 1, 2003, which did not have a material impact on our consolidated results of operations and financial position as of December 31, 2003.

Obligations Associated with the Retirement of Long-Lived Assets.

For a discussion of SFAS No. 143, please see the discussion set forth above.

Results of Operations

Our historical operating results, as a percentage of total revenues are presented below. A comparison of the different periods described below may be of limited value, as a result of the effects that (i) our recent acquisitions and enhancements of acquired projects, (ii) the sale of our investment in Karaganda Holding Company, which we refer to as KHC, in the third quarter of 2002, which owned and operated two coal fired power plants in Kazakhstan, and (iii) volatility in revenues of our Products Segment, in each case, have had on our historical operating results.


	Year ended December 31,									Three Months ended March 31,
	2001			2002			2003			2003			2004
Statements of Operations Data:
Revenues:
Electricity Segment		70.9			76.5			65.1			69.3			70.3
Products Segment		29.1			23.5			34.9			30.7			29.7
		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenues:
Electricity Segment		36.9			51.1			60.1			57.6			58.0
Products Segment		125.0			85.9			70.7			80.9			80.1
		62.6			59.3			63.8			64.8			64.5
Gross margin:
Electricity Segment		63.1			48.9			39.9			42.4			42.0
Products Segment		(25.0	)		14.1			29.3			19.1			19.9
		37.4			40.7			36.2			35.2			35.5
Operating expenses:
Research and development		3.6			1.8			1.2			1.7			0.6
Selling and marketing		13.6			7.1			5.9			5.4			3.9
General and administrative		11.4			8.3			7.7			8.1			4.9
Operating income		8.8			23.5			21.4			20.0			26.1
Other income (expense):
Interest income		3.0			1.5			0.5			0.4			0.5
Interest expense		(9.3	)		(8.0	)		(6.8	)		(6.8	)		(17.9	)
Foreign currency translation and transaction gain (loss)		0.6			(0.4	)		(0.3	)		(0.4	)		(0.7	)
Equity of income of investees		0.3			0.4			0.5			0.4			1.7
Miscellaneous income		0.6			1.5			0.4			0.5			(0.1	)
Income from continuing operations before minority interest and income taxes		4.0			18.5			15.7			14.1			9.6
Minority interest in earnings of subsidiaries		1.2			1.4			0.5			0.8			0.2
Income (loss) from continuing operations before income taxes		2.8			17.1			15.2			13.3			9.4
Income tax provision		(6.4	)		(7.2	)		(2.1	)		(5.5	)		(3.6	)
Income (loss) from continuing operations		(3.6	)		9.9			13.1			7.8			5.8


	Year ended December 31,									Three Months ended March 31,
	2001			2002			2003			2003			2004
Discontinued operations:
Loss from operations of discontinued activities in Kazakhstan		(9.8	)		(3.6	)		—			—			—
Loss of sale of Kazakhstan operations		—			(7.5	)		—			—			—
Income (loss) before cumulative effect of change in accounting principle		(13.4	)		(1.2	)		13.1			7.8			5.8
Cumulative effect of change in accounting principle net of tax benefit		—			—			(0.2	)		(0.8	)		—
Net income (loss)		(13.4	)		(1.2	)		12.9			7.0			5.8

Comparison of the Three Months Ended March 31, 2004 and the Three Months Ended March 31, 2003

Total Revenues

Total revenues for the three months ended March 31, 2004 were $47.6 million, as compared with $25.4 million for the three months ended March 31, 2003, which represented an 87.4% increase in total revenues. Such increase was attributable to additional revenues being generated from the Heber 1 project and the Heber 2 project that were acquired in December of 2003 and the Steamboat 2/3 project that was acquired on February 13, 2004. Such increase in revenues was also due to an additional $6.3 million received from the sale of products during such period.

Electricity Segment


	Three Months ended March 31,
	2003		2004
	(in millions)
Heber 1 and Heber 2 Project	$	—	$	13.0
Steamboat Project		—		3.0
Other Projects		17.6		17.5
Total	$	17.6	$	33.5

Revenues attributable to our Electricity Segment for the three months ended March 31, 2004 were $33.5 million, as compared with $17.6 million for the three months ended March 31, 2003, which represented a 90.3% increase in such revenues. Such period included $13.0 million of revenues generated by the Heber 1 project and Heber 2 project and $3.0 million of revenues generated by the Steamboat 1/1A and Steamboat 2/3 projects, as compared to the same period in 2003, during which we did not record any revenues from such projects.

Products Segment

Revenues attributable to our Products Segment for the three months ended March 31, 2004 were $14.1 million, as compared with $7.8 million for the three months ended March 31, 2003, which represented an 80.8% increase in such revenues. This increase resulted from added revenues of $6.3 million, principally attributable to two large projects (Mokai and Wairakei) during the three-month period ended March 31, 2004. Such increase reflects the volatility of the revenues generated from our Products Segment.

Total Cost of Revenues

Total cost of revenues for the three months ended March 31, 2004 was $30.7 million, as compared with $16.5 million for the three months ended March 31, 2003, which represented an 86.1% increase in total cost of revenues. As a percentage of total revenues, our total cost of revenues for the three months ended March 31, 2004 and the three months ended March 31, 2003 were 64.5% and 64.8%, respectively.

Electricity Segment

Total cost of revenues attributable to our Electricity Segment for the three months ended March 31, 2004 was $19.4 million, as compared with $10.1 million for the three months ended March 31, 2003, which represented a 92.1% increase in cost of revenues for such segment. The three months ended March 31, 2004 included $8.3 million and $1.2 million, respectively, of cost of revenues attributable to the Heber 1 project and the Heber 2 project and the Steamboat 1/1A and Steamboat 2/3 projects, as compared to the three months ended March 31, 2003, during which such projects were not included in our results of operations. As a percentage of total revenues, total cost of revenues attributable to our Electricity Segment for the three months ended March 31, 2004 (58.0%) remained consistent with such percentage for the three months ended March 31, 2003 (57.6%) because as a percentage of revenues, total cost of revenues for our newly acquired projects were substantially the same as those for the projects in our portfolio prior to such acquisitions.

Products Segment

Total cost of revenues attributable to our Products Segment for the three months ended March 31, 2004 was $11.3 million, as compared with $6.3 million for the three months ended March 31, 2003, which represented a 79.4% increase in cost of revenues related to such segment. Such $5.0 million increase in cost of revenues was attributable to an increase in revenues received during the relevant period in 2004, as compared to the relevant period in 2003. As a percentage of total revenues, our total cost of revenues for the three months ended March 31, 2004 and the three months ended March 31, 2003 were substantially the same.

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2004 were $0.3 million, as compared with $0.4 million for the three months ended March 31, 2003, which represented a 25.0% decrease in research and development expenses. Such decrease was in the ordinary course of our operations and does not represent any significant change in our research and development program or our ability to maintain and continue to develop our technologies and operations.

Selling and Marketing Expenses

Selling and marketing expenses for the three months ended March 31, 2004 were $1.9 million, as compared with $1.4 million for the three months ended March 31, 2003, which represented a 35.7% increase in selling and marketing expenses. Selling and marketing expenses for the three months ended March 31, 2004 constituted 3.9% of total revenues for such period, as compared with 5.4% for the three months ended March 31, 2003. Such 1.5% decrease is attributable to the fixed cost nature of certain of our selling and marketing expenses as compared to a larger revenue base. The larger revenue base was principally attributable to an increase in the revenues generated by our Electricity Segment. Once a project is in operation and generates electricity, selling and marketing expenses attributable to such project are relatively insignificant.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2004 were $2.3 million, as compared with $2.1 million for the three months ended March 31, 2003, which represented a 9.5% increase in general and administrative expenses. Such increase was principally attributable to an increase in professional services fees related to our business development activities in the United States. General and administrative expenses for the three months ended March 31, 2004 constituted 4.9% of total revenues for such period, as compared with 8.1% for the three months ended March 31, 2003. Such 3.3% decrease is attributable to the fixed cost nature of certain of our general and administrative expenses as compared to a larger revenue base.

Interest Expense

Interest expense for the three months ended March 31, 2004 was $8.5 million, as compared with $1.7 million for the three months ended March 31, 2003, which represented a 400.0% increase in such

interest expense. Approximately $2.8 million of such increase was attributable to the interest expenses incurred by certain of our subsidiaries in connection with the Beal Bank financing and approximately $2.2 million of such increase was attributable to the interest expenses incurred in connection with the issuance by Ormat Funding, on February 13, 2004, of $190.0 million of senior secured notes. The remaining $1.8 million increase was attributable to an increase in parent company loans. Interest on the senior secured notes of Ormat Funding for a full quarter would be $3.9 million.

Income Taxes

Income taxes for the three months ended March 31, 2004 were $1.7 million, as compared with $1.4 million for the three months ended March 31, 2003, which represented a 21.4% increase in such income taxes. The effective tax rate for periods ended March 31, 2004 and March, 31, 2003 was 38.5% and 41.3%, respectively. The higher effective rate for the period ended March 31, 2003 is primarily due to net losses of Ormat Systems for which no tax benefit was recognized because a deferred tax valuation allowance was applied to the related net operating losses in both periods. The net losses related to the operations of Ormat Systems were higher for the period ended March 31, 2003 than those for the corresponding period in 2004.

Equity in Income of Investees

Our participation in the income generated from our investees for the three months ended March 31, 2004 was $0.8 million, as compared with $0.1 million for the three months ended March 31, 2003, which represented a 700% increase. Such increase was principally attributable to the income generated in connection with our 50.0% equity interest in the Mammoth project, which was acquired in December, 2003 and which accounted for $0.6 million of such income for the three months ended March 31, 2004.

Net Income

Net income for the three months ended March 31, 2004 was $2.7 million, as compared with $1.8 million for the three months ended March 31, 2003, which represented an increase of 50.0% in our net income. Our net income was reduced by the increase in our interest expenses incurred for the three months ended March 31, 2004. Net income as a percentage of our total revenues for the three months ended March 31, 2004 was 5.7%, as compared with 7.0% for the three months ended March 31, 2003. Such decrease was attributable to an increase in our financing expenses relating to the financing of the acquisition of the Heber 1 project, Heber 2 project and Steamboat 2/3 project.

Comparison of the Year Ended December 31, 2003 and the Year Ended December 31, 2002

Total Revenues

Total revenues for the year ended December 31, 2003 were $119.4 million, as compared with $85.6 million for the year ended December 31, 2002, which represented a 39.5% increase in our total revenues. Such increase was principally attributable to the receipt of additional revenues generated by the Ormesa project that was acquired on April 15, 2002 and the increase in revenues generated from the sale and installation of equipment to power plants worldwide.

Electricity Segment


	Year Ended December 31,
	2002		2003
	(in millions)
Ormesa Project	$	21.8	$	30.5
Heber 1 and Heber 2 Projects		—		2.0
Steamboat 1/1A Project		—		1.0
Leyte Project		15.6		12.6
Momotombo Project		9.2		11.6
Other Projects		18.9		20.1
Total	$	65.5	$	77.8

Revenues from the sale of electricity for the year ended December 31, 2003 were $77.8 million, as compared with $65.5 million for the year ended December 31, 2002, which represented a 18.8% increase in such revenues. Such increase was a result of: (i) the acquisition of the Ormesa project in April of 2002, which for the full fiscal year ended December 31, 2003 generated $30.5 million of revenues, as compared to $21.8 million for the eight-months of operation in 2002 following its acquisition; (ii) $2.0 million of revenues generated by the Heber 1 project and the Heber 2 project for the 13-day period ended December 31, 2003, as compared with no revenues attributable to such projects in 2002; and (iii) $1.0 million of revenues generated by the Steamboat 1/1A project as compared with no revenues attributable to such project in 2002. The increase in our revenues for the fiscal year ended December 31, 2003, as compared to the fiscal year ended December 31, 2002 would have been higher, but for the one-time addition to the revenues received in 2002 in the amount of $2.7 million, as a result of a disputed performance bonus that was resolved and recognized in 2002.

Products Segment

Revenues from our Products Segment for the year ended December 31, 2003 were $41.7 million, as compared with $20.1 million for the year ended December 31, 2002, which represented a 107.5% increase in such revenues. Such increase resulted primarily from $14.0 million of revenues primarily attributable to two large projects (Mokai and Miravalles) and the sale of products, services and parts for the year ended December 31, 2003. Such increase reflects the volatility of the revenues generated from our Products Segment.

Total Cost of Revenues

Total cost of revenues for the year ended December 31, 2003 was $76.2 million, as compared with $50.8 million for the year ended December 31, 2002, which represented a 50.0% increase. As a percentage of total revenues, our total cost of revenues for the year ended December 31, 2003 was 63.8% as compared to 59.3% for the year ended December 31, 2002. This increase is explained below.

Electricity Segment

Cost of revenues attributable to our Electricity Segment for the year ended December 31, 2003 was $46.7 million, as compared with $33.5 million for the year ended December 31, 2002, which represented a 39.4% increase for such cost of revenues. Such increase was principally attributable to the acquisition of the Ormesa project, as cost of revenues for the year ended December 31, 2003 included expenses of the Ormesa project in the amount of $23.3 million, as compared to $15.7 million for the year ended December 31, 2002. The Ormesa project had higher operating expenses than the other projects we operated at such time due to additional transmission costs relating to the transmission of electricity over the Imperial Irrigation District transmission system and the type of equipment used in the Ormesa project, which is more costly to operate and maintain than the equipment used in our other projects that existed at the time of such acquisition. As a percentage of total revenues, the total cost of revenues attributable to our Electricity Segment was 60.1% for the

year ended December 31, 2003 as compared to 51.1% for the year ended December 31, 2002. Such increase, on a percentage basis, was partially attributable to $2.7 million of revenues received as a result of a one-time disputed performance bonus that was resolved and recognized in 2002.

Products Segment

Cost of revenues attributable to our Products Segment for the year ended December 31, 2003 was $29.5 million, as compared with $17.3 million for the year ended December 31, 2002, which represented a 70.5% increase in such cost of revenues. Such $12.2 million increase in cost of revenues was attributable to the generation of additional revenues from the sale of our equipment during the year ended December 31, 2003. As a percentage of our total revenues, our cost of revenues attributable to our Products Segment for the year ended December 31, 2003 was 70.7% as compared to 85.9% for the year ended December 31, 2002. Such 15.2% decrease reflects the fixed nature of our cost of revenues as compared to a larger revenue base.

Research and Development Expenses

Research and development expenses for the year ended December 31, 2003 were $1.4 million, as compared with $1.5 million for the year ended December 31, 2002, which represented a 6.7% decrease in such research and development expenses. Such decrease reflects a fluctuation in the ordinary course of our business and does not represent a significant change in our research and development program or our ability to maintain and continue to develop our technologies and operations.

Selling and Marketing Expenses

Selling and marketing expenses for the year ended December 31, 2003 were $7.1 million, as compared with $6.1 million for the year ended December 31, 2002, which represented a 16.4% increase in such selling and marketing expenses. Selling and marketing expenses for the year ended December 31, 2003 represented 5.9% of our total revenues, as compared to 7.1% for the year ended December 31, 2002. Such 1.2% decrease is a result of the effect of the fixed cost component of our selling and marketing expenses over a larger revenue base. The larger revenue base was principally attributable to an increase in the revenues generated by our Electricity Segment. Once a project is in operation and generates electricity, selling and marketing expenses are relatively insignificant.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2003 were $9.3 million, as compared with $7.1 million for the year ended December 31, 2002, which represented a 31.0% increase in general and administrative expenses. Such increase was attributable to costs related to an increase in our personnel, wages and professional services and other costs related to our business development activities in the United States. As a percentage of our total revenues, general and administrative expenses were 7.7% of such revenues for the year ended December 31, 2003 and 8.3% of such revenues for the year ended December 31, 2002.

Interest Expense

Interest expense for the year ended December 31, 2003 was $8.1 million, as compared with $6.9 million for the year ended December 31, 2002, which represented an increase of 17.4% in our total interest expense. Such increase resulted from $1.9 million of interest expense incurred in connection with the United Capital project finance loan incurred on December 31, 2002 by our project subsidiary to refinance the Ormesa acquisition, $0.8 million of interest expense incurred in connection with outstanding parent company loans, and $0.4 million of interest expense incurred in connection with the Beal Bank loan incurred on December 18, 2003, in order to finance the acquisition of the Heber 1 project, the Heber 2 project and the Mammoth project. Interest expenses related to certain other bank loans decreased by $1.2 million for the fiscal year ended December 31, 2003 due to a decrease in outstanding corresponding balances.

Income Taxes

Income taxes for the year ended December 31, 2003 were $2.5 million, as compared with $6.1 million for the year ended December 31, 2002, which represented a decrease of 59.0% in such income taxes. The effective tax rate for the years ended December 31, 2003 and 2002 was 13.8% and 41.9%, respectively. For the year ended December 31, 2003, our effective tax rate was reduced by approximately 8.0% as a result of the application of investment tax credits. In addition, our foreign tax rates were substantially lower than our U.S. tax rates due primarily to the tax holiday in the Philippines that applied to us and the reversal of a deferred tax valuation allowance related to the realization of net operating losses in Ormat Systems which decreased our effective tax rate by approximately 5.6%. For the year ended December 31, 2002, our effective tax rate was reduced by approximately 2.7% as a result of the application of investment tax credits and increased by approximately 8.5% related to a deferred tax valuation allowance applied to the net operating losses in Ormat Systems.

Equity in Income of Investees

Our participation in the income generated from our investees for the year ended December 31, 2003 was $0.6 million, as compared with $0.3 million for the year ended December 31, 2002, which represented an increase of 100%. Such increase was principally attributable to an increase in our income derived from our 21.0% ownership of the Zunil project, which had lower debt service and therefore higher net income.

Discontinued Operations

Losses from operations of discontinued activities in Kazakhstan and losses from the sale of our Kazakhstan operations were $3.1 million and $6.4 million, respectively for the year ended December 31, 2002. The sale of our Kazakhstan operations (consisting of coal fired power plants and related assets), occurred on September 16, 2002. Such losses were recorded and reflected in our financial statements for the fiscal year ended December 31, 2002.

Net Income

Our income from continuing operations was $15.7 million in the fiscal year ended December 31, 2003, as compared to $8.5 million in fiscal year ended December 31, 2002, representing 13.1% of revenues in 2003 as compared to 9.9% of revenues in 2002. Such increase was attributable to increased revenues in both segments. Net income in 2002 was equal to a loss of $1.0 million as a result of the loss from discontinued operations in Kazakhstan and the loss from the sale of our Kazakhstan assets. Net income in 2003 was $15.5 million.

Comparison of the Year Ended December 31, 2002 and the Year Ended December 31, 2001

Total Revenues

Total revenues for the year ended December 31, 2002 were $85.6 million, as compared with $47.9 million for the year ended December 31, 2001, which represented a 78.7% increase in such total revenues. Such increase in total revenues was principally attributable to the revenues generated by the acquired Ormesa project and Brady project and is also due to an increase in the revenues generated by our Products Segment.

Electricity Segment


	Year Ended December 31,
	2001		2002
	(in millions)
Brady Project	$	4.0	$	9.6
Ormesa Project		—		21.8
Leyte Project		12.5		15.6
Other Projects		17.5		18.5
Total	$	34.0	$	65.5

Revenues attributable to our Electricity Segment for the year ended December 31, 2002 were $65.5 million, as compared with $34.0 million for the year ended December 31, 2001, which represented a 92.6% increase in such revenues. Such increase in revenues was principally attributable to the acquisition of the Ormesa project, as total revenues for the year ended December 31, 2002 included $21.8 million of revenues generated from the Ormesa project, as compared with the year ended December 31, 2001, during which no revenues from the Ormesa project were recorded. Additionally, the acquisition of the Brady project on June 29, 2001 also contributed additional revenues, as total revenues for the year ended December 31, 2002 included Brady project revenues in the amount of $9.6 million, while the period from June 29, 2001 to December 31, 2001 only included $4.0 million of Brady project revenues. Lastly, our increased revenues were partially attributable to $2.7 million of revenues received as a result of a one-time disputed performance bonus that was resolved and recognized in 2002.

Products Segment

Revenues from our Products Segment for the year ended December 31, 2002 were $20.1 million, as compared with $14.0 million for the year ended December 31, 2001, which represented a 43.6% increase in such revenues. Such increase resulted from revenues of $7.0 million attributable to the Miravalles power plant during the year ended December 31, 2002, as compared with no revenues from any large project during 2001. Such difference reflects the volatility of the revenues generated from our Products Segment.

Total Cost of Revenues

Total cost of revenues for the year ended December 31, 2002 was $50.8 million, as compared with $30.0 million for the year ended December 31, 2001, which represented a 69.3% increase in total cost of revenues. As a percentage of our total revenues, our total cost of revenues for the year ended December 31, 2002 was 59.3%, as compared with 62.6% for the year ended December 31, 2001.

Electricity Segment

Cost of revenues attributable to our Electricity Segment for the year ended December 31, 2002 was $33.5 million, as compared with cost of revenues of $12.5 million for the year ended December 31, 2001, which represented a 168.0% increase in such cost of revenues. Such increase was principally attributable to the acquisition of the Ormesa project, as cost of revenues for the year ended December 31, 2002 included expenses of the Ormesa project equal to $15.7 million, as compared to operating expenses relating to the Ormesa project during the year ended December 31, 2001. In addition to the acquisition of the Ormesa project, as a result of the acquisition of Brady project, operating expenses for the year ended December 31, 2002 included expenses for the Brady project equal to $5.3 million, as compared to the fiscal year ended December 31, 2001, which included $2.6 million of such expenses. As a percentage of our total revenues, our cost of revenues attributable to our Electricity Segment was 51.1% for the fiscal year ended December 31, 2002, as compared with 36.9% for the fiscal year ended December 31, 2001. Such increase was primarily attributable to the cost of revenues for the Ormesa project which were substantially higher than the cost of revenues of

our other existing projects at the time of such acquisition which are due to additional transmission costs relating to the transmission of electricity over the Imperial Irrigation District transmission system and the type of equipment used in the Ormesa project, which is more costly to operate and maintain than the equipment used in our other projects that existed at the time of such acquisition.

Products Segment

Cost of revenues attributable to our Products Segment for the year ended December 31, 2002 was $17.3 million, as compared with $17.5 million for the year ended December 31, 2001, which represented a 1.1% decrease in such cost of revenues. As a percentage of our total revenues, our cost of revenues attributable to our Products Segment for the fiscal year ended December 31, 2002 was 85.9%, as compared with 125.0% for the fiscal year ended December 31, 2001. Such reduction was primarily attributable to a higher volume of product sales which was sufficient to absorb the related fixed costs whereas in 2001, cost of revenues attributable to our Products Segment exceeded revenues generated from our Products Segment.

Research and Development Expenses

Research and development expenses for the year ended December 31, 2002 were $1.5 million, as compared with $1.7 million for the year ended December 31, 2001, which represented a 11.8% decrease in research and development expenses. Such decrease was in ordinary course of our operations and does not represent a significant change in our research and development program or our ability to maintain and continue to develop our technologies and operations.

Selling and Marketing Expenses

Selling and marketing expenses for the year ended December 31, 2002 were $6.1 million, as compared with $6.5 million for the year ended December 31, 2001, which represented a 6.2% decrease in such selling and marketing expenses. Selling and marketing expenses for the year ended December 31, 2002 represented 7.1% of our total revenues, as compared with 13.6% for the year ended December 31, 2001. Such 6.5% decrease is attributable to the fixed cost nature of certain of our selling and marketing expenses as compared to a larger revenue base. The larger revenue base was principally attributable to an increase in the revenues generated by our Electricity Segment. Once a project is in operation and generates electricity, selling and marketing expenses attributable to such project are relatively insignificant.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2002 were $7.1 million, as compared with $5.4 million for the year ended December 31, 2001, which represented a 31.5% increase in general and administrative expenses. Such increase was principally attributable to an increase in our business development activities in the United States. General and administrative expenses for the year ended December 31, 2002 constituted 8.3% of our total revenues, as compared to 11.3% for the year ended December 31, 2001.

Interest Expense

Interest expense for the year ended December 31, 2002 was $6.9 million, as compared with $4.5 million for the year ended December 31, 2001, which represented a 53.3% increase in our total interest expense. Such increase was primarily attributable to an increase in interest expense and related guarantee fees of $1.9 million relating to short term bank loans, and an increase in interest expense of approximately $0.5 million relating to medium term corporate loans.

Income Taxes

Income taxes for the year ended December 31, 2002 were $6.1 million, as compared with $3.1 million for the year ended December 31, 2001, which represented an increase of 96.8% in such income taxes. The effective tax rate for the years ended December 31, 2002 and 2001 was 41.9% and

229.9%. For the year ended December 31, 2002, our effective tax rate was reduced by approximately 2.7% as a result of the application of investment tax credits and increased by approximately 8.5% related to a deferred tax valuation allowance applied to the net operating losses of Ormat Systems. For the year ended December 31, 2001, our effective tax rate was increased by a deferred tax valuation allowance applied to the net operating losses in Ormat Systems.

Equity in Income of Investees

Our participation in the income generated from our investees for the year ended December 31, 2002 was $0.3 million, as compared with $0.2 million for the year ended December 31, 2001, which represented an increase of 50.0%. Such increase was principally attributable to an increase in our income derived from our 21.0% ownership interest of the Zunil project, which had lower debt service and therefore higher net income.

Discontinued Operations

Losses from operations of discontinued activities in Kazakhstan and losses from the sale of our operations in Kazakhstan were $3.1 million and $6.4 million, respectively, for the year ended December 31, 2002. Losses from operations of discontinued activities in Kazakhstan for the year ended December 31, 2001 were $4.7 million.

Net Income (Loss)

Our income from continuing operations was $8.5 million in the fiscal year ended December 31, 2002, as compared to a loss of $1.7 million for the fiscal year ended December 31, 2001. Such increase was attributable to increased revenues generated by both segments. Loss from discontinued operations amounted to $3.1 million compared with $4.7 million in 2001. In 2002, we also recorded a loss on the sale of our Kazakhstan assets of $6.4 million. The net income was a loss of $1 million in 2002, compared to a loss of $6.4 million in 2001.

Quarterly Results of Operations

The table below sets forth unaudited consolidated statement of operations data for each of the five consecutive quarters ended March 31, 2004. The unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements included elsewhere in this prospectus and include all adjustments, consisting only of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial information. The operating results for any quarter described below are not necessarily indicative of our future results of operations for any fiscal quarter or year.


	Three Months ended
	March 31, 2003		June 30, 2003		Sept. 30, 2003		Dec. 31, 2003		March 31, 2004
					(unaudited) (inthousands)
Revenues:
Electricity Segment	$	17,604	$	18,047	$	21,494	$	20,607	$	33,459
Products Segment		7,812		8,210		10,907		14,759		14,146
		25,416		26,257		32,401		35,366		47,605
Cost of revenues:
Electricity Segment		10,148		12,017		10,837		13,724		19,390
Products Segment		6,317		3,493		8,684		11,000		11,328
		16,465		15,510		19,521		24,724		30,718
Gross margin		8,951		10,747		12,880		10,642		16,887


	Three Months ended
	March 31, 2003			June 30, 2003			Sept. 30, 2003			Dec. 31, 2003			March 31, 2004
							(unaudited) (inthousands)

Operating expenses:
Research and development		439			432			325			195			302
Selling and marketing		1,367			1,799			2,563			1,358			1,854
General and administrative		2,057			2,367			1,245			3,583			2,332
Operating income		5,088			6,149			8,747			5,506			12,399

Other income (expense):
Interest income		109			178			229			26			244
Interest expense		(1,720	)		(2,115	)		(2,277	)		(1,943	)		(8,523	)
Equity in income of investees		89			99			106			265			787
Foreign currency translation and transaction loss		(114	)		(38	)		(65	)		(99	)		(321	)
Other non-operating income		133			145			48			138			(24	)
Income from continuing operations before minority interest and income taxes		3,585			4,418			6,788			3,893			4,562
Minority interest in earnings of subsidiaries		201			197			162			(41	)		108
Income from continuing operations before income taxes		3,384			4,221			6,626			3,934			4,454
Income tax provision		(1,397	)		(776	)		(2,134	)		1,801			(1,717	)
Income before cumulative effect of change in accounting principle		1,987			3,445			4,492			5,735			2,737
Cumulative effect of change in accounting principle (net of tax benefit of $124,740)		(205	)		—			—			—			—
Net income	$	1,782		$	3,445		$	4,492		$	5,735		$	2,737

Liquidity and Capital Resources

Since our inception, we have funded our operations through a combination of internally generated cash and parent company loans, supplemented with third party debt.

Our third-party debt is composed of two principal categories. The first consists of project finance debt or acquisition financing that we or our subsidiaries have incurred for the purpose of developing and constructing our projects or for the acquisition of our projects. The second consists of debt incurred by us or our subsidiaries for general corporate purposes. Orcal Geothermal, one of our subsidiaries, has incurred a non-recourse project finance loan from Beal Bank, for the purpose of financing, in part, the acquisition of the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project, of which $154.5 million was outstanding as of March 31, 2004, bearing an interest rate of the greater of 7.125% or LIBOR plus 5.125% per annum. On February 13, 2004, Ormat Funding, one of our subsidiaries, issued 8¼% senior secured notes in a capital markets offering subject to Rule 144A and Regulation S of the Securities Act, for the purpose of the refinancing of the acquisition cost of the Brady, Ormesa and Steamboat 1/1A projects, and the financing of the acquisition cost of the Steamboat 2/3 project, of which $190.0 million was outstanding as of March 31, 2004. The Bank Hapoalim project finance debt, of which $19.2 million was outstanding as of March 31, 2004, bearing an interest rate of LIBOR plus 2.375% per annum on tranche one of the loan and LIBOR plus 3.0% per annum on tranche two of the loan, and the Export-Import Bank of the United States project finance debt, of which $17.8 million was outstanding as of March 31, 2004, bearing an interest rate of 6.54% per annum, were each incurred by our relevant subsidiaries to finance the Momotombo project and Leyte project, respectively. All of the agreements described in this section are described in more detail under "Description of Certain Material Agreements — Financing Agreements."

The second category of our third party debt includes the following loans: (i) a $20.0 million credit facility from United Mizrahi Bank, of which no amount was outstanding as of March 31, 2004, bearing an interest rate of LIBOR plus 1.2% per annum, (ii) a $20 million credit facility from Bank Leumi, of which $14.9 million was outstanding as of March 31, 2004, bearing an interest rate of LIBOR plus 5% per annum, (iii) medium term loans from Bank Continental, of which $6.8 million was outstanding as of March 31, 2004, and which we are obligated to repay no later than January 14, 2005 or otherwise refinance with Bank Continental or one of its affiliates, bearing an interest rate of LIBOR plus 1% per annum; (iv) a medium term loan from Bank Hapoalim, of which $5.0 million was outstanding as of March 31, 2004, bearing an interest rate of LIBOR plus 1.7% per annum; (v) a medium term loan from Discount Bank, of which $4.6 million was outstanding as of March 31, 2004, bearing an interest rate of LIBOR plus 1.7% per annum and (vi) a medium term loan from Israel's Industrial Development Bank, of which $5.8 million was outstanding as of March 31, 2004, bearing an interest rate of LIBOR plus 1.8% per annum. Our payment obligation under such credit facilities are all currently guaranteed by our parent.

From time to time, Bank Leumi has issued, as security for certain of our obligations, performance letters of credit in favor of our customers. Our parent is the counterparty with respect to such letters of credit. Pursuant to certain existing agreements described elsewhere in this prospectus, we are required to pay to our parent a guarantee fee with respect to such letters of credit (and other guarantees) and are responsible to reimburse our parent for any draw or payment made under these letters of credit or guarantees. As of March 31, 2004, the outstanding aggregate amount available to be drawn under these letters of credit was $8.5 million.

In connection with the acquisition transaction between Ormat Systems and our parent, we have entered into certain agreements with each of Bank Hapoalim, Bank Leumi, Bank Continental, United Mizrahi Bank and Israel's Industry Development Bank pursuant to which, in exchange for such banks' release of our parent's guarantee and a release of their security interest over the assets our subsidiary, Ormat Systems, acquired from our parent, we will, and Ormat Systems will, agree to certain negative pledge covenants and, in some cases, comply with certain financial ratios such as a debt service coverage ratio and a debt to equity ratio. We do not expect that these covenants or ratios, which will apply to us on a consolidated basis, will materially limit our ability to execute our future business plans or our operations. In addition, as part of the consideration for the acquisition transaction between Ormat Systems and our parent, we will assume approximately $5.4 million of our parent's outstanding loan with Continental Bank.

We have also entered into an agreement with Bank Hapoalim pursuant to which we have assumed our parent's existing obligations to Bank Hapoalim with respect to approximately $17.2 million of outstanding letters of credit.

We do not expect that any third party debt that we, or any of our subsidiaries, will incur in the future will be guaranteed by our parent.

We are currently evaluating different options for the refinancing of the acquisition cost of the Puna project, which may include the issuance by Ormat Funding of an additional tranche of its senior secured notes or the incurrence by our project subsidiary that owns the Puna project of project finance debt, lease financing, or other form of leverage financing. If we are successful in acquiring the remaining 50% ownership of the Mammoth project, we will also be able to finance such acquisition with the issuance by Ormat Funding of an additional tranche of its senior secured notes.

Our management believes that we are in material compliance with our covenants with respect to our third-party debt.

We expect to use the net proceeds of this offering to finance the continued growth of our business and for general corporate purposes, including by making other investments or acquisitions. However,

we have no present understanding or agreement relating to any specific acquisition. Accordingly, management will have significant flexibility in applying the net proceeds of this offering. Pending the use of such proceeds, we intend to invest such proceeds in interest-bearing instruments. Our management believes that the sources of liquidity described above, together with the proceeds of this offering, will be sufficient to address our near and short term liquidity and other investment requirements.

Historical Cash Flows

The following table sets forth the components of our cash flows for the relevant periods indicated:


	Year ended December 31,									Three months ended March 31,
	2001			2002			2003			2003			2004
	(in thousands)									(unaudited)
Net cash provided by operating activities	$	11,392		$	11,545		$	46,019		$	8,929		$	22,496
Net cash used in investing activities		(62,436	)		(60,521	)		(285,180	)		(6,183	)		(151,446	)
Net cash provided by (used in) financing activities		54,468			72,509			211,350			(15,858	)		148,978
Effect of foreign currency translation adjustments		(293	)		(51	)		—			—			—
Net increase (decrease) in cash and cash equivalents	$	3,131		$	23,482		$	(27,811	)	$	(13,112	)	$	20,028

For the Three Months Ended March 31, 2004

Net cash provided by operating activities for the three months ended March 31, 2004 was $22.5 million, as compared with $8.9 million for the three months ended March 31, 2003. Such increase was principally attributable to the addition of cash flows from the operating activities of the Heber 1 project and Heber 2 project.

Net cash used in investing activities for the three months ended March 31, 2004 was $151.4 million, as compared with $6.2 million for the three months ended March 31, 2003. The principal factors that affected the increase in the use of our cash flow for investing activities during such period were the aggregate amount of cash paid for acquisitions, net of cash received, which, for the three months ended March 31, 2004, as a result of the acquisition of the Steamboat 2/3 project, was equal to $82.8 million and the increase in our restricted cash and cash equivalents during such period, which was equal to $64.3 million resulting primarily from the issuance by Ormat Funding of its 8¼% senior secured notes in the amount of $190.0 million. A portion of the proceeds from the issuance of the such senior secured notes was escrowed and reserved for additional investments for the Galena project and for the purpose of repayment of the loan extended by United Capital to fund the acquisition of the Ormesa project.

Net cash provided by financing activities for the three months ended March 31, 2004 was $149.0 million, as compared with $15.9 million used in financing activities for the three months ended March 31, 2003. The principal factors that affected the cash flow provided by financing activities during the three months ended March 31, 2004 were the use of the proceeds from the issuance of the senior secured notes in order to finance the acquisition of the Steamboat 2/3 project and to refinance the acquisition of the Ormesa, Brady, and Steamboat 1/A projects, and a repayment of outstanding parent company loans in the amount of $27.0 million.

For the Year Ended December 31, 2003

Net cash provided by operating activities for the year ended December 31, 2003 was $46.0 million, as compared with $11.5 million for the year ended December 31, 2002. Such change was principally attributable to an increase in revenues as a result of the acquisition of the Ormesa project and an increase in revenues generated from our Products Segment.

Net cash used in investing activities for the year ended December 31, 2003 was $285.2 million, as compared with $60.5 million for the year ended December 31, 2002. The principal factors that affected the increase in the use of our cash flow for investing activities during such period included:


•	Cash paid for acquisitions (net of cash received) in the amount of $256.6 million, relating to the acquisition of the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project; and


•	Capital expenditures spent in connection with the Ormesa project in an amount equal to $17.0 million for the installation of new power units and the modification of the geothermal fluid gathering and electrical systems, in order to increase the capacity, reliability and availability of the Ormesa project.

Net cash provided by financing activities for the year ended December 31, 2003 was $211.4 million, as compared with $72.5 million for the year ended December 31, 2002. The principal factors that impacted our cash flow provided by financing activities during the year ended December 31, 2003 were the incurrence of a loan by Orcal in an amount of $154.5 million from Beal Bank in December 2003, and the receipt of $126.3 million of proceeds from parent company loans, less a repayment of $55.0 million of short-term debt.

For the Year Ended December 31, 2002

Net cash provided by operating activities for the year ended December 31, 2002 was $11.5 million, as compared with $11.4 million for the year ended December 31, 2001. Such increase was principally attributable to the acquisition of the Ormesa project.

Net cash used in investing activities for the year ended December 31, 2002 was equal to $60.5 million, as compared to $62.4 million for the year ended December 31, 2001. The principal factors that impacted the use of our cash flow from investing activities during such period included:


•	Cash paid for acquisitions (net of cash received) in the amount of $39.7 million, relating to the acquisition of the Ormesa project in 2002, as compared to the cash paid for acquisitions (net of cash received) in the amount of $30.5 million, relating to the acquisition of the Brady project in 2001; and


•	Capital expenditures incurred in connection with the Brady project and the Momotombo project in the amount of $19.7 million and the Ormesa project in the amount of $1.7 million.

Net cash provided by financing activities for the year ended December 31, 2002 was $72.5 million, as compared with $54.5 million for the year ended December 31, 2001. The principal factors that impacted our cash flow provided by financing activities were $55.0 million of proceeds received pursuant to short term lines of credit and $18.4 million of proceeds received in connection with the loan made to the Ormesa project.

Capital Expenditures

Our capital expenditures primarily relate to two principal components, the enhancement of our existing power plants and the development of new power plants. In addition, we have budgeted approximately $5.0 million for purposes of the acquisition of machinery and equipment and for an office building for the next two to three years.

Enhancement of existing plants

To the extent not otherwise described below, we expect that the following enhancements of our existing power plants will be funded from internally generated cash or other available corporate resources, which we expect to subsequently refinance with non- or limited-resource debt at the project level.

Galena Re-powering . We have commenced the design and construction phase of the re-powering of the Galena project and expect to complete the project by the end of 2005. The estimated $23.0 million of costs attributable to such enhancement will be funded from proceeds received by Ormat Funding in connection with its issuance of its senior secured notes, which are currently deposited in an escrow account, and will be released in accordance with the progress of the construction phase for such enhancement. We expect that the investment will increase the total output of the Steamboat complex by 13MW.

Mammoth Project Enhancement . Mammoth-Pacific, L.P. plans to commence a $5.0 million enhancement program of the Mammoth project, consisting primarily of drilling activities, which we believe will result in an increase in such output of the project of 30,500 MWh per year and is expected to be completed by January of 2006. A substantial portion of the funds required for such enhancement have been earmarked by us and our partners for such enhancement program.

Heber Project Enhancement . In connection with the Heber 1 and Heber 2 projects, we are currently pursuing an enhancement program consisting of geothermal field optimization and the drilling of an additional well at the Heber 2 project and the adding of additional OEC units at the Heber 1 and Heber 2 projects, in order to increase the generating capacity of the Heber 1 and Heber 2 projects by 18 MW, for a total budgeted investment of approximately $28.0 million. Such enhancement program will be funded from cash generated by the Heber 1 and Heber 2 projects and other liquidity sources.

Steamboat Hills Project Enhancement . In connection with the Steamboat Hills project, we plan to add a further OEC unit and perform associated work in order to increase the output of the power plant by 7.5 MW for a total budgeted investment of approximately $10.0 million, which is currently scheduled to be completed in 2006.

Puna Project Enhancement . In connection with the Puna project, an approximately $22.0 million dollar enhancement program is currently planned and is intended to increase the output of the project by 6.5 MW and to improve its reliability. We expect that such enhancement program will be completed in 2007. We are currently exploring various financing options for the refinancing of the acquisition cost of the Puna project.

Construction of new projects

Initially, we intend to fund the construction projects described below from internally generated cash, parent company loans and short-term debt.

Desert Peak 2 and Desert Peak 3 Projects . In connection with the Desert Peak 2 and Desert Peak 3 projects, we have already drilled the necessary production wells and expect to begin the manufacturing and construction of the associated power plant shortly, which manufacturing and construction is expected to be completed in 2006. The total construction cost for the construction of the 15 MW power plant is estimated to be between $30.0 million and $35.0 million.

Amatitlan Project . The Amatitlan project, which is in its final engineering stage, is scheduled to be completed in 2006 and the aggregate construction cost related to such project is estimated at approximately $40 million.

Other than the enhancements described above, we do not anticipate any other material capital expenditures in the near term for any of our operating projects, other than ordinary maintenance requirements, which we typically fund with internally generated cash.

Exposure To Market Risks

One market risk to which power plants are typically exposed is the volatility of electricity prices. However, our exposure to such market risk is not significant, principally because our long-term power purchase agreements have fixed or escalating rate provisions that limit our exposure to changes in electricity prices. However, beginning in May 2007, the energy payments payable under the power purchase agreements for the Heber 1 project and Heber 2 project, the Ormesa project and the Mammoth project will be determined by reference to the relevant power purchaser's short run avoided costs. In addition, under certain of the power purchase agreements for our projects in Nevada, the price that Sierrra Pacific Power Company pays for energy and capacity is based upon its short run avoided cost. We estimate that energy payments will represent approximately two-thirds of those projects' revenues after 2007 and as a result, expect that there will be some volatility in the revenues received from such projects. 44.4% of our consolidated long-term debt (excluding amounts owed to our parent) is currently in the form of fixed rate securities and is therefore not subject to

interest rate fluctuation risk. However, 55.6% of our debt is currently in the form of a floating rate which exposes us to changes in interest rates in connection therewith. In order to mitigate such risks, we have acquired an interest rate cap of 6.0% with respect to the LIBOR component of the interest rate applicable to the Beal Bank loan from 2007 to 2011. Ormat Systems has also entered into an interest rate swap transaction relating to the Bank Continental loan in order to mitigate the risk of LIBOR fluctuations in connection with such loan. Pursuant to such swap, Ormat Systems pays a fixed interest rate of 2.26% instead of the three-month LIBOR rate applicable to the loan. The outstanding balance of such loan as at March 31, 2004 was $6.8 million. Giving effect to such financial instruments, as of March 31, 2004, $194.5 million of our debt is subject to some floating rate risk. As such, we are exposed to changes in interest rates with respect to our long term obligations. The detrimental effect on our pre-tax earnings of a hypothetical 50 basis point increase in interest rates would be approximately $970,000. See "— Liquidity and Capital Resources" for further discussion of our debt instruments.

Another market risk to which we are exposed is primarily related to potential adverse changes in foreign currency exchange rates, in particular the fluctuation of the U.S. dollar versus the new Israeli shekel. Risks attributable to fluctuations in currency exchange rates can arise when any of our foreign subsidiaries borrows funds or incurs operating or other expenses in one type of currency but receives revenues in another. In such cases, an adverse change in exchange rates can reduce such subsidiary's ability to meet its debt service obligations, reduce the amount of cash and income we receive from such foreign subsidiary or increase such subsidiary's overall expenses. Risks attributable to fluctuations in foreign currency exchange rates can arise when the currency-denomination of a particular contract is not the U.S. dollar. All of our power purchase agreements in the international markets are either U.S. dollar-denominated or linked to the U.S. dollar. Our construction contacts from time to time contemplate costs which are incurred in local currencies. The way we often mitigate such risk is to receive part of the proceeds from the sale contract in the currency in which the expenses are incurred. Currently, we have not used any material foreign currency exchange contracts or other derivative instruments to reduce our exposure to this risk. In the future, we may use such foreign currency exchange contracts and other derivative instruments to reduce our foreign currency exposure to the extent we deem such instruments to be the appropriate tool for managing such exposure. We do not believe that our exchange rate exposure has or will have a material adverse effect on our financial condition, results of operations or cash flows.

We currently maintain our surplus cash in short-term, interest-bearing bank deposits and Preferred Auctioned Rate Securities, which we refer to as PARS (deposits of entities with a minimum investment grade rating of AA (by Standard & Poor's Ratings Services)). Upon completion of this offering, pending further application, we may invest a portion of the net proceeds we derive from this offering in interest-bearing investment-grade instruments or bank deposits. We do not expect that a 300 basis point increase or decrease from current interest rates would have a material adverse effect on our financial position, but will have an effect on our results of operations and cash flows.

Effects of Inflation

We do not expect that the low inflation environment of recent years in most of the countries in which we operate will continue. To address rising inflation, some of our contracts include certain mitigating factors against any inflation risk. In connection with the Electricity Segment, inflation may directly impact an expense incurred for the operation of our projects, hence increasing the overall operating cost to us. The negative impact of inflation may be partially offset by price adjustments built into some of our power purchase agreements that could be triggered upon such occurrences. As energy payments pursuant to the power purchase agreements for the Mammoth project (after April 2007), Ormesa project (after April 2007), Heber 1 project, Heber 2 project (after April 2007) and Steamboat 1/1A project change our power purchasers' underlying short run avoided cost, to the extent that inflation causes an increase in the short run avoided cost of our power purchaser, higher energy payments could have an offsetting impact to any inflation-driven increase in our expenses. Similarly, the energy payments pursuant to the power purchase agreements for the Brady project, Steamboat 2/3 project, the Steamboat Hills project and the Galena project increase every year through the end of the

relevant terms of such agreements, however, such increases are not directly linked to the CPI. Lease payments are generally fixed, while royalty payments are generally determined as a percentage of revenues and therefore are not significantly impacted by inflation.

The recent price increase in the cost of raw materials that we use in our Products Segment has not been due to inflation but rather to a high demand for such raw materials, which we believe mainly to result from demand generated by the Chinese market. This may cause a reduction in the profitability of our Products Segment, as well as an increase in the capital cost of our projects under construction and enhancements.

Overall, we believe that the impact of inflation on our business will not be significant.

Contractual Obligations and Commercial Commitments

The following table sets forth our material contractual obligations as of March 31, 2004, excluding interest:


	Payment Due By Period
	Remaining Total		2004		2005		2006		2007		2008		Thereafter
Long-Term non-recourse & limited recourse debt	$	188,573	$	9,292	$	19,141	$	9,456	$	11,386	$	12,931	$	126,367
Long-Term recourse debt		49,003		27,942		10,490		5,771		1,700		1,700		1,400
Non-recourse Senior Secured Notes due 2020		190,000		511		6,090		9,611		8,932		7,835		157,021
Unconditional purchase obligations		—		—		—		—		—		—		—
Ormat Industries notes payable		150,504		—		—		—		—		—		150,504
Total contractual obligations	$	578,080	$	37,745	$	35,721	$	24,838	$	22,018	$	22,466	$	435,292

Off Balance Sheet Arrangements

Letters of Credit

On June 30, 2004, our subsidiary, Ormat Nevada, entered into a Letter of Credit Agreement with Hudson United Bank, pursuant to which Hudson United Bank agreed to issue one or more letters of credit in an aggregate face amount of up to $15.0 million. As of the date hereof, two letters of credit have been issued pursuant to this facility. The first was issued in favor of the trustee for the 8¼% senior secured notes, for a face amount of $8.1 million, which will be increased by an additional amount of $2.7 million as of December 31, 2004. The second was issued in favor of Beal Bank, for a face amount of $3.6 million. Such letters of credit have been issued to substitute for current cash balances in respective reserve accounts. We will use the available cash, in the amount of $11.7 million, that will be released from such reserve accounts either for working capital, repayment of parent company loans, or reductions of outstanding bank debt.

On July 15, 2004, we entered into a reimbursement agreement with Ormat Industries, pursuant to which we agreed to reimburse Ormat Industries for any draws made on any standby letter of credit issued by Ormat Industries that is subject to the guarantee fee agreement between us and Ormat Industries and any payments made under any guarantee provided by Ormat Industries subject to such agreement. Interest on any amounts owing pursuant to the reimbursement agreement is paid in U.S. dollars at a rate per annum equal to Ormat Industries' average effective cost of funds plus 0.3%.

Some of our customers require our project subsidiaries to post letters of credit in order to guarantee their respective performance under relevant contracts. We are also required to post letters of credits to secure our obligations under various leases and licenses and may, from time to time, decide to post letters of credit in lieu of cash deposits in reserve accounts under certain financing arrangements. In addition, our subsidiary, Ormat Systems, is required from time to time to post performance letters of credit in favor of our customers with respect to orders of products.

Bank Hapoalim has issued such performance letters of credit in favor of our customers from time to time. Initially, our parent, Ormat Industries, was Bank Hapoalim's counterparty on such letters of credit and we paid our parent a guarantee fee and were responsible to reimburse our parent for any draw under these letters of credit. In connection with the acquisition transaction between Ormat Systems and our parent, we have assumed such letters of credit and are now the direct counterparty of Bank Hapoalim on such letters of credit. As of March 31, 2004 the aggregate amount available to be drawn under these letters of credit was $17.2 million. The amount that can be drawn under some of these letters of credit may be increased from time to time subject to the satisfaction of certain conditions.

As of the date hereof, we have not had a draw presented against any letter of credit issued or provided on our behalf and do not believe that it is likely that any claims will be made under a letter of credit in the foreseeable future.

Prior to 2003, our research and development efforts were partially funded through grants from the Office of the Chief Scientist of the Israeli Ministry of Industry and Trade. We currently have no such grants available or outstanding. Under Israeli law, we are required to pay royalties to the Israeli government based on revenues derived from the sale of products developed with the assistance of such grants. The applicable royalty rate is between 3.0% to 5.0%, and the amount of royalties required to be paid are capped at the amount of the grants received (in U.S. dollars). The outstanding balance of grants provided after January 1, 1999 accrue interest at a rate equal to the 12-month LIBOR, as published on the first day of the calendar year in which the particular grant was approved. Because the royalties are payable only from revenues, if any, derived from the relevant products, we only recognize a royalty expense to the government upon delivery of the product to our customers.

Concentration of Credit Risk

Our credit risk is currently concentrated with a limited number of major customers, Sierra Pacific Power Company, Southern California Edison Company, Hawaii Electric Light Company, PNOC-Energy Development Corporation, The Kenya Power and Lighting Company Limited and two electric distribution companies who are assignees of Empresa Nicaraguense de Electricidad. If any of these electric utilities fails to make payments under its power purchase agreements with us, such failure would have a material adverse impact on our financial condition.

Historically, Southern California Edison Company accounted for 27.1%, 25.5% and 0% of our total revenues for the three years ended December 31, 2003, 2002 and 2001, respectively, and 40.6% and 24.0% of our total revenues for the three months ended March 31, 2004 and 2003, respectively. Southern California Edison Company is also the power purchaser and revenue source for our Mammoth project, which we account for separately under the equity method of accounting.

Sierra Pacific Power Company accounted for 9.5%, 11.2% and 8.3% of our total revenues for the three years ended December 31, 2003, 2002 and 2001, respectively, and 12.5% and 11.3% of our total revenues for the three months ended March 31, 2004 and 2003, respectively.

PNOC-Energy Development Corporation accounted for 10.6%, 18.2% and 26.0% of our total revenues for the three years ended December 31, 2003, 2002 and 2001, respectively, and 6.5% and 12.6% of our total revenues for the three months ended March 31, 2004 and 2003, respectively.

The two electric distribution companies who are assignees of Empresa Nicaraguense de Electricidad accounted for 9.7%, 10.8% and 18.6% of our total revenues for the three years ended December 31, 2003, 2002 and 2001, respectively, and 6.2% and 12.2% of our total revenues for the three months ended March 31, 2004 and 2003, respectively.

The Kenya Power & Lighting Co. Ltd. accounted for 8.1%, 10.8% and 18.0% of our total revenues for the years ended December 31, 2003, 2002 and 2001, respectively, and 5.0% and 9.2% of our total revenues for the three months ended March 31, 2004 and 2003, respectively.

Following the acquisition of the Puna project, Hawaii Electric Light Company has become one of our key customers, and we expect that Hawaii Electric Light Company will account for approximately 4.0% of our total revenues in the year 2004.

Government Grants and Tax Benefits

Our subsidiary, Ormat Systems, has received "approved enterprise" status under Israel's Law for Encouragement of Capital Investments, 1959, with respect to two of its investment programs. One such approval was received in 1996 and another such approval was received in May 2004. As an approved enterprise, our subsidiary is exempt from Israeli income taxes with respect to revenues derived from the approved investment program for a period of two years commencing on the year it first generates profits from the approved investment program and, thereafter, such revenues are subject to reduced Israeli income tax rates of 25.0% for an additional five years. These benefits are subject to certain conditions set forth in the certificate of approval from Israel's Investment Center, that include, among other things, a requirement that Ormat Systems comply with Israeli intellectual property law, that all transactions between Ormat Systems and our affiliates be at arms length, and that there will be no change in control of, on a cumulative basis, more than 49% of Ormat Systems' capital stock (including by way of a public offering) without the prior written approval of the Investment Center.

For a discussion of our grants from Israel's Office of the Chief Scientist, see "Off Balance Sheet Arrangements" above.

BUSINESS

Overview

Our Power Generation Business

We own and operate all of our projects, except the Momotombo project in Nicaragua, which we do not own but which we control and operate, and three of our other projects, in which we have less than full ownership.

All of the revenues that we derive from the sale of electricity are from fully-contracted payments under long-term power purchase agreements. In the United States, the power purchasers under such

agreements are all investor-owned electric utilities. More than 80% of our total pro forma revenues in 2003 from the sale of electricity by our domestic projects were derived from power purchasers that currently have investment grade credit rating. The purchasers of electricity from our foreign projects are either state-owned entities or recently privatized state-owned entities. We have obtained political risk insurance from the Multilateral Investment Guarantee Agency of the World Bank group for all of our foreign projects (other than the Leyte project) in order to cover a portion of any loss that we may suffer upon the occurrence of certain political events covered by such insurance.


•	the development and construction of new geothermal and recovered energy-based power plants;


•	the expansion and enhancement of our existing projects; and


•	the acquisition of additional geothermal and other renewable assets from third parties.

Our Products Business

We design, manufacture and sell products for electricity generation and provide the related services described below. Generally, we manufacture products only against customer orders and do not manufacture products for inventory purposes.

Power Units for Geothermal Power Plants. We design, manufacture and sell power units for geothermal electricity generation, which we refer to as Ormat Energy Converters or OECs. Our customers include contractors and geothermal plant owners and operators. We recently sold two of our OEC units, with a total gross output of approximately 18 MW, to Instituto Costarricense de Electricidad in Costa Rica, which is developing the Miravalles V geothermal power project in that country. We also recently sold one of our OEC units for approximately 2 MW for installation at Oserian Farm in Kenya, where farmers grow flowers for export.

Operation and Maintenance of Power Plants. We provide operation and maintenance services for geothermal power plants owned by us and by third parties.

In 2003, our actual revenues from our products business were $41.7 million, constituting approximately 20.4% of our total pro forma revenues and approximately 34.9% of our actual revenues.

Industry Background

Geothermal Energy

All of the projects we currently own produce electricity from geothermal energy. Geothermal energy is a clean, renewable and generally sustainable energy source that, because it does not utilize combustion in the production of electricity, releases significantly lower levels of emissions, principally steam, than those that result from energy generation based on the burning of fossil fuels. Geothermal energy is derived from the natural heat of the earth when water comes sufficiently close to hot molten rock to heat the water to temperatures of 300 degrees Fahrenheit or more. The heated water then ascends toward the surface of the earth where, if geological conditions are suitable for its commercial extraction, it can be extracted by drilling geothermal wells. The energy necessary to operate a geothermal power plant is typically obtained from several such wells which are drilled using established technology that is in some respects similar to that employed in the oil and gas industry. Geothermal production wells are normally located within approximately one to two miles of the power plant as geothermal fluids cannot be transported economically over longer distances due to heat and pressure loss which result in redistributive costs. The geothermal reservoir is a renewable source of energy if natural ground water sources and reinjection of extracted geothermal fluids are adequate over the long term to replenish the geothermal reservoir following the withdrawal of geothermal fluids as long as the wellfield is properly operated. Geothermal energy projects typically have higher capital costs (primarily as a result of the costs attributable to wellfield development) but tend to have significantly lower variable operating costs, principally consisting of maintenance expenditures, than fossil fuel-fired power plants that require ongoing fuel expenses.

Geothermal Power Plant Technologies

Geothermal power plants generally employ either binary systems or conventional flash systems. In our projects, we also employ our proprietary technology of combined geothermal cycle systems. See "Business — Our Technology."

Binary System

In a plant using a binary system, geothermal fluid, either hot water (also called brine) or steam or both, is extracted from the underground reservoir and flows from the wellhead through a gathering system of insulated steel pipelines to a heat exchanger, which heats a secondary working fluid which has a low boiling point. This is typically an organic fluid such as isopentane or isobutene, which is vaporized and is used to drive the turbine. The organic fluid is then condensed in a condenser which may be cooled by air or by water from a cooling tower. The condensed fluid is then recycled back to the heat exchanger, closing the cycle within the sealed system. The cooled geothermal fluid is then reinjected back into the reservoir. The binary technology is depicted in the graphic below.

Flash Design System

In a plant using flash design, geothermal fluid is extracted from the underground reservoir and flows from the wellhead through a gathering system of insulated steel pipelines to flash tanks and/or separators. There, the steam is separated from the brine and is sent to a demister in the plant, where any remaining water droplets are removed. This produces a stream of dry steam, which drives a turbine generator to produce electricity. In some cases, the brine at the outlet of the separator is flashed a second time (dual flash), providing additional steam at lower pressure used in the low pressure section steam turbine to produce additional electricity. Steam exhausted from the steam turbine is condensed in a surface or direct contact condenser cooled by cold water from a cooling tower. The non-condensable gases (such as carbon dioxide) are removed through the removal system in order to optimize the performance of the steam turbines. The condensate is used to provide make-up water for the cooling tower. The hot brine remaining after separation of steam is injected back into the geothermal resource through a series of injection wells. The flash technology is depicted in the graphic below.

In some instances, the wells directly produce dry steam (the flashing occurring under ground). In such cases, the steam is fed directly to the steam turbine and the rest of the system is similar to the flash power plant described above.

Market Opportunity

A recent forecast of the U.S. Department of Energy projects the addition of geothermal installations with generating capacity totaling 6,800 MW by 2025, based on the assumption that natural

gas prices will remain relatively stable at current levels. This forecast is based on existing, known geothermal resources and does not take into account any positive effects on generating capacity resulting from new technology, such as enhanced utilization of existing geothermal bases and engineered geothermal systems (according to the Energy Information Administration, Annual Energy Outlook 2004).

The federal government also encourages production of electricity from geothermal resources through certain tax subsidies. We are permitted to claim approximately 10% of the cost of each new geothermal power plant as a credit against our federal income taxes. We are also permitted to deduct up to 95% of the cost of the power plant over five years on an accelerated basis, which results in more of the cost being deducted in the first few years than during the remainder of the depreciation period. These two tax benefits collectively offset approximately one-third of the capital cost of each new project.

In May 2004, the United States Senate passed a bill to allow geothermal power companies to claim a "production tax credit" of 1.8 cents per kilowatt hour on electricity produced from geothermal resources. According to such proposal, credits could be claimed on such electricity sold during the first ten years after a project achieves commercial operation. Only projects put into service during 2005 and 2006 would qualify for such production tax credits. The owner of the project would have to choose between this production tax credit and the 10% energy tax credit described above. The Senate bill, however, was not approved by the United States House of Representatives, which has passed its own version of a production tax credit bill, and will not become law unless the two legislative bodies reconcile the differences between the two bills.

new capacity development and/or refurbishment of existing assets by independent power developers. These foreign governments have taken a variety of approaches to encourage the development of competitive power markets, including awarding long-term contracts for energy and capacity to independent power generators and creating competitive wholesale markets for selling and trading energy, capacity and related products. Different countries have also adopted active governmental programs designed to encourage clean renewable energy power generation. For example, China, where we are currently developing a project, has in place a five-year Plan for New and Renewable Energy Commercialization Development. The plan's goals include increasing production of geothermal energy as well as providing electricity in remote areas. Several Latin American countries have rural electrification programs and renewable energy programs. For example, Nicaragua, where we operate the Momotombo project, is currently developing a national rural electrification plan with the support of the World Bank. One of the plan's primary goals is the reduction of market barriers to renewable energy technologies useful for remote areas not connected to the main electricity grid. Nicaragua also has a national master plan for geothermal energy, which is intended to facilitate the awarding of concessions for geothermal exploration and development in the country. Guatemala, another country in which we have ongoing operations (the Zunil project) and development activities (the Amatitlan project), recently approved a law which creates incentives for power generation from renewable energy sources by, among other things, providing economic and fiscal incentives such as exemptions from taxes on the importation of relevant equipment and various tax exemptions for companies implementing renewable energy projects. We believe that these developments and governmental plans will create opportunities for us to acquire and develop geothermal power generation facilities internationally as well as create additional opportunities for us to sell our remote power units and other products.

In addition to our geothermal power generation activities, we have also identified recovered energy power generation as a significant market opportunity for us in the United States and internationally. We are initially targeting the North American market, where we expect that recovered energy-based power generation will be derived principally from compressor stations along interstate pipelines, from midstream gas processing facilities, and from processing industries in general. Several states, as well as the federal government, have recognized the environmental benefits of recovered energy-based power generation. For example, Nevada and Hawaii allow electric utilities to include recovered energy-based power generation in calculating their compliance with the state's renewable portfolio standards. In addition, North Dakota, South Dakota and the Department of Agriculture (through the Rural Electricity Service) have certified recovered energy-based power generation as "green" energy, which qualifies recovered energy-based power generators (whether in those two states or elsewhere in the United States) for federally subsidized, low-cost funding. We believe that the European market has similar potential and we expect to leverage our early success in North America in order to expand into such market and other markets worldwide. In North America alone, we estimate the potential total market for recovered energy-based generation to be approximately 1000 MW.

Competitive Strengths

Competitive Assets. Our assets are highly competitive:


•	Contracted Generation. All of the electricity generated by our geothermal power plants is currently sold pursuant to long-term power purchase agreements, providing generally predictable cash flows.

•

Baseload Generation. All of our geothermal power plants supply a part of the baseload capacity of the electric system in their respective markets, meaning that they operate to serve all or a part of the minimum power requirements of the electric system in such market on an around-the-clock basis. Because our projects supply a part of the baseload needs of the respective electric system and are marginally weather dependent, we have a competitive advantage over other renewable energy sources, such as wind power, solar power, or hydro-electric power (to the extent dependent on rainfall), which compete with us to meet


	electric utilities' renewable portfolio requirements but which cannot serve baseload capacity because of the weather dependence and thus intermittent nature of these other renewable energy sources.


•	Competitive Pricing. Geothermal power plants, while site specific, are economically feasible to develop, construct, own and operate in many locations, and the electricity they generate is generally price competitive as compared to electricity generated from fossil fuels or other renewable sources under existing economic conditions and existing tax and regulatory regimes.

High Efficiency from Vertical Integration. Unlike any of our competitors in the geothermal industry, we are a fully-integrated geothermal equipment, services and power provider. We design, develop and manufacture most of the equipment we use in our geothermal power plants. Our intimate knowledge of the equipment that we use in our operations allows us to operate and maintain our projects efficiently and to respond to operational issues in a timely and cost efficient manner. Moreover, given the efficient communications among our subsidiary that designs and manufactures the products we use in our operations and our subsidiaries that own and operate our projects, we are able to quickly and in a cost-effective manner identify and repair mechanical issues and to have technical assistance and replacement parts available to us as and when needed.

Technological Innovation. We own or have rights to use more than 70 patents relating to various processes and renewable resource technologies. Our ability to draw upon internal resources from various disciplines related to the geothermal power sector, such as geological expertise relating to reservoir management, and equipment engineering relating to power units, allows us to be innovative in creating new technologies and technological solutions.

Business Strategy


•	Development and Construction of New Projects — continuously seeking out commercially exploitable geothermal resources and developing and constructing new geothermal and recovered energy-based power projects in jurisdictions where the regulatory, tax and business environments encourage or provide incentives for such development and which meet our investment criteria;


•	Increasing Output from Our Existing Projects — increasing output from our existing geothermal power projects by adding additional generating capacity, upgrading plant technology, and improving geothermal reservoir operations, including improving methods of heat source supply and delivery;


•	Acquisition of New Assets — acquiring from third parties additional geothermal and other renewable assets that meet our investment criteria;


•	Technological Expertise — investing in research and development of renewable energy technologies and leveraging our technological expertise to continuously improve power plant components, reduce operations and maintenance costs, develop competitive and environmentally friendly products for electricity generation and target new service opportunities;


•	Developing Recovered Energy — establishing a first-to-market leadership position in recovered energy projects in North America and building on that experience to expand into other markets worldwide; and


•	Long-term Contracts — entering into long-term contracts with energy purchasers that will provide stable cash flows.

Operations of our Power Generation Segment

How We Own Our Power Plants. We customarily establish a separate subsidiary to own interests in each power plant. Our purpose in establishing a separate subsidiary for each plant is to ensure that the plant, and the revenues generated by it, will be the only source for repaying indebtedness, if any, incurred to finance the construction or the acquisition (or to refinance the acquisition) of the relevant plant. If we do not own all of the interest in a power plant, we enter into a shareholders agreement or a partnership agreement that governs the management of the specific subsidiary and our relationship with our partner in connection with our project. Our ability to transfer or sell our interest in certain projects may be restricted by certain purchase options or rights of first refusal in favor of our project partners or the project's power purchasers and/or certain change of control and assignment restrictions in the underlying project and financing documents. All of our domestic projects, with the exception of the Puna project, which is an EWG, are Qualifying Facilities and are eligible for regulatory exemptions from most provisions of the FPA, certain state laws and regulations, and PUHCA as set forth in 18 C.F.R. Section 292, Subpart F. As an EWG, the Puna project is exempt from regulation under PUHCA, and does not cause us to be regulated as a holding company under PUHCA. The Puna project is not subject to the FPA.

How We Obtain Development Sites and Geothermal Resources. For domestic projects, we either lease or own the sites on which our power plants are located. In our foreign projects, our lease rights for the plant site are generally contained in the terms of a concession agreement or other contract with the host government or an agency thereof. In certain cases, we also enter into one or more geothermal resource leases (or subleases) or a concession or other agreement granting us the exclusive rights to extract geothermal resources from specified areas of land, with the owners (or sublessors) of such land. A geothermal resource lease (or sublease) or a concession or other agreement will usually give us the right to explore, develop, operate and maintain the geothermal field including, among other things, the right to drill wells (and if there are existing wells in the area, to alter them) and build pipelines for transmitting geothermal fluid. At times, the holder of rights in the geothermal resource is a governmental entity and at times, a private entity. Usually, the terms of the lease (or sublease) and concession agreement correspond to the term of the relevant power purchase agreement. In certain other cases, we own the land where the geothermal resource is located, in which case, there are no restrictions on its utilization.

How We Sell Electricity. In the United States, the purchasers of power from our projects are investor-owned electric utility companies. Outside of the United States, the purchaser is typically a state-owned utility or distribution company or a recently privatized state-owned entity and we typically operate our facilities pursuant to rights granted to us by a governmental agency pursuant to a concession agreement. In each case, we enter into long-term contracts (typically called power purchase agreements) for the sale of electricity or the conversion of geothermal resources into electricity. A project's revenues under a power purchase agreement usually consist of two payments: energy payments and capacity payments. Energy payments are normally based on a project's electrical output actually delivered to the purchaser measured in kilowatt hours, with payment rates either fixed or

indexed to the power purchaser's "avoided" costs (i.e., the costs the power purchaser would have incurred itself had it produced the power it is purchasing from third parties, such as us). Capacity payments are normally calculated based on the generating capacity or the declared capacity of a project available for delivery to the purchaser, regardless of the amount of electrical output actually produced or delivered. In addition, most of our domestic projects located in California are eligible for capacity bonus payments under the respective power purchase agreements upon reaching certain levels of generation.

How We Operate and Maintain Our Power Plants. We usually employ one of our subsidiaries to act as operator of our power plants pursuant to the terms of an operation and maintenance agreement. Our operations and maintenance practices are designed to minimize operating costs without compromising safety or environmental standards while maximizing plant flexibility and maintaining high reliability. Our approach to plant management emphasizes the operational autonomy of our individual plant managers and staff to identify and resolve operations and maintenance issues at their respective projects, however, each project draws upon the collective resources and experience available in our operation and maintenance subsidiary. We have organized our operations such that inventories, maintenance, backup and other operational functions are pooled within each project complex and provided by one operation and maintenance provider. This approach enables us to realize cost savings and enhances our ability to meet our project availability goals.

We have a long track record of excellence in operating different power plants with diverse resource characteristics. We currently operate and maintain approximately 353 MW of generating capacity. Since our recent acquisitions in California and Nevada, as a result of our vertical integration, our proprietary technology and our operational and maintenance expertise, we have been successful in increasing the efficiency and performance of most of our acquired facilities and have been able to use the staff required to operate these facilities more efficiently. For example, we have been able to increase the output of the Brady project by approximately 50% since its acquisition by us.

Safety is a key area of concern to us. We believe that the most efficient and profitable performance of our projects can only be accomplished within a safe working environment for our employees. Our compensation and incentive program includes safety as a factor in evaluating our employees, and we have a well-developed reporting system to track safety and environmental incidents at our projects.

How We Finance Our Power Plants. Historically, we have funded our projects with a combination of non-recourse or limited recourse debt, parent company loans and internally generated cash. Such leveraged financing permits the development of projects with a limited amount of equity contributions, but also increases the risk that a reduction in revenues could adversely affect a particular project's ability to meet its debt obligations. Leveraged financing also means that distributions of dividends or other distributions by plant subsidiaries to us are contingent on compliance with financial and other covenants contained in the financing documents.

Non-recourse debt refers to debt that is repaid solely from the project's revenues (rather than our revenues or revenues of any other project) and generally is secured by the project's physical assets, major contracts and agreements, and cash accounts and, in many cases, our ownership interest in that project affiliate. This type of financing is referred to as "project financing." Project financing transactions generally are structured so that all revenues of a project are deposited directly with a bank or other financial institution acting as escrow or security deposit agent. These funds then are payable in a specified order of priority set forth in the financing documents to ensure that, to the extent available, they are used first to pay operating expenses, senior debt service and taxes and to fund reserve accounts. Thereafter, subject to satisfying debt service coverage ratios and certain other conditions, available funds may be disbursed for management fees or dividends or, where there are subordinated lenders, to the payment of subordinated debt service.

In the event of a foreclosure after a default, our project affiliate owning the project would only retain an interest in the assets, if any, remaining after all debts and obligations were paid in full. In addition, incurrence of debt by a project may reduce the liquidity of our equity interest in that project

because the interest is typically subject both to a pledge in favor of the project's lenders securing the project's debt and to transfer and change of control restrictions set forth in the relevant financing agreements.

Limited recourse debt refers to project financing as described above with the addition of our agreement to undertake limited financial support for the project affiliate in the form of certain limited obligations and contingent liabilities. These obligations and contingent liabilities take the form of guarantees of certain specified obligations, indemnities, capital infusions and agreements to pay certain debt service deficiencies. To the extent we become liable under such guarantees and other agreements in respect of a particular project, distributions received by us from other projects and other sources of cash available to us may be required to be used by us in order to satisfy these obligations. To the extent of these limited recourse obligations, creditors of a project financing of a particular project may have direct recourse to us.

How We Mitigate International Political Risk. We generally purchase insurance policies to cover our exposure to certain political risks involved in operating in developing countries. The policies are issued by entities which specialize in such policies, such as the Multilateral Investment Guarantee Agency (an institution that is part of the World Bank Group). From time to time, we also examine the possibility of purchasing political risk insurance from private sector providers, such as Zurich Re, AIG and other such companies, however, to date all of our political risk insurance contracts are with the Multilateral Investment Guarantee Agency. Such insurance policies cover, in general and subject to the limitations and restrictions contained therein, 80%-90% of our revenue loss derived from a specified governmental act, such as confiscation, expropriation, riots, the inability to convert local currency into hard currency and, in certain cases, the breach of agreements. We have obtained such insurance for all of our foreign projects in operation except for the Leyte project.

Description of Our Projects

In 2003, pro forma revenues from the sale of electricity by our domestic projects were $128.7 million, constituting 79.1% of our total pro forma revenues from the sale of electricity, and pro forma revenues from the sale of electricity by our foreign projects were $33.9 million, constituting 20.9% of our total pro forma revenues from the sale of electricity. In 2003, our actual revenues from the sale of electricity by our domestic projects were $43.8 million and by our foreign projects were $34.0 million, respectively. Pro forma revenues from the sale of electricity constituted approximately 79.6% of our total pro forma revenues in 2003. As noted previously, such pro forma revenues do not include revenues generated from the Steamboat 2/3 project and Steamboat Hills project, two additional domestic projects that were acquired this year.

The financing of certain of our projects and the terms of our power purchase agreements and certain other agreements related to our operations are further described in the "Description of Certain of our Material Agreements" section.

Domestic Projects

Our projects in operation in the United States have a generating capacity of approximately 240 MW. All of our current domestic projects are located in California, Nevada and Hawaii. We also have projects under construction and enhancement in California, Nevada and Hawaii.

The Ormesa Project

The Ormesa project is located in East Mesa, Imperial Valley, California. The Ormesa project consists of six plants, OG I, OG IE, OG IH (collectively, the OG I plant), OG II, GEM 2 and GEM 3. The various OG I plants commenced commercial operations between 1987 and 1989 and the OG II plant commenced commercial operations in 1988. The GEM 2 and GEM 3 plants commenced commercial operations in April 1989. The OG plants utilize a binary system and the GEM plants utilize a flash system. The OG I plants have a generating capacity of 35 MW; the OG II plant has a generating capacity of 17 MW; and the GEM 2 and GEM 3 plants have a generating capacity of

28 MW. However, electricity generated by the GEM 2 and GEM 3 plants is not sold under a power purchase agreement because their power is used to provide auxiliary power for wellfield operations at the Ormesa project. The Ormesa project sells its electrical output to Southern California Edison Company under two separate power purchase agreements. In certain circumstances, Southern California Edison Company or its designee has a right of first refusal to acquire the OG I and OG II plants. The Ormesa project was acquired in April 2002, and was initially re-financed with project finance debt from United Capital. It is anticipated that on or before January 31, 2005, the United Capital loan will be paid off with a portion of the proceeds from the issuance by Ormat Funding of its senior secured notes on February 13, 2004.

In connection with the power purchase agreements for the Ormesa project, Southern California Edison Company has raised an issue regarding a potential breach by the Ormesa project of such power purchase agreements as a result of the use of power from the GEM 2 and GEM 3 plants by the Ormesa project for auxiliary purposes. We are currently in negotiation with Southern California Edison Company to resolve such dispute and, in addition, combine the relevant power purchase agreements for the Ormesa project into one agreement, which would enhance our operating flexibility and would not otherwise adversely affect our operations.

The Heber Projects

The Heber 1 Project. The Heber 1 project is located in Heber, Imperial County, California. The Heber 1 project includes one power plant which commenced commercial operations in 1985, and a geothermal resources field. The plant utilizes a dual flash system and has a generating capacity of 38 MW. The Heber 1 project sells its electrical output to Southern California Edison Company under a power purchase agreement. In certain circumstances, Southern California Edison Company and its affiliated entities have a right of first refusal to acquire the power plant. Upon satisfaction of certain conditions specified in the power purchase agreement and subject to receipt of requisite approvals and negotiations between the parties, our project subsidiary will have the right to demand that Southern California Edison Company purchase the power plant. The Heber 1 project was acquired in December 2003 and was financed with project finance debt from Beal Bank in December 2003.

The Heber 2 Project. The Heber 2 project is located in Heber, Imperial County, California. The Heber 2 project includes one power plant which commenced commercial operations in 1993. The plant utilizes a binary system and has a generating capacity of 38 MW. The Heber 2 project sells its electrical output to Southern California Edison Company under a power purchase agreement. The Heber 2 project was acquired in December 2003, and was financed with project finance debt from Beal Bank in December 2003.

The Steamboat Projects

The Steamboat 1/1A Project. The Steamboat 1/1A project is located in Steamboat Hills, Washoe County, Nevada. The Steamboat 1/1A project includes two power plants which commenced commercial operations in 1986 and 1988, respectively. The Steamboat 1/1A project utilizes a binary system and has a generating capacity of 5 MW. The Steamboat 1/1A project sells its electrical output to Sierra Pacific Power Company under two separate power purchase agreements. The Steamboat 1/1A project was acquired in June 2003 using internally generated cash, and was re-financed with the proceeds from the issuance by Ormat Funding of its senior secured notes on February 13, 2004.

The Steamboat 2/3 Project. The Steamboat 2/3 project is also located in Steamboat, Washoe County, Nevada. The Steamboat 2/3 project consists of two power plants which commenced commercial operations in 1992. The Steamboat 2/3 project utilizes a binary system and has a generating capacity of 29 MW. The Steamboat 2/3 project sells its electrical output to Sierra Pacific Power Company under two separate power purchase agreements. The Steamboat 2/3 project was acquired in February 2004 using internally generated cash and was financed with the proceeds from the issuance by Ormat Funding of its senior secured notes on February 13, 2004.

The Steamboat Hills Project. The Steamboat Hills project is also located in Steamboat Hills, Washoe County, Nevada. The Steamboat Hills project is comprised of one plant and commenced

commercial operations in 1988. The Steamboat Hills project utilizes a single flash system and water cooled condenser and has a generating capacity of 7 MW, although the power purchase agreement capacity is 12.5 MW. The Steamboat Hills project sells its electrical output to Sierra Pacific Power Company pursuant to a power purchase agreement. The project, under the predecessor owner, experienced difficulties operating at full capacity, among other reasons because of a well blow-out. We intend to increase the generating capacity of the Steamboat Hills project by additional drilling and certain other capital expenditures to take full advantage of the power purchase agreement. The Steamboat Hills project was acquired in May 2004 using internally generated cash.

The Mammoth Project

The Mammoth project is located in Mammoth Lakes, California. The Mammoth project is comprised of three plants, G-1, G-2 and G-3. The G-1 plant commenced commercial operations in 1985 and the G-2 and G-3 plants commenced commercial operations in 1990. The Mammoth project utilizes a binary system and has a generating capacity of 26 MW. Our project subsidiary owns a 50% partnership interest in Mammoth-Pacific, L.P., which owns 100% of the Mammoth project. The other 50% partnership interest is owned by an unrelated third party. The Mammoth project sells its electrical output to Southern California Edison Company under three separate power purchase agreements. Under the G-1 power purchase agreement, in certain circumstances, Southern California Edison Company or its affiliates has a right of first refusal to acquire the plant. Our 50% ownership interest in the Mammoth project was acquired in December 2003 using internally generated cash and was financed with project finance debt from Beal Bank in December 2003.

The Brady Project

The Brady project is located in Churchill County, Nevada and includes the Brady plant and the Desert Peak 1 plant. The Desert Peak 1 plant is approximately 4.5 miles southeast of the Brady plant. The Brady plant commenced commercial operations in 1992 and the Desert Peak 1 plant commenced commercial operations in 1985. The Brady project has a generating capacity of 20 MW and has in the past utilized a dual flash design. In August 2002, an additional 6 MW binary unit was added to the Brady plant to generate additional power from the brine before its reinjection. The Desert Peak 1 plant utilizes a dual flash design. The Brady project sells its electrical output from the Brady plant and Desert Peak 1 plant to Sierra Pacific Power Company under a power purchase agreement. Our project subsidiary is currently evaluating the replacement of the Desert Peak 1 plant with a new plant that would be more efficient. The new plant may be constructed on the same site as the existing Desert Peak 1 plant. However, subject to the results of ongoing engineering studies and additional drilling which may indicate additional geothermal resource availability at the site of the Brady plant, our project subsidiary may instead construct a replacement plant adjacent to the Brady plant. If our project subsidiary decides to build either plant, construction would likely begin in the first quarter of 2005 and be completed in the fourth quarter of 2005, at an estimated total project cost of approximately $10 million. The Brady project was acquired in June 2001 using internally generated cash and was re-financed with the proceeds from the issuance by Ormat Funding of its senior secured notes on February 13, 2004.

The Puna Project

The Puna project is located in the Puna district, Hawaii. The Puna plant commenced commercial operations in 1993. The Puna plant utilizes a geothermal combined cycle system, and has a generating capacity of 25 MW, although the power purchase agreement is for 30 MW. The Puna project sells its electrical output to Hawaii Electric Light Company under two power purchase agreements. Although the Puna project has significant geothermal resources, because of existing geological conditions, these resources are difficult to manage. In the past, the Puna project required extensive levels of investment mainly to address problems with the production and injection wells related to the geothermal resources. We intend to increase the output of the Puna project by upgrading the technology of the plant through the addition of Ormat Energy Converters, drilling another production well, and negotiating a new power purchase agreement for the additional generating capacity that will be

available as a result of such activities. The Puna project was acquired in June 2004 with the proceeds of parent company loans and short-term bank loans.

Foreign Projects

Our foreign projects in operation have a generating capacity of approximately 113 MW. Our current foreign projects are located in the Philippines, Nicaragua, Kenya and Guatemala. We also have projects under development or construction in Guatemala, China, El Salvador and Kenya.

The Leyte Project (The Philippines)

The Leyte project is located in Leyte, Philippines, on the Isle of Leyte. The Leyte project consists of 4 power plants. The Leyte plant utilizes a steam system and has a generating capacity of 49 MW. Our project subsidiary has an 80% partnership interest in Ormat-Leyte Co. Ltd., which owns 100% of the Leyte project. The remaining 20% partnership interest in Ormat-Leyte Co. Ltd. is held by two unrelated third parties. In August 1995, following a build-operate-transfer, which we refer to as BOT, international tender, Ormat Inc. (which later transferred its interest in the BOT agreement to Ormat-Leyte Co. Ltd.) entered into a BOT agreement with PNOC-Energy Development Corporation, a Philippine company wholly owned by Philippine National Oil Company, a government-owned company. Ormat-Leyte Co. Ltd. has an outstanding non-recourse loan to the Export-Import Bank of the United States, whose balance, as of March 31, 2004, is $17.8 million. The loan is due and payable in approximately equal quarterly installments until July 2007.

The Government of The Philippines has initiated the privatization of its electricity industry. However, we cannot foresee when such privatization may be completed. If such privatization is achieved in a manner that jeopardizes PNOC-Energy Development Corporation's or its affiliate's ability to comply with their obligations under the BOT agreement, the parties are required to negotiate an amendment to the power purchase agreement. Should they fail to reach an agreement, PNOC-Energy Development Corporation has the obligation (and our project subsidiary has the right to demand PNOC-Energy Development Corporation) to buy out Ormat-Leyte Co. Ltd.'s rights in the project at a price based upon the net present value of the projected cash flow from the project during the remaining term of the BOT agreement.

The Momotombo Project (Nicaragua)

The Momotombo project is located in Momotombo, Nicaragua. The Momotombo project is comprised of one plant and a geothermal field. The plant was already in existence when we signed the concession agreement for the project in March 1999, and had commenced commercial operations in the mid-1980s utilizing a dual flash system. In 2003, an additional 6 MW binary unit was added, bringing the generating capacity to approximately 28 MW. The Momotombo project has a power purchase agreement with Empresa Distribuidora de Electricidad del Norte (DISNORTE) and Empresa Distribuidora de Electricidad del Sur (DISSUR), two corporations which own the power distribution rights in Nicaragua. Our project subsidiary, which operates the Momotombo project, has an outstanding loan from Bank Hapoalim B.M., whose outstanding balance as of March 31, 2004 was $19.2 million.

The Olkaria III Project — Phase I (Kenya)

The Olkaria III project is located in Naivasha, Kenya. The Olkaria III project is comprised of one plant, which commenced commercial operations in August 2000, and a geothermal field. The plant currently has a generating capacity of approximately 13 MW (early generation commercial operation for Phase I). The parties contemplated the construction of Phase II (full generation commercial operation) of this project which, upon completion, would increase the generating capacity of the Olkaria III project to approximately 48 MW. A description of Phase II of this project is set forth below in "Projects under Development." Phase I of the Olkaria III project utilizes a binary system. In November 1998, following an international tender, our project subsidiary entered into a power

purchase agreement with the Kenya Power & Lighting Co. Ltd. which was further amended in July 2000 and April 2003. Our project subsidiary leases the site on which the geothermal resources and the plant facilities are located from the Kenyan government pursuant to an agreement which will expire in 2040. The Kenyan government granted our project subsidiary a license giving it exclusive rights of use and possession of the relevant geothermal resources for an initial period of 30 years, expiring in 2029, which initial period may be extended by two additional five year terms. The Kenyan Minister of Energy has the right to terminate or revoke the license in the event our project subsidiary ceases work in or under the license area during a period of six months, or has failed to comply with the terms of the license or the provisions of the law relating to geothermal resources. Our project subsidiary is obligated to pay the Kenyan government monthly fees and royalties based on the amount of power supplied to the Kenya Power & Lighting Co. Ltd.

The Zunil Project (Guatemala)

The Zunil project is located in Zunil, Guatemala. The Zunil project is comprised of one plant which commenced commercial operations in 1999. The plant utilizes a binary system consisting of Ormat Energy Converters and has a generating capacity of 24 MW. The project is owned by Orzunil I de Electricidad, Limitada, which owns 100% of the Zunil project. Our project subsidiary owns 21% of the outstanding partnership interests of Orzunil I de Electricidad, Limitada. Another of our subsidiaries provides operation and maintenance services to the project. The Zunil project sells its generating capacity to Instituto Nacional de Electrification pursuant to a power supply agreement. As of the date of this prospectus, Orzunil I de Electricidad, Limitada has two senior outstanding non-recourse loans, one from International Finance Corporation (IFC) and the other from the Commonwealth Development Corporation (CDC), the aggregate total balance of which was, as of March 31, 2004, $32 million. The loans are due and payable in quarterly installments until November 2011. Each of IFC and the CDC owns 14% of the issued and outstanding partnership interests of Orzunil I de Electricidad, Limitada.

Projects under Construction

We are in varying stages of development and construction of projects, both domestic and foreign. Based on our current construction schedule, we expect to have an additional generating capacity of approximately 49 MW in the United States by the end of 2006 and approximately 20 additional MW in Guatemala by June 2006.

The Desert Peak 2 Project

Our project subsidiary is currently constructing the Desert Peak 2 project in Churchill County, Nevada (near the Brady project). The Desert Peak 2 project is expected to have a generating capacity of up to 15 MW and will utilize our Ormat Energy Converters. The electrical output from the project will be sold, and renewable energy and environmental credits will be transferred to Nevada Power Company under a power purchase agreement that has a 20-year term commencing from the January 1 following the commercial operation date of such power plant. The Desert Peak 2 project is expected to be completed in early 2006.

The Amatitlan Project (Guatemala)

Our project subsidiary is currently constructing a geothermal power plant in Amatitlan, Guatemala on a "build, own and operate" or "BOO" basis. The project is comprised of one power plant, and has obtained the rights to various geothermal production and reinjection wells. The Amatitlan plant will use our Ormat Energy Converters.

The term of the power purchase agreement for the Amatitlan project is 20 years from the date of the commencement of operations at the power plant or 23 years from the date of commencement of the construction works, whichever is later. During a period of two years after the completion of the construction of the power plant, and subject to the signing of an additional agreement with Instituto

Nacional de Electrification and the result of a feasibility test, our project subsidiary may increase the power generating capacity of the power plant to 50 MW by drilling additional wells. We anticipate that the Amatitlan project will be completed in 2006.

The Galena Project

Our project subsidiary is in the process of replacing the equipment currently used in the Steamboat 1/1A project with new upgraded equipment. Our project subsidiary will augment the operation of the Steamboat 1/1A project with additional geothermal resources extracted from the Steamboat 2/3 project's leases that will be diverted for use by Steamboat 1/1A project. After such upgrade, we will rename the Steamboat 1/1A project as the Galena project. We believe that this upgrade will allow the Galena project to obtain a generating capacity of 20 MW (adding an incremental 13 MW to the existing Steamboat complex). We anticipate that the Galena project will achieve commercial operations by the end of 2005 and that the project will sell its electrical output and transfer its renewable energy credits to Sierra Pacific Power Company under a power purchase agreement that has a 20-year term commencing from the January 1 following the commercial operation date of such power plant. Our project subsidiary is coordinating the transition from the Steamboat 1/1A project to the Galena project with Sierra Pacific Power Company. We intend to replace the existing equipment at the Steamboat 1/1A project with current Ormat technology, which we believe will optimize the geothermal resources available.

Enhancement of Operating Projects

We are currently pursuing the addition of Ormat Energy Converters for the Heber 1 and Heber 2 projects, the drilling of additional wells with respect to the Heber 2 project, and other enhancement activities for the Heber 1 and Heber 2 projects. We believe that these enhancements could increase the generating capacity of the Heber 1 and the Heber 2 projects collectively by 18 MW, and are currently in discussion with Southern California Edison Company regarding these proposed enhancements. We are also in the early engineering stages of an enhancement program for the Mammoth, Steamboat Hills and Puna projects, which we believe could increase the generating capacity of each of these facilities by 4 MW, 7 MW and 9 MW, respectively.

Projects under Development

We also have projects under development in the United States, China, El Salvador and Kenya. In certain cases we have obtained concession agreements and/or financing commitments, and in other cases, the projects are in early development stages. We expect to continue to explore these and other opportunities for expansion so long as they continue to meet our business objectives and investment criteria.

The Desert Peak 3 Project

In the United States, the Desert Peak 3 project is currently under development and is expected to have a generating capacity of 10 MW. Our project subsidiary will sell electrical output from the plant, and transfer the renewable energy and environmental credits, to Nevada Power Company under a power purchase agreement that has a 20-year term from the January 1 following the commercial operation date of the plant and which was signed as part of Nevada Power Company's efforts to comply with Nevada's renewable portfolio standards.

The Yunnan Project (China)

OrYunnan Geothermal Co., Ltd., which is a joint venture established between our project subsidiary and Yuan Province Geothermal Development Co., Ltd., owns exclusive rights to develop all of the geothermal resources in Teng Chong County, Baoshan City, in Yunnan Province, southwest China. Our project subsidiary owns 85% of the interests in OrYunnan Geothermal Co. Ltd., which owns all of the ownership interests in the Yunnan project. The area of the geothermal concession is

approximately 65 square miles and it is located approximately 200 miles southwest of Kunming, the provincial capital of Yunnan, approximately 40 miles from the border with Myanmar. We estimate the potential of the geothermal resources in the concession area to be between 150 to 200 MW. Initially, our project subsidiary and its partner intend to develop a geothermal field and construct a power plant with a generating capacity of approximately 48 MW, which we estimate will require a capital investment of approximately CNY 940,000,000 (approximately $112.8 million calculated at the prevailing exchange rate as at June 30, 2004). As of the date hereof, our project subsidiary is awaiting completion of the Chinese central government approval procedures, following which negotiations with the provincial utility company towards the signing of a power purchase agreement can conclude. On May 29, 2002, our project subsidiary entered into a memorandum of understanding regarding the main terms of the power purchase agreement and other major project agreements with Yunan Electric Power Co., Ltd., a state-owned utility company, concerning the purchase of electric power by the utility company from our project subsidiary on a 30-year basis and the related interconnection arrangements. The MOU estimates that the commercial operation date of the plant is to be January 1, 2006. However, we have been in the development stage of the OrYunnan Project for several years and there is no assurance that this date will not have to be extended.

The San Vicente/Chanameca Project (El Salvador)

The San Vicente project and the Chanameca project in El Salvador are in the early development stage. Our project subsidiary has a concession over the relevant geothermal field and is in the process of evaluating the geothermal resources covered by the concession.

The Olkaria III Project — Phase II (Kenya)

As previously noted, our project subsidiary and Kenya Power & Lighting Co. Ltd. contemplated the construction of Phase II of the Olkaria III project. As of the date hereof, our project subsidiary has drilled the wells and commenced preliminary construction activities but has not begun any material construction activities with respect to Phase II. We halted our construction activities due to uncertainty relating to the form of government support that would be provided for the project and the related collateral package, both of which are pre-conditions for the financing of such Phase II. Our project subsidiary has recently engaged in discussions with the Kenyan government and Kenya Power & Lighting Co. Ltd., as facilitated by the Multilateral Investment Guarantee Agency in connection with such matters. Pursuant to the power purchase agreement, our obligation to construct Phase II is contingent upon Kenya Power & Lighting Co. Ltd. providing to us (1) a letter of support from the Kenyan Government and (2) a certain deposit by April 17, 2004, a deadline which was not met. We currently have until April 17, 2005 to notify Kenya Power & Lighting Co. Ltd. whether we will proceed to construct Phase II of the Olkaria III project, in which case the current power purchase agreement with respect to Phase I will remain valid until 2020. If we notify Kenya Power & Lighting Co. Ltd. that we will not proceed, then the portion of the current power purchase agreement applicable to Phase II of the Olkaria III project will be terminated (but the current portion applicable to Phase I will be unaffected). If we fail to make such notification that we will not proceed, we will be required to construct Phase II and reach commercial operations by May 31, 2007 in order to avoid the application of financial penalties, or at the latest by April 17, 2008 in order to avoid termination of the entire power purchase agreement. In recent discussions, our project subsidiary has requested that certain adjustments be made to the power purchase agreement which, if implemented, would extend the period during which the option to decide to pursue the construction of Phase II can be exercised.

Geothermal Assets for Future Development in the United States

We have various geothermal leases for future development in the United States. These geothermal leases include the Meyberg lease near Steamboat, Nevada, the Newberry lease in Oregon, the Rhyolite Plateau lease near Mammoth, various leases for future development in Puna and various other leases for development in Nevada.

Operations of our Products Segment

Power Units for Geothermal Power Plants. We design, manufacture and sell power units for geothermal electricity generation, which we refer to as Ormat Energy Converters or OECs. Our

customers include contractors and geothermal plant owners and operators. Recently, one of our 1.8 MW power units was installed at Oserian Farm in Kenya, where farmers grow flowers for export.

The consideration for the power units is usually paid in installments, in accordance with milestones set in the supply agreement. Sometimes we agree to provide the purchaser with spare parts (or alternatively, with a non-exclusive license to manufacture such parts). We provide the purchaser with at least a 12-month warranty for such products. We usually also provide the purchaser (often, upon receipt of advances made by the purchaser) with a guarantee, which expires in part upon delivery of the equipment to the site and fully expires at the termination of the warranty period.

Power Units for Recovered Energy-Based Power Generation. We design, manufacture and sell power units used to generate electricity from recovered energy or so-called "waste heat" that is generated as a residual by-product of gas turbine-driven compressor stations and a variety of industrial processes such as cement manufacturing, and is not otherwise used for any purpose. Our existing and target customers include interstate natural gas pipeline owners and operators, gas processing plant owners and operators, cement plant owners and operators, and other companies engaged in other energy-intensive industrial processes. We view the recovered energy generation as a significant market opportunity for us, and we utilize two different business models in connection with such business opportunity. The first, which is similar to the one utilized in our geothermal power generation business, consists of the development, construction, ownership and operation of the recovered energy-based generation power plant. In this case, we enter into agreements to purchase industrial waste heat, and into long-term power purchase agreements with offtakers to sell the electricity generated by the recovered energy generation unit that utilizes such industrial waste heat. We expect that the power purchasers in such cases will be investor owned electric utilities or local electrical cooperatives.

Pursuant to the second business model, we construct and sell the power units for recovered energy-based power generation to third parties for use in "inside-the-fence" installations or otherwise. Our customers include gas processing plant owners and operators, cement plant owners and operators and companies in the process industry. Our Neptune recovered energy project is an example of such a model. We have installed one of our recovered energy-based generation units at Enterprise Product's Neptune gas processing plant in Louisiana. The unit utilizes exhaust gas from two gas turbines at the plant and is providing electrical power that is consumed internally by the facility (although a portion of the generated electricity is also sold to the local electric utility). Our Basin Electric/NBPL recovered generation project is another example of this model. We will supply four 5 MW recovered energy generation units which will be used by Basin Electric, the largest generation cooperative in the United States.

Our recovered energy generation units qualify as Qualifying Facilities for regulatory purposes and, if structured properly, may also be eligible for favorable tax treatment such as the seven year modified accelerated cost recovery under relevant U.S. federal tax rules.

Remote Power Units and other Generators. We design, manufacture and sell fossil fuel powered turbo-generators with a capacity ranging between 200 watts and 5,000 watts, which operate unattended in extreme climate conditions, whether hot or cold. The remote power units supply energy for remote and unmanned installations and along communications lines and cathodic protection along gas and oil pipelines. Our customers include contractors installing gas pipelines in remote areas. In addition, we manufacture and sell generators for various other uses, including heavy duty direct current generators. Our remote power units were recently installed on a Pemex pipeline in Mexico. The terms of sale of the turbo-generators are similar to those for the power units produced for power plants.

the timing and delivery of required equipment and its costs. Recent examples of our construction activities include the design and construction of the Mokai and Wairakei geothermal power plants in New Zealand.

The consideration for such services is usually paid in installments, in accordance with milestones set in the EPC contract and related documents. We usually provide performance guarantees or letters of credit securing our obligations under the contract. Upon delivery of the plant to its owner, such guarantees are replaced with a warranty guarantee, usually for a period ranging from 12 months to 36 months. The EPC contract usually places a cap on our liabilities for failure to meet our obligations thereunder. For example, our subsidiary, Ormat Pacific, Inc., is currently acting as EPC contractor for two geothermal projects in New Zealand owned by Contact Energy Limited and Tuaropaki Power Company Limited, respectively. Ormat Industries has guaranteed Ormat Pacific, Inc.'s obligations under both agreements. Ormat Systems will supply the equipment and products necessary for the construction and operation of these power plants.

We also design and construct the recovered energy generation units on a turnkey basis, and may provide a long-term agreement to supply non-routine maintenance for such units. Our customers constitute interstate natural gas pipeline owners and operators, gas processing plant owners and operators, cement plant owners and operators and companies engaged in the process industry.

Operation and Maintenance of Power Plants. We provide operation and maintenance services for geothermal power plants owned by us and by third parties. For example, we provide operations and management services to the Orzunil project in Guatemala, in which we have a minority ownership interest.

Our manufacturing operations and products are certified ISO 9001, ISO 14001, ASME and TÜV and we are an approved supplier to many electric utilities around the world.

Our Technology

Our proprietary technology covers power plants operating according to the Organic Rankine Cycle only or in combination with the Steam Rankine Cycle and Brayton Cycle, as well as integration of power plants with energy sources such as geothermal, recovered energy, biomass, solar energy and fossil fuels. Specifically, our technology involves original designs of turbines, pumps, and heat exchangers, as well as formulation of organic motive fluids. All of our motive fluids are non-ozone-depleting substances. Using advanced computerized fluid dynamics and other CAD software as well as our test facilities, we continuously seek to improve power plant components, reduce operations and maintenance costs, and increase the range of our equipment and applications. In particular, we are examining ways to increase the output of our plants by utilizing evaporative cooling, cold reinjection, performance simulation programs, and topping turbines. In the geothermal as well as the recovered energy (waste heat) area, we are examining two-level recovered energy systems and new motive fluids.

We also construct combined cycle geothermal plants where the steam first produces power in a backpressure steam turbine and is subsequently condensed in a vaporizer of a binary plant which produces additional power.

In the conversion of geothermal energy into electricity, our technology has a number of advantages compared with conventional geothermal steam turbine plants. A conventional geothermal steam turbine plant consumes significant quantities of water, causing depletion of the aquifer, and also requires cooling water treatment with chemicals and thus a need for the disposition of such chemicals. A conventional geothermal steam turbine plant also creates a significant visual impact in the form of an emitted plume from the cooling tower during cold weather. By contrast, our binary and combined cycle geothermal power plants have a low profile with minimum visual impact and do not emit a plume when they use air cooled condensers. Our binary and combined cycle geothermal power plants reinject all of the geothermal fluids utilized in the respective processes into the geothermal reservoir. Consequently, such processes generally have no emissions. Accidental or fugitive emissions (that result from minor leaks) of motive fluids are within the limits defined by federal, state and local regulatory standards.

Other advantages of our technology include simplicity of operation and easy maintenance, low RPM, temperature and pressure in the Ormat Energy Converter, a high efficiency turbine and the fact that there is no contact between the turbine itself and often corrosive geothermal fluids.

We use the same elements of our technology in our recovered energy products. The heat source could be exhaust gases from a simple cycle gas turbine, low pressure steam or medium temperature liquid found in the process industry. In most cases we attach an additional heat exchanger in which we circulate thermal oil to transfer the heat into the Ormat Energy Converter's own vaporizer in order to provide greater operational flexibility and control. Once this stage of each recovery is completed, the rest of the operation is identical to the Ormat Energy Converter used in our geothermal power plants. The same advantages using the Organic Rankine Cycle apply here as well. In addition, our technology allows for better load following than a conventional steam turbine can exhibit, requires no water treatment as it is air cooled, and does not require the continuous presence of a steam licensed operator on site.

More than 70 valid United States patents (and about 10 pending patents) cover our products (mainly power units based on Organic Rankine Cycle) and systems (mainly geothermal power plants and industrial waste heat recovery for electricity production). The systems-related patents cover not only a particular component but rather the overall effectiveness of the plant's systems from the "fuel" (i.e., geothermal fluid, waste heat, biomass or solar) to generated electricity.

The products-related patents cover components such as turbines, heat exchanges, seals and controls. The system patents cover subjects such as disposal of non-condensable gases present in geothermal fluids, power plants for very high pressure geothermal resources and use of two-phase fluids. A number of patents cover the combined cycle geothermal power plants where the steam first produces power in a backpressure steam turbine and is subsequently condensed in a vaporizer of a binary plant which produces additional power.

We are also involved in developing new technology to extract heat from the earth by circulating fluid through an enhanced or man-made reservoir created in naturally low permeable or water-poor rocks. We are undertaking this development in cooperation with GeothermEx Inc., the University of Utah, Energy & Geoscience Institute, the University of Nevada-Reno and the Great Basin Center for Geothermal Energy, with funding support from the United States Department of Energy.

Competition

The power generation industry is characterized by intense competition from electric utilities, other power producers, and marketers. In recent years, the United States in particular has seen increasing competition in power sales, in part due to excess capacity in a number of U.S. markets and an emphasis on short-term markets, and competition has contributed to a reduction in electricity prices. There is also increasing competition between electric utilities, particularly in California where the California Public Utilities Commission has launched an initiative designed to give all electric consumers the ability to choose between competing suppliers of electricity.

In the geothermal power generation sector, our main competitors in the United States are CalEnergy, Calpine and Caithness. Some of these companies are also active outside of the United States. Outside of the United States, aside from these companies, we have not recently encountered competition from any private sector geothermal power developer, but may face competition from national electric utilities or state-owned oil companies.

In the products segment of our business, our main competitors are Mitsubishi, Fuji and Toshiba of Japan, GE/Nuevo Pignone and Ansaldo of Italy, Siemens of Germany, Alstom of France and Kaluga of Russia. In the remote power unit business, we face competition from Global Thermoelectric, as well as from manufacturers of diesel generator sets.

Siemens of Germany as well as other manufacturers of conventional steam turbines are potential competitors in the recovered energy generation business, although we believe that our recovered energy generation unit has technological and economical advantages over the Siemens/Kalina technology and the conventional steam technology.

We also compete with companies engaged in the power generation business from renewable energy sources other than geothermal energy, such as wind power, solar power and hydro-electric power.

None of our competitors competes with us in both the power generation segment and the products segment of our business.

Customers

All of our revenues from the power generation segment were derived from fully-contracted energy and/or capacity payments under long-term power purchase agreements with governmental and private utility companies. Southern California Edison Company, Hawaii Electric Light Company, PNOC-Energy Development Corporation and Sierra Pacific Power Company have accounted for 48.3%, 9.2%, 6.2% and 5.6% of our pro forma revenues, respectively, for the fiscal year ended December 31, 2003. Based on publicly available information, as of June 30, 2004, the issuer ratings of Southern California Edison Company, Sierra Pacific Power Company and Nevada Power Company (a potential power purchaser for the Desert Peak 2 and Desert Peak 3 projects) were Baa3 (under review), B1 (negative outlook) and B1 (negative outlook), respectively, from Moody's Investors Services and BBB (stable outlook), B+ (negative outlook), and B+ (negative outlook), respectively, from Standard & Poor's Ratings Services and the issuer rating of Hawaii Electric Light Company was BBB+ (stable outlook) from Standard & Poor's Ratings Services. The credit ratings of any power purchaser may decrease from time to time. There is no publicly available information with respect to the credit rating or stability of the power purchasers under the power purchase agreements for our foreign power projects.

All of our revenues from the products segment were derived from contractors or owners or operators of power plants, process companies and pipelines, including Miravalles and Mokai, which accounted for 25.8% and 24.8%, respectively, of our revenues from the sale of products in 2003.

Raw Materials

In connection with our manufacturing activities, we use raw materials such as steel and copper. We do not rely on any one supplier for the raw materials used in our manufacturing activities, as all of such raw materials are readily available.

Employees

As of July 1, 2004, we had 676 employees, of which 223 employees were in the United States, 294 employees were in Israel and 159 employees were located in other countries around the world. We expect that any future growth in the number of our employees would be mainly attributable to the purchase and/or development of new power plants.

None of our employees (other than the Momotombo project employees) are represented by a labor union, and we have never experienced any labor dispute, strike or work stoppage. We consider our relations with our employees to be satisfactory. We believe our future success will depend on our continuing ability to hire, integrate and retain qualified personnel.

We have no collective bargaining agreements with respect to our Israeli employees. However, by order of the Israeli Ministry of Labor and Welfare, the provisions of a collective bargaining agreement between the Histadrut (the General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (which includes the Industrialists Association) may apply to some of our non-managerial, finance and administrative, and sales and marketing personnel. This collective bargaining agreement principally concerns cost of living increases, length of the workday, minimum wages, insurance for work-related accidents, procedures for dismissing employees, annual and other vacation, sick pay, determination of severance pay, pension contributions and other conditions of employment. We currently provide such employees with benefits and working conditions which are at least as favorable as the conditions specified in the collective bargaining agreement.

Insurance

We maintain business interruption insurance, casualty insurance, including flood and earthquake coverage, and primary and excess liability insurance, as well as customary worker's compensation and

automobile insurance and such other insurance, if any, as is generally carried by companies engaged in similar businesses and owning similar properties in the same general areas and financed in a similar manner. To the extent any such casualty insurance covers both us and/or our projects, on the one hand, and any other person and/or plants, on the other hand, we generally have specifically designated as applicable solely to us and our projects "all risk" property insurance coverage in an amount based upon the estimated full replacement value of our projects (provided that earthquake and flood coverages may be subject to annual aggregate limits depending on the type and location of the project) and business interruption insurance in an amount that also varies from project to project.

We generally purchase insurance policies to cover our exposure to certain political risks involved in operating in developing countries. The policies are issued by entities which specialize in such policies, such as Multilateral Investment Guarantee Agency (a member of the World Bank Group). From time to time, we also examine the possibility of purchasing political risk insurance from private sector providers, such as Zurich Re, AIG and other such companies, however, to date all of our political risk insurance contracts are with the Multilateral Investment Guarantee Agency. Such insurance policies cover, in general, and subject to the limitations and restrictions contained therein, 80%-90% of our revenue loss derived from a specified governmental act, such as confiscation, expropriation, riots, the inability to convert local currency into hard currency and, in certain cases, the breach of agreements. We have obtained such insurance for all of our foreign projects in operation except for the Leyte project.

Legal Proceedings

In August 2003, Ormesa LLC agreed to enter into binding arbitration with the Imperial Irrigation District, which we refer to as IID, in connection with IID's claim that Ormesa LLC is obligated to pay scheduling and transmission charges (including those applicable to the GEM 2 and GEM 3 plants) through the effective date of relinquishment of nominated capacity for the GEM 2 and GEM 3 plants. The amount in dispute is $529,000. Ormesa LLC contends that it is not obligated to pay the subject charges for the GEM 2 and GEM 3 plants after the January 1, 2003 effective date of the Energy Services Agreement that Ormesa LLC entered into with the IID. Settlement discussions are in progress. We believe that the dispute will be resolved in 2004 and that any outcome will not have a material impact on our operations or relationship with the IID.

As a result of our acquisition of the Steamboat 1 plant and Steamboat 1A plant, our subsidiary Steamboat Geothermal LLC has become a party to litigation pending in the Second Judicial District Court in Washoe County, Nevada with Geothermal Development Associates and Delphi Securities, Inc. In April 2002, these plaintiffs initiated a lawsuit against the former owner and operator of the Steamboat 1/1A project. The plaintiffs dispute amounts owing to them pursuant to an agreement, dated July 14, 1985, through which Geothermal Development Associates assigned all of its right, title, and interest in the subject geothermal leasehold property in exchange for a net operating royalty interest in the revenues of the Steamboat 1 plant. The plaintiffs allege damages based upon three separate theories: (1) that the actions of the former owner in developing the Steamboat 1A plant have decreased the output of the Steamboat 1 plant; (2) that general, administrative, and corporate expenses included by the former owner in the calculation of the net royalty amount were overstated for the years 2000 and 2001; and (3) that, in addition to its royalty interest in the revenues from the Steamboat 1 plant, plaintiffs are entitled to a net revenue royalty interest from the Steamboat 1A plant. The plaintiffs have asserted in pleadings and in settlement negotiations that the sum of their claimed damages arising from these three claims is approximately $1 million. This case was originally set for trial in September 2003, but the trial date was continued in order to allow the plaintiffs to obtain substitute counsel. Prior to the continuance of the trial date, initial evidentiary disclosures had been made, as well as some initial discovery requests. No dispositive motions are pending before the court and the trial date has not been rescheduled. We have initiated settlement discussions with plaintiff and believe that any outcome will not have a material impact on our results of operations.

From time to time, we (and our subsidiaries) are a party to various other lawsuits, claims and other legal and regulatory proceedings that arise in the ordinary course of our (and their) business. These actions typically seek, among other things, compensation for alleged personal injury, breach of

contract, property damage, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to such lawsuits, claims and proceedings, we accrue reserves in accordance with U.S. generally accepted accounting principles. We do not believe that any of these proceedings, individually or in the aggregate, would materially and adversely affect our business, financial condition, future results and cash flows.

Regulation of the Electric Utility Industry in the United States

The following is a summary overview of the electric utility industry in the United States and applicable regulations and should not be considered a full statement of the law or all issues pertaining thereto.

PURPA

PURPA, in relevant part, exempts renewable electric generating projects that are "Qualifying Facilities" from various regulations under the FPA. There are two types of Qualifying Facilities: "Qualifying Small Power Production Facilities" and "Qualifying Cogeneration Facilities." Under PURPA and the regulations promulgated thereunder, a power production facility is a "Qualifying Small Power Production Facility" if (1) the facility produces no more than 80 MW (on a net capacity basis) or satisfies certain FERC certification and construction dates, (2) the primary energy source of the facility is biomass, waste, renewable resources, geothermal resources or any combination thereof, and at least 75% of the total energy input is from these sources, and (3) the facility is owned by a person not primarily engaged in the generation or sale of electric power (other than electric power solely from cogeneration facilities or small power production facilities) ( i . e ., the project company cannot be controlled by, more than 50% of the equity interests of the facility may not be owned by, and more than 50% of the equity benefits cannot be received by an electric utility, an electric utility holding company or a combination thereof or their subsidiaries).

Under PURPA, Qualifying Facilities receive two primary benefits. First, PURPA exempts Qualifying Facilities, such as our domestic projects (other than the Puna project) from the definition of "electric utility company" under PUHCA, most provisions of the FPA and state laws and regulations relating to financial, organization and rate regulation of electric utilities. Second, the regulations promulgated by FERC under PURPA require, in relevant part, that electric utilities (1) purchase energy and capacity made available by Qualifying Facilities, construction of which commenced on or after November 9, 1978, at a rate based on the purchasing utility's full "avoided costs" and (2) sell supplementary, back-up, maintenance and interruptible power to Qualifying Facilities on a just and reasonable and nondiscriminatory basis. FERC's regulations define "avoided costs" as the "incremental costs to an electric utility of electric energy or capacity or both which, but for the purchase from the qualifying facility or qualifying facilities, such utility would generate itself or purchase from another source." Utilities may also purchase power at prices other than avoided cost pursuant to negotiations as provided by FERC's regulations. Under an amendment to PURPA and PURPA regulations, FERC has also provided that utility geothermal small power production facilities (that is, geothermal small power production facilities that could be Qualifying Facilities except that they are owned by a person primarily engaged in the generation or sale of electric energy) are exempt from PUHCA but not state regulation or, if applicable, the FPA.

We expect that our domestic projects will continue to meet all of the criteria required for Qualifying Facilities under PURPA. If any of our domestic projects in which we have an interest loses its Qualifying Facility status or if amendments to PURPA are enacted that substantially reduce the benefits currently afforded Qualifying Facilities, our operations could be adversely affected. Loss of Qualifying Facility status for one of our domestic projects for having more than 50% utility ownership would make that facility a utility geothermal small power production facility. Such facilities are exempt from PUHCA but are subject to state regulation and, if applicable, the FPA. Loss of Qualifying Facility status for any other reason would also make the facility subject to state regulation and, if applicable, the FPA. In addition, loss of Qualifying Facility status for any reason other than utility ownership would make the facility subject to PUHCA unless it has EWG status or falls within

another exemption. If a facility lost Qualifying Facility status for any reasons other than utility ownership and it was ineligible for EWG status because it made retail sales, we would face the choice between discontinuing the retail sales and filing for EWG status or becoming subject to PUHCA. At present, none of our domestic projects makes retail sales of electricity (other than to affiliates). In the unlikely event that we become a public utility holding company, which could be deemed to occur prospectively or retroactively to the date that any of our plants lost its Qualifying Facility status (assuming that that plant was neither an EWG nor a utility geothermal small power production facility), our other domestic projects could lose Qualifying Facility status because our interests in such projects could be considered to be electric utility holding company interests for purposes of the Qualifying Facility ownership requirements. This could cause all of our projects to become subject to federal and state energy regulations. In addition, a loss of Qualifying Facility status could allow the power purchaser, pursuant to the terms of the particular power purchase agreement, to cease taking and paying for electricity from the relevant project or, consistent with FERC precedent, to seek refunds of past amounts paid. This could cause the loss of some or all contract revenues, result in significant liability for refunds of past amounts paid, or otherwise impair the value of a project. If a power purchaser were to cease taking and paying for electricity or seek to obtain refunds of past amounts paid, there can be no assurance that the costs incurred in connection with the project could be recovered through sales to other purchasers or that we would have sufficient funds to make such refund payment. In addition, such a loss of status would be an event of default under the financing arrangements currently in place for some of our projects which would enable the lenders to exercise their remedies and enforce the liens on the relevant project.

In 2003, Congress proposed legislation that, among other provisions, would have had the practical effect of repealing PUHCA and shifting regulatory oversight of holding companies to FERC, and repealing the mandatory purchase requirements of PURPA. Although the 2003 legislation would not affect existing power purchase agreements for Qualifying Facilities, such legislation or other legislation (1) could repeal or amend PURPA in a manner that substantially reduces the benefits currently afforded Qualifying Facilities, or (2) could otherwise make more burdensome the requirements for the projects to maintain their status as Qualifying Facilities. In such event, operations at the projects or compliance with the terms of the power purchase agreements could be adversely affected, which in turn could reduce our net income and materially and adversely affect our business, financial condition, future results and cash flow.

PUHCA

PUHCA, in relevant part, provides that any corporation, partnership or other entity or organized group that owns, controls or holds power to vote 10% or more of the outstanding voting securities of a "public utility company" (which is defined to include an "electric utility company" or a "gas utility company") or of a company that is a "holding company" of a public utility company or public utility holding company, is subject to registration with the Securities and Exchange Commission and to regulation under PUHCA, unless exempted by a Securities and Exchange Commission rule, regulation or order. An entity may also be deemed to be a holding company if the Securities and Exchange Commission determines, after providing notice and an opportunity for a hearing, that such entity exercises a controlling influence over the management or policies of any public utility or holding company as to make it necessary or appropriate in the public interest or for the protection of investors or consumers that such entity be regulated as a holding company. Unless an exemption is obtained, PUHCA requires registration for a holding company of a public utility company, and requires a public utility holding company to limit its utility operations to a single integrated utility system and to divest any other operations not functionally related to the operation of the utility system. In addition, a public utility company that is a subsidiary of a registered holding company under PUHCA is subject to financial and organizational regulation, including approval by the Securities and Exchange Commission of its financing transactions.

Under current federal law, we are not subject to regulation as a holding company under PUHCA and will not be subject to such regulation as long as the plants in which we have an interest (1) are

Qualifying Facilities, (2) are "Exempt Wholesale Generators" (as defined in PUHCA) or (3) are subject to another exemption or waiver, such as status as an electric utility geothermal small power production facility.

FPA

Under the FPA, FERC has exclusive rate-making jurisdiction over wholesale sales of electricity and transmission in interstate commerce. These rates may be based on a cost of service approach or may be determined through competitive bidding or negotiation. If a project were to lose its Qualifying Facility status, the rates set forth in its power purchase agreement would have to be filed with FERC and would be subject to review by FERC under the FPA, unless the project is located in Hawaii, Alaska or the parts of Texas that are not deemed to be interstate commerce, in which case state regulations would apply. Under FERC policy, the rates under those circumstances could be no higher than the rate or price the relevant power purchaser would have paid for energy had it not been required to purchase from such project under PURPA's mandatory purchase requirements, i.e., such power purchaser's economy energy (incremental) cost during the period of non-compliance with Qualifying Facility requirements, unless the applicable power purchase agreement otherwise provides for alternative rates to apply in the event of such loss of Qualifying Facility status and FERC accepts such alternative rates.

State Regulation

Our projects in California and Nevada, by virtue of being Qualifying Facilities and because they engage in wholesale sales of electricity to public electric utilities in California and Nevada, are not subject to rate, financial and organizational regulations applicable to public electric utilities in those states. The projects each sell or will sell their electrical output to public electric utilities (either Sierra Pacific Power Company, Nevada Power Company or Southern California Edison Company) which are regulated by their respective state public utility commission. Sierra Pacific Power Company and Nevada Power Company are regulated by the Public Utility Commission of Nevada, which we refer to as NPUC. Southern California Edison Company and a small portion of Sierra Pacific Power Company in the Lake Tahoe area are regulated by the California Public Utility Commission. Since the NPUC and the CPUC regulate the retail rates through which the purchasing utilities recover their payments to our facilities from the retail electric customers of the public electric utilities under their jurisdiction, it is important for the purchasing electric utilities to obtain approval by their respective public utility commissions of their agreements with our projects. It is also important for the public electric utilities to be allowed continued recovery in their retail electric rates of the cost paid to our projects for electricity.

The NPUC has previously approved the agreements for each of our existing projects located in Nevada and has continuously allowed recovery of the costs of the electricity from those projects in the retail electric rates charged by Sierra Pacific Power Company. The NPUC, pursuant to a delegation of authority from FERC, also sets the avoided cost basis for updating the rates in several of our contracts. While we have no reason to believe that the NPUC will not continue to allow such recovery and continue to set the appropriate avoided cost rate, we cannot guarantee a specific avoided cost rate level or recovery in rates by the regulated public utility. The inability to recover the full cost of the electricity from our project by a public utility could adversely impact the ability of the public utility to pay for the electricity from a project, but such adverse treatment is unlikely given the pre-approval of the agreements. Further, we believe that federal law requires the state commissions to permit full recovery of PURPA-based wholesale rates by the purchasing utility, but we are aware of no judicial decisions in California, Nevada, or Hawaii upholding this principle.

Under Hawaii law, non-fossil generators are not public utilities. Hawaii law provides that a geothermal power producer is to negotiate the rate for its output with the public utility purchaser; if such rate cannot be determined by mutual accord, the Hawaii Public Utility Commission will set a just and reasonable rate. If a non-fossil generator in Hawaii is a Qualifying Facility, federal law applies to such Qualifying Facility and the utility is required to purchase the energy and capacity at full avoided cost.

Foreign Regulation of the Electric Utility Industry

The following is a summary overview of certain aspects of the electric industry in the foreign countries in which we have an operating geothermal power project and should not be considered a full statement of the laws in such countries or all of the issues pertaining thereto.

Nicaragua. Two recently approved laws, Law No. 272-98 and Law No. 271-98, define the structure of the new energy sector in Nicaragua. Law No. 272-98 provides for the establishment of a National Energy Commission, which we refer to as CNE, that is responsible for setting policies, strategies and objectives for such sector and approving indicative plans therefor. Law No. 271-98 formally assigned regulatory, supervisory, inspection and oversight functions to the Nicaraguan Institute of Energy, which we refer to as INE. The Nicaraguan government currently owns all of the commercial activities in the energy sector through Empresa Nacional de Electricidad (ENEL), a vertically integrated utility. The Nicaraguan energy sector has recently been restructured and partially privatized. Following such restructuring and privatization, the government has retained title and control of the transmission assets and has created the Empresa Estatal de Transmision which will be in charge of the operation of the transmission system in the country and of the new wholesale market. As part of the recent restructuring of the energy sector, most of the distribution facilities previously owned by the Nicaraguan Electricity Company, the government-owned vertically-integrated monopoly, were transferred to two companies, Empresa Distribuidora de Electricidad del Norte (DISNORTE) and Empresa Distribuidora de Electricidad del Sur (DISSUR), which in turn were privatized and acquired by an affiliate of Union Fenosa, a large Spanish utility. Following such privatization, the power purchase agreement for our Momotombo project was assigned by the Nicaraguan Electricity Company to Empresa Distribuidora de Electricidad del Norte and Empresa Distribuidora de Electricidad del Sur. A subsidiary of the Nicaraguan Electricity Company, ENTRESA, owns the transmission grid and is currently scheduled to be privatized. In addition, a National Dispatch Center was created to work with ENTRESA and provide for dispatch and wholesale market administration.

Guatemala. The General Electricity Law of 1996 created a wholesale electricity market in Guatemala and established a new regulatory framework for the electricity sector. The law created a new regulatory commission, the National Electric Energy Commission (CNEE) and a new wholesale power market administrator, the Administrator of the Wholesale Market (AMM), for the regulation and administration of such sector. The CNEE functions as an independent agency under the Ministry of Energy and Mines and is in charge of regulating the electricity law, overseeing the market and setting rates for transmission services and for electricity service to medium and small customers. All distribution companies must supply electricity to such customers pursuant to long-term contracts with electricity generators. Large customers can contract directly with electricity generators or power marketers, or buy energy in the spot market. Guatemala has approved a Law of Incentives for the Development of Renewable Energy Projects in order to promote the development of renewable energy projects in Guatemala. Such law provides certain benefits to companies utilizing renewable energy, including a 10-year corporate income tax exemption and a 10-year business tax exemption.

Kenya. Kenya's Electric Power Act of 1997 restructured the electricity sector in such country. Among other things, the Act provides for the licensing of electricity power producers and public electricity suppliers or distributors. The Kenya Power & Lighting Co. Ltd. is the only licensed public electricity supplier and has a monopoly in the transmission and distribution of electricity in the country. The Act permitted independent power producers (IPPs) to install power generators and sell electricity to Kenya Power & Lighting Co. Ltd., which is owned by various private and government entities and which purchases energy and capacity from three other IPPs in addition to our Olkaria III project. The Act also created the Electricity Regulation Board, as an independent regulator for the electricity sector. Kenya Power & Lighting Co. Ltd.'s retail electricity rates are subject to approval by the Electricity Regulation Board.

Philippines. The Philippine's Electric Power Industry Reform Act of 2001 created the Energy Regulatory Commission, which is an independent quasi-judicial regulatory body mandated to promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the restructured electricity industry. The Energy Regulatory Commission is responsible for

the enforcement of the rules and regulations governing the operations of the electricity spot market and the activities of the spot market operator and other participants, to ensure a greater supply and rational pricing of electricity. In addition, the Energy Regulatory Commission determines, fixes, and approves transmission and distribution wheeling charges and retail electricity rates for the captive market of a distribution utility through an Energy Regulatory Commission-established and enforced methodology. The Energy Regulatory Commission also monitors and takes measures to penalize abuse of market power and anti-competitive or discriminatory behavior by any electric power industry participant.

Permit Status

While our power generation operations produce electricity without emissions of certain pollutants such as nitrogen oxide, and with far lower emissions of other pollutants such as carbon dioxide, some of our projects do emit air pollutants in quantities that are subject to regulation under applicable environmental air pollution laws. Such operations typically require air permits. Especially critical to our geothermal operations are those permits and standards applicable to the construction and operation of geothermal wells and brine reinjection wells. In the United States, injection wells are regulated under the federal Safe Drinking Water Act Underground Injection Control, which we refer to as UIC, program. Our injection wells typically fall into UIC Class V, one of the least regulated categories, because fluids are reinjected to enhance utilization of the geothermal resource. Our projects are required to comply with numerous domestic and foreign federal, regional, state and local statutory and regulatory environmental standards and to maintain numerous environmental permits and governmental approvals required for their operation. Some of the environmental permits and governmental approvals that have been issued to the projects contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms. As of the date hereof, we are in material compliance with all such material permits and approvals.

As of the date of this prospectus, all of the material permits and approvals required to construct or operate our projects have been obtained and are currently valid, except for the fact that certain permits for some of the projects are held in the name of predecessor owners and must be transferred or reissued to the correct entity. We believe such transfer and reissuance will occur in the ordinary course.

Environmental Laws and Regulations

Geothermal operations can produce significant quantities of brine and scale, which builds up on metal surfaces in our equipment with which the brine comes into contact. These waste materials, most of which are currently reinjected into the subsurface, can contain various concentrations of hazardous materials, including arsenic, lead, and naturally occurring radioactive materials. We also use various substances, including isobutene, isopentane, and industrial lubricants, that could become potential contaminants and are generally flammable. Hazardous materials are also used and generated in connection with our equipment manufacturing operations in Israel. As a result, our projects are subject to numerous domestic and foreign federal, state and local statutory and regulatory standards relating to the use, storage, fugitive emissions and disposal of hazardous substances. The cost of any remediation activities in connection with a spill or other release of such contaminants could be significant.

Although we are not aware of any mismanagement of these materials, including any mismanagement prior to the acquisition of some of our projects that may have impacted any of the project sites, any disposal or release of these materials onto project sites, other than by means of permitted injection wells, could result in material cleanup requirements or other responsive obligations under applicable environmental laws. We believe that there may have at one time been a gas station located on the Mammoth project site (which we lease), but because of significant surface disturbance and construction since that time further physical evaluation of the former gas station site has been impractical. We believe that, given the subsequent surface disturbance and construction activity in the vicinity of the suspected location of the service station, it is likely that the former facilities and any associated underground storage tanks would have already been encountered if they still existed.

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Properties

Our corporate offices are at 980 Greg Street, Sparks, Nevada 89431. We also occupy an approximately 66,000 square meter office and manufacturing facility located in the industrial park of Yavne, Israel, which we sublease from Ormat Industries. See "Certain Relationships and Related Transactions." We also lease small offices in each of the countries we operate.

We believe that our current facilities are adequate for our operations as currently conducted. If additional facilities are required, we believe that we could obtain additional facilities at commercially reasonable prices.

Each of our plants is located on property that we lease or own, or property subject to a concession agreement. See "Business — Our Projects."

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MANAGEMENT

The following table sets forth the name, age and positions of our directors, executive officers, persons who are executive officers of certain of our subsidiaries who perform policy making functions for us, and our significant employees:


Name	Age		Position
Lucien Bronicki		69	Chairman of the Board of Directors; Chief Technology Officer
Yehudit "Dita" Bronicki		62	Chief Executive Officer; Director
Yoram Bronicki		37	Chief Operating Officer—North America
Lisa Kidron		40	Chief Financial Officer, Ormat Systems ^*
Nadav Amir		54	Executive Vice President—Engineering, Ormat Systems ^*
Hezy Ram		54	Executive Vice President—Business Development, Ormat Nevada ^†
Joseph Shiloah		58	Executive Vice President—Marketing and Sales, Ormat Systems ^*
Aaron Choresh		58	Vice President—Operations and Product Support, Ormat Systems ^*
Zvi Krieger		49	Vice President—Geothermal Engineering, Ormat Systems ^*
Zvi Reiss		53	Vice President—Project Management, Ormat Systems ^*
Etty Rosner		48	Vice President—Contract Administrator; Corporate Secretary ^*
Connie Stechman		48	Vice President—Controller; Director
Significant Employees:
Shimon Hatzir		42	Vice President—Electrical and Conceptual Engineering, Ormat Systems ^*
Ran Raviv		36	Vice President—Business Development, Ormat Nevada ^†
Ohad Zimron		49	Vice President—Product Engineering, Ormat Systems ^*
Uzi Albert		52	Manager—Logistics and Production, Ormat Systems ^*


*	Performs the functions described in the table, but is employed by Ormat Systems.


†	Performs the functions described in the table, but is employed by Ormat Nevada.

Lucien Bronicki . Lucien Bronicki is the Chairman of our board of directors, a position he has held since our inception in 1994, and is also our Chief Technology Officer, effective as of July 1, 2004. Mr. Bronicki co-founded Ormat Turbines Ltd. in 1965 and is the Chairman of the board of directors of Ormat Industries, the publicly-traded successor to Ormat Turbines Ltd., and various of its subsidiaries. Since 1992, Mr. Bronicki has also been the Chairman of the board of directors of Bet Shemesh Engines, a manufacturer of jet engines, and of OPTI Canada Inc. Mr. Bronicki is also the Chairman of the board of directors of Orad Hi-Tec Systems Ltd., a manufacturer of image processing systems, and was the Co-Chairman of Orbotech Ltd., a NASDAQ-listed manufacturer of equipment for inspecting and imaging circuit boards and display panels. Mr. Bronicki has worked in the power industry since 1958. He is a member of the Executive Council of the Weizmann Institute of Science and chairs the Israeli Committee of the World Energy Council. Yehudit Bronicki and Lucien Bronicki are married. Mr. Bronicki obtained a postgraduate degree in Nuclear Engineering from Conservatoire National des Arts et Metiers in 1958 and a Master of Science Degree in Physics from Universite de Paris in 1958 and a Master of Science in Mechanical Engineering from Ecole Nationale Superieure d'Ingenieurs Arts et Metiers in 1957.

Yehudit "Dita" Bronicki . Yehudit "Dita" Bronicki is our Chief Executive Officer, effective as of July 1, 2004, and is also a member of our board of directors, our President and our Secretary, positions she has held since our inception in 1994. Mrs. Bronicki is also the President of Ormat Systems, effective as of July 1, 2004. Mrs. Bronicki was also a co-founder of Ormat Turbines Ltd. and

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is a member of the board of directors and the General Manager (a CEO-equivalent position) of Ormat Industries, the publicly-traded successor to Ormat Turbines Ltd., and various of its subsidiaries. Since 1992, Mrs. Bronicki has also been a director of Bet Shemesh Engines. Mrs. Bronicki is also a member of the board of directors of OPTI Canada Inc., and of Orbotech Ltd., a NASDAQ-listed manufacturer of equipment for inspecting and imaging circuit boards and display panels. From 1994 to 2001, Mrs. Bronicki was on the Advisory Board of the Bank of Israel. Mrs. Bronicki has worked in the power industry since 1965. Yehudit Bronicki and Lucien Bronicki are married. Mrs. Bronicki obtained a Bachelor of Arts in Social Sciences from Hebrew University in 1965.

Yoram Bronicki . Yoram Bronicki is our Chief Operating Officer, effective as of July 1, 2004. Mr. Bronicki is also a member of the board of directors of Ormat Industries, a position he has held since 2001. From 2001 to 2004, Mr. Bronicki was Vice President of OPTI Canada Inc., from 1999 to 2001, he was Project Manager of Ormat Industries and Ormat International, from 1996 to 1999, he was Project Manager of Ormat Industries, and from 1995 to 1996, he was Project Engineer of Ormat Industries. Mr. Bronicki is the son of Lucien and Yehudit Bronicki. Mr. Bronicki obtained a Bachelor of Science in Mechanical Engineering from Tel Aviv University in 1989 and a Certificate from the Technion Institute of Management Senior Executives Program.

Lisa Kidron . Lisa Kidron performs the function of our Chief Financial Officer and is the Chief Financial Officer of Ormat Systems, effective as of July 1, 2004. Ms. Kidron is also the Chief Financial Officer of Ormat Industries, a position she has held since 2002. From 2000 to 2002, Ms. Kidron was Chief Financial Officer at MUL-T-LOCK Ltd. and from 1999 to 2000, Ms. Kidron was Chief Financial Officer at MUL-T-LOCK Technologies Ltd. Ms. Kidron served as a director on the boards of various subsidiaries within the MUL-T-LOCK group from 1999 to 2002. Until 1999, Ms. Kidron was a senior manager in the accounting firm Kost-Forrer & Gabai (Ernst & Young, Global Services). Ms. Kidron obtained an L.L.M. Degree in Law from Bar-Ilan University in 2002, a Bachelor of Arts in Accounting from Tel Aviv University in 1994, a Masters of Science in Industrial Engineering from Ben Gurion University in 1987 and a Bachelor of Science in Computer Science and Mathematics from Rutgers University in 1985.

Nadav Amir . Nadav Amir performs the function of our Executive Vice President of Engineering, and is the Executive Vice President of Engineering of Ormat Systems, effective as of July 1, 2004. From 2001 through June 30, 2004, Mr. Amir was Executive Vice President of Engineering of Ormat Industries, from 1993 to 2001, he was Vice President of Engineering of Ormat Industries, from 1988 to 1993, he was Manager of Engineering of Ormat Industries, from 1984 to 1988, he was Manager of Product Engineering of Ormat Industries, and from 1983 to 1984, he was Manager of Research and Development of Ormat Industries. Mr. Amir obtained a Bachelor of Science in Aeronautical Engineering from Technion Haifa in 1972.

Hezy Ram . Hezy Ram performs the function of our Executive Vice President of Business Development, and is the Executive Vice President of Ormat Nevada, a position he has held since January 1, 2004. From 1999 through December 31, 2003, Mr. Ram was Executive Vice President of Business Development of Ormat Industries. Mr. Ram obtained a Master of Business Administration Degree from Hebrew University in 1978, a Master of Science Degree in Mechanical Engineering from Ben Gurion University in 1977 and a Bachelor of Science in Mechanical Engineering from Ben Gurion University in 1975.

Joseph Shiloah . Joseph Shiloah performs the function of our Executive Vice President of Marketing and Sales, and is the Executive Vice President of Marketing and Sales of Ormat Systems, effective as of July 1, 2004. From 2001 through June 30, 2004, Mr. Shiloah was the Executive Vice President of Marketing and Sales at Ormat Industries, from 1989 to 2000, he was Vice President of Marketing and Sales of Ormat Industries, from 1983 to 1989, he was Vice President of Special Projects of Ormat Turbines Ltd., from 1984 to 1989, he was Operating Manager of the Solar Pond project of Solmat Systems Ltd., a subsidiary of Ormat Turbines Ltd., and from 1981 to 1983, he was Project Administrator of the Solar Pond power plant project of Ormat Turbines Ltd. and Solmat Systems Ltd. Mr. Shiloah obtained a Bachelor of Arts in Economics from Hebrew University in 1972.

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Aaron Choresh . Aaron Choresh performs the function of our Vice President of Operations and Product Support, and is the Vice President of Operations and Product Support of Ormat Systems, effective as of July 1, 2004, and will also serve in that capacity and provide services to us upon the completion of this offering. From 1999 through June 30, 2004, Mr. Choresh was the Vice President of Operations and Product Support of Ormat Industries, from 1993 to 1998, he was the Director of Operations and Product Support of Ormat Industries, from 1991 to 1992, he was Manager of Project Engineering and Product Support, and from 1989 to 1990, he was Manager of Project Engineering of Ormat Industries. Mr. Choresh obtained a Bachelor of Science in Electrical Engineering from Technion Haifa in 1982.

Zvi Krieger . Zvi Krieger performs the function of our Vice President of Geothermal Engineering, and is the Vice President of Geothermal Engineering of Ormat Systems, effective as of July 1, 2004. From 2001 through June 30, 2004, Mr. Krieger was the Vice President of Geothermal Engineering of Ormat Industries. Mr. Krieger has been with Ormat Industries since 1981 and served as Application Engineer, Manager of System Engineering, Director of New Technologies Business Development and Vice President of Geothermal Engineering. Mr. Krieger obtained a Bachelor of Science in Mechanical Engineering from the Technion, Israel Institute of Technology in 1980.

Zvi Reiss . Zvi Reiss performs the function of our Executive Vice President of Project Management, and is the Executive Vice President of Project Management of Ormat Systems, effective as of July 1, 2004. From 2001 through June 30, 2004, Mr. Reiss was the Executive Vice President of Project Management of Ormat Industries, from 1995 to 2000, he was Vice President of Project Management and from 1993 to 1994 he was Director of Projects of Ormat Industries. Mr. Reiss obtained a Bachelor of Science in Mechanical Engineering from Ben Gurion University in 1975.

Etty Rosner . Etty Rosner performs the function of our Corporate Secretary, and is the Corporate Secretary of Ormat Systems, effective as of July 1, 2004. Ms. Rosner is also the Corporate Secretary of Ormat Industries, a position she has held since 1991, and Vice President of Contract Management of Ormat Industries, a position she has held since 1999. From 1991 to 1999, Ms. Rosner was Contract Administrator Manager and Corporate Secretary and from 1981 to 1991, she was the Manager of the Export Department and Office Administrative Manager. Ms. Rosner obtained a Diploma in General Management from Tel Aviv University in 1990.

Connie Stechman . Connie Stechman is a member of our board of directors and our Vice President and Controller, positions she has held since our inception in 1994. Prior to joining Ormat Technologies, Ms. Stechman worked for an international public accounting firm. Ms. Stechman is a Certified Public Accountant and obtained a Bachelor of Science in Business and Concentration Accounting from California State University, Sacramento, in 1977.

Shimon Hatzir . Shimon Hatzir performs the function of our Vice President of Electrical and Conceptual Engineering, and is the Vice President of Electrical and Conceptual Engineering of Ormat Systems, effective as of July 1, 2004. From 2002 through June 30, 2004, Mr. Hatzir was the Vice President of Electrical and Conceptual Engineering of Ormat Industries, from 1996 to 2001, he was Manager of Electrical and Conceptual Engineering of Ormat Industries, and from 1989 to 1995, he was Project Engineer in the Engineering Division. Mr. Hatzir obtained a Bachelor of Science Degree in Mechanical Engineering from Tel Aviv University in 1988.

Ran Raviv . Ran Raviv performs the function of our Vice President of Business Development, and is the Vice President of Business Development of Ormat Nevada, a position he has held since 2001. From 1994 to 1997, Mr. Raviv was a business manager at Green Land Ltd., a subsidiary of Browning Ferris Inc. of Houston, Texas. In 1993, Mr. Raviv was a management consultant at Global Present Ltd. Mr. Raviv obtained a Bachelor of Science Degree in Computer Science and Business Studies from the University of Buckingham in 1992 and a Master of Business Administration Degree from City University Business School in 1993.

Ohad Zimron . Ohad Zimron performs the function of our Vice President of Product Engineering, and is the Vice President of Product Engineering of Ormat Systems, effective as of July 1, 2004. From 1999 through June 30, 2004, Mr. Zimron was the Vice President of Product Engineering

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of Ormat Industries, from 1992 to 1999, he was Manager of Product Engineering of Ormat Industries, from 1986 to 1992 he was Product Engineer of Ormat Industries, from 1984 to 1986, he was Product Support Manager of Ormat Systems Inc. and from 1981 to 1984, he was Product Engineer of Ormat Turbines Ltd. Mr. Zimron obtained a Bachelor of Science Degree in Mechanical Engineering from Ben Gurion University in 1979 and a Master of Business Administration from Bar Ilan University in 2002.

Uzi Albert . Uzi Albert performs the function of our Manager of Logistics and Production, and is the Manager of Logistics and Production of Ormat Systems, effective as of July 1, 2004. From 1998 through June 30, 1994, Mr. Albert was the Manager of Logistics and Production of Ormat Industries. Mr. Albert obtained a Diploma of Business Administration from Tel Aviv University in 1991.

Security Ownership of Certain Beneficial Owners and Management

We are a wholly owned subsidiary of Ormat Industries. Ormat Industries is an Israeli company that is publicly traded on the Tel Aviv Stock Exchange. Based on publicly available information, Lucien Bronicki, the Chairman of our board of directors, Yehudit Bronicki, our Chief Executive Officer, Yoram Bronicki, our Chief Operating Officer, and their family beneficially own 35.38%, as of June 30, 2004, of the shares of common stock of Ormat Industries.

Board Composition

Our board of directors is currently composed of three members. Before this offering is completed, we intend to increase the number of directors on our board of directors to a total of six members, including three independent directors. Also, before this offering is completed, our board of directors will be classified into three classes of directors serving staggered, three-year terms and may be removed only for cause. In addition, in order to ensure compliance with the independence requirements of the New York Stock Exchange, the composition of the board of directors may change prior to and following the offering. It is our intention to be in full and timely compliance with all applicable rules of the New York Stock Exchange and applicable laws, including with respect to the independence of our directors. We intend to rely on the "controlled company" exception to the board of directors and committee composition requirements under the rules of the New York Stock Exchange. The "controlled company" exception does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of the Sarbanes-Oxley Act of 2002 and the New York Stock Exchange rules which require that our audit committee be composed of at least three independent directors.

Board Committees

Our board of directors has the authority to appoint committees to perform certain management and administration functions. Our board of directors currently intends to establish an audit committee, a compensation committee and a nominating and corporate governance committee, effective upon completion of this offering.

Audit Committee. The audit committee will select, on behalf of our board of directors, an independent public accounting firm to be engaged to audit our financial statements, discuss with the independent auditors their independence, review and discuss the audited financial statements with the independent auditors and management and review our compliance with legal and regulatory requirements with respect to accounting policies, internal controls and financial reporting. The audit committee will consist of three or more members, all of whom will be independent directors.

Compensation Committee. The compensation committee will review and either approve, on behalf of our board of directors, or recommend to the board of directors for approval (1) the annual salaries and other compensation of our chief executive officer and certain other executive officers and (2) individual stock and stock option grants. The compensation committee also provides recommendations with respect to our compensation policies and practices and incentive compensation plans and equity plans. The compensation committee will consist of three or more members, of which at least two will be independent directors.

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Nominating and Corporate Governance Committee. The nominating and corporate governance committee will assist our board of directors in fulfilling its responsibilities by identifying and approving individuals qualified to serve as members of our board of directors, selecting director nominees for our annual meetings of stockholders, and developing and recommending to our board of directors corporate governance guidelines and oversight with respect to corporate governance and ethical conduct. The nominating and corporate governance committee will consist of three or more directors, of which at least one will be an independent director.

Compensation Committee Interlocks and Insider Participation

Prior to the completion of this offering, we have not had a compensation committee. Lucien Bronicki, Yehudit Bronicki and Connie Stechman served as the Chairman of our board of directors, President and Controller, respectively, during 2003. Lucien Bronicki and Yehudit Bronicki also held such positions in our parent and all of our subsidiaries and Connie Stechman also held such positions in a number of our subsidiaries during fiscal year 2003. See "Certain Relationships and Related Transactions."

Compensation of Directors

After consummation of this offering, we intend to pay our non-employee directors an annual retainer of $ as fees related to their service on our board of directors and an additional annual retainer of $ for each committee on which they serve as a member. Any non-employee director who also serves as chairman of the board will receive an annual retainer of $ in lieu of the foregoing retainers.

We intend to promptly reimburse all directors for reasonable expenses incurred to attend meetings of our board of directors or committees.

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Executive Compensation

The following table sets forth all compensation received during the year ended December 31, 2003, 2002 and 2001 by our named executive officers. The compensation described in this table does not include medical, group life insurance, or other benefits which are available generally to all of our salaried employees.

Summary Compensation Table


Name and Principal Position(s)	Year		Salary ($) ⁽¹⁾		Bonus ($) ⁽²⁾		Other Annual Compensation ($)		Securities Underlying Options (#) ⁽³⁾		All Other Compensation ($) ⁽⁴⁾
Yehudit Bronicki		2003		45,518		—		—		—		—
Chief Executive Officer		2002		—		—		—		—		—
		2001		—		—		—		—		—
Nadav Amir		2003		—		—		—		—		—
Executive Vice President		2002		—		—		—		—		—
—Engineering		2001		—		—		—		—		—
Hezy Ram		2003		—		—		—		—		—
Executive Vice President		2002		—		—		—		—		—
—Business Development		2001		—		—		—		—		—
Aaron Choresh		2003		—		—		—		—		—
Vice President		2002		—		—		—		—		—
—Operations and Product Support		2001		—		—		—		—		—
Zvi Reiss		2003		—		—		—		—		—
Vice President		2002		—		—		—		—		—
—Geothermal Energy		2001		—		—		—		—		—

(1)

In 2003, 2002 and 2001, in addition to these amounts, Mrs. Bronicki received $58,438, $100,206 and $110,794, respectively, as salary compensation from Ormat Industries; and in 2003, 2002 and 2001, Mr. Amir received $169,820, $156,016 and $166,004, respectively, Mr. Ram received $145,495, $110,593 and $127,951, respectively, Mr. Choresh received $115,819, $110,185 and $95,688, respectively, and Mr. Reiss received $135,441, $124,970 and $132,993, respectively, as salary compensation from Ormat Industries.


(2)	In 2002, Mr. Amir earned $101,492, as bonus compensation from Ormat Industries; in 2003, 2002 and 2001, Mr. Ram earned $333,242, $128,739 and $118,516, respectively, and Mr. Choresh earned $22,161, $19,543 and $16,592, respectively, as bonus compensation from Ormat Industries.

(3)

In 2003, 2002 and 2001, Mr. Amir received options to purchase 33,000, 33,000 and 33,000 shares of Ormat Industries' common stock, respectively, Mr. Ram received options to purchase 33,000, 33,000 and 33,000 shares of Ormat Industries' common stock, respectively, Mr. Choresh received options to purchase 22,500, 20,000 and 20,000 shares of Ormat Industries' common stock, respectively, and Mr. Reiss received options to purchase 33,000, 33,000 and 24,750 shares of Ormat Industries' common stock, respectively.

(4)

In 2003, 2002 and 2001, Mrs. Bronicki received $7,872, $7,271 and $8,000, respectively, Mr. Amir received $6,017, $5,561 and $5,987, respectively, Mr. Ram received $3,996, $3,693 and $3,316, respectively, Mr. Choresh received $3,996, $3,693 and $3,757, respectively, and Mr. Reiss received $3,996, $3,693 and $3,757, respectively, from Ormat Industries reflecting the private use of company-leased cars.

Option Grants

We have not granted any options to any of our executive officers since our inception.

Stock Option Plans

Our board of directors intends to adopt, prior to completion of this offering, subject to approval of the shareholders, the Ormat Technologies, Inc. 2004 Incentive Compensation Plan. The plan is a

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broad-based equity incentive compensation plan which will cover the employees, directors and independent contractors of Ormat Technologies. The compensation committee will have the flexibility to grant a wide range of equity-based compensation, including incentive and non-qualified stock options, tandem and free-standing stock appreciation rights, restricted and unrestricted stock, restricted and unrestricted stock units, phantom stock, cash incentives, or any combination thereof. For both equity and cash compensation awards, there may either be time-based or performance-based criteria for full vesting of the award. The awards with performance-based criteria for vesting will satisfy the requirements of Internal Revenue Code Section 162(m), where applicable.

Employment Agreements

Mrs. Bronicki is currently employed by us as our President pursuant to an employment agreement dated January 1, 2003. Such employment agreement provides for a monthly base salary of $3,500, payable in arrears. Pursuant to the terms of Mrs. Bronicki's employment agreement, if we terminate her employment without cause, Mrs. Bronicki is entitled to receive her monthly salary for the following 90-day period. If we terminate her employment for cause, Mrs. Bronicki is not entitled to any subsequent payments. Mrs. Bronicki is also employed as President of Ormat Systems pursuant to an employment agreement that sets forth terms of employment that are generally applicable to all of Ormat Systems' staff, covering matters such as vacation, health and other benefits. Pursuant to such employment agreement, Mrs. Bronicki can be terminated for any reason subject to 30 days prior notice. No prior notice is required in the case of a termination for cause. Mrs. Bronicki's base salary at Ormat Systems is approximately $104,000. In addition, she has the use of a company-leased car. Mrs. Bronicki is also covered by Ormat Systems' management insurance plan, to which Ormat Systems contributes a percentage of her salary, and which covers any compensation she might be entitled to receive upon termination, other than in the case of termination for cause.

We intend to enter into a new executive employment agreement with Mrs. Bronicki, effective as of July 1, 2004. Such employment agreement will provide for a salary that is yet to be determined. We expect that the employment agreement will be for a two-year term initially expiring on June 30, 2006, but subject to automatic renewal unless terminated in the manner provided in the employment agreement and that it will also include the terms described below.

Pursuant to the terms of such employment agreement, if we terminate Mrs. Bronicki's employment without cause, upon providing 30 days' prior written notice, Mrs. Bronicki will be entitled to her salary, bonus and other compensation and benefits set forth in such agreement for the unexpired portion of the term of the employment agreement. If we terminate her employment for cause, Mrs. Bronicki will not be entitled to any salary, bonus or other compensation or benefits except for accrued but unpaid salary through the last day worked prior to such termination. If Mrs. Bronicki voluntarily terminates her employment upon providing 120 days' prior written notice to us, unless we are in breach of the provisions of such agreement, Mrs. Bronicki will not be entitled to receive any salary, bonus or other compensation or benefits except for accrued but unpaid salary through the last day worked prior to such termination. If Mrs. Bronicki dies during the term of the agreement, we must pay Mrs. Bronicki's estate (1) any unpaid base salary accrued to the date of Mrs. Bronicki's death, (2) any unpaid bonus earned by Mrs. Bronicki for a completed year, and (3) a portion of the annual bonuses for the year of Mrs. Bronicki's death and payable after the end of such year but multiplied by a fraction, the numerator of which is the number of days in the year through Mrs. Bronicki's death and the denominator of which is 365. If Mrs. Bronicki becomes disabled, we may terminate her employment.

Hezy Ram is currently employed by Ormat Nevada and serves as our Executive Vice President of Business Development pursuant to an employment agreement dated January 1, 2004, which expires on December 31, 2004. Mr. Ram's employment agreement provides for an annual base salary of $175,000. Pursuant to the terms of Mr. Ram's employment agreement, in addition to his annual salary, Mr. Ram is entitled to certain other benefits paid for by us, including, among other things, annual bonuses and medical and hospitalization insurance. Pursuant to the terms of Mr. Ram's employment agreement, if we terminate his employment without cause, Mr. Ram is entitled to receive his monthly salary for the following 90-day period. If Mr. Ram terminates his employment voluntarily, he is not entitled to

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receive any subsequent payments. Mr. Ram's employment agreement also contains a one-year non-competition and non-solicitation provision.

Nadav Amir is employed by Ormat Systems and serves as our Executive Vice President of Engineering, Aaron Choresh is employed by Ormat Systems and serves as our Vice President of Operations and Product Support and Zvi Reiss is employed by Ormat Systems and serves as our Vice President of Geothermal Engineering. Each of Messrs. Amir, Choresh and Reiss is party to an employment agreement with Ormat Systems that sets forth their respective terms of employment that are generally applicable to all of Ormat Systems' staff, covering matters such as vacation, health and other benefits. Under such employment agreements, any Ormat Systems employee may be terminated for any reason subject to 30 days' prior notice. However, termination for cause does not require any prior notice. An employee that is terminated for cause is not entitled to any subsequent payments.

The actual salary and other compensation arrangements of Messrs. Amir, Choresh, and Reiss are agreed separately with each employee. Mr. Amir is entitled to a base salary of approximately $173,750 and a guaranteed bonus for 2004 of approximately $44,440, Mr. Choresh is entitled to a base salary of approximately $115,600 and a guaranteed bonus for 2004 of approximately $35,500 and Mr. Reiss is entitled to a base salary of approximately $139,500 and a guaranteed bonus for 2004 of approximately $44,400. Each of these individuals is also covered by Ormat Systems' management insurance plan, to which Ormat Systems contributes a percentage of such individual's salary, and which covers any compensation that such individual may be entitled to receive upon termination. In addition, each of the individuals has the benefit of the use of a company-leased car.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Loan Agreement between us and Ormat Industries

In 2003, we entered into a loan agreement with Ormat Industries. Pursuant to this loan agreement, Ormat Industries agreed to make a loan to us in one or more advances not exceeding a total aggregate amount of $150,000,000. The proceeds of the loan are to be used to fund our general corporate activities and investments. We are required to repay the loan and accrued interest in full and in accordance with an agreed-upon repayment schedule and in any event on or prior to June 5, 2010.

Interest on the loan is calculated on the balance from the date of the receipt of each advance until the date of payment thereof at a rate per annum equal to Ormat Industries' average effective cost of funds plus 0.3% percent in U.S. dollars, which represented a rate of 7.5% for the advances made during year 2003. All computations of interest shall be made by Ormat Industries on the basis of a year consisting of 360 days. As of March 31, 2004, the outstanding balance of the loan was approximately $150.5 million.

The loan agreement contains customary representations and warranties to Ormat Industries and also contains customary events of default and notice provisions.

The loan agreement is governed by, and interpreted and construed under the laws of Israel.

Capital Note Issued to Ormat Industries

In 2003, pursuant to the terms of a capital note, Ormat Industries converted outstanding balances owed by us to Ormat Industries into a subordinated non-interest bearing loan in an amount equal to NIS 240.0 million. We can repay the loan in full or, upon demand by Ormat Industries, we will be required to repay the loan in full, at any time after November 30, 2005. The final maturity of the loan is December 30, 2006. In accordance with the terms of such note, we will not be required to repay any amount in excess of $50 million (using the exchange rate existing on the date of such note).

Guarantee Fee Agreement between us and Ormat Industries

In 1999, we entered into a guarantee fee agreement with Ormat Industries, pursuant to which Ormat Industries agreed to issue certain standby letters of credit and guarantees on our behalf to certain of our customers as well as guarantees with respect to our bank credit lines.

Such agreement establishes a fee, calculated quarterly, equal to 1% per annum of all amounts guaranteed or subject to an outstanding letter of credit during the relevant quarter. Such payment is due quarterly in arrears and is payable against the receipt of an invoice from Ormat Industries.

Asset Purchase Agreement between us and Ormat Industries

Pursuant to an asset purchase agreement, effective as of July 1, 2004, Ormat Industries sold and assigned to our subsidiary, Ormat Systems, certain assets and liabilities related to Ormat Industries' geothermal power plants and power units business, which is described elsewhere in this prospectus as our products business. The parties agreed to use their best efforts to assign the contracts and liabilities related to this business to Ormat Systems within 12 months from July 15, 2004, and until then, their unassigned assets are to be held in trust by Ormat Industries for Ormat Systems. As part of this transaction, Ormat Industries agreed, for so long as it holds more than 50% of the voting interest in us, not to compete or engage in any business which is in the same field of the business acquired by Ormat Systems.

As total consideration for the purchase, Ormat Systems agreed to pay Ormat Industries the amount of $11.0 million, which consists of a cash payment and the assumption of an outstanding loan to Bank Continental and certain employment liabilities.

As part of this transaction, Ormat Systems also agreed to pay to Ormat Industries certain commissions ranging between 2.5% and 5.0% on revenues from sale orders entered into prior to July 1, 2004.

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Sublease between us and Ormat Industries

Our subsidiary, Ormat Systems, has entered into a sublease with Ormat Industries for real estate leased by Ormat Industries from the Israeli Land Administration on which our production and manufacturing facilities are located. Such sublease is effective as of July 1, 2004 and the term of such sublease is 4 years and 11 months, which term may be extended for up to 25 years (which includes the initial term) provided certain consents are obtained from the Israeli Land Administration, if necessary, and if not, the sublease term will automatically be 25 years.

Pursuant to the sublease, Ormat Systems agreed to pay rent, in advance, on a monthly basis, equal to $52,250.00 (plus VAT) per month. Payment will be adjusted every year to reflect increases in the Israeli Consumer Price Index, but will in no event be lower than the rent paid during the previous year. Pursuant to the sublease, Ormat Systems has also agreed to pay taxes and other compulsory charges, to make other required payments, and to indemnify Ormat Industries for taxes (other than income taxes) imposed in connection with the subleased real estate.

Pursuant to the sublease, Ormat Systems agreed to certain other customary undertakings, including indemnification and insurance undertakings.

The sublease was executed in connection with the asset purchase agreement between Ormat Systems and Ormat Industries.

License Agreement between us and Ormat Industries

On July 15, 2004, our subsidiary, Ormat Systems, entered into a patents and trademarks license agreement, effective as of July 1, 2004, pursuant to which Ormat Industries granted a world-wide royalty-free license to Ormat Systems (which is exclusive with respect to the patents and certain of the trademarks) to internally copy, use, and create derivatives of certain patents and trademarks. The license survives sales and/or transfers of the patents and trademarks and Ormat Systems owns the derivatives created from the licensed patents. The term of the license agreement continues until the patents or trademarks expire or are assigned to Ormat Systems (which are intended to be assigned, subject to tax and other considerations) and the agreement may be terminated if either party becomes insolvent.

The license agreement was executed in connection with the asset purchase agreement between Ormat Systems and Ormat Industries.

Service Agreement between us and Ormat Industries

On July 15, 2004, our subsidiary, Ormat Systems, entered into a services agreement, effective as of July 1, 2004, pursuant to which Ormat Systems agreed to provide, as an independent contractor, certain corporate, financial, secretarial and administrative services to Ormat Industries. At the request of Ormat Industries, Ormat Systems may also provide certain engineering services.

Ormat Industries is required to pay $10,000 per month for all services (other than engineering services) rendered pursuant to such services agreement plus all out-of-pocket expenses of Ormat Systems. For engineering services, Ormat Industries is required to pay a fee equal to the cost of such services plus 10.0% and all out-of-pocket expenses of Ormat Systems. On each anniversary of such services agreement, such monthly fees are adjusted in accordance with the Israeli Consumer Price Index during the previous 12-month period plus 10.0%.

The services agreement was executed in connection with the asset purchase agreement between Ormat Systems and Ormat Industries.

Reimbursement Agreement between us and Ormat Industries

On July 15, 2004, we entered into a reimbursement agreement pursuant to which we agreed to reimburse Ormat Industries for any draws made on any standby letter of credit subject to the guarantee fee agreement, dated as of January 1, 1999, between us and Ormat Industries, and any

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payments made under any guarantee provided by Ormat Industries subject to such guarantee fee agreement. Interest on any amounts owing pursuant to the reimbursement agreement is paid at a rate per annum equal to Ormat Industries' average effective cost of funds plus 0.3% in U.S. dollars.

Registration Rights Agreement between us and Ormat Industries

At or prior to the closing of this offering, we will enter into a registration rights agreement with Ormat Industries. Under this agreement, Ormat Industries may require us on one occasion to register our common stock for sale on Form S-1 under the Securities Act if we are not eligible to use Form S-3 under that Act. After we become eligible to use Form S-3, Ormat Industries may require us on unlimited occasions to register our common stock for sale on this form. In addition, we will be required to file a registration statement on Form S-3 to register for sale shares of our common stock that are or have been acquired by directors, officers and employees of Ormat Industries upon the exercise of options granted to them by Ormat Industries. Ormat Industries will also have an unlimited number of piggyback registration rights. This means that any time we register our common stock for sale, Ormat Industries may require us to include shares of our common stock held by it or its directors, officers and employees in that offering and sale. Ormat Industries will not be allowed to exercise any registration rights during the lock-up period.

We will also agree to pay all expenses that result from the registration of our common stock under the registration rights agreement, other than underwriting commissions for such shares and taxes. We have also agreed to indemnify Ormat Industries, its directors, officers and employees against liabilities that may result from their sale of our common stock, including Securities Act liabilities.

Employment Agreement

We intend to enter into an executive employment agreement with Yoram Bronicki. The terms of the employment agreement are substantially similar to those of our Chief Executive Officer. See "Management — Employment Agreements." Yoram Bronicki will be our Chief Operating Officer. The employment agreement will provide for a salary that is yet to be determined.

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DESCRIPTION OF CERTAIN MATERIAL AGREEMENTS

The following is a description of certain of our material agreements relating to our projects:

Financing Agreements

Beal Bank Credit Agreement and Related Documents

On December 18, 2003, our subsidiary OrCal Geothermal, Inc. entered into a credit agreement with Beal Bank, S.S.B. pursuant to which Beal Bank made a loan to OrCal Geothermal, Inc. in the amount of $154,500,000. The proceeds of this loan were used to fund a portion of the purchase price for the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project. Such loan amortizes quarterly in amounts set forth in the credit agreement. The loan accrues at an interest rate determined on each anniversary date of the loan as the greater of 7.125%, which increases 0.50% starting December 2011, or the three-month LIBOR plus 5.125%, with the margin stepping up after a certain number of years. We have entered into cap transactions with Union Bank of California and Lehman Brothers Special Financing Inc. pursuant to which our effective interest rate is capped at 6% for the period between March 30, 2007 and March 31, 2011. The final maturity of the loan is December 18, 2019. As of March 31, 2004, the outstanding balance on the loan was $154.5 million.

Effective January 30, 2004, Beal Bank released its security interest over our partnership interest in the Mammoth project which was subsequently included in the collateral package supporting the issuance by Ormat Funding of its 8¼% senior secured notes described below.

The loan is secured by liens over (1) all real and personal property comprising the Heber 1 project and the Heber 2 project, (2) the bank accounts into which revenues from these projects are required to be paid, and (3) all capital stock and partnership interests in OrCal Geothermal, Inc. and its subsidiaries, including the entities that own the Heber 1 project and the Heber 2 project.

The credit agreement and related documents contain various affirmative and negative covenants regarding the manner in which OrCal Geothermal, Inc. and its subsidiaries conduct their business, including their ownership, operation, and maintenance of the Heber 1 project and the Heber 2 project and the performance of their obligations and exercise of their rights under the project documents related to these projects. One such negative covenant is that OrCal Geothermal, Inc. and its subsidiaries may not expand their geothermal fields, develop new geothermal resources, or drill new geothermal wells without the lenders' consent. In addition, OrCal Geothermal, Inc. is prohibited from paying any dividend or making any other distributions to its immediate parent, Ormat Nevada, unless certain conditions are satisfied, including debt services coverage ratios that are at or above specified levels, cash flow forecasts that do not demonstrate an inability to repay the loan as it amortizes, and the absence of defaults and events of default under the credit agreement and related documents.

The credit agreement contains customary events of default, some of which are subject to cure periods and, in some instances, materiality thresholds. The occurrence of any of such events of default would enable the lenders to enforce their liens on the collateral.

All project revenues from the Heber 1 project and the Heber 2 project are required to be deposited into a bank account over which Beal Bank has a lien. Amounts from time to time on deposit in this account are disbursed into other segregated accounts (over which Beal Bank has liens) available to pay or fund operating expenses of the Heber 1 project and the Heber 2 project, fees and expenses of the lenders and their agents, principal and interest on the loan, debt service reserve obligations, capital expenditure reserve obligations, and dividends. During the 2004 and 2005 calendar years, OrCal Geothermal, Inc. is required to use project revenues to establish and maintain a capital expenditures reserve in an amount equal to 50% of the capital expenditures reasonably anticipated to become due and payable during such years. We estimate the required amount of these reserves during these years to be between $4.2 million and $10.5 million. In subsequent calendar years, OrCal Geothermal, Inc. must use project revenues to maintain a capital expenditures reserve in an amount at any time that is equal to 100% of the capital expenditures reasonably anticipated to become due and payable during the next three months.

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Senior Secured Notes and Related Documents

On February 13, 2004, our subsidiary Ormat Funding issued $190,000,000 of 8¼% senior secured notes due 2020 in an offering under Rule 144A and Regulation S of the U.S. Securities Act of 1933, as amended. The proceeds of the senior secured notes were used to finance the acquisition of the Steamboat 2/3 project, refinance the acquisition of the Brady project, the Steamboat 1/1A project and the Mammoth project, provide funds for the capital expenditures associated with the upgrade of the Steamboat 1/1A project and the Galena repowering, fund a reserve account to repay a loan from United Capital Bank (the proceeds of which were previously used to refinance the acquisition of the Ormesa project), repay a portion of a certain subordinated loan from Ormat Nevada, prepay a portion of the Meyberg lease, and pay transaction expenses associated with the issuance of such notes.

The notes have a final maturity date of December 30, 2020, unless redeemed earlier. Interest on the notes is payable in arrears on June 30 and December 30 of each year, beginning June 30, 2004. The principal of the notes amortizes over time in amounts set forth in the indenture.

The notes are secured by liens over (1) the capital stock of Ormat Funding and all of the capital stock held by Ormat Funding in each of the direct and indirect subsidiaries that own the Brady project, the Steamboat 1/1A project, the Steamboat 2/3 project, and the Mammoth project, (2) with certain exceptions for unassigned leases, all real property owned or leased by Ormat Funding and all of its direct and indirect subsidiaries that own the Brady, Steamboat 1/1A and Steamboat 2/3 projects, (3) all contractual rights under the agreements relating to the Brady, Steamboat 1/1A and Steamboat 2/3 projects (such as the power purchase agreements and all other relevant contracts) and all governmental approvals and permits relating to such projects; (4) all of Ormat Funding's revenues and all of the revenues derived from the Brady, Steamboat 1/1A and Steamboat 2/3 projects, including amounts received as distributions from the Ormesa and Mammoth projects, as well as all of Ormat Funding bank accounts and those of Ormat Funding direct and indirect subsidiaries that own the Brady, Steamboat 1/1A, Steamboat 2/3 and Mammoth projects; (5) any intercompany notes payable to Ormat Funding or any of the direct or indirect subsidiaries that own the Brady, Steamboat and Mammoth projects; (6) insurance policies covering the Brady, Steamboat 1/1A and Steamboat 2/3 projects and, to the extent of our interest therein, any insurance maintained with respect to the Mammoth project; and (7) guarantees from each of the direct and indirect subsidiaries that own the Brady, Steamboat 1/1A and Steamboat 2/3 projects.

Following the repayment of the United Capital Bank loan, which we expect will happen on or prior to January 31, 2005, or such other date as of which Ormesa LLC is no longer prohibited by the terms of the United Capital Bank loan to grant liens on its assets, Ormat Funding and Ormesa LLC are obligated to grant similar liens over similar items of collateral in favor of the indenture trustee and collateral agent for the senior secured notes.

Ormat Funding may redeem all or a portion of the senior secured notes at our option, at any time, at a redemption price equal to the principal amount of the senior secured notes to be redeemed, plus a "make-whole" premium, accrued interest and liquidated damages, if any, to the redemption date. The make-whole premium is calculated using a discount rate equal to the interest on U.S. Treasury securities with a comparable maturity, plus 50 basis points. In no event can the sum of the redemption price for the notes being redeemed and the make-whole premium be less than 100% of the principal amount of senior secured notes to be redeemed.

Under certain circumstances, Ormat Funding must redeem a portion of the senior secured notes. If Ormat Funding has not satisfied certain conditions with respect to the Galena repowering on or prior to September 30, 2005, or Ormat Funding fails to achieve certain levels of generating capacity from the Galena repowering or from the Mammoth enhancement by March 31, 2006 or January 1, 2006, respectively, Ormat Funding will have to redeem the senior secured notes at a price equal to 101% together with accrued interest and liquidated damages, if any, to the redemption date, in an amount calculated in accordance with the indenture for the senior secured notes which cannot exceed, in the aggregate, $20.0 million. Upon the occurrence of certain loss, eminent domain and similar events described in the indenture for the senior secured notes, Ormat Funding will have to use any

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funds received in connection with such events to redeem the senior secured notes at a price equal to the principal amount of the notes scheduled to be redeemed plus accrued interest to the redemption date.

The indenture for the senior secured notes and related documents contains various affirmative and negative covenants regarding the manner in which Ormat Funding and its direct or indirect subsidiaries that own the Brady, Steamboat, Mammoth and, after the repayment of the United Capital Bank loan, Ormesa projects conduct their business, including their ownership, operation and maintenance of these projects and the performance of their obligations and exercise of their rights under the relevant project documents (such as the power purchase agreement and other relevant contracts) relating to such projects. In addition, Ormat Funding cannot make any dividend distribution to its immediate parent, Ormat Nevada, unless certain conditions are satisfied, including compliance with debt service coverage ratios and projected debt service coverage ratios that are at or above specified levels, and the absence of defaults and events of default under the indenture for the senior secured notes and related documents.

The indenture for the senior secured notes contains customary events of default, some of which are subject to cure periods and, in some instances, materiality thresholds. One such event of default is the occurrence of any change in control which, among other things, refers to a situation whereby a party other than Ormat Nevada and certain related parties becomes, in certain circumstances, the beneficial owner of 50% or more of the economic and voting interests in Ormat Funding.

Under the depositary agreement for the senior secured notes, all revenues from the projects (other than the Ormesa project, which are not required to be deposited until the United Capital Bank loan is paid off) are required to be deposited into certain bank accounts established with a collateral agent and pledged as security for payment obligations under the senior secured notes. The principal accounts so established constitute a revenue account, operating account, debt service payment account and debt service reserve account. All revenues are required to be deposited initially in the revenue account, and are then transferred in a prescribed order to pay operating expenses, to pay principal and interest on the senior secured notes, to fund the debt service reserve account, and to fund certain other accounts.

The indenture for the senior secured notes authorizes Ormat Funding to issue an unlimited aggregate principal amount of senior secured notes, subject to compliance with certain financial and other conditions set forth in the indenture. Ormat Funding may decide to issue additional senior secured notes under the indenture in the future in connection with possible financing or refinancing of additional projects.

In connection with the issuance of the senior secured notes, Ormat Funding entered into a registration rights agreement, pursuant to which it (1) undertook to file a registration statement with the Securities and Exchange Commission and offer to exchange the senior secured notes for publicly registered notes with substantially identical terms and conditions to the senior secured notes and consummate the exchange offer within 330 days from February 13, 2004; and (2) undertook to file a shelf registration statement for the resale of senior secured notes if the exchange offer described in the foregoing clause could not be consummated within the time period prescribed in such agreement and in certain other circumstances. If Ormat Funding does not comply with these exchange or registration obligations, it will be required under certain circumstances to pay to holders of the senior secured notes liquidated damages until such obligations are satisfied.

Credit Facility Agreement (The Momotombo Project)

On September 15, 2000, our subsidiary Ormat Momotombo Power Company Ltd. entered into a credit facility agreement (as amended as of March 25, 2003) with Bank Hapoalim B.M. The loan, in an aggregate amount equal to $26,435,000, was made pursuant to two tranches, which are used to finance up to 70% of the costs of Phases I and II of the project. Tranche one of the loan bears interest at LIBOR plus 2.375%. Tranche two of the loan bears interest at LIBOR plus 3%. As of March 31, 2004, the outstanding balance on the loan was approximately $19.2 million. The first tranche of the loan is due by December 2009 and the final maturity of the second tranche of the loan is December 2010.

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The loan is secured by liens over (1) all real and personal property comprising the Momotombo project, (2) all project revenues and the bank account into which they are required to be deposited, and (3) all of the equity interests in Ormat Momotombo Power Company Ltd.

Ormat Systems has also guaranteed the repayment of 50% of such outstanding obligations to Bank Hapoalim B.M. upon the occurrence of certain events.

Pursuant to the terms of the credit facility agreement, Ormat Momotombo Power Company Ltd. is required to repay all principal amounts disbursed under the credit facility agreement in approximately equal, successive quarterly installments.

Subject to the successful receipt of any required governmental approvals, Ormat Momotombo Power Company Ltd. may, at any time on at least 30 but not more than 60 days' prior written notice to Bank Hapoalim, prepay all or any part of the outstanding principal amount, without premium or penalty.

The credit facility agreement contains various affirmative and negative covenants regarding the manner in which Ormat Momotombo Power Company Ltd. conducts its business, including its ownership, operation and maintenance of the project and the performance of its obligations and exercise of its rights under the related project documents. Such covenants include, but are not limited to, restrictions on the ability of Ormat Momotombo Power Company Ltd. (1) to take actions which would constitute or result in any material alteration to the nature of its business or the nature and scope of the Momotombo project without Bank Hapoalim's prior written consent, (2) to consolidate, merge or consolidate its assets, (3) to modify or amend its organizational documents or its filings with the Nicaraguan Foreign Investment Committee, (4) to declare dividends or make certain payments to holders of any share capital, (5) to enter into certain leases (subject to certain exceptions contained in the credit facility agreement) or (6) to incur any additional indebtedness. Ormat Momotombo Power Company Ltd. must also maintain certain leverage and debt service coverage ratios under the terms of the credit facility agreement.

The credit facility agreement also contains certain customary events of default, some of which are subject to cure periods and/or materiality thresholds. Upon the occurrence of an event of default, Bank Hapoalim is authorized at any time or from time to time, without notice to Ormat Momotombo Power Company Ltd., to set off and to appropriate and apply any deposits (general or special) and any other indebtedness at any time held or owing by Bank Hapoalim B.M. to or for Ormat Momotombo Power Company Ltd. against and on account of the secured obligations and liabilities of Ormat Momotombo Power Company Ltd. under the credit facility agreement or any related agreement.

Eximbank Credit Agreement (The Leyte Project)

On May 13, 1996, our subsidiary Ormat-Leyte Co. Ltd. entered into a credit agreement with the Export-Import Bank of the United States, an agency of the United States, pursuant to which the Export-Import Bank made a loan to Ormat-Leyte Co. Ltd. in the amount of $44,448,038. The credit was established as part of the overall debt financing for the construction of the Leyte project and the proceeds of the loan were used to repay in part certain short-term previous loans made by other lenders to the project owner. As of March 31, 2004, the outstanding balance on the loan was approximately $17.8 million. The final maturity of the loan is July 2007.

The loan is secured by liens over (1) all real and personal property comprising the Leyte project, (2) the bank accounts into which revenues from the project are required to be deposited and (3) all of the equity interests in Ormat-Leyte Co. Ltd.

Pursuant to the terms of the credit agreement, Ormat-Leyte Co. Ltd. is required to repay all principal amounts disbursed under the credit agreement in approximately equal, successive quarterly installments. Ormat-Leyte Co. Ltd. is required to pay interest at a rate equal to 6.54% per annum.

Subject to providing 10 business days' prior written notice, Ormat-Leyte Co. Ltd. may from time to time prepay all or any part of the outstanding principal amount of the loan, together with accrued

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interest and all other amounts due to Eximbank under the credit agreement and the related financing documents, and a prepayment premium, as provided for in the credit agreement.

The credit agreement contains various customary affirmative and negative covenants regarding the manner in which Ormat-Leyte Co. Ltd. conducts its business, including its ownership, operation and maintenance of the Leyte project and the performance of its obligations and exercise of its rights under the related project documents.

The credit agreement also contains certain customary events of default, some of which are subject to cure periods and/or materiality thresholds.

Project-related Agreements

Power Purchase Agreements For Our Nevada Projects

Our existing projects in Nevada sell, and the Galena project will sell, their electrical output to Sierra Pacific Power Company under individual power purchase agreements for each project. The Desert Peak 2 and Desert Peak 3 projects will sell their electrical output to Nevada Power Company under separate power purchase agreements. These agreements have different durations, but generally have similar terms and conditions, except as specifically noted below. We refer to our Nevada project, including our projects under development, construction or enhancement as, the Galena, Steamboat 1/1A, Steamboat 2/3, Steamboat Hills, Brady, Desert Peak 2 and Desert Peak 3 projects.

The power purchase agreements with Sierra Pacific Power Company (other than the Steamboat 1 and Galena power purchase agreements) generally provide that they may be terminated by Sierra Pacific Power Company prior to their respective expiry dates if our project subsidiaries fail to deliver energy for 180 consecutive days, so long as our project subsidiaries are not attempting to resume operations of the relevant project. In the case of the Galena, Desert Peak 2 and Desert Peak 3 power purchase agreements, early termination may occur if the required approval from the NPUC or FERC is not obtained or, in the case of the Galena power purchase agreement, after a force majeure event has occurred and continued for longer than six months (or twelve months if the force majeure event caused loss of a major component of the plant). In the case of the Steamboat 1 power purchase agreement, early termination may occur if there is a force majeure event.

Pursuant to the Steamboat 1 and Steamboat 1A power purchase agreements, our project subsidiaries are entitled to receive, on a monthly basis, energy payments equal to the short term avoided cost rates for energy in effect for the relevant billing period. Under the Brady power purchase agreement and the Steamboat 2 and Steamboat 3 power purchase agreements, our project subsidiaries are entitled to receive, on a monthly basis, energy and capacity payments. The energy payment escalates each year under the Steamboat 2, Steamboat 3 and the Brady power purchase agreements. The capacity payments under these power purchase agreements are subject to reduction if certain capacity availability percentages are not met. There is also a scheduled reduction in the capacity price that will occur in the future with respect to the Steamboat 2, Steamboat 3 and Brady power purchase agreements. In addition, under these power purchase agreements, Sierra Pacific Power Company may dispatch the Steamboat 2/3 and Brady projects up to a certain number of hours per year at a reduced energy rate.

Pursuant to the Galena, Desert Peak 2 and Desert Peak 3 power purchase agreements, our project subsidiaries are obligated to deliver energy on a continuous basis, along with dedicating all renewable energy credits and environmental credits, to Sierra Pacific Power Company. Our project subsidiaries receive an energy payment for all energy they deliver under such agreements, which payment escalates over time. In the event our project subsidiaries do not supply 95% of the amount of energy required during a certain period, they must compensate Sierra Pacific Power Company or Nevada Power Company for its replacement costs to purchase such shortfall amount from an alternate source. In addition, if our project subsidiaries do not transfer all of our renewable energy credits associated with the project to Sierra Pacific Company or Nevada Power Company, our project subsidiaries may have to compensate for Sierra Pacific Power Company's or Nevada Power Company's replacement cost to purchase such credits from alternate sources.

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Our project subsidiaries are generally relieved from their obligations under the power purchase agreements to the extent they cannot wholly or partly perform such obligations as a result of the occurrence of a force majeure event. Generally, under these power purchase agreements, such relief is contingent upon our providing Sierra Pacific Power Company or Nevada Power Company with prompt notice of the suspension of our performance and our project subsidiaries attempting to remedy the inability to perform.

Pursuant to most of the power purchase agreements, including those of the Brady, Steamboat 1A, Steamboat 2, Steamboat 3, Steamboat Hills, Desert Peak 2 and Desert Peak 3 projects, the non-availability of the geothermal resource by itself is not a force majeure event. The Brady, Steamboat 2 and Steamboat 3 power purchase agreements provide that if the project does not maintain Peak Period Capacity values of at least 85% of those listed in the contract, our relevant project subsidiary will be obligated to pay liquidated damages to Sierra Pacific Power Company in amounts ranging from $1.0 million to $1.5 million.

Pursuant to these power purchase agreements, our project subsidiaries have certain customary obligations to indemnify Sierra Pacific Power Company and Nevada Power Company under certain circumstances.

Pursuant to the Steamboat Hills and Steamboat 1A power purchase agreements, our project subsidiaries must provide notice of the project's availability for sale to Sierra Pacific Power Company. Under the Steamboat 2, Steamboat 3, Brady, Galena, Desert Peak 2 and Desert Peak 3 power purchase agreements, our project subsidiaries must provide Sierra Pacific Power Company or Nevada Power Company, as the case may be, with a right of first refusal for the acquisition of such projects.

Our project subsidiaries are generally required to coordinate scheduled maintenance on the plants with Sierra Pacific by providing a list of proposed maintenance operations certain months in advance. In the case of the Steamboat 1 power purchase agreement, our project subsidiary is obligated only to give notice to Sierra Pacific Power Company of scheduled maintenance outages. In the case of the Galena, Desert Peak 2 and Desert Peak 3 power purchase agreements, our project subsidiaries have an obligation to obtain Sierra Pacific Power Company's or Nevada Power Company's, as the case may be, consent for any non-forced outage and are limited to fifteen days per year for the Galena project and thirty days per year for the Desert Peak 2 and Desert Peak 3 projects.

Our project subsidiaries are required to obtain and maintain insurance coverage for our plants. Other than in the case of the Steamboat 1, Desert Peak 2, Desert Peak 3 and the Galena power purchase agreements, if our project subsidiaries fail to carry insurance, our project subsidiaries may not deliver capacity and energy to Sierra Pacific Power Company and Sierra Pacific Power Company has no obligation to accept or pay for any capacity or energy until appropriate insurance is obtained or reinstated. If any of our Desert Peak 2 or Desert Peak 3 project subsidiaries fails to maintain the requisite coverage, it must indemnify Nevada Power Company for liabilities that would have been protected against had our project subsidiary maintained such coverage.

Pursuant to the Desert Peak 2 and Desert Peak 3 power purchase agreements, our project subsidiaries are required to maintain a certain credit rating or to provide certain security as collateral in favor of Nevada Power Company. Pursuant to the Galena power purchase agreement, our project subsidiary is required to provide certain collateral as security in favor of Sierra Pacific Power Company.

Our project subsidiaries generally cannot assign the power purchase agreements without the prior written consent of Sierra Pacific Power Company or Nevada Power Company, as the case may be, although the power purchase agreements of all our project subsidiaries provide for collateral assignment for financing purposes without consent from Sierra Pacific Power Company or Nevada Power Company.

The Steamboat 1 power purchase agreement term continues until December 5, 2006 and is then automatically renewed each year unless terminated by either party; the Steamboat 1A power purchase agreement expires on December 14, 2018; the Steamboat 2 and Steamboat 3 power purchase agreements expire on December 19, 2022; the Steamboat Hills power purchase agreement expires in

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February, 2018; the Brady power purchase agreement expires in July 2022; and the Galena, Desert Peak 2 and Desert Peak 3 power purchase agreements expire twenty years from the first January 1 after the commercial operation date, which we currently expect to be the end of 2005, in the case of the Galena project, and early 2006 in the case of the Desert Peak 2 and Desert Peak 3 projects.

Interconnection Arrangements For Our Nevada Projects

The Steamboat 1A plant is interconnected to Sierra Pacific Power Company's grid pursuant to the terms of a special facilities agreement. There are no material outstanding obligations under this agreement remaining to be performed by our project subsidiary. The Steamboat 1 and Steamboat Hills projects are interconnected to Sierra Pacific Power Company's grid pursuant to the terms of each project's power purchase agreement.

Our project subsidiaries also have interconnected the Steamboat 2 and Steamboat 3 plants to Sierra Pacific Power Company's grid pursuant to the terms of a special facilities agreement. Our project subsidiaries reimburse Sierra Pacific Power Company, the interconnecting utility, for costs incurred in the operation, maintenance and refurbishment of the interconnection facilities and equipment. As a part of the interconnection agreement, it was stipulated that Sierra Pacific Power Company would perform a reduced scope of work, as certain recommendations made by Sierra Pacific Power Company were not agreed to by us. As a result of the reduced scope of work performed by Sierra Pacific Power Company, our project subsidiaries agreed, under the terms of the agreement to assume certain increased risks of outages, indemnify Sierra Pacific Power Company from liability resulting from the reduced scope of work, and add certain equipment to our facilities before expanding the plants.

All of the special facilities agreements for the Steamboat 1A, Steamboat 2, and Steamboat 3 projects require our project subsidiaries to indemnify Sierra Pacific Power Company from liability arising out of the engineering, design, construction, maintenance or operation of, or the making of improvements or additions to, our facilities. However, our project subsidiaries do not have an obligation to indemnify Sierra Pacific Power Company for liability or loss to the extent such liability or loss results from Sierra Pacific Power Company's negligence or willful misconduct.

Our project subsidiary has interconnected the Brady project to Sierra Pacific Power Company's grid pursuant to the terms of the Brady power purchase agreement. Our project subsidiary has an obligation under this agreement to maintain all project property required for the receipt of energy from the interconnecting utility.

Power Purchase Agreements For Our California Projects

Our California project subsidiaries sell electricity from our Mammoth, Ormesa, Heber 1 and Heber 2 projects under seven separate power purchase agreements with Southern California Edison Company. In the case of our Mammoth project subsidiary, there are three such agreements which we refer to as the G-1, G-2 and G-3 power purchase agreements. In the case of our Ormesa project subsidiary, there are two such power purchase agreements, which we refer to as the Ormesa I and Ormesa II power purchase agreements. Each of our Heber 1 and Heber 2 project subsidiaries also has one such power purchase agreement. These agreements have different durations, but generally have the same terms and conditions, except as specifically noted below.

The G-1, G-2, G-3, Ormesa I, Ormesa II, Heber 1 and Heber 2 power purchase agreements do not terminate at their stated expiry dates unless either party gives prior written notice. The notice period is five years in the case of the G-1 power purchase agreement and 90 days in the case of the other power purchase agreements. The Heber 1 power purchase agreement may be terminated by our project subsidiary prior to its stated expiry upon making a certain payment to Southern California Edison Company.

Under all of the power purchase agreements, our project subsidiaries are entitled to receive, against performance of their obligations, capacity and energy payments on a monthly basis. The energy payments for all of our California project subsidiaries are currently set pursuant to the terms

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of settlement agreements through April 2007, but beginning in May 2007 will be based on Southern California Edison Company's short run avoided cost. Under the G-3, Ormesa I, Ormesa II and Heber 1 and 2 power purchase agreements, our project subsidiaries potentially are entitled to receive capacity bonuses if the performance of the respective facilities exceed certain requisite performance requirements. Under the G-2, G-3, Ormesa I, Ormesa II and Heber 2 power purchase agreements, Southern California Edison Company may request that our project subsidiaries discontinue or reduce the delivery of energy during off-peak periods if certain economic circumstances exist.

Our project subsidiaries are entitled to perform scheduled maintenance on the respective facilities subject to certain limitations. Under the G-1 power purchase agreement, our project subsidiary has agreed to give reasonable prior written notice of its intent to perform scheduled maintenance and must use its best efforts to schedule such outages during off-peak hours. Under the G-2, G-3, Ormesa I, Ormesa II, Heber 1 and Heber 2 power purchase agreements, our project subsidiaries have agreed to give prior written notice of all scheduled outages; not to perform major overhauls during peak months; to use reasonable efforts to schedule routine maintenance during off-peak months; to cap the number of outage hours that may be taken during peak hours of peak months; and to cap the number of outage hours that may be taken during any twelve-month period.

Under the G-3, Ormesa I, Ormesa II and Heber 1 and 2 power purchase agreements, each of our project subsidiaries has an obligation to meet certain minimum performance requirements set forth in such agreements and to demonstrate its capacity on an annual basis. If one of our project subsidiaries fails to meet the performance requirements, it may be placed on probation, the capacity of the relevant plant may be permanently reduced and, in such an instance, a refund would be owed from such project subsidiary to Southern California Edison Company. If one of our project subsidiaries fails to demonstrate its capacity, the capacity of the relevant power plant may be permanently reduced and, in such case, a refund would be required to be made from such project subsidiary to Southern California Edison Company. Our project subsidiary may also reduce the capacity of the plants upon notice to Southern California Edison Company and after making a certain payment to it.

All of our project subsidiaries have an obligation pursuant to their respective power purchase agreements to indemnify Southern California Edison Company under certain circumstances.

As part of their obligations, our project subsidiaries must maintain certain insurance coverage for the relevant project. If any of our project subsidiaries fails to maintain such coverage, it must indemnify Southern California Edison Company for liabilities to the extent Southern California Edison Company would have been protected had our project subsidiary maintained such insurance coverage.

Our project subsidiaries are released from their obligations under the relevant power purchase agreement to the extent any of them cannot wholly or partly perform such obligations as a result of uncontrollable force, so long as our project subsidiary provides prompt written notice to Southern California Edison Company and attempts to remedy its inability to perform. In addition, under the G-3, Ormesa I, Ormesa II, and Heber 1 and 2 power purchase agreements, Southern California Edison Company is obligated to make capacity payments for up to 90 days during the occurrence of an uncontrollable force. Also, pursuant to the Heber 1, Ormesa I and Ormesa II power purchase agreements, an uncontrollable force that prevents operation for certain prolonged periods of time is deemed to be an abandonment of the project. An abandonment, whether due to an uncontrollable force or other specified events provides Southern California Edison Company with certain rights to purchase the relevant power plant.

All of our project subsidiaries are prohibited from assigning their respective power purchase agreements without the prior written consent of Southern California Edison Company, except that all of our project subsidiaries other than Heber 1 may assign their respective power purchase agreement in connection with the merger or a sale of substantially all of the project assets. The Ormesa II power purchase agreement may be assigned by our project subsidiary to a lender in connection with a related financing. Our Heber 1 and 2 project subsidiaries may assign their power purchase agreements without the prior written consent of Southern California Edison Company to an affiliate.

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Under the Ormesa I and Ormesa II power purchase agreements, under certain circumstances, Southern California Edison Company or its designee has a right of first refusal to acquire the facility. Under the G-1 power purchase agreements, under certain circumstances, Southern California Edison Company or its subsidiary or affiliate has a right of first refusal to acquire the facility. Under the Heber 1 power purchase agreement, under certain circumstances, Southern California Edison Company or its subsidiary has a right of first refusal to acquire the facility.

The G-1 power purchase agreement expires on February 26, 2014; the G-2 power purchase agreement expires on December 7, 2020 and the G-3 power purchase agreement expires on December 22, 2020. The Ormesa I and Ormesa II power purchase agreements expire on October 2016 and March 1, 2017, respectively. Our Heber 1 and 2 power purchase agreements expire on December 2015 and July 2023, respectively.

Interconnection Arrangements for our California Projects

Each of our project subsidiaries have entered into an interconnection facilities agreement for the Mammoth G-1, G-2 and G-3 plants with Southern California Edison Company. Each of our project subsidiaries has an obligation to operate and maintain the interconnection facilities at its own expense. Each of our project subsidiaries must indemnify the interconnecting utility from liability arising out of any fault or damage to our interconnection facilities, the interconnecting utility's transmission system or the public as a result of its operation of the G-1, G-2 and G-3 plants.

Each of our project subsidiaries interconnects the Ormesa project (for the Ormesa I and Ormesa II power purchase agreements) and Heber 1 and 2 projects to Southern California Edison Company's grid by way of transmission lines owned by the Imperial Irrigation District, which we refer to as IID. These transmission lines interconnect the Ormesa, Heber 1 and Heber 2 projects with Southern California Edison Company's transmission system and are governed by the terms of certain plant connection agreements. IID has the right to curtail the amount of electricity it carries on such transmission lines under certain circumstances. Transmission service charges are paid monthly to IID pursuant to certain transmission service agreements.

Power Purchase Agreement for the Puna Project

Our Puna project subsidiary in Hawaii sells its electrical output to Hawaii Electric Light Company under a long-term power purchase agreement.

The power purchase agreement with Hawaii Electric Light Company provides that either party may terminate the agreement if an event of force majeure occurs and is continuing for twelve consecutive months and the affected party has not taken action to cure the event.

Under the Puna power purchase agreement, our project subsidiary is entitled to receive, on a monthly basis, energy payments and capacity payments. The energy payments for a portion of the energy delivered by our project subsidiary are equal to the higher of the short term avoided cost rates for energy in effect for the relevant billing period or a fixed rate. The energy payments for a smaller portion of energy to be delivered by our project subsidiary to Hawaii Electric Light Company are equal to an amount based on a fuel rate and a variable operation and maintenance rate, as each are adjusted over the term of the agreement, but which rate will never go below a certain floor. Our project subsidiary also receives a payment for providing reactive power to Hawaii Electric Light Company. Our project subsidiary is required to make certain payments to Hawaii Electric Light Company if certain performance requirements under the Puna power purchase agreement are not met.

Our project subsidiary is not required to perform its obligations under the power purchase agreement following the occurrence of a force majeure event, upon providing Hawaii Electric Light Company with prompt notice of the suspension of our project subsidiary's performance and commencing with remedial measures. Issues with the geothermal resource by itself do not constitute a force majeure event unless our project subsidiary has taken adequate measures to try to mitigate the adverse impacts of such issues.

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Our project subsidiary has an obligation to indemnify Hawaii Electric Light Company in certain circumstances. Our project subsidiary also is required to obtain and maintain insurance coverage for the power plant.

Our project subsidiary is generally required to coordinate scheduled maintenance with respect to the power plant with Hawaii Electric Light Company. Our project subsidiary has an obligation to obtain Hawaii Electric Light Company's approval in order to schedule the days each year during which a plant overhaul may be performed.

Our project subsidiary cannot assign the power purchase agreement without the prior written consent of Hawaii Electric Light Company, although our project subsidiary may assign the power purchase agreement to lending institutions in connection with the financing of the project without the prior consent of Hawaii Electric Light Company.

The initial term of the Puna power purchase agreement is scheduled to expire on December 31, 2027 which term will continue in effect after such initial term until either party has given notice of not less than five years of its intent to terminate such power purchase agreement.

Interconnection Arrangement for the Puna Project

Our project subsidiary is interconnected to Hawaii Electric Light Company's transmission system pursuant to agreements to design and construct transmission lines and substation facilities. There are no material outstanding obligations under these agreements.

Foreign Projects

Power Purchase Agreement for the Leyte Project

The Leyte project in the Philippines sells energy and capacity to the Philippine National Power Corporation. According to the BOT agreement which was subsequently amended in February and April 1996, Ormat-Leyte Co. Ltd. is required to deliver the electricity generated at the Leyte Project to the Philippine National Power Corporation, on behalf of PNOC-Energy Development Corporation. PNOC-Energy Development Corporation agreed to supply Ormat-Leyte Co. Ltd. with the geothermal fluid necessary for operating the power plant during the entire term of the BOT agreement at no cost. Under the BOT agreement, our project subsidiary will dedicate all energy and capacity of the power plant to the purchaser, and the purchaser is obligated to purchase all of the electricity generated by the project and provide our project with capacity payments and energy fees. PNOC-Energy Development Corporation agreed to make the Leyte Power Expansion Geothermal Reservation site available exclusively to us at no cost in exchange for the construction and operation of the project. The BOT agreement expires in September 2007, at the end of which the power plant will be transferred to PNOC-Energy Development Corporation (for no further consideration).

Power Purchase Agreement for the Momotombo Project

The Momotombo project in Nicaragua sells electricity to the Nicaraguan Electricity Company. The Momotombo project has a power purchase agreement and a concession agreement with Nicaraguan Electricity Company, both of which will expire in 2014. The revenues from the Momotombo project will cease at the time the concession expires. The term of the concession may be extended for an additional period of 15 years or less with both parties' consent. There is also a provision for possible extension of the power purchase agreement, subject to both parties' consent. In 2001, Nicaraguan Electricity Company assigned the power purchase agreement to Empresa Distribuidora de Electricidad del Norte (DISNORTE) and Empresa Distribuidora de Electricidad del Sur (DISSUR), two corporations which own the power-distribution rights in Nicaragua. Under the power purchase agreement, Ormat Momtombo Power Company, our wholly owned project subsidiary that operates the project, is required to use all available geothermal steam extracted by the plant in order to generate electricity. Our project subsidiary cannot sell the electricity to any person or organization other than the power purchasers. The power purchasers are required to pay for the

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electricity each month according to the amount of electricity that our project subsidiary sold or is deemed to have sold. Our project subsidiary may sell electricity to third parties if the power purchase agreement is terminated prior to the end of its term for reasons attributable to the power purchasers. However, if the price at which the electricity is sold to the third party is higher than the price fixed in the power purchase agreement, the power purchasers are entitled to 85% of such difference.

Power Purchase Agreement for the Olkaria III Project

The Olkaria III project in Kenya sells electricity to the Kenya Power & Lighting Co. Ltd. Under the power purchase agreement, the purchaser is obligated to pay the project a capacity fee and an energy fee. The term of the power purchase agreement expires in 2020 or, if Phase II of the project is constructed, 20 years from the date on which such Phase II commences commercial operation, and may be extended with both parties' consent on such terms as the parties may agree.

Power Purchase Agreement for the Zunil Project

The Zunil project in Guatemala sells electricity to Instituto Nacional de Electrification. Pursuant to the power purchase agreement, which will expire in October 2019, the power purchaser is responsible for supplying the geothermal fluid to the plant. The power purchaser is obligated to purchase all the power generated by the plant's facilities, as converted from the geothermal fluid. The power purchaser is required to make both an energy payment and a capacity payment to the project, the rate of which is pre-determined under the power purchase agreement, regardless of whether or not the power purchaser is able to supply the geothermal fluid to the plant. Instituto Nacional de Electrification has the option to receive, by way of allotment for no consideration, 3% of the issued share capital of Orzunil, the owner of the Zunil project. Upon termination of the power purchase agreement, Instituto Nacional de Electrification will have the right of first refusal to acquire the power plant's assets at a price no lower than its market value. In the event that our project terminates the power purchase agreement, it will have the right to continue and operate the power plant and sell electricity to any other purchaser. Pursuant to the power purchase agreement, the purchaser is responsible, among other things, for building and maintaining transmission lines and maintaining and operating the geothermal reservoir.

Bureau of Land Management Geothermal Leases

Certain of our domestic project subsidiaries have entered into geothermal resources leases with the U.S. government, pursuant to which they have obtained the right to conduct their geothermal development and operations on federally-owned land. These leases are made pursuant to the Geothermal Steam Act of 1970, which we refer to as the Act, and the lessor under such leases is the U.S. government, acting through the U.S. Department of the Interior, Bureau of Land Management, which we refer to as the BLM.

Typically, BLM geothermal leases grant projects the exclusive right and privilege to drill for, extract, produce, remove, utilize, sell and dispose of geothermal steam and associated geothermal resources. The projects are also granted certain nonexclusive rights, which include, among others, the right to conduct within the leased area geological and geophysical exploration (in accordance with certain applicable regulations), as well as the right to construct and operate within the leased area power generating plants and certain other works and related structures and to use so much of the surface of the land as may be necessary or reasonably convenient for the production, utilization and processing of geothermal resources (subject to applicable laws and regulations). Additionally, projects are granted the right to reinject into the leased lands geothermal resources and condensates to the extent that such resources and condensates are not utilized and to the extent that such reinjection is necessary for geothermal operations.

The leases provide for a primary term of 10 years and so long thereafter as geothermal steam is being produced or utilized in commercial quantities, but cannot exceed a period of 40 years after the end of the primary term. However, if at the end of the such 40-year period geothermal steam is still being produced or utilized in commercial quantities and the applicable leased lands are not needed for

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other purposes, the project will have a preferential right for a renewal of the lease for a second 40-year term, in accordance with such terms and conditions as the BLM deems appropriate. If actual drilling operations are commenced on the leased lands or under an approved plan or agreement on behalf of the leased lands prior to the end of the primary term and are being diligently prosecuted at the end of the primary term, the lease will be extended for 5 additional years and so long thereafter (but not more than 35 years) as geothermal steam is produced or utilized in commercial quantities. If at the end of such extended term, geothermal steam is still being produced or utilized in commercial quantities, the project will have the preferential right for a renewal for a second term. The leases also provide for extensions under certain other circumstances.

Under the terms of the BLM leases, projects are required to pay an annual rental fee (on a per acre basis), which escalates according to a schedule described therein, until production of geothermal steam in commercial quantities has commenced. After such production has commenced, the projects are required to pay royalties (on a monthly basis) on the amount or value of (1) steam, (2) by-products derived from production and (3) commercially de-mineralized water sold or utilized by the project (or reasonably susceptible to such sale or use).

Such BLM leases include certain covenants that require the projects to conduct their operations under the lease in a workmanlike manner and in accordance with all applicable laws and BLM directives and to take all mitigating actions required by the BLM to protect the surface of and the environment surrounding the land. Additionally, certain leases contain additional requirements, some of which concern the mitigation or avoidance of disturbance of any antiquities, cultural values or threatened or endangered plants or animals, the payment of royalties for timber and the imposition of certain restriction on residential development on the leased land.

In the event of a default under any such BLM lease, or the failure to comply with any of the provisions of the Act or regulations issued under the Act or the terms or stipulations of the lease, the BLM may, 30 days after notice of default is provided to the relevant project, (1) suspend operations until the requested action is taken or (2) cancel the lease.

Private Geothermal Leases

Certain of our domestic project subsidiaries have entered into geothermal resources leases with private parties, pursuant to which they have obtained the right to conduct their geothermal development and operations on privately owned land.

Typically, the leases grant our project subsidiaries the exclusive right and privilege to drill for, produce, extract, take and remove from the leased land water, brine, steam, steam power, minerals (other than oil), salts, chemicals, gases (other than gases associated with oil), and other products produced or extracted by such project subsidiary. The project subsidiaries are also granted certain rights pertaining to the construction and operation of plants, structures and facilities on the leased land. Additionally, the project subsidiaries are granted the right to dispose of waste brine and other waste products as well as the right to reinject into the leased land water, brine, steam and gases in a well or wells for the purpose of maintaining or restoring pressure in the productive zones beneath the leased land or other land in the vicinity.

The leases provide for a term consisting of a primary term in the range of five to 30 years, depending on the lease, and so long thereafter as lease products are being produced or the project subsidiary is engaged in drilling, extraction, processing or reworking operations on the leased land.

As consideration under such leases, the project subsidiary must pay to the lessor a certain specified percentage of the value "at the well" (which is not attributable to the enhanced value of electricity generation) of all lease products produced, saved and sold on a monthly basis.

In addition, pursuant to the leases, the project subsidiary typically agrees to commence drilling, extraction or processing operations on the leased land within the primary term, and to conduct such operations with reasonable diligence until lease products have been found, extracted and processed in quantities deemed "paying quantities" by the project subsidiary, or until further operations would, in such project subsidiary's judgment, be unprofitable or impracticable, or the project subsidiary may at

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any time within the primary term terminate the lease and surrender the relevant land. If the project subsidiary has not commenced any such operations on said land or on the unit area or terminated the lease within the primary term, the project subsidiary must pay to the lessor, annually in advance, a rental fee until operations are commenced on the leased land.

If the project subsidiary fails to pay any installment of royalty or rental when due and if such default continues for a period of 15 days after its receipt of written notice thereof from the lessor, then at the option of the lessor, the lease will terminate as to the portion or portions thereof as to which the project subsidiary is in default.

If the project subsidiary defaults in the performance of any obligations under the lease, other than a payment default, and if, for a period of 90 days after written notice is given to it by the lessor of such default, the project subsidiary fails to commence and thereafter diligently and in good faith take remedial measures to remedy such default, the lessor may terminate the lease.

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PRINCIPAL STOCKHOLDERS

The following table shows information with respect to the beneficial ownership of our common stock as of June 30, 2004, and as adjusted to reflect the sale of common stock being offered in this offering, for:


•	each person, or group of affiliated persons, known to us to own beneficially 5% or more of our outstanding common stock;


•	each of our directors;


•	each of our named executive officers; and


•	all of our directors and executive officers as a group.

Percentage ownership before the offering is based on 32,307,692 shares of common stock outstanding as of June 30, 2004, subject to the assumptions set forth below. Percentage ownership after the offering is based on shares of common stock outstanding immediately after the closing of this offering. Beneficial ownership is determined in accordance with the rules of the SEC. Except as indicated by footnote and subject to community property laws where applicable, to our knowledge, the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options held by that person that are exercisable as of June 30, 2004, or will become exercisable within 60 days thereafter are deemed outstanding, while such shares are not deemed outstanding for purposes of computing percentage ownership of any other person.


	Shares of Ormat Technologies Common Stock Beneficially Owned						Shares of Ormat Industries Common Stock Beneficially Owned						Maximum Number of Shares being Sold in the Over- Allotment Option, if Any	Shares Beneficially Owned After the Offering if the Underwriters' Over- Allotment Option is Exercised in Full
		Percent in this Offering
Name of Beneficial Owner	Number of Shares	Before Offering			After Offering		Number			Percent				Number of Shares	Percentage Ownership
Principal Stockholder:
Ormat Industries Ltd. ^†	32,307,692		100	%		%		—			—
Directors and Executive Officers:
Yehudit Bronicki ^†	—		—			%		32,269,130	⁽¹⁾		35.38	%
Nadav, Amir†	—		—			%		33,000	⁽²⁾			*
Hezy Ram††	—		—			%		24,750	⁽³⁾			*
Aaron Choresh†	—		—			%		20,625	⁽⁴⁾			*
Zvi Reiss†	—		—			%		28,875	⁽⁵⁾			*
All executive officers and directors as a group (eleven (11) persons)	—		—			%		38,906,811			42.66	%
Holders of more than 5% of shares:
Bronicki Investment Ltd. ^†	—		—			%		32,269,030			35.38	%
Youval Bronicki ^†	—		—			%		6,456,968	⁽⁶⁾		7.08	%
Yoram Bronicki ^†	—		—			%		6,453,806	⁽⁷⁾		7.08	%
Michal Cath ^†	—		—			%		6,453,806	⁽⁷⁾		7.08	%
Bank Leumi	—		—			%		8,049,015			8.82	%
Bank Hapoalim B.M.	—		—			%		6,599,990			7.24	%


^†	c/o Ormat Industries Ltd., Industrial Area, P.O. Box 68 Yavneh 81100, Israel


^††	c/o Ormat Technologies, Inc., 980 Greg Street, Sparks, NV 89431


*	Represents beneficial ownership of less than 1% of the outstanding shares of common stock.


(1)	Includes shares beneficially owned by Bronicki Investment Ltd. Mr. and Mrs. Bronicki are directors of Bronicki

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	Investment Ltd. and each also owns 20% of Bronicki Investment Ltd. Accordingly, they may be deemed to share beneficial ownership of such shares held by Bronicki Investment Ltd. Each of Mr. and Mrs. Bronicki disclaims beneficial ownership of all shares held by Bronicki Investment Ltd., except to the extent of his or her 20% ownership in Bronicki Investment Ltd.


(2)	Represents currently exercisable options granted to Mr.Amir to purchase 33,000 shares of common stock of Ormat Industries; this excludes options to purchase 66,000 shares of common stock of Ormat Industries which are not exercisable within 60 days of June 30, 2004.


(3)	Represents currently exercisable options granted to Mr. Ram to purchase 24,750 shares of common stock of Ormat Industries; this excludes options to purchase 66,000 shares of common stock of Ormat Industries which are not exercisable within 60 days of June 30, 2004.


(4)	Represents currently exercisable options granted to Mr. Choresh to purchase 20,625 shares of common stock of Ormat Industries; this excludes options to purchase 41,875 shares of common stock of Ormat Industries which are not exercisable within 60 days of June 30, 2004.


(5)	Represents currently exercisable options granted to Mr. Reiss to purchase 28,875 shares of common stock of Ormat Industries; this excludes options to purchase 61,875 shares of common stock of Ormat Industries which are not exercisable within 60 days of June 30, 2004.


(6)	Includes shares indirectly owned through the 20% ownership in Bronicki Investment Ltd.


(7)	Represents shares indirectly owned through the 20% ownership in Bronicki Investment Ltd.

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DESCRIPTION OF CAPITAL STOCK

The following is a description of our capital stock and the material provisions of our amended and restated certificate of incorporation, amended and restated by-laws and other agreements to which we and our stockholders are parties, in each case upon the closing of this offering. The following is only a summary and is qualified by applicable law and by the provisions of the amended and restated certificate of incorporation, amended and restated by-laws and other agreements, copies of which are available as set forth under the caption entitled "Where You Can Find More Information."

General

As of June 30, 2004, 32,307,692 shares of our common stock were issued and outstanding, all of which were owned by Ormat Industries. Our amended and restated certificate of incorporation provides that our authorized capital stock will consist of an aggregate number of 200,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share, of which our board of directors has designated 500,000 shares as Series A Junior Participatory Preferred Stock for issuance in connection with the exercise of our preferred share purchase rights pursuant to a rights plan which we intend to adopt. See "—Rights Plan" below. Each such outstanding share of our common stock will be validly issued, fully paid and non-assessable. In addition, at such time, shares of our common stock will be reserved for issuance upon exercise of outstanding options.

Common Stock

Voting. The holders of our common stock are entitled to one vote for each outstanding share of common stock owned by that stockholder on every matter properly submitted to the stockholders for their vote. Stockholders are not entitled to vote cumulatively for the election of directors.

Dividend Rights. Subject to the dividend rights of the holders of any outstanding series of preferred stock, holders of our common stock are entitled to receive ratably such dividends and other distributions of cash or any other right or property as may be declared by our board of directors out of our assets or funds legally available for such dividends or distributions.

Liquidation Rights. In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of our common stock would be entitled to share ratably in our assets that are legally available for distribution to stockholders after payment of liabilities. If we have any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation preferences. In either such case, we must pay the applicable distribution to the holders of our preferred stock before we may pay distributions to the holders of our common stock.

Conversion, Redemption and Preemptive Rights. Holders of our common stock have no conversion, redemption, preemptive, subscription or similar rights.

Preferred Stock

Our amended and restated certificate of incorporation authorizes our board of directors, subject to limitations prescribed by law, to issue up to 5,000,000 shares of preferred stock in one or more series without further stockholder approval. The board will have discretion to determine the rights, preferences, privileges and restrictions of, including, without limitation, voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences of, and to fix the number of shares of, each series of our preferred stock.

Our board of directors has designated 500,000 shares of our preferred stock as Series A Junior Participatory Preferred Stock for issuance in connection with the exercise of our preferred share purchase rights pursuant to a rights plan which we intend to adopt. Although our board of directors has no intention at the present time of doing so, it could authorize the issuance of shares of preferred stock with terms and conditions that could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise be in their best interest. See "—Rights Plan" below.

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Limitations on Directors' Liability

Our amended and restated certificate of incorporation and by-laws contain provisions indemnifying our directors and officers to the fullest extent permitted by law. Prior to the completion of this offering, we intend to enter into indemnification agreements with each of our directors which may, in some cases, be broader than the specific indemnification provisions contained under Delaware law.

In addition, as permitted by Delaware law, our amended and restated certificate of incorporation provides that no director will be liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. The effect of this provision is to restrict our rights and the rights of our stockholders in derivative suits to recover monetary damages against a director for breach of fiduciary duty as a director, except that a director will be personally liable for:


•	any breach of his or her duty of loyalty to us or our stockholders;


•	acts or omissions not in good faith which involve intentional misconduct or a knowing violation of law;


•	the payment of dividends or the redemption or purchase of stock in violation of Delaware law; or


•	any transaction from which the director derived an improper personal benefit.

This provision does not affect a director's liability under the federal securities laws.

To the extent that our directors, officers and controlling persons are indemnified under the provisions contained in our amended and restated certificate of incorporation, Delaware law or contractual arrangements against liabilities arising under the Securities Act, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Provisions of Our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws and Delaware Law that May Have an Anti-Takeover Effect

Amended and Restated Certificate of Incorporation and Amended and Restated By-laws

Certain provisions in our amended and restated certificate of incorporation and amended and restated by-laws summarized below may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might result in a premium being paid over the market price for the shares held by stockholders.

Classified Board of Directors . Our amended and restated certificate of incorporation provides that the number of directors is fixed by our board of directors. Other than directors elected by the holders of any series of preferred stock or any other series or class of stock (except common stock), our directors are divided into three classes. Each class consists as nearly as possible of an equal number of directors. Currently, the terms of office for the three classes of directors expire, respectively, at our annual meetings in 2005, 2006 and 2007. The term of the successors of each class of directors expires three years from the year of election. Directors elected by stockholders at an annual meeting of stockholders will be elected by a plurality of all votes cast.

Special Meetings . Our amended and restated certificate of incorporation and amended and restated by-laws provide that a special meeting of stockholders may be called only by the Chairman of the Board, the President, our board of directors, the holders of not less than a majority of all of the outstanding shares of the corporation entitled to vote at the meeting or, at any time that Ormat Industries (or a certain transferee of Ormat Industries) owns at least 20% of the then outstanding shares of our common stock, by Ormat Industries (or such transferee). Stockholders are not permitted to call, or to require that the board of directors call, a special meeting of stockholders. Moreover, the business permitted to be conducted at any special meeting of stockholders is limited to the business

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brought before the meeting pursuant to the notice of the meeting given by us. Our amended and restated by-laws establish an advance notice procedure for stockholders to nominate candidates for election as directors or to bring other business before meetings of our stockholders.

The foregoing proposed provisions of our amended and restated certificate of incorporation and amended and restated by-laws could discourage potential acquisition proposals and could delay or prevent a change in control. These provisions are intended to enhance the likelihood of continuity and stability in the composition of the board of directors and in the policies formulated by the board of directors and to discourage certain types of transactions that may involve an actual or threatened change of control. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also are intended to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our common stock that could result from actual or rumored takeover attempts. Such provisions also may have the effect of preventing changes in our management.

Rights Plan

Prior to the completion of this offering, we intend to enter into a rights agreement. The material terms of such rights agreement and the preferred share purchase rights will be determined and disclosed upon adoption of the rights plan prior to the completion of this offering.

Delaware Takeover Statute

We are subject to Section 203 of the Delaware General Corporation Law, which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any "business combination" (as defined below) with any "interested stockholder" (as defined below) for a period of three years following the date that such stockholder became an interested stockholder, unless: (1) prior to such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (2) on consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (x) by persons who are directors and also officers and (y) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (3) on or subsequent to such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.

Section 203 of the Delaware General Corporation Law defines "business combination" to include: (1) any merger or consolidation involving the corporation and the interested stockholder; (2) any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; (3) subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; (4) any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or (5) the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. In general, Section 203 defines an "interested stockholder" as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by such entity or person.

The New York Stock Exchange

We will apply to list our common stock on the New York Stock Exchange under the symbol "ORA".

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is .

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock, and a significant public market for our common stock may not develop or be sustained after this offering. Future sales of significant amounts of our common stock, including shares of our outstanding common stock and shares of our common stock issued upon exercise of outstanding options, in the public market after this offering could adversely affect the prevailing market price of our common stock and could impair our future ability to raise capital through the sale of our equity securities.

Sale of Restricted Shares and Lock-Up Agreements

Upon the closing of this offering, we will have outstanding shares of common stock based upon our shares outstanding as of .

Of these shares, the shares of common stock sold in this offering will be freely tradable without restriction under the Securities Act, unless purchased by affiliates of our company, as that term is defined in Rule 144 under the Securities Act.

The remaining shares of common stock were issued and sold by us in private transactions, and are eligible for public sale if registered under the Securities Act or sold in accordance with Rules 144, 144(k) or 701 of the Securities Act. However, of these remaining shares of common stock are held by officers, directors, and existing stockholders who are subject to lock-up agreements for a period of 180 days after the date of this prospectus under which all holders of our common stock have agreed not to sell or otherwise dispose of their shares of common stock. The representatives of the underwriters may, in their sole discretion and at any time without notice, release all or any portion of the securities subject to the lock-up agreements.

Lehman Brothers Inc., in its sole discretion, may release the shares subject to the lock-up agreements in whole or in part at anytime with or without notice. We have been advised by Lehman Brothers Inc. that, when determining whether or not to release shares from the lock-up agreements, Lehman Brothers Inc. will consider, among other factors, the stockholder's reasons for requesting the release, the number of shares for which the release is being requested and market conditions at the time. Lehman Brothers Inc. has advised us that they have no present intention to release any of the shares subject to the lock-up agreements prior to the expiration of the lock-up period.

As of the date of this prospectus, up to of the remaining shares may be eligible for sale in the public market. Beginning 180 days after the date of this prospectus, of these remaining shares will be eligible for sale in the public market, although all but shares will be subject to certain volume limitations under Rule 144.

Rule 144

In general, Rule 144 allows a stockholder (or stockholders where shares are aggregated) who has beneficially owned shares of our common stock for at least one year and who files a Form 144 with the SEC to sell within any three month period commencing 90 days after the date of this prospectus a number of those shares that does not exceed the greater of:


•	1% of the number of shares of common stock then outstanding, which will equal approximately shares immediately after this offering; or


•	the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of the Form 144 with respect to such sale.

Sales under Rule 144, however, are subject to specific manner of sale provisions, notice requirements, and the availability of current public information about our company. We cannot estimate the number of shares of common stock our existing stockholders will sell under Rule 144, as this will depend on the market price for our common stock, the personal circumstances of the stockholders, and other factors.

Rule 144(k)

Under Rule 144(k), in general, a stockholder who has beneficially owned shares of our common stock for at least two years and who is not deemed to have been an affiliate of our company at any

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time during the immediately preceding 90 days may sell shares without complying with the manner of 98 sale provisions, notice requirements, public information requirements, or volume limitations of Rule 144. Affiliates of our company, however, must always sell pursuant to Rule 144, even after the otherwise applicable Rule 144(k) holding periods have been satisfied.

Rule 701

Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation, or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling such shares pursuant to Rule 701.

As of the date of this prospectus, no shares of our outstanding common stock had been issued in reliance on Rule 701 as a result of exercises of stock options.

Options

In addition to the shares of common stock outstanding, immediately after this offering, as of , there were outstanding options to purchase shares of our common stock. As soon as practicable after the closing of this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering shares of our common stock issued or reserved for issuance under our 2004 Incentive Compensation Plan. Accordingly, shares of our common stock registered under such registration statement will be available for sale in the open market upon exercise by the holders, subject to vesting restrictions with us, contractual lock-up restrictions, and/or market stand-off provisions applicable to each option agreement that prohibit the sale or other disposition of the shares of common stock underlying the options for a period of 180 days after the date of this prospectus without the prior written consent from us or our underwriters.

Registration Rights

At or prior to the closing of this offering, we will enter into a registration rights agreement with Ormat Industries. See "Certain Relationships and Related Transactions." We do not have any other contractual obligations to register our common stock.

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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following is a description of the material United States federal income tax consequences that may be relevant to Non-U.S. Holders, as defined below, with respect to the acquisition, ownership and disposition of our common stock. This description addresses only the United States federal income tax considerations of holders that are initial purchasers of our common stock pursuant to the offering and that will hold our common stock as capital assets. This description does not address tax considerations applicable to holders that are U.S. persons or that may be subject to special tax rules, including:


•	financial institutions or insurance companies;


•	real estate investment trusts, regulated investment companies or grantor trusts;


•	dealers or traders in securities or currencies;


•	tax-exempt entities;


•	persons that received our stock as compensation for the performance of services;


•	persons that will hold our stock as part of a "hedging" or "conversion" transaction or as a position in a "straddle" for United States federal income tax purposes;


•	persons that have a "functional currency" other than the U.S. dollar; or


•	holders that own or are deemed to own 10% or more, by voting power or value, of our stock.

Moreover, except as set forth below, this description does not address the United States federal estate and gift or alternative minimum tax consequences of the acquisition, ownership and disposition of our common stock.

This description is based on the Internal Revenue Code of 1986, as amended, which we refer to as the Code, existing, proposed and temporary United States Treasury Regulations and judicial and administrative interpretations thereof, in each case as in effect and available on the date hereof. All of the foregoing are subject to change, which change could apply retroactively and could affect the tax consequences described below.

For purposes of this description, a "Non-U.S. Holder" is a beneficial owner of our common stock that, for United States federal income tax purposes, is not:


•	a citizen or resident of the United States;


•	a partnership or corporation created or organized in or under the laws of the United States or any state thereof, including the District of Columbia;


•	an estate the income of which is subject to United States federal income taxation regardless of its source; or


•	a trust if such trust validly elects to be treated as a United States person for United States federal income tax purposes or if (1) a court within the United States is able to exercise primary supervision over its administration and (2) one or more United States persons have the authority to control all of the substantial decisions of such trust.

If a partnership (or any other entity treated as a partnership for United States federal income tax purposes) holds our common stock, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner should consult its tax advisor as to its tax consequences.

You should consult your own tax advisor with respect to the United States federal, state, local and foreign tax consequences of acquiring, owning and disposing of our common stock.

Distributions

Generally, but subject to the discussions below under "Status as United States Real Property Holding Corporation" and "Backup Withholding Tax and Information Reporting Requirements," if

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you are a Non-U.S. Holder, distributions of cash or property paid to you will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable United States income tax treaty. In order to obtain the benefit of any applicable United States income tax treaty, you will have to file certain forms (e.g., Form W-8BEN). Such forms generally would contain your name and address and a certification that you are eligible for the benefits of such treaty.

Except as may be otherwise provided in an applicable United States income tax treaty, if you are a Non-U.S. Holder and conduct a trade or business within the United States, you generally will be taxed at ordinary United States federal income tax rates (on a net income basis) on dividends that are effectively connected with the conduct of such trade or business and such dividends will not be subject to the withholding described above. If you are a foreign corporation, you may also be subject to a 30% "branch profits tax" unless you qualify for a lower rate under an applicable United States income tax treaty. To claim an exemption from withholding because the income is effectively connected with a United States trade or business, you must provide a properly executed Form W-8ECI (or such successor form as the Internal Revenue Service designates) prior to the payment of dividends.

Sale or Exchange of Our Common Stock

Generally, but subject to the discussions below under "Status as United States Real Property Holding Corporation" and "Backup Withholding Tax and Information Reporting Requirements," if you are a Non-U.S. Holder, you will not be subject to United States federal income or withholding tax on any gain realized on the sale or exchange of our common stock unless (1) such gain is effectively connected with your conduct of a trade or business in the United States or (2) if you are an individual, you are present in the United States for 183 days or more in the taxable year of such sale or exchange and certain other conditions are met.

Status as United States Real Property Holding Corporation

If you are a Non-U.S. Holder, under certain circumstances, gain recognized on the sale or exchange of, and certain distributions in excess of basis with respect to, our common stock would be subject to United States federal income tax, notwithstanding your lack of other connections with the United States, if we are or have been a "United States real property holding corporation" for United States federal income tax purposes at any time during the five-year period ending on the date of such sale or exchange (or distribution). We believe that we will not be classified as a United States real property holding corporation as of the date of this offering and do not expect to become a United States real property holding corporation.

Federal Estate Tax

Our common stock held by an individual at death, regardless of whether such individual is a citizen, resident or domiciliary of the United States, will be included in the individual's gross estate for United States federal estate tax purposes, subject to an applicable estate tax or other treaty, and therefore may be subject to United States federal estate tax.

Backup Withholding Tax and Information Reporting Requirements

United States backup withholding tax and information reporting requirements generally apply to certain payments to certain non-corporate holders of stock. The backup withholding tax rate is currently 28%.

If you are not a United States person, under current Treasury regulations, backup withholding will not apply to distributions on our common stock to you, provided that we have received valid certifications meeting the requirements of the Code and neither we nor the payor has actual knowledge or reason to know that you are a United States person for purposes of such backup withholding tax requirements.

If provided by a beneficial owner, the certification must give the name and address of such owner, state that such owner is not a United States person, or, in the case of an individual, that such person is

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neither a citizen or resident of the United States, and must be signed by the owner under penalties of perjury. If provided by a financial institution, other than a financial institution that is a qualified intermediary, the certification must state that the financial institution has received from the beneficial owner the certificate set forth in the preceding sentence, set forth the information contained in such certificate (and include a copy of such certificate), and be signed by an authorized representative of the financial institution under penalties of perjury. Generally, the furnishing of the names of the beneficial owners of our common stock that are not United States persons and a copy of such beneficial owner's certificate by a financial institution will not be required where the financial institution is a qualified intermediary.

In the case of such payments made within the United States to a foreign simple trust, a foreign grantor trust or a foreign partnership, other than payments to a foreign simple trust, a foreign grantor trust or a foreign partnership that qualifies as a "withholding foreign trust" or a "withholding foreign partnership" within the meaning of such United States Treasury Regulations and payments to a foreign simple trust, a foreign grantor trust or a foreign partnership that are effectively connected with the conduct of a trade or business in the United States, the beneficiaries of the foreign simple trust, the persons treated as the owners of the foreign grantor trust or the partners of the foreign partnership, as the case may be, will be required to provide the certification discussed above, and the trust or partnership, as the case may be, will need to provide an appropriate intermediary certification form, in order to establish an exemption from backup withholding tax and information reporting requirements. Moreover, a payor may rely on a certification provided by a payee that is not a United States person only if such payor does not have actual knowledge or a reason to know that any information or certification stated in such certificate is incorrect.

The above description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our common stock. You should consult your own tax advisor concerning the tax consequences of your particular situation.

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UNDERWRITING

Under the underwriting agreement, which is filed as an exhibit to the registration statement relating to this prospectus, Lehman Brothers Inc. and , as representatives of the underwriters listed below, have severally agreed to purchase from us, on a firm commitment basis, subject only to the conditions contained in the underwriting agreement, the number of shares of common stock shown opposite each of their names below:

The underwriting agreement provides that the underwriters' obligations to purchase our common stock depend on the satisfaction of the conditions contained in the underwriting agreement, which include:


•	if any shares of common stock are purchased by the underwriters, then all of the shares of common stock the underwriters agreed to purchase must be purchased;


•	the representations and warranties made by us to the underwriters are true;


•	there is no material change in the financial markets; and


•	we deliver customary closing documents to the underwriters.

Commissions and Expenses

The representatives have advised us that the underwriters propose to offer the common stock directly to the public at the public offering price presented on the cover page of this prospectus, and to selected dealers, that may include the underwriters, at the public offering price less a selling concession not in excess of $ per share. The underwriters may allow, and the selected dealers may re-allow, a concession not in excess of $ per share to brokers and dealers. After the offering, the underwriters may change the offering price and other selling terms.

The following table summarizes the underwriting discounts and commissions that we will pay. The underwriting discount is the difference between the offering price and the amount the underwriters pay to purchase the shares from us. These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase up to an additional shares. The underwriting discounts and commissions equal % of the public offering price.


	No Exercise	Full Exercise
Per share	$	$
Total

We estimate that the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately . We have agreed to pay such expenses.

Over-Allotment Option

We have granted to the underwriters an option to purchase up to an aggregate of additional shares of common stock, exercisable to cover over-allotments, if any, at the public offering price less the underwriting discounts and commissions shown on the cover page of this prospectus. The underwriters may exercise this option at any time, and from time to time, until 30 days after the date of the underwriting agreement. To the extent the underwriters exercise this option, each underwriter will be committed, so long as the conditions of the underwriting agreement are satisfied, to purchase a number of additional shares of common stock proportionate to that underwriter's initial commitment as indicated in the preceding table, and we will be obligated, under the over-allotment option, to sell the additional shares of common stock to the underwriters.

Lock-Up Agreements

Pursuant to lock-up agreements, we will agree not to, and each of our officers, directors and stockholders will agree not to, for period of 180 days from the date of this prospectus, directly or

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indirectly, (1) offer for sale, sell, pledge or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of common stock or securities convertible into or exchangeable for common stock (other than the stock and shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date hereof or pursuant to currently outstanding options, warrants or rights), or sell or grant options, rights or warrants with respect to any shares of common stock or securities convertible into or exchangeable for common stock (other than the grant of options pursuant to option plans existing on the date hereof), (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or other securities, in cash or otherwise, in each case without the prior written consent of Lehman Brothers Inc. on behalf of the underwriters. If (1) during the last 17 days of such 180-day period we issue an earnings release or material news or a material event relating to us occurs or (2) prior to the expiration of such 180-day period, we announce that we will release earnings results during the 17-day period beginning on the last day of such 180-day period, then such 180-day period shall continue to apply until the expiration of the 17-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

Offering Price Determination

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated between the representatives and us. In determining the initial public offering price of our common stock, the representatives will consider:


•	prevailing market conditions;


•	estimates of our business potential and earning prospects;


•	our historical performance and capital structure;


•	an overall assessment of our management; and


•	the consideration of these factors in relation to market valuation of companies in related businesses.

Indemnification

We have agreed to indemnify the underwriters against certain liabilities relating to the offering, including liabilities under the Securities Act, liabilities arising from breaches of the representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters may be required to make for these liabilities.

Discretionary Shares

The underwriters have informed us that they do not intend to confirm sales to discretionary accounts that exceed 5% of the total number of shares of our common stock offered by them.

Stabilization, Short Positions and Penalty Bids

The underwriters may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Exchange Act:

•

Over-allotment involves sales by the underwriters of shares of common stock in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a

137


	naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by either exercising their over-allotment option, in whole or in part, or purchasing shares in the open market.


•	Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

•

Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.


•	Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time.

Neither we, nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we, nor any of the underwriters make any representation that the underwriters will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Stamp Taxes

Purchasers of the shares of our common stock offered in this prospectus may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus. Accordingly, we urge you to consult a tax advisor with respect to whether you may be required to pay those taxes or charges, as well as any other tax consequences that may arise under the laws of the country of purchase.

Electronic Distribution

A prospectus in electronic format may be made available on Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations.

Other than the prospectus in electronic format, the information on any underwriter's or selling group member's web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

138

Relationships

The underwriters may in the future perform investment banking and advisory services for us from time to time for which they may in the future receive customary fees and expenses. The underwriters may, from time to time, engage in transactions with or perform services for us in the ordinary course of their business.

139

VALIDITY OF COMMON STOCK

The validity of the shares of common stock offered hereby will be passed upon for us by Chadbourne & Parke LLP, New York, New York, and for the underwriters by White & Case, New York, New York. Chadbourne & Parke LLP has from time to time represented Lehman Brothers, Inc. on unrelated matters. White & Case has from time to time represented one of our subsidiaries on unrelated matters.

140

EXPERT

Our financial statements as of December 31, 2002 and 2003 and for each of the three years in the period ended December 31, 2003 and those of Puna Geothermal Venture as of December 31, 2002 and 2003 and for the year ended December 31, 2002 and for the period from January 1, 2003 to December 10, 2003, and for the period from December 11, 2003 to December 31, 2003, Combined Heber and Affiliates as of December 31, 2002 and December 17, 2003, and for the years ended December 31, 2001 and 2002, and for the period from January 1, 2003 to December 17, 2003, and Mammoth-Pacific, L.P. as of December 31, 2002 and September 30, 2003 and for the year ended December 31, 2002 and the nine months ended September 30, 2003, included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. The report on Combined Heber and Affiliates contains an explanatory paragraph indicating that Heber and Affiliates filed a petition for reorganization under the provisions of Chapter 11 of the Bankruptcy Code on April 1, 2002 and emerged from bankruptcy on December 18, 2003.

141

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 (including the exhibits, schedules, and amendments to the registration statement) under the Securities Act with respect to the shares of common stock offered by this prospectus. This prospectus does not contain all the information set forth in the registration statement. For further information with respect to us and the shares of common stock to be sold in this offering, we refer you to the registration statement. Statements contained in this prospectus as to the contents of any contract, agreement or other document to which we make reference are not necessarily complete. In each instance, we refer you to the copy of such contract, agreement or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by the more complete description of the matter involved. Our World Wide Web site is located at http://www.ormat.com. Information contained on our company Web site is not a part of this prospectus.

Upon completion of this offering, we will become subject to the reporting and information requirements of the Securities Exchange Act of 1934, as amended, and, as a result, will file periodic and current reports, proxy statements, and other information with the SEC. You may read and copy this information at the Public Reference Room of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Copies of all or any part of the registration statement may be obtained from the SEC's offices upon payment of fees prescribed by the SEC. The SEC maintains an Internet site that contains periodic and current reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the SEC's website is http://www.sec.gov.

142

INDEX TO FINANCIAL STATEMENTS


Consolidated Financial Statements of Ormat Technologies, Inc. and Subsidiaries
Report of Independent Registered Public Accounting Firm					F-3
Consolidated Financial Statements as of December 31, 2002, and 2003 and for each of the three years in the period ended December 31, 2003, including Unaudited Consolidated Financial Statements as of March 31, 2004 and for the three-month periods ended March 31, 2003 and 2004:
Consolidated Balance Sheets					F-4
Consolidated Statements of Operations and Comprehensive Income (Loss)					F-5
Consolidated Statements of Stockholder's Equity					F-6
Consolidated Statements of Cash Flows					F-7
Notes to Consolidated Financial Statements					F-8
Financial Statements of Puna Geothermal Venture
Report of Independent Auditors					F-47
Financial Statements as of December 31, 2002 and 2003, and for the year ended December 31, 2002, for the period from January 1, 2003 to December 10, 2003 and for the period from December 11, 2003 to December 31, 2003, including Unaudited Financial Statements as of March 31, 2004 and for the three-month periods ended March 31, 2003 and 2004:
Balance Sheets					F-49
Statements of Operations					F-50
Statements of Partners' Equity					F-51
Statements of Cash Flows					F-52
Notes to Financial Statements					F-53
Combined Financial Statements of Heber and Affiliates
Report of Independent Auditors					F-61
Financial Statements as of December 31, 2002 and December 17, 2003, and for the years ended December 31, 2001 and 2002, and for the period from January 1, 2003 to December 17, 2003:
Balance Sheets					F-62
Statements of Operations					F-63
Statements of Partners' Capital					F-64
Statements of Cash Flows					F-65
Notes to Financial Statements					F-66
Financial Statements of Mammoth Pacific, L.P.
Report of Independent Auditors					F-75
Financial Statements as of December 31, 2002 and September 30, 2003, and for the year ended December 31, 2002, and for the nine-month period ended September 30, 2003, including Unaudited Financial Statements for the nine-month period ended September 30, 2002:
Balance Sheets					F-76
Statements of Operations					F-77
Statements of Partners' Capital					F-78
Statements of Cash Flows					F-79
Notes to Financial Statements					F-80

F-1

Ormat Technologies, Inc.
and Subsidiaries

Report on Audits of
Consolidated Financial Statements
As of December 31, 2002 and 2003, and for the years
ended December 31, 2001, 2002 and 2003 and
Unaudited Consolidated Financial Statements
As of March 31, 2004 and for three month periods
ended March 31, 2003 and 2004

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of
Ormat Technologies, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income (loss), of stockholder's equity and of cash flows present fairly, in all material respects, the financial position of Ormat Technologies, Inc. and its subsidiaries at December 31, 2002 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 11 to the financial statements, effective January 1, 2003, the Company adopted the provisions of Statement of Financial Accounting Standards No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets .

/s/ PricewaterhouseCoopers LLP

Sacramento, California
July 19, 2004

F-3

Ormat Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets (dollars in thousands, except per share amounts)


	December 31,
	2002			2003			March 31, 2004
							(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	36,684		$	8,873		$	28,901
Restricted cash and cash equivalents		8,010			16,371			50,645
Receivables:
Trade		20,713			28,689			25,721
Related entities		1,756			6,337			2,529
Other		2,658			729			1,433
Inventories, net		5,948			3,712			4,285
Costs and estimated earnings in excess of billings on uncompleted contracts		—			1,922			4,211
Prepaid expenses and other		1,853			2,091			2,446
Total current assets		77,622			68,724			120,171
Restricted cash and cash equivalents		—			—			25,800
Unconsolidated investments		8,363			46,760			52,210
Deposits and other		12,395			13,071			10,710
Property, plant and equipment, net		152,342			344,015			398,630
Construction-in-process		27,776			35,118			37,990
Deferred financing costs, net		1,624			7,843			16,388
Intangible assets, net		7,256			32,005			35,985
Total assets	$	287,378		$	547,536		$	697,884
Liabilities and Stockholder's Equity
Current liabilities:
Short-term debt	$	65,000		$	—		$	—
Accounts payable and accrued expenses		18,650			27,479			36,236
Billings in excess of costs and estimated earnings on uncompleted contracts		3,153			7,843			6,301
Current portion of long-term debt:
Limited and non-recourse		11,036			15,686			22,402
Full recourse		8,271			10,490			30,482
Senior secured notes (non-recourse)		—			—			511
Due to Parent		53,171			—			—
Total current liabilities		159,281			61,498			95,932
Long-term debt, net of current portion:
Limited and non-recourse		44,171			193,251			166,171
Full recourse		32,329			41,061			18,521
Senior secured notes (non-recourse)		—			—			189,489
Notes payable to Parent		—			177,004			150,504
Other liabilities		1,549			1,469			1,449
Deferred income taxes		11,951			13,886			14,903
Liabilities for severance pay		9,534			9,993			9,823
Asset retirement obligation		—			5,737			6,752
Total liabilities		258,815			503,899			653,544
Minority interest in net assets of subsidiaries		2,532			2,113			69
Commitments and contingencies (Notes 6, 11, 17 and 18)
Stockholder's equity:
Common stock, par value $0.001 per share; authorized 200,000,000 shares; issued and outstanding 30,769,230 shares		31			31			31
Additional paid-in capital		6,980			6,994			6,994
Unearned stock-based compensation		(111	)		(86	)		(76	)
Retained earnings		19,131			34,585			37,322
Total stockholder's equity		26,031			41,524			44,271
Total liabilities and stockholder's equity	$	287,378		$	547,536		$	697,884

The accompanying notes are an integral part of these financial statements.

F-4

Ormat Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations and Comperhensive Income (loss)
(dollars in thousands, except per share amounts)


	Year Ended December 31,									Three Months Ended March 31,
	2001			2002			2003			2003			2004
										(unaudited)
Revenues:
Electricity	$	33,956		$	65,491		$	77,752		$	17,604		$	33,459
Products		13,959			20,138			41,688			7,812			14,146
		47,915			85,629			119,440			25,416			47,605
Cost of revenues:
Electricity		12,536			33,482			46,726			10,148			19,390
Products		17,454			17,293			29,494			6,317			11,328
		29,990			50,775			76,220			16,465			30,718
Gross margin		17,925			34,854			43,220			8,951			16,887
Operating expenses:
Research and development expenses		1,729			1,503			1,391			439			302
Selling and marketing expenses		6,535			6,051			7,087			1,367			1,854
General and administrative expenses		5,444			7,073			9,252			2,057			2,332
Operating income		4,217			20,227			25,490			5,088			12,399
Other income (expense):
Interest income		1,441			1,319			542			109			244
Interest expense		(4,451	)		(6,889	)		(8,055	)		(1,720	)		(8,523	)
Foreign currency translation and transaction gain (loss)		305			(323	)		(316	)		(114	)		(321	)
Equity in income of investees		166			314			559			89			787
Other non-operating income		300			1,195			464			133			(24	)
Income from continuing operations before minority interest and income taxes		1,978			15,843			18,684			3,585			4,562
Minority interest in earnings of subsidiaries		645			1,194			519			201			108
Income from continuing operations before income taxes		1,333			14,649			18,165			3,384			4,454
Income tax provision		(3,065	)		(6,135	)		(2,506	)		(1,397	)		(1,717	)
Income (loss) from continuing operations		(1,732	)		8,514			15,659			1,987			2,737
Discontinued operations (Note 2):
Loss from operations of discontinued activities in Kazakhstan		(4,681	)		(3,114	)		—			—			—
Loss on sale of Kazakhstan operations		—			(6,444	)		—			—			—
Income (loss) before cumulative effect of change in accounting principle		(6,413	)		(1,044	)		15,659			1,987			2,737
Cumulative effect of change in accouting principle
(net of tax benefit of $125)		—			—			(205	)		(205	)		—
Net income (loss)		(6,413	)		(1,044	)		15,454			1,782			2,737
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(1,133	)		(51	)		—			—			—
Comprehensive income (loss)	$	(7,546	)	$	(1,095	)	$	15,454		$	1,782		$	2,737
Basic and diluted income (loss) per share:
Income (loss) from continuing operations	$	(0.06	)	$	0.28		$	0.51		$	0.06		$	0.09
Loss from discontinued operations		(0.15	)		(0.31	)		—			—			—
Cumulative effect of change in accounting principle		—			—			(0.01	)		(0.01	)		—
Net income (loss)	$	(0.21	)	$	(0.03	)	$	0.50		$	0.05		$	0.09
Weighted average number of shares outstanding		30,769,230			30,769,230			30,769,230			30,769,230			30,769,230

The accompanying notes are an integral part of these financial statements.

F-5

Ormat Technologies, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (dollars in thousands)


	Common Stock				Additional Paid-in Capital		Unearned Stock-based Compensation			Retained Earnings			Accumulated Other Comprehensive Loss			Total
	Shares		Amount		Additional Paid-in Capital		Unearned Stock-based Compensation			Retained Earnings			Accumulated Other Comprehensive Loss			Total
	(in thousands)
Balance, December 31, 2000		30,769	$	31	$	6,831	$	—		$	26,588		$	—		$	33,450
Foreign currency translation adjustments		—		—		—		—			—			(1,133	)		(1,133	)
Net loss		—		—		—		—			(6,413	)		—			(6,413	)
Balance, December 31, 2001		30,769		31		6,831		—			20,175			(1,133	)		25,904
Foreign currency translation adjustments		—		—		—		—			—			(51	)		(51	)
Reduction of accumulated foreign currency translation losses		—		—		—		—			—			1,184			1,184
Unearned stock-based compensation		—		—		149		(149	)		—			—			—
Amortization of unearned stock-based compensation		—		—		—		38			—			—			38
Net loss		—		—		—		—			(1,044	)		—			(1,044	)
Balance, December 31, 2002		30,769		31		6,980		(111	)		19,131			—			26,031
Unearned stock-based compensation		—		—		14		(14	)		—			—			—
Amortization of unearned stock-based compensation		—		—		—		39			—			—			39
Net income		—		—		—		—			15,454			—			15,454
Balance, December 31, 2003		30,769		31		6,994		(86	)		34,585			—			41,524
Amortization of unearned stock- based compensation (unaudited)		—		—		—		10			—			—			10
Net income (unaudited)		—		—		—		—			2,737			—			2,737
Balance, March 31, 2004 (Unaudited)		30,769	$	31	$	6,994	$	(76	)	$	37,322		$	—		$	44,271

The accompanying notes are an integral part of these financial statements.

F-6

Ormat Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (dollars in thousands)


	Year Ended December 31,									Three Months Ended March 31,
	2001			2002			2003			2003			2004
										(unaudited)
Cash flows from operating activities:
Net income (loss)	$	(6,413	)	$	(1,044	)	$	15,454		$	1,782		$	2,737
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		11,245			14,477			16,619			3,596			9,142
Minority interest in earnings of subsidiaries		645			1,194			519			201			108
Loss on sale of subsidiary		—			6,444			—			—			—
Equity in income of investee		(166	)		(314	)		(559	)		(89	)		(787	)
Provision for (recovery of) doubtful accounts		465			(256	)		(234	)		(6	)		(7	)
Deferred income tax provision		2,782			5,883			2,059			1,401			1,053
Cumulative effect of change in accounting principle		—			—			205			205			—
Changes in operating assets and liabilities, net of sale and acquisitions:
Receivables		629			(11,079	)		508			1,791			2,558
Costs and estimated earnings in excess of billings on uncompleted contracts		2,307			—			(1,922	)		—			(2,290	)
Inventories		(3,365	)		408			2,236			(1,457	)		(573	)
Prepaid expenses and other		(99	)		2,102			867			469			19
Deposits and other		1,659			(1,721	)		(639	)		2,138			1,959
Accounts payable and accrued expenses		899			(4,619	)		5,623			(1,210	)		5,910
Due from/to related entities, net		214			195			(150	)		(45	)		3,975
Billings in excess of costs and estimated earnings on uncompleted contracts		74			(581	)		4,691			—			(1,542	)
Liabilities for severance pay		516			456			511			153			160
Asset retirement obligation		—			—			231			—			74
Net cash provided by operating activities		11,392			11,545			46,019			8,929			22,496
Cash flows from investing activities:
Change in restricted cash and cash equivalents		254			(3,343	)		(2,403	)		(292	)		(64,218	)
Capital expenditures		(32,265	)		(22,710	)		(25,296	)		(6,024	)		(2,774	)
Decrease of cash resulting from deconsolidation of OLCL		—			—			—			—			(1,800	)
Increase in severance fund asset, net		(565	)		(448	)		(446	)		(112	)		(105	)
Repayment from joint ventures		651			1,674			794			245			218
Cash received from sale of subsidiary		—			3,966			—			—			—
Cash paid for acquisitions, net of cash received		(30,511	)		(39,660	)		(257,829	)		—			(82,767	)
Net cash used in investing activities		(62,436	)		(60,521	)		(285,180	)		(6,183	)		(151,446	)
Cash flows from financing activities:
Due to Parent, net		10,394			9,987			(6,937	)		(6,634	)		(26,951	)
Proceeds from issuance of notes payable to Parent		—			—			126,339			—			—
Distributions to minority shareholders		(890	)		(1,320	)		(940	)		(220	)		—
Proceeds from issuance of short-term debt		—			50,000			—			—			—
Proceeds from issuance of long-term debt		51,662			20,279			178,018			13,449			190,000
Payments of long-term debt		(6,698	)		(6,437	)		(23,336	)		(2,453	)		(5,133	)
Payments of short-term debt		—			—			(55,000	)		(20,000	)		—
Deferred debt issue costs		—			—			(6,794	)		—			(8,938	)
Net cash provided by (used in) financing activities		54,468			72,509			211,350			(15,858	)		148,978
Effect of foreign currency translation adjustments		(293	)		(51	)		—			—			—
Net increase (decrease) in cash and cash equivalents		3,131			23,482			(27,811	)		(13,112	)		20,028
Cash and cash equivalents, beginning of the period		10,071			13,202			36,684			36,684			8,873
Cash and cash equivalents, end of the period	$	13,202		$	36,684		$	8,873		$	23,572		$	28,901
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	4,248		$	5,055		$	4,937		$	1,050		$	837
Income taxes	$	297		$	453		$	—		$	—		$	—
Supplemental non-cash investing and financing activities:
Effect of adopting SFAS No. 143:
Asset retirement cost	$	—		$	—		$	2,475		$	—		$	—
Asset retirement obligation	$	—		$	—		$	2,805		$	—		$	—
Conversion of amounts due to Parent to notes payable to Parent	$	—		$	—		$	50,665		$	—		$	—
Accounts payable related to purchases of fixed assets	$	71		$	—		$	748		$	219		$	757
Net deferred tax liabilities resulting from the change in functional currency of the Company's Kazakhstan operations	$	839		$	—		$	—		$	—		$	—
Business acquisitions — See Note 2

The accompanying notes are an integral part of these financial statements.

F-7

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

1. Business and Significant Accounting Policies

Business

Ormat Technologies, Inc. ("Company"), a wholly owned subsidiary of Ormat Industries Ltd. ("Parent"), is engaged in the geothermal and recovered energy business, including supply of equipment that is manufactured by the Company and design and construction of such power plants for projects owned by the Company or for third parties. The Company owns and operates geothermal power plants in various countries, including Kenya, Nicaragua, the Philippines, Guatemala and the United States of America ("U.S."). The Company also owned coal fueled heating and electricity power plants and distribution facilities in the Republic of Kazakhstan ("Kazakhstan"), that were sold on September 16, 2002 (Note 2). The Company's equipment manufacturing operations are located in Israel.

Several of the Company's power plant facilities are listed as Qualifying Facilities (QF) under the Public Utility Regulatory Policies Act (PURPA). The related power purchase agreements for such facilities are dependent upon the Company maintaining the QF status.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, an 85% interest in OrYunnan Geothermal Co. Ltd. ("OrYunnan"), a 79% interest in Ormat Leyte Co, Ltd. ("OLCL"), a 50% interest in Karaganda Holding Company ("KHC") prior to March 12, 2002, and a 100% interest in KHC from March 12, 2002 to September 16, 2002. All intercompany accounts and transactions are eliminated.

In November 1999, the Company, through a wholly owned subsidiary, entered into an agreement with Yunnan Province Geothermal Development Co. ("YPGD") to form OrYunnan, a limited liability joint venture, whereby the Company is to contribute, for an 85% ownership interest, $2,550 and YPGD is to contribute, for the remaining 15% ownership interest, $450. Pursuant to such agreement, 15% of the capital contribution was made in April 2000, and the remaining portion is to be paid within 60 days after the date on which a power purchase agreement is executed. OrYunnan is currently in the process of negotiating a power purchase agreement. OrYunnan was formed for the purpose of utilizing, for electric power generation, all of the geothermal resources of Teng Chong County of the Yunnan Province in the Republic of China.

OLCL is a limited partnership established for the purpose of developing, financing, constructing, owning, operating, and maintaining geothermal power plants in Leyte Provina, the Philippines.

The Company's consolidated balance sheets include 100% of the assets and liabilities of OrYunnan and of OLCL prior to March 31, 2004. The unrelated entity's 15% interests in OrYunnan, and 21% interest in OLCL prior to March 31, 2004, have been reflected as "Minority interest in net assets of subsidiaries" in the Company's consolidated balance sheets and the earnings therefrom have been reflected on the consolidated statements of operations and comprehensive income for all periods presented and have been reflected in "Minority interest in earnings of subsidiaries". Intercompany accounts and transactions have been eliminated in the consolidation.

The Company accounts for its interests in partnerships and companies in which it has equal to or less than a 50% ownership interest under the equity method. Under the equity method, original investments are recorded at cost and adjusted by the Company's share of undistributed earnings or losses of such companies. The Company's earnings in investments accounted for under the equity method have been reflected as "Equity in income of investees" on the Company's consolidated statements of operations and comprehensive income.

Adoption of FIN No. 46R

In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB 51 ("FIN No. 46"), and amended

F-8

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

it by issuing FIN No. 46R in December 2003. Among other things, FIN No. 46R generally deferred the effective date of FIN No. 46 to the quarter ended March 31, 2004. The objectives of FIN No. 46R are to provide guidance on the identification of Variable Interest Entities ("VIEs") for which control is achieved through means other than ownership of a majority of the voting interest of the entity, and how to determine which company (if any), as the primary beneficiary, should consolidate the VIE. A variable interest in a VIE, by definition, is an asset, liability, equity, contractual arrangement or other economic interest that absorbs the entity's economic variability.

Effective as of March 31, 2004, the Company adopted FIN No. 46R. In connection with the adoption of FIN No. 46R, the Company concluded that OLCL, in which the Company has an 80% ownership interest, should be deconsolidated. OLCL's operating results continue to be accounted for using the consolidated method of accounting for the three month period ended March 31, 2004, and effective April 1, 2004, the Company's ownership interest in OLCL will be accounted for using the equity method of accounting. The Company's maximum exposure to loss as a result of its involvement with OLCL is estimated to be $4.9 million, which is the Company's net investment at March 31, 2004 (unaudited).

The Company also has variable interests in certain other consolidated wholly owned VIEs that will continue to be consolidated because the Company is the primary beneficiary. Further, the Company has concluded that the Company's remaining significant equity investments do not require consolidation as they are not VIEs.

Purchase of the power generation business from the Parent

As of July 1, 2004, a wholly owned subsidiary of the Company, Ormat Systems Ltd. ("OSL"), an Israeli company, acquired from the Parent for $11 million the power generation business which includes the manufacturing and sale of energy-related products pertaining mainly to the geothermal and recovered energy industry.

The Company considers this business to be synergistic with its ownership and operation of geothermal power plants as well as to the construction of the projects (on a turnkey basis). In addition to acquiring the tangible net assets of the power generation business, OSL has assumed the title and interest to certain related contracts and liabilities and rights under agreements with employees and consultants, and obtained a perpetual license of all intellectual property pertaining to the power generation business from the Parent. Further, in connection with binding work and product orders that the Parent had with its customers, which were transferred to OSL as part of the acquisition, OSL has agreed to pay the Parent a commission ranging from 2.5% to 5% of sales by OSL related to such work and product orders.

In connection with the acquisition, OSL and the Parent have entered into an agreement whereby OSL will provide to the Parent, for a monthly fee of $10, services including certain corporate administrative services, including the services of executive officers. In addition, OSL has agreed to provide the Parent with services of certain skilled engineers at OSL's cost plus 10%. Such agreements may be terminated by either party after the initial term through 2009.

Also in connection with the acquisitions, OSL entered into a rental agreement with the Parent for the use of office and manufacturing facilities in Yavne, Israel, for a monthly rent of $52, adjusted annually for the Israeli Consumer Price Index, plus tax and other costs to maintain the properties. The term of the rental agreement is for 59 months and expires in June 2009.

The Company has recorded the purchase of the power generation business at historical net book value, and has accounted for the purchase as a transfer of assets between entities under common control in a manner similar to the pooling of interests, accordingly, all prior period consolidated financial statements of the Company have been restated to include the results of operations, financial position, and cash flows of the power generation business.

F-9

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

Interim financial data

The interim financial data as of March 31, 2004, and for the three months ended March 31, 2003 and 2004, is unaudited, however, in the opinion of the Company, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for such interim periods. The interim amounts presented are not necessarily indicative of the results of operations of the Company for the year ending December 31, 2004.

Cash and cash equivalents

The Company considers all highly liquid instruments, with an original maturity of three months or less, to be cash equivalents.

Restricted cash and cash equivalents

Under the terms of certain long-term debt agreements, the Company is required to maintain certain debt service reserve, cash collateral and operating fund accounts that have been classified as restricted cash and cash equivalents. Funds that will be used to satisfy obligations due during the next twelve months are classified as current restricted cash and cash equivalents, with the remainder classified as non-current restricted cash and cash equivalents. Such amounts are invested primarily in money market accounts. The Company considers all highly liquid instruments, with an original maturity of three months or less, to be cash equivalents.

Concentration of credit risk

Financial instruments which potentially subject the Company to concentration of credit risk consist principally of temporary cash investments and accounts receivable.

The Company places its temporary cash investments with high credit quality financial institutions located in the U.S. and in foreign countries. At December 31, 2002 and 2003, and March 31, 2004 (unaudited), the Company had deposits in four, six and seven, respectively, U.S. financial institutions that were federally insured up to $100 per financial institution. At December 31, 2002 and 2003, and March 31, 2004 (unaudited), the Company's deposits in foreign countries of approximately $9,642, $9,927, and $10,382, respectively, were not insured.

At December 31, 2002 and 2003, and March 31, 2004 (unaudited), accounts receivable related to operations in foreign countries amounted to approximately $15,093, $13,029, and $10,198, respectively. The Company performs ongoing credit evaluations of its customers' financial condition. The Company requires the customer in Nicaragua to provide a cash security arrangement for its payment obligations. The Company has historically been able to collect on all of its receivable balances, and accordingly, no provision for doubtful accounts has been made.

As further described in Note 15, a substantial portion of the Company's revenues are earned from major power companies. Power sales from operations in foreign countries amounted to approximately 82%, 37%, 33%, 38% and 17% of total power sales during the years ended December 31, 2001, 2002, and 2003, and the three months ended March 31, 2003 and 2004 (unaudited), respectively. Five geothermal power customers accounted for 76%, 57%, 80%, and 53% of the Company's total revenues for the years ended December 31, 2002 and 2003, and the three months ended March 31, 2003 and 2004 (unaudited), respectively, and three geothermal power customers accounted for 63% of the Company's total revenues for the year ended December 31, 2001. These customers also accounted for 66%, 74% and 66% of the Company's accounts receivable as of December 31, 2002 and 2003, and March 31, 2004 (unaudited), respectively.

F-10

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

Inventories

Inventories consist primarily of raw material parts and sub assemblies for power units, and are stated at the lower of cost or market value, using the moving-average cost method, which approximates the first-in first-out method, and is stated net of provision for slow-moving and obsolescence, which was not significant.

Deposits and other

Deposits and other consist primarily of performance bonds for construction projects and a long-term insurance contract.

Property, plant and equipment

Property, plant and equipment are stated at cost. All costs associated with the acquisition, development and construction incurred as part of the construction of power plants operated by the Company are capitalized. Major improvements are capitalized and repairs and maintenance costs are expensed. Power plants operated by the Company are depreciated using the straight-line method over the term of the relevant power purchase agreement. The geothermal power plants in the Philippines and Nicaragua are to be fully depreciated over the period that the plants are owned by the Company. The other assets are depreciated using the straight-line method over their estimated useful lives of three to twenty years. The cost and accumulated depreciation of items sold or retired are removed from the accounts. Any resulting gain or loss is recognized currently and is recorded in operating income.

The Company capitalizes interest costs as part of constructing power plants. Such capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset's estimated useful life. Capitalized interest costs amounted to approximately $974, $201, and $297 for the years ended December 31, 2001, 2002 and 2003, respectively. No amounts were capitalized during the three months ended March 31, 2003 and 2004 (unaudited).

Intangible assets

Intangible assets consist of allocated acquisition cost of power purchase agreements, that are amortized over the 15 to 20-year terms of the agreements using the straight-line method.

Deferred financing costs

Deferred financing costs are amortized over the term of the related obligation using the effective interest method. Amortization of deferred financing costs are presented as interest expense in the statement of operations. Accumulated amortization related to deferred financing costs amounted to $0, $576 and $900 at December 31, 2002 and 2003 and March 31, 2004 (unaudited), respectively. Amortization expense for the years ended December 31, 2001, 2002 and 2003 and for the three months ended March 31, 2003 and 2004 (unaudited) amounted to $0, $0, $576, $142 and $324, respectively.

Impairment of long-lived assets and long-lived assets to be disposed of

F-11

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Management believes that no impairment exists for long-lived assets, however, future estimates as to the recoverability of such assets may change based on revised circumstances.

Derivative instruments

Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted by other related accounting literature, establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). SFAS No. 133 requires companies to record derivatives on their balance sheets as either assets or liabilities measured at their fair value unless exempted from derivative treatment as a normal purchase and sale. All changes in the fair value of derivatives are recognized currently in earnings unless specific hedge criteria are met, which requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

The Company maintains a risk management strategy that incorporates the use of interest rate swaps and interest rate caps to minimize significant fluctuation in cash flows and/or earnings that are caused by interest rate volatility. Gain or loss on contracts that initially qualify for cash flow hedge accounting is included as a component of other comprehensive income and are subsequently reclassified into earnings when interest on the related debt is paid. Gain or loss on contracts that are not designated to qualify as a cash flow hedge is included as a component of interest expense.

The Company is subject to the provisions of SFAS No. 133 Derivative Implementation Group ("DIG") Issue No. C15 (DIG Issue No. C15), Normal Purchases and Normal Sales Exception for Certain Option-Type Contracts and Forward Contracts in Electricity , which expands the requirements for the normal purchase and normal sales exception to include electricity contracts entered into by a utility company when certain criteria are met. Also under DIG Issue No. C15, contracts that have a price adjustment clause based on an index that is not directly related to the electricity generated, as defined in SFAS No. 133, do not meet the requirements for the normal purchases and normal sales exception. The Company has power sales agreements that qualify as derivative instruments under DIG Issue No. C15 because they have a price adjustment clause based on an index that does not directly relate to the sources of the power used to generate the electricity. The adoption of the provisions of DIG Issue No. C15 in 2002 did not have a material impact on the Company's consolidated financial position and results of operations.

In June 2003, the FASB issued DIG Issue No. C20, Scope Exceptions: Interpretation of the Meaning of Not Clearly and Closely Related in Paragraph 10(b) regarding Contracts with a Price Adjustment Feature . DIG Issue No. C20 superseded DIG Issue No. C11 Interpretation of Clearly and Closely Related in Contracts That Qualify for the Normal Purchases and Normal Sales Exception , and specified additional circumstances in which a price adjustment feature in a derivative contract would not be an impediment to qualifying for the normal purchases and normal sales scope exception under SFAS No. 133. DIG Issue No. C20 was effective as of the first day of the fiscal quarter beginning after July 10, 2003, (i.e. October 1, 2003, for the Company). In conjunction with initially applying the implementation guidance, DIG Issue No.C20 requires contracts that did not previously qualify for the normal purchases normal sales scope exception, and do qualify for the exception under DIG Issue No. C20, to freeze the fair value of the contract as of the date of the initial application, and amortized such fair value over the remaining contract period. Upon adoption of DIG Issue No. C20, the Company elected the normal purchase and normal sales scope exception under FAS No. 133 related to its power purchase agreements. Such adoption did not have a material impact on the Company's consolidated financial position and results of operations.

F-12

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

Foreign currency translation

The functional currency of all foreign entities is the reporting currency (U.S. dollars). For these entities, monetary assets and liabilities are translated at the current exchange rate, while non-monetary items are translated at historical rates. Income and expense items are translated at the average exchange rate for the year, except for depreciation, which is translated at historical rates. Translation adjustments and transaction gains or losses are included in results of operations.

The Company's functional currency of certain Kazakhstan activities was considered to be the local currency, accordingly all assets and liabilities were translated at the exchange rate as of the balance sheet date. Revenues, costs and expenses were translated at the weighted average exchange rate for the period. Translation adjustments were accumulated in a separate component of equity. Upon sale of the Kazakhstan business (Note 2), the accumulated foreign currency translation losses were eliminated.

Revenue and cost of revenues

Revenues are primarily related to (i) sale of electricity from geothermal power plants owned and operated by the Company; and (ii) geothermal and recovered energy power plant equipment engineering, sale, construction and installation and operating services.

Revenues related to the sale of electricity from geothermal power plants and capacity payments are recorded based upon output delivered and capacity provided at rates specified under relevant contract terms. Revenues from engineering, operating services, and parts and product sales are recorded upon providing the service or delivery of the products and parts. Revenue from the construction of geothermal and recovered energy power plant equipment on behalf of others is recognized on the percentage completion method. Revenue is based on the percentage relationship that incurred costs bear to total estimated costs. Costs include direct material, labor, and indirect costs. Selling, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

Warranty on products sold

The Company generally provides a one-year warranty against defects in workmanship and materials related to the sale of products for electricity generation. A provision for warranty reserve is recorded currently for the estimated costs that may be incurred under its warranty. Such reserve is estimated based on past experience, which have historically been immaterial.

Research and development

Research and development costs incurred by OSL, a wholly owned Israeli subsidiary, for the development of existing and new geothermal, recovered energy, and remote power technologies, are expensed as incurred. Grants received from the Office of the Chief Scientist ("OCS") of the Israeli Government are offset against the related research and development expenses. Such grants amounted to $1,030, $531 and $142 during the years ended December 31, 2001, 2002, and 2003, respectively. No grants were received during the three months ended March 31, 2003 and 2004 (unaudited). During 2003, OSL discontinued requesting any further grants from OCS.

Advertising expense

Advertising costs are expensed as incurred and totaled $118, $72, $58, $11, and $25 for the years ended December 31, 2001, 2002, and 2003, and the three months ended March 31, 2003 and 2004 (unaudited), respectively.

F-13

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

Income taxes

Income taxes are accounted for using an asset and liability approach, which requires the recognition of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in the Company's financial statements or tax returns. The measurement of current and deferred tax assets and liabilities are based on provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated. The Company accounts for investment tax credits as a reduction to income taxes in the year in which the credit arises. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

Income (loss) per share

Basic income (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. The Company does not have any equity instruments that are dilutive. The stock options granted to employees of the Company in the Parent's stock are not dilutive to the Company's earnings per share.

Stock-Based compensation

The Company accounts for stock-based compensation based on the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation , and other related interpretations which states that no compensation expense is recorded for stock options or other stock-based awards to employees that are granted with an exercise price equal to or above the estimated fair value per share of common stock on the grant date. In the event that stock options are granted at a price lower than the fair market value at that date, the difference between the fair market value of the common stock and the exercise price of the stock options is recorded as unearned compensation. Unearned compensation is amortized to compensation expense over the vesting period applicable to the stock option. The Company has adopted the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123"), as it relates to stock options granted to employees, which requires proforma net income be disclosed based on the fair value of the options granted at the date of the grant.

The Company calculated the fair value of each option on the date of grant using the Black-Scholes option pricing model using the following assumptions. There were no options granted during the three months ended March 31, 2004 (unaudited):


	Year Ended December 31,
	2001			2002			2003
Risk-free interest rates		4.8	%		4.7	%		4.7	%
Expected lives (in years)		5			5			5
Dividend yield		0	%		0	%		0	%
Expected volatility		44	%		37	%		31	%

F-14

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

Had compensation cost for the options granted to employees of the Company been determined based on the fair value method prescribed by SFAS No. 123, the Company's proforma net income (loss) and earnings (loss) per share would have been as follows:


	Year Ended December 31,									Three Months Ended March 31,
	2001			2002			2003			2003		2004
										(unaudited)
Net income (loss):
As reported	$	(6,413	)	$	(1,044	)	$	15,454		$	1,782	$	2,737
Add: Total stock-based employee compensation expense included in reported net income, net of tax		—			24			24			—		6
Deduct: Total stock-based employee compensation expense determined under fair value based method, net of tax		—			(94	)		(175	)		—		—
Pro forma net income (loss)	$	(6,413	)	$	(1,114	)	$	15,303		$	1,782	$	2,743
Basic and diluted net income (loss) per share:
As reported	$	(0.21	)	$	(0.03	)	$	0.50		$	0.05	$	0.09
Pro forma	$	(0.21	)	$	(0.03	)	$	0.50		$	0.05	$	0.09

Fair value of financial instruments

The carrying amount of cash and cash equivalents approximates fair value because of the short maturity of those instruments. The fair value of long-term debt is estimated based on the current borrowing rates for similar issues, which approximates carrying amount.

Accounting estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of such financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

New accounting pronouncements

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities . SFAS No. 149 amends and clarifies the accounting and reporting for derivative instruments, including certain derivatives embedded in other contracts, and hedging activities under SFAS No. 133. The amendments in SFAS No. 149 require that contracts with comparable characteristics be accounted for similarly. SFAS No. 149 clarifies the circumstances under which a contract with an initial net investment meets the characteristics of a derivative according to SFAS No. 133 and clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. The requirements of SFAS No. 149 are effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The Company adopted the provisions of SFAS No. 149 effective July 1, 2003, which did not have a material impact on its consolidated results of operations and financial position as of December 31, 2003.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity . SFAS No. 150 establishes standards for how an issuer

F-15

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability because that financial instrument embodies an obligation of the issuer. The requirements of SFAS No. 150 are effective for financial instruments entered into or modified after May 31, 2003, effective the first interim period beginning after June 15, 2003. For financial instruments created prior to the issuance date of SFAS No. 150, transition shall be achieved by reporting the cumulative effect of a change in accounting principle. The Company adopted the provisions of SFAS No. 150 effective July 1, 2003, which did not have a material impact on its consolidated results of operations and financial position as of December 31, 2003.

In May 2003, the Emerging Issues Task Force ("EITF") reached consensus in EITF Issue No. 01-08, Determining Whether an Arrangement Contains a Lease , to clarify the requirements of identifying whether an arrangement should be accounted for as a lease at its inception. The guidance in the consensus is designed to broaden the scope of arrangements, such as power purchase agreements, accounted for as leases. EITF Issue No. 01-08 requires both parties to an arrangement to determine whether a service contract or similar arrangement is, or includes, a lease within the scope of SFAS No. 13, Accounting for Leases . The consensus is being applied prospectively to arrangements agreed to, modified, or acquired in business combination on or after July 1, 2003. The adoption of EITF No. 01-08 did not have a material effect to the Company's financial position or results of operations.

2. Business Acquisitions and Sale

Karaganda Holding Company ("KHC")

KHC was established for the purpose of generating power and selling and distributing electricity and heating power in Kazakhstan. Prior to March 12, 2002, the Company had a 50% ownership interest in KHC. Effective March 12, 2002, the Company purchased the remaining 50% interest in KHC for $500. Such transaction was accounted for using the purchase method, and the allocation of the $500 purchase price was as follows:


Cash and cash equivalents	$	2,541
Accounts receivable assumed		6,988
Property, plant and equipment		9,089
Other assets assumed		3,056
Accounts payable and accrued liabilities assumed		(9,747	)
Long-term debt assumed		(10,632	)
Deferred tax liabilities assumed		(795	)
Total purchase price allocation	$	500

On September 16, 2002, the Company sold all of its ownership interest in KHC to a third party for approximately $4.1 million, less $184 of costs related to the sale. The Company recognized a loss on the sale of this subsidiary equal to approximately $6.4 million during 2002, in addition to the operational losses incurred prior to such sale. The net assets of KHC on the date of the sale were as follows:

F-16

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)


Accounts receivable	$	12,718
Inventory, prepaid expenses and other		5,035
Property, plant and equipment		27,061
Accounts payable and accrued liabilities		(13,966	)
Long-term debt		(19,988	)
Deferred tax liabilities		(1,634	)
Accumulated foreign currency translation adjustments		1,184
Net assets	$	10,410

The sale of KHC resulted in the Company discontinuing its operating activities in Kazakhstan. The net results of operations of the discontinued activities in Kazakhstan prior to September 16, 2002 are shown in the statement of operations as "Loss from discontinued activities in Kazakhstan" for the year ended December 31, 2001 and 2002.

The Ormesa Project

In April 2002, the Company acquired 100% of the equity interests in the combined 52-megawatt ("MW") generating capacity of the Ormesa Project, located in Imperial Valley, Southern California, to expand its geothermal power plant operations. The Ormesa Project consists of six power plants and was owned by several unrelated companies. The Company acquired 100% interests in four of the entities and acquired the assets of a fifth entity. These entities and assets were merged into Ormesa, LLC ("Ormesa") in 2002. The Company paid approximately $41.7 million for the ownership of the Ormesa Project, of which approximately $35.7 million and $6 million has been allocated to property, plant and equipment and intangible assets, respectively. The acquisition was accounted for as a purchase and the acquired assets are being depreciated over their estimated useful lives of five to fifteen years.

The Steamboat Projects

On June 30, 2003, the Company acquired from two groups of unrelated sellers, a 100% interest in Steamboat Geothermal LLC ("SG"), which owns geothermal power plants ("Steamboat 1/1A") in Nevada. The purchase price of $1,215 was paid in cash, of which, $2,138 has been recorded as property, plant and equipment, less assumption of liabilities of $923. The acquisition has been accounted for as a purchase and the acquired assets are being depreciated over their estimated useful lives of three to fifteen years.

On February 11, 2004, the Company acquired 100% of the outstanding shares of capital stock of Steamboat Development Corp. ("SDC"), and certain real property ("Meyberg Property") from an unrelated party. SDC owned certain leasehold interests as a lessee in the two Steamboat 2/3 geothermal power plants and certain related geothermal leases. On February 13, 2004, the Company acquired all of the beneficial rights, title, and interest in the Steamboat 2/3 geothermal power plants from the lessor. The Company acquired SDC and the Meyberg Property to increase its geothermal power plant operations in the United States. The Company acquired the lessee and lessor positions of the Steamboat 2/3 geothermal power plants for a combined purchase price of approximately $82 million, plus transaction cost of approximately $0.8 million. The results of SDC's operations have been included in the consolidated financial statements since February 11, 2004.

The acquisition of the Steamboat 2/3 power plants and the Meyberg Property have been accounted for under the purchase method of accounting and the depreciable acquired assets and intangibles, are being depreciated over their estimated useful lives of approximately 19 years. The purchase price of the lessee and lessor position has been allocated based on independent valuation and management's estimates as follows (unaudited):

F-17

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)


Current assets	$	1,944
Property, plant and equipment		78,719
Intangibles (power purchase agreement)		4,499
Accounts payable and other liabilities assumed		(2,395	)
Net assets acquired	$	82,767

The Heber and Mammoth Projects

On December 18, 2003, the Company purchased certain geothermal assets from Covanta Energy Corporation ("CEC"), an unrelated entity for a total purchase price of $215 million, plus transaction costs of approximately $3.2 million. As further discussed in Note 10, the Company entered into a loan agreement and borrowed $154.5 million from Beal Bank, all of which is collateralized by the acquired assets described below, except for the assets related to the Company's 50% ownership interest in Mammoth-Pacific, L.P. ("Mammoth").

The assets purchased include (i) a 100% ownership in Heber Geothermal Company, which owns a 38 MW geothermal power plant ("Heber 1") located near Heber, California, (ii) a 100% ownership in Second Imperial Geothermal Company ("SIGC"), that has rights to the lessee position of a 38 MW geothermal power plant ("Heber 2"), adjacent to the Heber 1 plant, (iii) a 100% ownership in Heber Field Company, that has the rights to the geothermal resources used by Heber 1 and Heber 2, and (iv) 50% ownership interest in Mammoth, that owns and operates three geothermal plants, with a combined generating capacity of 26 MW located near the city of Mammoth, California.

In addition, the Company acquired all of the beneficial rights, title and interest in the Heber 2 geothermal power plant from the lessor for a purchase price of approximately $38.5 million.

The SG and Heber and Mammoth projects asset acquisitions have been accounted for under the purchase method of accounting and the acquired assets and intangibles are being depreciated over their estimated useful lives of three to 20 years. The purchase price has been allocated based on independent valuation and management's estimates as follows:


	SG			Heber and Mammoth Projects			Total
Cash and cash equivalents	$	—		$	195		$	195
Restricted cash		—			5,959			5,959
Accounts receivable assumed		—			7,155			7,155
Property, plant and equipment		2,138			184,585			186,723
Intangibles (power purchase agreement)		—			25,273			25,273
Investment in Mammoth		—			38,632			38,632
Other assets assumed		—			270			270
Accounts payable and other liabilities assumed		(923	)		(2,559	)		(3,482	)
Asset retirement obligation		—			(2,701	)		(2,701	)
Total purchase price allocation	$	1,215		$	256,809		$	258,024

The following unaudited pro forma financial information for the years ended December 31, 2002 and 2003, assumes the Heber and Mammoth projects acquisition occurred as of the beginning of the respective periods, after giving effect to certain adjustments, including the amortization of intangible assets, interest expense on acquisition debt, depreciation based on the adjustments to the fair market value of the property, plant and equipment acquired, and related income tax effects. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the

F-18

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

results of operations that may occur in the future or that would have occurred had the acquisition of the Heber and Mammoth projects been affected on the dates indicated.


	Year Ended December 31,
	2002		2003
	(unaudited)
Revenues	$	150,707	$	185,571
Income before cumulative effect of accounting change		10,684		42,246
Net income		10,684		40,381
Basic and diluted income per share	$	0.35	$	1.31

3. Cost and Estimated Earnings on Uncompleted Contracts


	December 31,						March 31,
	2002			2003			2004
							(unaudited)
Costs and estimated earnings incurred on uncompleted contracts	$	7,622		$	12,493		$	24,454
Less billings to date		(10,775	)		(18,414	)		(26,544	)
Total	$	(3,153	)	$	(5,921	)	$	(2,090	)

These amounts are included in the accompanying balance sheets under the following captions:


	December 31,						March 31,
	2002			2003			2004
							(unaudited)
Costs and estimated earnings in excess of billings on uncompleted contracts	$	—		$	1,922		$	4,211
Billings in excess of costs and estimated earnings on uncompleted contracts		(3,153	)		(7,843	)		(6,301	)
Total	$	(3,153	)	$	(5,921	)	$	(2,090	)

The completion costs of the Company's construction contracts are subject to estimation. Due to uncertainties inherent in the estimation process, it is reasonably possible that estimated contract earnings will be further revised in the near term.

4. Inventories

Inventories consist of the following:


	December 31,				March 31,
	2002		2003		2004
					(unaudited)

Raw materials and purchased parts for assembly	$	3,090	$	2,181	$	3,550
Self-manufactured assembly parts and finished products		2,858		1,531		735
Total	$	5,948	$	3,712	$	4,285

F-19

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

5. Unconsolidated Investments

Unconsolidated investments in power plant projects consist of the following:


	December 31,				March 31,
	2002		2003		2004
					(unaudited)
Orzunil:
Investment	$	2,303	$	2,722	$	2,881
Advances		6,060		5,266		5,048
		8,363		7,988		7,929
Mammoth		—		38,772		39,400
OLCL		—		—		4,881
Total	$	8,363	$	46,760	$	52,210

The Zunil Project

The Company has a 21% ownership interest in Orzunil I de Electricidad, Limitada ("Orzunil"), a limited responsibility company incorporated in Guatemala and established for the purpose of the generation and co-generation of power from a geothermal power plant in the Province of Quetzaltenango in Guatemala. The Company operates and maintains the geothermal power plant and the power purchaser supplies geothermal fluid to the power plant. The Company's 21% ownership interest in Orzunil is accounted for under the equity method of accounting as the Company has the ability to exercise significant influence, but not control, over Orzunil.

Notes receivable for cash advances to Orzunil consist of the following:


	December 31,				March 31, 2004		Interest Rate	Maturity Date
	2002		2003		March 31, 2004		Interest Rate	Maturity Date
					(unaudited)
Subordinated	$	4,499	$	4,207	$	4,122	Libor +4%	11/15/2011
Junior subordinated		1,561		1,059		926	0%	see below
	$	6,060	$	5,266	$	5,048

All available cash after the debt service under the Subordinated Loan is used to repay the Junior Subordinated Loan. Interest income received from these loans amounted to approximately $546, $296, $270, and $56 during the years ended December 31, 2001, 2002 and 2003, and the three months ended March 31, 2004 (unaudited), respectively.

The Company's equity in income of Orzunil was not significant for each of the periods presented in the accompanying financial statements.

The Mammoth Project

As discussed in Note 2, on December 18, 2003, the Company acquired a 50% interest in the Mammoth Project, which is comprised of three geothermal power plants. The purchase price was less than the underlying net equity of Mammoth by approximately $9.5 million. As such, the basis difference will be amortized over the remaining useful life of the property, plant and equipment and the power purchase agreements, which range from 12 to 17 years. Effective December 18, 2003, the Company operates and maintains the geothermal power plants under an O&M agreement. The Company's 50% ownership interest in Mammoth is accounted for under the equity method of accounting as the Company has the ability to exercise significant influence, but not control, over Mammoth.

F-20

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

The condensed financial position and results of operations of Mammoth are summarized below:


	December 31, 2003		March 31, 2004
			(unaudited)
Condensed balance sheets:
Current assets	$	11,182	$	13,191
Non-current assets		88,918		87,652
Current liabilities		608		369
Non-current liabilities		3,680		3,704
Stockholders' equity		95,812		96,770


	Period from December 18, 2003 to December 31, 2003		Three Months Ended March 31, 2004
			(unaudited)
Condensed statements of operations:
Net sales	$	672	$	3,892
Gross margin		252		1,013
Net income		246		958

Company's equity in income of Mammoth:
50% of Mammoth net income	$	123	$	479
Plus amortization of the equity		18		148
	$	141	$	627

The Leyte Project

The Company holds an 80% interest in OLCL (which owns the Leyte Project), however, as further discussed in Note 1, upon the adoption of FIN No. 46R, the balance sheet of OLCL was deconsolidated as of March 31, 2004, and the income and cash flow statements will be deconsolidated effective April 1, 2004.

The condensed financial position of OLCL at March 31, 2004, is summarized below (unaudited):


Condensed balance sheets:
Current assets	$	7,528
Non-current assets		21,509
Current liabilities		5,754
Non-current liabilities		12,699
Stockholders' equity		10,584

OLCL's operating results for all periods prior to March 31, 2004 have been accounted for on the consolidated method of accounting, and effective April 1, 2004, the Company's ownership interest in OLCL will be accounted for using the equity method of accounting.

F-21

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

6. Property, plant and equipment

Property, plant and equipment, net, consists of the following :


	December 31,						March 31, 2004
	2002			2003			March 31, 2004
							(unaudited)
Land	$	399		$	1,090		$	9,465
Leasehold improvements		993			907			915
Machinery and equipment		9,630			10,672			10,802
Office equipment		2,151			2,218			2,288
Automobiles		1,003			1,221			1,238
Geothermal power plants, including geothermal wells:
United States of America		71,094			269,108			340,429
Foreign countries		111,212			113,177			64,037
Asset retirement cost		—			5,316			6,257
		196,482			403,709			435,431
Less accumulated depreciation		(44,140	)		(59,694	)		(36,801	)
	$	152,342		$	344,015		$	398,630

U.S. operations:

The net book value of the property, plant and equipment, including construction in progress, located in the United States is approximately $67,640, $274,465 and $387,820, as of December 31, 2002 and 2003, and March 31, 2004 (unaudited), respectively.

Foreign operations:

In 1996, OLCL entered into a Build, Operate, and Transfer ("BOT") agreement with PNOC-Energy Development Corporation (PNOC) in connection with the geothermal power plants located in Leyte, Philippines. The BOT agreement calls for the Company to design, construct, own, and operate geothermal electricity generating plants, utilizing the geothermal resources of the Leyte Geothermal Power Optimization Project Area. During 1997, the power plants started commercial operations and began selling power to PNOC under a 10 year power purchase agreement (tolling arrangement). The Company owns the plants for a ten-year period ending September 2007, at which time they will be transferred to PNOC for no further consideration. As such, the Company's cost is being depreciated over the 10 year period. The net book value of the assets related to the geothermal power plants located in the Philippines amounted to approximately $22,078 and $17,433, at December 31, 2002 and 2003. As further discussed in Note 1, the Company deconsolidated the balance sheet of OLCL as of March 31, 2004.

During 1998, the Company entered into a power purchase agreement with Kenya Power and Lighting Company Limited ("KPLC"). Under the agreement, the Company will design, construct and operate geothermal power plants in Kenya in several phases. Upon the completion of construction of each phase, KPLC is committed to purchase the electricity generated by the power plants for a minimum of 20 years under the terms of the power purchase agreement. The first phase has been completed and the net book value of the assets related to the generation power plant and the related wells amounted to approximately $33,269, $32,722 and $32,320 at December 31, 2002 and 2003, and March 31, 2004 (unaudited), respectively. The Company is currently in discussions with the Kenyan government and KPLC regarding, among other things, the construction of Phase II of the Olkaria III project in Kenya and the provision of certain collateral and government support. The Company must notify KPLC, by

F-22

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

April 17, 2005, whether the Company will proceed to construct Phase II of the Olkaria III project and, if the company notifies KPLC that the Company will not proceed with such construction, then the portion of the current power purchase agreement applicable to Phase II of the Olkaria III project will be terminated (but the current portion applicable to Phase I will be unaffected). If the Company fails to provide such notification the Company will be required to construct Phase II and reach commercial operations by May 31, 2007 in order to avoid the application of financial penalties, or at the latest by April 17, 2008 in order to avoid termination of the entire power purchase agreement. As of December 31, 2002 and 2003, and March 31, 2004 (unaudited), the Company had incurred approximately $22,913, $22,189 and $22,198, respectively, (included in construction-in-process) in connection with construction of Phase II of the power plant, which is required to be completed no later than 2007. Management believes that the discussions will be successful and the project will be completed in the required timeframe.

In June 1999, the Company entered into an agreement with Nicaraguan Electricity Company ("NEC") a Nicaraguan power utility, whereby the Company will rehabilitate existing wells, drill new wells, and operate the geothermal facilities. The Company owns the plants for a fifteen-year period ending in 2014, at which time they will be transferred to NEC at no cost. The Company sells the power from the facilities to two power companies who are assignees of NEC at the agreed upon price and terms of the "take or pay" power purchase agreement. The net book value of the assets related to the constructed plant and wells and rehabilitated existing wells amounted to approximately $27,567, $26,087 and $25,435 at December 31, 2002 and 2003, and March 31, 2004 (unaudited), respectively. Additionally, as of December 31, 2002 and 2003, and March 31, 2004 (unaudited), the Company has incurred approximately $1,506, $1,103 and $1,153, respectively, (included in construction-in-process) to drill an additional well.

The Company is engaged in the construction of several geothermal power plants in other foreign countries. At December 31, 2002 and 2003, and March 31, 2004 (unaudited), such projects were in the early stages of construction and the related costs totaling approximately $2,260, $3,588 and $4,443, respectively, have been included as construction-in-process.

7. Intangible assets

Intangible assets consist of power purchase agreements amounting to $7,256, $32,005 and $35,985, net of accumulated amortization of $402, $926 and $1,446 as of December 31, 2002, 2003 and March 31, 2004 (unaudited), respectively. Amortization expense for the years ended December 31, 2001, 2002 and 2003, and for the three months ended March 31, 2003 and 2004 (unaudited) amount to $40, $362, $524, $120, and $520, respectively.

Estimated future amortization expense for the intangible assets as of December 31, 2003 is as follows:


Year ending December 31:
2004	$	1,743
2005		1,743
2006		1,743
2007		1,743
2008		1,743
Thereafter		23,290
Total	$	32,005

F-23

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

8. Accounts payable and accrued expenses

Accounts payable and accrued expenses consist of the following:


	December 31,				March 31, 2004
	2002		2003		March 31, 2004
					(unaudited)
Trade payables	$	9,455	$	11,528	$	19,824
Scheduling and transmission charges		890		3,684		2,602
Royalties		406		2,570		858
Salaries and other payroll costs		3,216		3,854		4,123
Debt issue costs		—		1,313		—
Accrued interest		1,460		631		5,533
VAT payable		349		306		308
Other		2,874		3,593		2,988
Total	$	18,650	$	27,479	$	36,236

9. Short-term debt

Line of credit

In July 2002, the Company consolidated an existing line of credit into a new line of credit for $55,000, all of which was outstanding as of December 31, 2002. During 2003, the line of credit was repaid in full and expired on June 30, 2004.

Bridge loan

During 2002, the Company entered into a $40,000 bridge loan agreement ("Bridge Loan") with an unrelated party, of which $10,000 was outstanding at December 31, 2002. During 2003, the Bridge Loan was amended and reclassified to long-term debt (Note 10).

F-24

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

10. Long-term debt

Long-term debt consists of notes payable under the following agreements:


	December 31,						March 31,
	2002			2003			2004
							(unaudited)
Limited and non-recourse agreements:
Non-recourse agreements:
Eximbank Credit Agreement (Term loan)	$	24,129		$	19,049		$	—
Ormesa loan		20,000			15,473			14,879
Beal bank credit agreement		—			154,500			154,500
Limited recourse agreements:
Credit facility agreement		11,078			19,915			19,194
		55,207			208,937			188,573
Less current portion		(11,036	)		(15,686	)		(22,402	)
	$	44,171		$	193,251		$	166,171

Full recourse agreements with banks:
Loan one	$	6,000		$	5,000		$	5,000
Loan two		5,600			4,900			4,550
Loan three		10,000			6,667			5,833
Loan four		9,500			8,143			6,786
Loan five		9,500			6,786			6,786
Bridge loan		—			20,000			20,000
Other		—			55			48
		40,600			51,551			49,003
Less current portion		(8,271	)		(10,490	)		(30,482	)
	$	32,329		$	41,061		$	18,521
Senior secured notes (non recourse)	$	—		$	—		$	190,000
Less current portion		—			—			(511	)
	$	—		$	—		$	189,489

Eximbank Credit Agreement (Term Loan)

In connection with the construction of four geothermal power generation plants, with a total capacity of 49MW in Leyte, Philippines, the Company obtained a term loan ("Term Loan") amounting to approximately $44.5 million from the Export-Import Bank of the government of the United States ("Eximbank"). Principal is payable in equal quarterly installments through July 2007. Interest on the Term Loan is at a fixed rate of 6.54% and is payable quarterly. The Term Loan is collateralized by mortgage on all real property, assignment of revenues, and pledge of partnership interest in OLCL. There are various covenants under the Term Loan, which include maintaining minimum levels of equity ratio, as defined, and limitations on additional indebtedness and payment of dividends.

Ormesa Loan

On December 31, 2002, a wholly owned subsidiary of the Company ("Ormesa LLC"), that owns and operates the Ormesa Complex, entered into a credit facility agreement ("Ormesa Loan") amounting to $20 million with a bank. Principal payments are payable in 20 varying quarterly payments that

F-25

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

commenced in March 2003. As further discussed below, in connection with the Company's issuance of 8¼% senior secured notes, the Company has committed under the terms of the notes to repay in full the Ormesa Loan no later than January 31, 2005. Interest is computed at LIBOR (2.1% at December 31, 2003, and 1.96% at March 31, 2004 – unaudited) plus 5%, and is also payable quarterly. The Ormesa Loan is collateralized by all of the assets of Ormesa LLC and the Company's ownership interest in Ormesa LLC. There are various restrictive covenants under the Ormesa Loan, which include limitations on additional indebtedness and payments of dividends.

As required by the Ormesa Loan agreement, the Company entered into an interest rate cap agreement ("Cap Agreement") with another bank. This agreement allows the Company to receive limited reimbursement, as defined in the Cap Agreement, for interest payments the Company will pay to the bank under the Ormesa Loan if the LIBOR rate should increase to more than 6%.

Beal Bank Credit Agreement

In December 2003, in connection with the acquisition of the CEC geothermal power plant assets (Note 2), OrCal Geothermal, Inc. ("OrCal"), a wholly owned subsidiary of the Company, entered into a loan agreement with Beal Bank ("Beal Bank Credit Agreement") amounting to $154.5 million. Principal payments range from 0.25% to 3.5% of the outstanding balance and are payable quarterly, commencing in June 2004 and continuing through December 2019. Interest payments on the unpaid principal balance commenced in March 2004, and are payable quarterly at a variable rate determined on each anniversary date of the loan as the greater of 7.125% or LIBOR plus 5.125%. The applicable interest rate will increase by 0.5% starting in December 2011.

The Beal Bank Credit Agreement is collateralized by substantially all of the assets of OrCal and certain OrCal subsidiaries ("OrCal Subsidiaries"). Performance under the Beal Bank Credit Agreement is guaranteed by OrCal and its subsidiaries. Funds held in debt service reserve accounts established under a depository agreement are pledged for the benefit of Beal Bank and have been included in restricted cash in the accompanying balance sheet.

There are various restrictive covenants under the Beal Bank Credit Agreement, which include limitations on indebtedness, transactions with related parties and payments of dividends. Beal Bank maintains the right, through December 31, 2004, to refinance up to $100 million of the Beal Bank Credit Agreement as senior secured notes under the 1933 Securities Act, at terms consistent with the terms of the Beal Bank Credit Agreement. Should Beal Bank exercise its right, OrCal would be required to provide necessary information in connection with the issuance of such senior secured notes, and pay reasonable fees and expenses, not to exceed $25. Mandatory prepayment of the Beal Bank Credit Agreement is required to the extent that OrCal or its subsidiaries receives funds from an issuance of equity or debt securities, as well as in the occurrence of a major casualty resulting from damage or destruction of power plants owned by OrCal, whereby, receipt of insurance proceeds are in excess of $2,500.

Credit Facility Agreement (the Momotombo Project)

In September 2000, Ormat Momotombo Power Company ("OMPC"), a wholly owned subsidiary of the Company, entered into a credit facility agreement with Bank Hapoalim B.M. pursuant to which the Company executed a two-phase loan with the bank in the amounts of $11,435 ("Phase I Loan") and $36,800 ("Phase II Loan") (collectively "Credit Facility Agreement"). In March 2003, the Company signed an amendment to the Credit Facility Agreement changing the amount of the Phase II Loan from $36,800 to $15,000. Principal and interest payments on the Phase I Loan are payable in 32 equal quarterly payments that commenced upon completion of Phase I of the project in December 2001. Interest on the Phase I Loan is variable based on LIBOR plus 2.375%. Principal and interest payments on the Phase II Loan are payable in equal 28 quarterly payments that commenced

F-26

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

in March 2004. Interest on the Phase II Loan is variable based on LIBOR plus 3.0%, and is added to the outstanding balances of the Phase II Loan until the commencement of the principal and interest payments. At December 31, 2003, and March 31, 2004 (unaudited), approximately $8,046 and $7,749, respectively, was outstanding under the Phase I Loan and approximately $11,869 and $11,445, respectively, was outstanding under the Phase II Loan. The Credit Facility Agreement is collateralized by liens over all real and personal property comprising the Momotombo Project and the Company's ownership interest in OMPC. Additionally, the Parent has provided to the lender a repayment guarantee of 50% of the unpaid principal, interest and all other amounts of the Credit Facility Agreement which become past due and are not paid by the Company due to any event of default as defined in the Credit Facility Agreement. There are various restrictive covenants under the Credit Facility Agreement, which include maintaining certain levels of debt to equity ratio and debt service coverage ratio, and limitations on additional indebtedness and payment of dividends.

Loan one

In May 1998, the Company entered into an $8,000 loan agreement, with principal payable in $1,000 annual installments that commenced in May 2001, and continue through May 2008. Interest is computed at LIBOR plus 1.7%, and is payable annually. The Parent has provided a guarantee, whereby in the event that the Company fails to perform its obligation under the loan agreement, the Parent would be required to pay the bank the remaining outstanding balance of the loan.

Loan two

In July 2000, the Company entered into a $5,600 loan agreement with principal payable in equal semi-annual payments that commenced in January 2003, and continue through July 2010. Interest is computed at LIBOR plus 1.7% and is payable semi-annually. The Parent has provided a guarantee, whereby in the event that the Company fails to perform its obligation under the loan agreement, the Parent would be required to pay the bank the remaining outstanding balance of the loan. On July 14, 2004 (unaudited), the Company repaid the loan in full.

Loan three

In March 2001, the Company entered into a $10,000 loan agreement, with principal payable in equal quarterly payments that commenced in April 2003, and continue through January 2006. Interest is computed at LIBOR plus a margin as calculated by the bank each quarter (1.8% at December 31, 2003), and is payable quarterly. The Parent has provided a guarantee, whereby in the event that the Company fails to perform its obligation under the loan agreement, the Parent would be required to pay the bank the remaining outstanding balance of the loan.

Loan four

In July 2001, the Company entered into a $9,500 loan agreement with a bank, with principal payable in equal semi-annual payments that commenced in July 2003, and continue through July 2006. Interest is computed at LIBOR plus 1% and is payable annually. The Parent has provided a guarantee, whereby in the event that the Company fails to perform its obligation under the loan agreement, the Parent would be required to pay the bank the remaining outstanding balance of the loan. In July 2004 (unaudited) the Company committed to the lender to repay the entire loan no later than January 14, 2005 or convert the outstanding balance into a five year loan bearing interest at LIBOR plus 2.5%. In addition, the Company is subject to various restrictive covenants. If neither of the actions is taken, the lender is entitled to demand immediate repayment of the above loan.

Loan five

In July 2001, the Company entered into a $9,500 loan agreement with a bank, with principal payable in equal semi-annual payments that commenced in May 2003, and continue through May 2006.

F-27

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

Interest is computed at LIBOR plus 1% and is payable annually. The Parent has provided a guarantee, whereby in the event that the Company fails to perform its obligation under the loan agreement, the Parent would be required to pay the bank the remaining outstanding balance of the loan. In July 2004 (unaudited) the Company committed to the lender to repay the entire loan no later than January 14, 2005 or convert the outstanding balance into a five year loan bearing interest at LIBOR plus 2.5%. In addition, the Company is subject to various restrictive covenants. If neither of the actions is taken, the lender is entitled to demand immediate repayment of the above loan.

In December 2002, the Company entered into an interest rate swap agreement with a financial institution that involves the exchange of fixed interest rate payments at a rate of 2.26% on a notional amount of $9,500 at the effective date of February 21, 2003, that is reduced periodically ($8,143 at December 31, 2003) in exchange for floating interest rate payments that equal the interest due under Loan Five. As the Company did not achieve hedge accounting on such swap, the net payments or receipts under such agreement are recognized as an adjustment to interest expense. This agreement expires on May 22, 2006.

The fair value of the interest rate swap is the estimated amount that the Company would currently pay to terminate the swap agreement at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties. The estimated fair value of the interest rate swap was a liability of $41 at December 31, 2003. The effect of the interest rate swap utilized to offset variable rate funding was to increase interest expense by approximately $74 in 2003.

Bridge loan

During 2003, a wholly owned subsidiary of the Company amended the Bridge Loan by changing the maximum loan amount from $40,000 to $20,000. The amendment also changed the interest rate from LIBOR plus 1% to LIBOR plus 1.5%, which is payable quarterly, and extended the maturity date to February 2005. Under the terms of the Bridge Loan, the Parent has provided a letter of credit in the amount of $21 million that expires in March 2005 as collateral for the Bridge Loan.

Future minimum payments under long-term obligations as of December 31, 2003 are as follows:


Year ending December 31:
2004	$	26,176
2005		48,048
2006		26,082
2007		23,960
2008		15,016
Thereafter		121,206
Total	$	260,488

Senior Secured Notes (Unaudited)

On February 13, 2004, the Company, through Ormat Funding Corporation ("OFC"), a wholly owned subsidiary, completed the issuance of 8¼% senior secured notes ("Notes") pursuant to an exempt offering under Rule 144A and Regulation S of the Securities Act of 1933 ("Offering"), amounting to $190 million, and received net cash proceeds of approximately $179.7 million net of bond issuance costs of approximately $10.3 million, which have been included in intangible assets at March 31, 2004. The Notes have a final maturity date of December 30, 2020. Principal and interest on the Notes are payable semi-annually beginning June 30, 2004. The Notes are collateralized by substantially all of the assets of OFC and fully and unconditionally guaranteed by all of the wholly owned subsidiaries of OFC, other than Ormesa LLC ("Ormesa"), which will be obligated to guarantee the Notes upon the

F-28

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

earlier of (i) January 31, 2005, (ii) the date that all the obligations under the Ormesa Loan have been repaid in full, and (iii) the date that Ormesa is no longer prohibited pursuant to the terms of the Ormesa Loan from providing a guarantee and (with certain exceptions) by all real property, contractual rights, revenues and bank accounts, intercompany notes, certain insurance policies and guarantees of OFC and its subsidiaries. There are various restrictive covenants under the Note, which include limitations on additional indebtedness and payment of dividends.

The Company may redeem the Notes, in whole or in part, at any time at a redemption price equal to the principal amount of the Notes to be redeemed plus accrued interest, premium and liquidated damages, if any, plus a "make-whole" premium. Under certain conditions, as defined in the note agreement, the Company may be required to redeem the Notes at a redemption price ranging from 100% to 101% of the principal amount of the Notes being redeemed plus accrued interest, premium and liquidated damages, if any.

OFC has agreed to file a registration statement with the Securities and Exchange Commission and offer to exchange the Notes for publicly registered exchange notes with substantially identical terms and consummate the exchange offer prior to January 8, 2005.

Non-current restricted cash at March 31, 2004 relating to proceeds from the Offering consists of the following:

Galena re-powering construction reserve

As required by the Offering, the Company has set aside approximately $25.8 million to replace the existing equipment at the Steamboat 1/1A project with more efficient equipment, in order to optimize the geothermal resources available. After such replacement, the company will rename the Steamboat 1/1A project as the Galena project. The Company expects the re-powering will be complete and the project will achieve commercial operations by the end of 2005.

Also as required under the terms of the Notes, the Company has restricted cash accounts, consisting of the following, which are classified as current on the balance sheet:

Debt service reserve

The Company maintains an account to fund an amount sufficient to pay scheduled debt service amounts, including principal and interest, due under the terms of the Notes in the following six months. As of March 31, 2004 the required funds amounted to $10.5 million.

Ormesa debt reserve

The Company has committed under the Offering to repay in full the Ormesa Loan no later than January 31, 2005. Approximately $13.6 million of the proceeds from the Offering equal to the outstanding balance on the Ormesa Loan, less the deposit in the Debt Service reserve account described above, was placed in escrow to be released to the Company for principal payments toward the Ormesa Loan. If the Ormesa Loan is not paid in full by January 31, 2005, the balance in the escrow account will be used to repay the outstanding balance on the Ormesa Loan.

Revenue reserve

The Company deposits all revenues received into the revenue account. Such amounts are used to pay operating expenses and fund the debt service reserve account, but the funds are only available to the Company upon submission of draw requests by the Company to the bank. As such amounts are not fully unrestricted to use by the Company, they have been classified as restricted on the accompanying balance sheet. As of March 31, 2004 the balance of such account was approximately $4 million.

F-29

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

11. Asset Retirement Obligation

The Company adopted SFAS No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets , effective January 1, 2003. Under SFAS No. 143, entities are required to record the fair value of a legal liability for an asset retirement obligation in the period in which it is incurred. The Company's legal liabilities include capping wells and post-closure costs of geothermal power producing sites. When a new liability for asset retirement obligations is recorded, the Company capitalizes the costs of the liability by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. At retirement, an entity settles the obligation for its recorded amount or incurs a gain or loss. On January 1, 2003, the Company recorded a cumulative effect of change in accounting principle of $205, net of related tax benefit of $125. As a result of adopting the provisions of SFAS No. 143, the net income for the year ended December 31, 2003, decreased by $238, net of tax benefit of $144. The proforma net loss for the years ended December 31, 2001 and 2002 reflecting the adoption of SFAS No. 143 applied retroactively would have been $6,435 and $1,227, respectively.

The following table summarizes the impact on the Company's balance sheet following the adoption of SFAS No. 143:


	Balance at December 31, 2002			Change Resulting from Application of SFAS No. 143			Balance at January 1, 2003
Property, plant and equipment	$	196,482		$	2,615		$	199,097
Accumulated depreciation		(44,140	)		(140	)		(44,280	)
Net property, plant and equipment	$	152,342		$	2,475		$	154,817
Deferred income tax liability (benefit)	$	11,951		$	(125	)	$	11,826
Non-current asset retirement obligation	$	—		$	2,805		$	2,805

The proforma changes to the non-current asset retirement obligation, based on the information, assumptions and interest rates as of January 1, 2003 are presented below to show what the Company would have reported if the provisions of SFAS No. 143 had been in effect for the periods presented below (unaudited):



	2001		December 31, 2002		2003		March 31, 2004
							(unaudited)
Balance, beginning of period	$	—	$	580	$	2,805	$	5,737
Liabilities incurred		556		2,057		2,701		941
Accretion expense		24		168		231		74
Balance, end of period	$	580	$	2,805	$	5,737	$	6,752

12. Stock Options

The Parent has four stock option plans: the 2001 Employee Stock Option Plan, the 2002 Employee Stock Option Plan, the 2003 Employee Stock Option Plan, and the 2004 Employee Stock Option Plan (collectively "the Plans"). Options under the 2004 Employee Stock Option Plan were granted in April 2004. Under the Plans, employees of the Company were granted options in the Parent's Ordinary shares, which are registered and traded on the Tel-Aviv Stock Exchange Ltd. Options under the Plans cliff vest and are exercisable from the grant date as follows: 25% after 24 months, 25% after 36 months, and the remaining 50% after 48 months. Vested shares may be exercised for up to five years

F-30

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

from the date of grant. The maximum aggregate number of shares that may be optioned and sold under the Plans is determined each year by the board of directors of the Parent, and is equal to the number of options granted during each plan year.

The following table summarizes the status of the Plans as of and for the periods presented below (shares in thousands):


	2001					Year Ended December 31, 2002					2003					Three Months Ended March 31, 2004
	Shares			Weighted- Average Exercise Price		Shares			Weighted- Average Exercise Price		Shares			Weighted- Average Exercise Price		Shares			Weighted- Average Exercise Price
																(unaudited)
Outstanding, beginning of year		—		$	—		695		$	2.26		1,320		$	1.83		1,930		$	1.73
Granted, above fair value		706			2.26		—			—		—			—		—			—
Granted, below fair value		—			—		693			1.41		710			1.75		—			—
Exercised		—			—		—			—		(68	)		2.26		(136	)		2.10
Forfeited		(11	)		2.26		(68	)		1.82		(32	)		2.00		—			—
Outstanding at period end		695			2.26		1,320			1.86		1,930			1.81		1,794			1.76
Options exercisable at period end		—			—		—			—		92			2.26		313			1.89
Weighted-average fair value of options granted during the period:
Above fair value				$	0.92				$	—				$	—				$	—
Below fair value				$	—				$	0.85				$	0.60				$	—

The following table summarizes information about stock options outstanding at December 31, 2003 (shares in thousands):


Exercise Prices	Number of Shares Outstanding		Weighted-Average Remaining Contractual Life in Years		Number of Shares Exercisable		Weighted-Average Remaining Contractual Life in Years
$ 1.41		656		3.2		—		—
1.75		704		4.2		—		—
2.26		570		2.1		92		2.1
		1,930		3.2		92		2.1

The following table summarizes information about stock options outstanding at March 31, 2004 (shares in thousands)(unaudited):


Exercise Prices	Number of Shares Outstanding		Weighted-Average Remaining Contractual Life in Years		Number of Shares Exercisable		Weighted-Average Remaining Contractual Life in Years
$ 1.41		630		2.9		138		2.9
1.75		704		3.9		—		—
2.26		460		1.8		175		1.8
		1,794		3.0		313		2.3

F-31

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

13. Power Purchase Agreements

U.S. operations:

The Company has various power purchase agreements in the U.S. as follows:

Southern California Edison Company ("SCE")

The Company has two power purchase agreements ("PPAs") with SCE related to the Ormesa Complex and two PPAs related to Heber 1 and Heber 2. The PPAs provide for the sale of capacity and energy through their respective terms, with the following expiring dates: Ormesa PPAs expiring in 2017 and 2018, and Heber 1 and Heber 2 PPAs expiring in 2015 and 2023, respectively. Under the PPAs, the Company receives a fixed energy payment through April 30, 2007, and thereafter an energy payment based on SCE's short-run avoided cost ("SRAC"). The PPAs provide for firm capacity and bonus payments established by the contracts and are paid to the Company each month through the contracts' term based on plant performance. Bonus capacity payments are earned based on actual capacity available during certain peak hours.

SPPC — Nevada

The Company also has four power purchase agreements with Sierra Pacific Power Company ("SPPC"); one related to the Brady Power Plant, two related to the Steamboat 1 and 1A Power Plants, and one related to the Steamboat 2 and 3 Power Plants. The PPAs provide for the sale of energy, and for capacity for all power plants except Brady, through their respective terms, with the following expiring dates: Steamboat 1 and 1A expire in 2006 and 2018, and Brady and Steamboat 2 and 3 expire in 2022. Energy payments under the Brady PPA are based on deliveries during specified winter and summer seasons for on-peak, mid-peak, and off-peak times.

Foreign operations:

The Company has power purchase agreements in various foreign countries as follows:

The Olkaria III Project (Kenya)

In connection with the agreement with KPLC (Note 6), the subsidiary in Kenya sells power to KPLC at the agreed upon price and terms of a 20-year power purchase agreement. Fees are paid each month through the term of the agreement and vary based on plant performance.

The Leyte Project (Philippines)

In connection with the BOT agreement with PNOC (Note 6), the subsidiary in the Philippines converts the steam delivered by PNOC into electric energy required by the National Power Corporation ("NPC") in accordance with the power purchase agreement between NPC and PNOC during the term of the BOT agreement. OLCL receives capacity and energy fees from PNOC established by the BOT agreement. Fees are paid each month through the term of the BOT agreement and vary based on plant performance.

The Momotombo Project (Nicaragua)

In connection with the agreement with NEC (Note 6), the subsidiary in Nicaragua sells power to two assignees of NEC at the agreed upon price and terms of a "take or pay" power purchase agreement. Fees are paid each month through the term of the agreement and vary based on plant performance.

F-32

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

Pursuant to the terms of certain of the power purchase agreements described above, the Company may be required to make payments to the relevant power purchaser under certain conditions, such as shortfall on delivery of renewable energy and energy credits, and not meeting certain threshold performance requirements, as defined.

14. Income Taxes

Income (loss) from continuing operations before provision for income taxes consisted of:


	Year Ended December 31,							Three Months Ended
	2001			2002		2003		2003		2004
								(unaudited)
U.S.	$	(2,843	)	$	5,756	$	2,263	$	988	$	1,230
Non-U.S. (foreign)		4,176			8,893		15,902		2,396		3,224
	$	1,333		$	14,649	$	18,165	$	3,384	$	4,454

The components of income tax expense (benefit) from continuing operations are as follows:


	Year Ended December 31,								Three Months Ended March 31,
	2001			2002		2003			2003		2004
									(unaudited)
Current:
Federal	$	188		$	—	$	—		$	—	$	—
Foreign		95			252		446			—		590
		283			252		446			—		590
Deferred:
Federal		(1,077	)		1,614		(1,210	)		336		392
State		—			878		432			95		81
Foreign		3,859			3,391		2,838			966		654
		2,782			5,883		2,060			1,397		1,127
	$	3,065		$	6,135	$	2,506		$	1,397	$	1,717

The significant components of the deferred income tax expense (benefit) from continuing operations are as follows:


	Year Ended December 31,									Three Months Ended March 31,
	2001			2002			2003			2003			2004
										(unaudited)
Deferred tax expense (exclusive of the effect of other components listed below)	$	3,657		$	9,846		$	5,233		$	2,148		$	2,970
Benefit of operating loss carryforwards – US		(1,154	)		(3,573	)		(1,643	)		(751	)		(1,843	)
(Benefit) utilization of operating loss carryforwards – Israel		(4,482	)		(1,248	)		1,019			(119	)		(58	)
Change in valuation allowance		4,539			1,248			(1,019	)		119			58
Benefit of investment tax credits		222			(390	)		(1,530	)		—			—
	$	2,782		$	5,883		$	2,060		$	1,397		$	1,127

F-33

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

The difference between the U.S. federal statutory tax rate and the Company's effective rate are as follows:


	Year Ended December 31,									Three Months Ended March 31,
	2001			2002			2003			2003			2004
										(unaudited)
U.S. federal statutory tax rate		34.0	%		34.0	%		34.0	%		34.0	%		34.0	%
State taxes, net of federal benefit		—			2.7			1.7			1.8			2.8
Effect of foreign income tax, net		(138.7	)		(4.4	)		(7.0	)		1.1			0.3
Valuation allowance – Israel		340.5			8.5			(5.6	)		3.5			1.3
Investment tax credits		—			(2.7	)		(8.4	)		—			(0.1	)
Other, net		(5.9	)		3.8			(0.9	)		0.9			0.2
		229.9	%		41.9	%		13.8	%		41.3	%		38.5	%

The net deferred tax assets and liabilities consist of the following:


	December 31,						March 31,
	2002			2003			2004
							(unaudited)
Deferred tax assets (liabilities):
Net foreign deferred taxes, primarily depreciation	$	(8,194	)	$	(11,032	)	$	(11,638	)
Depreciation		(9,361	)		(11,704	)		(13,960	)
Net operating loss carryforwards – U.S.		5,702			7,345			9,188
Net operating loss carryforwards – Israel		7,047			6,028			6,086
Investment tax credits		441			1,971			1,971
State income taxes		—			73			75
		(4,365	)		(7,319	)		(8,278	)
Valuation allowance		(7,586	)		(6,567	)		(6,625	)
	$	(11,951	)	$	(13,886	)	$	(14,903	)

Realization of the deferred tax assets and investment tax credits is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that the deferred tax asset, except for those of the Company's Israeli operations (separate tax jurisdiction), will be realized.

At December 31, 2003, the Company had U.S. federal and state net operating loss carryforwards of approximately $20.7 million and $7.3 million, respectively, available to reduce future taxable income, which expire between 2021 and 2023, and 2014, respectively. The investment tax credits carry over indefinitely until utilized.

At December 31, 2003, the Company had net operating loss carryforwards related to its Israeli operations of approximately $16.7 million available to reduce future taxable income, which carryover indefinitely until utilized. Further, despite the fact that the net operating losses carryforward indefinitely, there is currently uncertainty as to the Israeli tax laws related to establishing limitations on the use of net operating losses. Due to OSL's history of operating losses and based on OSL's inability to generate sufficient taxable income in the foreseeable future, management believes it is not more likely than not that such net operating loss carry forwards will be utilized. Accordingly, the Company has recorded a full valuation allowance against such deferred tax assets.

The total amount of undistributed earnings of foreign subsidiaries for income tax purposes was approximately $31 million at December 31, 2003. It is the Company's intention to reinvest undistributed earnings of its foreign subsidiaries and thereby indefinitely postpone their remittance. Accordingly, no provision has been made for foreign withholding taxes or U.S. income taxes which

F-34

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

may become payable if undistributed earnings of foreign subsidiaries were paid as dividends to the Company. The additional taxes on that portion of undistributed earnings which is available for dividends are not practicably determinable.

Income taxes related to foreign operations

Philippines – From OLCL's inception in 1996 to September 2003, OLCL, an 80% owned subsidiary with operations in the Philippines, had an income tax holiday. Subsequent to September 2003, OLCL is subject to the Philippines regular corporate income tax rate of 32%. The tax holiday, assuming a tax rate of 32%, has the effect of reducing tax expense by $1,032, $1,978, $798, $327, and $0, and increasing earnings per share by $0.03, $0.06, $0.03, $0.01, and $0, for the years ended December 31, 2001, 2002 and 2003 and for the three months ended March 31, 2003 and 2004 (unaudited), respectively.

Israel – The Company's operations in Israel through OSL are taxed at the regular corporate tax rate of 36%. However, under the Israeli Law for the Encouragement of Capital Investments, some of the operations of OSL have been granted "Approved Enterprise" status under expansion plan of 1996 and 2003, whereby income from the Approved Enterprise, which is determined as the increase of revenues in a particular year compared to those of the program's determined base year (1995 and 2002), will be exempt from taxes for two years commencing in the first year OSL generates taxable income, which for OSL has not commenced yet, and at a reduced tax rate of 25% for a remaining five years. The Approved Enterprise status plans of 1996 and 2003 expire in 2010 and 2017, respectively.

Other significant foreign countries – The Company's operations in Nicaragua and Kenya are taxed at the rates of 25% and 40%, respectively.

15. Business Segments

The Company engages in the following business segments, which report to the Company's management for decision-making purposes: The electricity segment is engaged in the maintenance and operation of wholly or partly owned power plants and in the production of electricity according to contracts. The products segment is engaged in the manufacture, including design and development, of turbines and power units for the supply of electrical energy and in the associated construction of power plants utilizing the power units manufactured by the Company to supply energy from geothermal fields and other alternative energy sources. Transfer prices between the operating segments were determined on current market value or cost plus markup of the seller's business segment.

F-35

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

Summarized financial information concerning the Company's reportable segments is shown in the following tables:


	Electricity		Products			Consolidated
Year ended December 31, 2001:
Net revenues from external customers	$	33,956	$	13,959		$	47,915
Intersegment revenues		—		1,481			1,481
Depreciation and amortization expense		10,634		611			11,245
Operating income (loss)		12,931		(8,714	)		4,217
Segment assets at period end		202,658		23,959			226,617
Expenditures for long-lived assets		68,324		52			68,376

Year ended December 31, 2002:
Net revenues from external customers	$	65,491	$	20,138		$	85,629
Intersegment revenues		—		10,157			10,157
Depreciation and amortization expense		13,780		697			14,477
Operating income		21,971		(1,744	)		20,227
Segment assets at period end		260,181		27,197			287,378
Expenditures for long-lived assets		76,568		207			76,775

Year ended December 31, 2003:
Net revenues from external customers	$	77,752	$	41,688		$	119,440
Intersegment revenues		—		7,130			7,130
Depreciation and amortization expense		15,969		650			16,619
Operating income		20,390		5,100			25,490
Segment assets at period end		519,140		28,396			547,536
Expenditures for long-lived assets		276,266		386			276,652

Three months ended March 31, 2003 (unaudited):
Net revenues from external customers	$	17,604	$	7,812		$	25,416
Intersegment revenues		—		2,280			2,280
Operating income		5,084		4			5,088
Segment assets at period end		247,931		25,780			273,711

Three months ended March 31, 2004 (unaudited):
Net revenues from external customers	$	33,459	$	14,146		$	47,605
Operating income		11,127		1,272			12,399
Segment assets at period end		670,934		26,950			697,884

F-36

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

Reconciling information between reportable segments and the Company's consolidated totals is shown in the following table:


	Year Ended December 31,									Three Months Ended March 31,
	2001			2002			2003			2003			2004
										(unaudited)
Revenues:
Total segment revenues	$	47,915		$	85,629		$	119,440		$	25,416		$	47,605
Intersegment revenues		1,481			10,157			7,130			2,880			—
Elimination of intersegment sales		(1,481	)		(10,157	)		(7,130	)		(2,880	)		—
Total consolidated sales	$	47,915		$	85,629		$	119,440		$	25,416		$	47,605

Operating income:
Operating income	$	4,217		$	20,227		$	25,490		$	5,088		$	12,399
Interest expenses, net		(3,010	)		(5,570	)		(7,513	)		(1,611	)		(8,279	)
Equity in income of investee		166			314			559			89			787
Non-operating income and other		605			872			148			19			(345	)
Minority interest in earnings of subsidiaries		(645	)		(1,194	)		(519	)		(201	)		(108	)
Total consolidated income from continuing operations before income taxes	$	1,333		$	14,649		$	18,165		$	3,384		$	4,454

F-37

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

Business segments according to geographical location: The Company sells products for power plants and others, mainly to the geographical areas according to location of the customers, as detailed below. The following table presents certain data by geographic area:


	Year Ended December 31,						Three Months Ended March 31,
	2001		2002		2003		2003		2004
							(unaudited)
Revenues from external customers attributable to: ⁽¹⁾
North America	$	4,901	$	33,557	$	52,534	$	10,047	$	26,104
Pacific Rim		1,646		4,502		10,340		—		11,566
Latin America		12,002		18,459		25,016		8,624		3,347
Africa		8,688		9,236		12,171		2,346		2,508
Far East		16,119		17,937		17,793		3,673		3,736
Europe		4,559		1,938		1,586		726		344
Consolidated total	$	47,915	$	85,629	$	119,440	$	25,416	$	47,605


⁽¹⁾	Revenues as reported in the geographic area in which they originate


	December 31,						March 31,
	2001		2002		2003		2004
							(unaudited)
Long-lived assets (primarily power plants and related assets) relating to continuing operations located in:
North America	$	37,537	$	77,617	$	314,296	$	401,837
Latin America		18,256		31,333		30,778		31,031
Africa		50,189		56,182		54,911		54,518
Far East		26,592		22,078		17,433		—
Europe		2,240		1,788		1,563		1,607
Consolidated total	$	134,814	$	188,998	$	418,981	$	488,993

F-38

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

The following table presents revenues from major customers:


	Year ended December 31,												Three months ended March 31,
	2001				2002				2003				2003				2004
	Revenues		%		Revenues		%		Revenues		%		Revenues		%		Revenues		%
													(unaudited)
Revenues from major customers:
Customer A (1)	$	—		—	$	21,845		26	$	32,458		27	$	6,089		24	$	19,350		41
Customer B (2)		—		—		—		—		10,318		9		—		—		8,538		18
Customer C (1)		12,475		26		15,593		18		12,620		11		3,198		13		3,096		7
Customer D (1)		8,910		19		9,221		11		11,617		10		3,095		12		2,968		6
Customer E (1)		3,964		8		9,606		11		11,389		10		2,879		11		5,958		13
Customer F (1)		8,607		18		9,225		11		9,669		8		2,343		9		2,398		5
Customer G (2)		—		—		7,025		8		10,754		9		5,075		20		—		—


⁽¹⁾	Revenues reported in electricity segment


⁽²⁾	Revenues reported in products segment

F-39

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

16. Transactions with related entities

Transactions between the Company and the related entities during the periods presented below and balances as of the periods presented below, other than those disclosed elsewhere in the financial statements, approximated:


	Year Ended December 31,						Three Months Ended March 31,
	2001		2002		2003		2003		2004
							(unaudited)
Transactions
Revenues on construction project to subsidiary of Parent	$	303	$	—	$	—	$	—	$	—
Revenues on construction of Zunil project	$	330	$	—	$	—	$	—	$	—
Property rental fee expense paid to Parent	$	627	$	627	$	627	$	157	$	157
Interest expense on note payable to Parent	$	1,131	$	1,068	$	1,874	$	171	$	2,198
Guarantee fees to Parent	$	145	$	783	$	709	$	307	$	123
Corporate financial, administrative and executive services provided to Parent	$	120	$	120	$	120	$	30	$	30
Year-End Balances (at end of period)
Due from Orzunil			$	132	$	145			$	140
Due from subsidiaries of Parent			$	1,624	$	1,761			$	881
Due from Parent			$	—	$	4,431			$	1,508

The Company has an agreement with the Parent whereby, for a fee, the Parent maintains certain standby letters of credit on behalf of the Company. During the years ended December 31, 2001, 2002 and 2003, and the three months ended March 31, 2003 and 2004 (unaudited), the fees under the agreement totaled approximately $145, $783, $709, $307 and $123, respectively.

The current liability due to Parent at December 31, 2002 and 2003, and March 31, 2004 (unaudited) of $53,171, $0 and $0, respectively, represents the net obligation resulting from ongoing operations and transactions with the Parent and is payable from available cash flow. Interest is computed on balances greater than 60 days at LIBOR plus 1%, however not less than the Israeli Consumer Price Index plus 4%, compounded quarterly, and is accrued and paid to the Parent annually.

Notes payable to Parent

In 2003, the Company entered into a loan agreement ("Parent Loan Agreement") with the Parent pursuant to which the Company may borrow up to $150 million in one or more advances. Interest accrues on the unpaid principal of the loan amount at a rate per annum of the Parent's average effective interest plus 0.3% (7.5% during 2003). The principal and interest on the Parent Loan Agreement are payable in varying amounts through the loan due date of June 2010. The outstanding balance of such loan at December 31, 2003 and March 31, 2004 (unaudited) was $126,339 and $99,839, respectively. As further discussed in Note 19, on June 29, 2004, $20,000 outstanding under the Parent Loan Agreement was converted to 1,538,462 shares of $0.001 par value common stock of the Company.

F-40

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

In 2003, the Company entered into a $50,665 non-interest bearing note agreement with the Parent. Principal is payable upon demand at any time after November 2005, but no later than December 2006. The loan is subordinated to all other liabilities of the Company.

Future minimum payments under the notes payable to Parent as of December 31, 2003 are as follows:


Year ending December 31:
2004	$	—
2005		17,834
2006		78,100
2007		27,435
2008		27,435
Thereafter		26,200
	$	177,004

17. Employee benefit plan

401(k) Plan

Prior to July 1, 2002, the Company had a Simple IRA ("IRA Plan") plan covering substantially all employees of the Company, age 21 or older, with minimum service requirements. The Company contributed 2% of the eligible employees' compensation for the year. The Company contributed $17 and $6 to the plan for year ended December 31, 2001 and for the six-month period ended June 30, 2002, respectively. On July 1, 2002 the Company discontinued making contributions to the IRA Plan, as the Company exceeded the maximum number of employees allowed for such a plan due to the purchase of the Ormesa Project. Any amounts remaining in the IRA Plan will continue to be invested, and earnings applied to the participating employees' accounts. All contributions made after July 1, 2002 are contributed into the Company's new 401(k) plan, discussed below.

On July 1, 2002 the Company established a 401(k) Plan (the "Plan") for the benefit of its employees. Employees of the Company who have completed one year of service or who had one year of service upon establishment of the Plan are eligible to participate in the Plan. Contributions are made by employees through pretax deductions up to 60% of their annual salary. Contributions made by the Company are matched up to a maximum of 2% of the employee's annual salary. The Company's contributions to the Plan were $46, $83, $23 and $39 and for the six-month period ended December 31, 2002, the year ended December 31, 2003 and for the three months ended March 31, 2003 and 2004 (unaudited), respectively.

Severance plan

The Company, through OSL, provides limited non-pension benefits to all current employees in Israel who are entitled to benefits in the event of termination or retirement in accordance with the Israeli government sponsored programs. These plans generally obligate the Company to pay one month's salary per year of service to employees in the event of involuntary termination. There is no limit on the number of years of service in calculation of the benefit obligation. The liabilities for these plans are accounted for under the guidance of EITF 88-1, Determination of Vested Benefit Obligation for a Defined Benefit Pension Plan , using what is commonly referred to as the "shut down" method, where a company records the undiscounted obligation as if it was payable at each balance sheet date. Such liabilities have been presented on the balance sheet as "Liability for severance pay". The Company has an obligation to partially fund the liabilities through regular deposits in pension funds and severance pay funds. The amounts funded amounted to $9,047, $9,440, and $9,215 at December 31,

F-41

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

2002 and 2003, and March 31, 2004 (unaudited), of which $8,067, $8,227 and $8,034 was restricted, respectively, and have been presented on the balance sheet as part of "Deposits and other". Under the severance pay law, restricted funds may not be withdrawn or pledged until the respective severance pay obligations have been met. As allowed under the program, earnings from the investment are used to offset severance pay costs. Severance pay expenses for the years ended December 31, 2001, 2002 and 2003, and for the three month periods ended March 31, 2003 and 2004 (unaudited) were $516, $456, $511, $153, and $162, respectively, which includes losses (income) amounting to $(49), $8, $65, $40, and $55, respectively, generated from the regular deposits and amounts accrued in severance funds.

18. Commitments and contingencies

Geothermal Resources

The Company, through its project subsidiaries in the United States, controls certain rights to geothermal fluids through certain leases with the Bureau of Land Management ("BLM") or through private leases. Royalties on the utilization of the geothermal resources are computed and paid to the lessors as defined in the respective agreements. Royalties expense under the geothermal resource agreements were $135, $925, $1,181, $290 and $917 for the years ended December 31, 2001, 2002 and 2003, and for the three months ended March 31, 2003 and 2004, respectively.

Letters of credit

In the ordinary course of business with customers, vendors, and lenders, the Company is contingently liable for performance under letters of credit and other financial guarantees obtained by the Parent and issued on behalf of the Company totaling $19,736 and $25,642 at December 31, 2003 and March 31, 2004 (unaudited). Management does not expect any material losses to result from these off-balance-sheet instruments because performance is not expected to be required, and, therefore, is of the opinion that the fair value of these instruments is zero.

Grants and royalties

The Company, through OSL, has historically requested and received grants for research and development from the Office of the Chief Scientist of the Israeli Government. OSL is required to pay royalties to the Israeli Government at a rate of 3.5% to 5.0% of the revenues derived from products and services developed using such grants, and amounted to $42, $700, $1,171, $231, and $389 for the years ended December 31, 2001, 2002 and 2003, and for the three months ended March 31, 2003 and 2004 (unaudited), respectively. Such royalties are capped at the amount of the grants received plus interest at LIBOR, and the cap at December 31, 2003 and March 31, 2004 (unaudited), amounted to $7,050 and $6,966, respectively, of which approximately $5,268 and $5,352 of the cap, respectively, increases based on the LIBOR rate, as defined.

In addition, OSL is obligated to pay royalties to an unaffiliated entity at 2% of its domestic sales up to a cumulative amount of $9.25 million, and royalties at a rate of 0.2% of revenues on the next $5.4 million related to a certain technology that is not currently being utilized. However, no royalties will be paid after 30 years have elapsed from the completion of the related project. OSL has not derived any revenues from this technology to date, nor have any royalties been paid to date.

Contingencies

In August 2003, Ormesa agreed to enter into binding arbitration with the Imperial Irrigation District in connection with Imperial Irrigation District's claim that Ormesa is obligated to pay scheduling and transmission charges in the amount of $529 through the effective date of relinquishment of nominated

F-42

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

capacity for two of the Ormesa Project plants. Ormesa contends that it is not obligated to pay the subject charges after the January 1, 2003, effective date of the Energy Services Agreement that Ormesa entered into with the Imperial Irrigation District. The Company believes that the dispute will be resolved in 2004 and that any outcome will not have a material impact on the Company's operations or relationship with the Imperial Irrigation District.

In response to an order issued by a California State Court of Appeal, the California Public Utilities Commission ("CPUC"), has commenced an administrative proceeding in order to address short run avoided cost pricing for Qualifying Facilities for the period spanning from December 2000 to March 2001. The court directed that the CPUC modify short run avoided cost pricing on a retroactive basis to the extent that the CPUC determined that short run avoided cost prices were not sufficiently "accurate" or "correct." If the short run avoided cost prices charged during the period in question were determined by the CPUC to not be "accurate" or "correct," retroactive price adjustments could be required for any of the Company's Qualifying Facilities in California whose payments are tied to short run avoided cost pricing, including the Heber 1, Heber 2, Mammoth and Ormesa projects. Currently it is not possible to predict the outcome of such proceeding, however, any retroactive price adjustment required to be made in relation to any of the Company's projects may require such projects to make refund payments, which could materially effect the financial condition, future results and cash flow of the Company.

SG is party to litigation related to a dispute over amounts owed to the plaintiffs under certain operating agreements. SG has initiated settlement discussions with the plaintiff and the Company believes that any outcome will not have a material impact on the Company's results of operations.

The Company is a defendant in various other legal suits in the ordinary course of business. It is the opinion of the Company's management that the expected outcome of these matters, individually or in the aggregate, will not have a material effect on the results of operations and financial condition of the Company.

Certain of the Company's projects are subject to contested FERC rulings whereby an adverse outcome could result in a refund of a portion of previous revenues and/or a reduction in future revenues from those projects. The outcome of this matter cannot be predicted at this time.

19. Subsequent events (unaudited)

Acquisition of Steamboat Hills

On May 20, 2004, the Company acquired 100% ownership interest in Yankee Caithness Joint Venture, L.P. ("Yankee") from unrelated parties for a purchase price of approximately $20.2 million. Yankee owns and operates a geothermal electric generation plant, located in the city of Steamboat Springs, Nevada. The Company purchased Yankee to increase its geothermal power plant operations in the United States. Yankee was subsequently renamed to Steamboat Hills.

Acquisition of Puna Geothermal Plant

On April 22, 2004, the Company entered into an agreement with an unrelated party to acquire 100% interests in Puna Geothermal Venture ("PGV"), which operates a geothermal power plant ("Puna Project") located on the island of Hawaii. The Company purchased PGV to increase its geothermal power plant operations in the United States. The PGV acquisition was completed on June 3, 2004 with a purchase price of approximately $72.8 million, including acquisition costs of $200, which purchase price is subject to working capital adjustments. Of the total purchase price of $72,831, the Company allocated $66,812 to property, plant and equipment, $6,500 to the power purchase agreement, $1,600 to net working capital, and $2,081 liability related to asset retirement obligation.

F-43

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

Such allocation is preliminary, pending completion of an independent valuation, and may differ from the final allocation. The property, plant and equipment and power purchase agreement will be amortized over their estimated useful life of 23 years. The Puna Project was not in compliance with the threshold minimum performance requirements of its power purchase agreement at the time of the acquisition, and is currently not in compliance with such requirements, which non-compliance has resulted in the imposition of sanctions that reduce the aggregate amounts of revenues payable to the Company from the power purchaser.

Loan agreement

In June 2004, the Company entered into a $20,000 loan agreement with a financial institution, with principal payable by November 2005. Interest is computed at LIBOR plus 1.45%, and is payable semi-annually. The Parent has provided a guarantee, whereby in the event that the Company fails to perform its obligation under the loan agreement, the Parent would be required to pay the bank the remaining outstanding balance of the loan.

Interest rate cap agreements

During the second quarter of 2004, the Company entered into two separate interest rate cap agreements ("Cap Transactions") with two different financial institutions pursuant to which the Company paid an aggregate of $3,820 to the financial institutions. The Cap Transactions are effective on March 30, 2007 and terminate on March 31, 2011. Under the terms of the Cap Transactions, the financial institutions are required to pay the Company the difference between the LIBOR rate and 6.0% (if LIBOR is greater than 6.0%), times the notional amount, which for each of the contracts will be $67,401 on the effective date and reduces each payment period down to $49,633 upon termination.

LOC Agreement

On June 30, 2004, the Company entered into a letter of credit and loan agreement ("LOC Agreement") with a bank pursuant to which the bank agreed to issue one or more letters of credit aggregating to $15 million, and expires on June 30, 2007, which shall be extended for successive one-year periods unless notice is provided by either the Company or the bank not to extend such expiration date. In the event that the bank is required to pay on a letter of credit drawn by the beneficiary thereof, such letter of credit converts to a loan, bearing interest at LIBOR plus 4.0%, and matures on the next expiration date of the LOC Agreement. There are various restrictive covenants under the LOC Agreement, which include maintaining certain levels of tangible net worth, leverage ratio, and minimum coverage ratio. Subsequent to June 30, 2004, two letters of credit were issued under this agreement aggregating $11,769, which have been used to replace cash on deposit in reserve funds that were used as a pledge against the OFC Notes and the Beal Bank Credit Agreement. The amount on one of the letters of credit will increase by $2,674 in December 2004.

Recapitalization

On June 29, 2004, the Company amended and restated its certification of incorporation, pursuant to which the authorized capital stock of the Company was increased from 1,000 shares of $1.00 par value common stock to 205,000,000 authorized shares, comprising of 200,000,000 shares of $0.001 par value common stock and 5,000,000 shares of $0.001 par value preferred stock, of which, 500,000 shares have been designated as Series A Preferred Stock. The board of directors has the authority to issue the undesignated preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof.

Additionally, on June 29, 2004, the outstanding and issued 200 shares of $1.00 par value common stock were divided and converted (stock split) to 30,769,230 shares of $0.001 par value common stock.

F-44

Ormat Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)

Accordingly, all common share and per common share amounts in the accompanying consolidated financial statements have been restated to give retroactive effect to the stock split for all periods presented.

Further, on June 29, 2004, $20,000 outstanding under the Parent Loan Agreement (Note 16) was converted to 1,538,462 shares of $0.001 par value common stock of the Company.

Reimbursement agreement

On July 15, 2004, the Company entered into a reimbursement agreement with its Parent pursuant to which the Company agreed to reimburse its Parent for (1) any draws made on any standby letter of credits issued by the Parent for the Company and (2) any payments made under any guarantee provided by the Parent to the Company. Interest on any amounts owing pursuant to the reimbursement agreement is payable at a rate per annum equal to the Parent's average effective cost of funds plus 0.3% in U.S. dollars.

Finance arrangements

In connection with the acquisition transaction between OSL and the Parent, the Company amended certain terms of its debt related to Loans 1, 4 and 5, and the Bridge Loan (Note 10), pursuant to which the Company is subject to various financial covenants, including maintaining certain levels of debt service coverage ratio and debt to equity ratio.

In July 2004, the Company also entered into an agreement with a bank pursuant to which the Company has assumed, as the primary obligor, existing contingent obligations of approximately $17.2 million in outstanding letters of credit that were previously obtained by the Parent under which the Parent was the primary obligor (Note 18).

F-45

Puna Geothermal Venture

Financial Statements

As of December 31, 2002 and 2003, and for the Year Ended
December 31, 2002 and for Periods from January 1, 2003 to
December 10, 2003 and December 11, 2003 to December 31,
2003 and

Unaudited Financial Statements

As of March 31, 2004 and for the Three-Months Ended
March 31, 2003 and 2004

F-46

Report of Independent Auditors

To the Partners of
Puna Geothermal Venture

In our opinion, the accompanying balance sheet present fairly, in all material respects, the financial position of Puna Geothermal Venture (the "Company") at December 31, 2002, and the results of its operations, partners' equity, and its cash flows for the period from January 1, 2003 to December 10, 2003 and for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Notes 2 and 8, effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations .

As discussed in Notes 1 and 2 to the financial statements, on December 11, 2003, CE Puna I Corporation, a subsidiary of Constellation Power Corporation, acquired the entire partnership interest of AMOR VIII Corporation, resulting in the Company being wholly owned by Constellation Power Corporation, through its subsidiaries. The financial statements for the period subsequent to December 10, 2003 have been prepared on the basis of accounting arising from this acquisition.

/s/ PricewaterhouseCoopers LLP

Honolulu, Hawaii
April 30, 2004, except for Notes 3 and 9,
as to which the date is July 1, 2004

F-47

Report of Independent Auditors

To the Partners of
Puna Geothermal Venture

In our opinion, the accompanying balance sheet present fairly, in all material respects, the financial position of Puna Geothermal Venture (the "Company") at December 31, 2003, and the results of its operations, partners' equity, and its cash flows for the period from December 11, 2003 to December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Notes 2 and 8, effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations .

/s/ PricewaterhouseCoopers LLP

Honolulu, Hawaii
April 30, 2004, except for Notes 3 and 9,
as to which the date is July 1, 2004

F-48

Puna Geothermal Venture
Balance Sheets
December 31, 2002 and 2003 and March 31, 2004


	Predecessor Company			Successor Company
	December 31, 2002			December 31, 2003			March 31, 2004
							(unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,194,294		$	4,618,961		$	5,111,961
Restricted cash (Note 3)		6,107,759			3,063,035			3,068,807
Advances		—			2,240			2,321
Accounts receivable — HELCO		363,474			1,975,136			1,878,977
Spare parts inventory		2,087,529			4,511,926			4,511,926
Other current assets		71,006			105,690			77,205
Total current assets		9,824,062			14,276,988			14,651,197
Plant and equipment
Plant and equipment		208,700,816			196,309,698			196,319,826
Less accumulated depreciation		52,029,567			58,827,358			60,281,276
		156,671,249			137,482,340			136,038,550
Construction in progress		2,019,245			52,724			52,724
		158,690,494			137,535,064			136,091,274
Deferred financing costs		1,205,321			1,071,449			1,037,981
Other assets		31,535			31,535			123,233
Total assets	$	169,751,412		$	152,915,036		$	151,903,685
Liabilities and Partners' Equity
Current liabilities
Note payable to Credit Suisse, current portion (Note 3)	$	3,678,051		$	4,004,990		$	3,024,176
Trade accounts payable		2,861,678			932,662			286,299
HELCO sanction (Note 5)		608,831			203,005			18,808
Payable to custodian		26,443			—			—
Accrued expenses		483,299			638,573			247,561
COSI — Puna, Inc. payables		887,871			897,263			1,355,780
Constellation Power, Inc. payables		264,000			—			66,000
Total current liabilities		8,810,173			6,676,493			4,998,624
Noncurrent liabilities
Swap agreements (Note 4)		4,758,265			3,692,233			2,769,130
Note payable to Credit Suisse, noncurrent portion (Note 3)		44,300,097			40,294,892			40,294,892
Asset retirement obligation		—			2,041,043			2,080,844
Total liabilities		57,868,535			52,704,661			50,143,490
Partners' equity
Partners' capital		116,641,142			103,902,608			104,529,325
Accumulated other comprehensive loss		(4,758,265	)		(3,692,233	)		(2,769,130	)
Total partners' equity		111,882,877			100,210,375			101,760,195
Total liabilities and partners' equity	$	169,751,412		$	152,915,036		$	151,903,685

The accompanying notes are an integral part of the financial statements.

F-49

Puna Geothermal Venture
Statements of Operations
Year Ended December 31, 2002, Period from January 1, 2003 to December 10, 2003, Period from December 11, 2003 to December 31, 2003, and Three Months Ended March 31, 2003 and 2004


	Predecessor Company						Successor Company			Predecessor Company			Successor Company
	Year Ended December 31, 2002			Period from January 1, 2003 to December 10, 2003			Period from December 11, 2003 to December 31, 2003			Three Months Ended March 31,
	Year Ended December 31, 2002			Period from January 1, 2003 to December 10, 2003			Period from December 11, 2003 to December 31, 2003			2003			2004
										(unaudited)
Operating revenues, all from a single customer
Electricity sales	$	4,465,946		$	9,485,176		$	728,746		$	1,581,283		$	4,607,244
Capacity payments		1,859,310			7,901,795			620,882			314,557			996,132
Total operating revenues		6,325,256			17,386,971			1,349,628			1,895,840			5,603,376
Operating expenses
Operating expenses		5,392,745			5,607,777			579,585			1,120,728			1,613,993
General and administration expenses		1,888,530			1,481,763			122,759			448,528			519,195
Royalties and land lease expenses (Note 6)		711,308			1,125,392			54,765			343,838			499,051
Depreciation and amortization		6,182,169			6,466,810			418,530			1,509,138			1,483,163
Accretion of asset retirement obligations (Note 8)		—			158,804			9,826			41,066			39,801
Capacity sanction expenses		608,831			313,473			—			108,076			18,808
Total operating expenses		14,783,583			15,154,019			1,185,465			3,571,374			4,174,011
Non-operating income (expenses)
Interest income		80,262			43,508			1,964			16,212			17,849
Interest expense		(3,801,492	)		(3,293,191	)		(174,916	)		(885,427	)		(820,497	)
Net income (loss) before cumulative effect of change in accounting principle		(12,179,557	)		(1,016,731	)		(8,789	)		(2,544,749	)		626,717
Cumulative effect of change in accounting principle (Note 8)		—			1,157,265			—			1,157,265			—
Net income (loss)	$	(12,179,557	)	$	(2,173,996	)	$	(8,789	)	$	(3,702,014	)	$	626,717
Proforma income tax provision (benefit) (unaudited)	$	(4,628,200	)	$	(826,100	)	$	(3,300	)	$	(1,406,800	)	$	238,200
Proforma net income (loss) reflecting tax provision (Note 2) (unaudited)	$	(7,551,357	)	$	(1,347,896	)	$	(5,489	)	$	(2,295,214	)	$	388,517

The accompanying notes are an integral part of the financial statements.

F-50

Puna Geothermal Venture
Statements of Partners' Equity
Year Ended December 31, 2002, Period from January 1, 2003 to December 10, 2003, Period from December 11, 2003 to December 31, 2003, and Three Months Ended March 31, 2004


	Partners' Capital														Accumulated Other Comprehensive Loss			Total Partners' Equity
	Capital									Preferred Capital		Total Partners' Capital
	AMOR VIII Corporation			CE Puna I			CE Puna L.P.			CE Puna L.P.		Total Partners' Capital
Balance at January 1, 2002	$	21,430,098		$	—		$	37,686,019		$	54,643,835	$	113,759,952		$	(2,595,000	)	$	111,164,952
Capital contribution		—			—			—			15,060,747		15,060,747			—			15,060,747
Comprehensive loss
Change in unrealized holding loss		—			—			—			—		—			(2,163,265	)		(2,163,265	)
Partnership loss for 2002		(121,795	)		—			(12,057,762	)		—		(12,179,557	)		—			(12,179,557	)
Total comprehensive loss																			(14,342,822	)
Balance at December 31, 2002		21,308,303			—			25,628,257			69,704,582		116,641,142			(4,758,265	)		111,882,877
Capital contribution		—			—			964,726			9,675,735		10,640,461			—			10,640,461
Comprehensive loss
Change in unrealized holding loss		—			—			—			—		—			265,699			265,699
Partnership loss for the period from January 1, 2003 to December 10, 2003		(12,093	)		—			(2,161,903	)		—		(2,173,996	)		—			(2,173,996	)
Total comprehensive loss																			(1,908,297	)
Balance at December 10, 2003	$	21,296,210		$	—		$	24,431,080		$	79,380,317	$	125,107,607		$	(4,492,566	)	$	120,615,041

Balance at December 11, 2003	$	—		$	100,000		$	24,431,080		$	79,380,317	$	103,911,397		$	(4,492,566	)	$	99,418,831
Comprehensive income
Change in unrealized holding loss		—			—			—			—		—			800,333			800,333
Partnership loss for the period from December 11, 2003 to December 31, 2003		—			(88	)		(8,701	)		—		(8,789	)		—			(8,789	)
Total comprehensive income																			791,544
Balance at December 31, 2003		—			99,912			24,422,379			79,380,317		103,902,608			(3,692,233	)		100,210,375
Comprehensive loss (unaudited)
Change in unrealized holding loss		—			—			—			—		—			923,103			923,103
Partnership income for the period from January 1, 2004 to March 31, 2004		—			6,268			620,449			—		626,717			—			626,717
Total comprehensive loss																			1,549,820
Balance at March 31, 2004 (unaudited)	$	—		$	106,180		$	25,042,828		$	79,380,317	$	104,529,325		$	(2,769,130	)	$	101,760,195

The accompanying notes are an integral part of the financial statements.

F-51

Puna Geothermal Venture
Statements of Cash Flows
Year Ended December 31, 2002, Period from January 1, 2003 to December 10, 2003, Period from December 11, 2003 to December 31, 2003, and Three Months Ended March 31, 2003 and 2004


	Predecessor Company						Successor Company			Predecessor Company			Successor Company
	Year Ended December 31, 2002			Period from January 1, 2003 to December 10, 2003			Period from December 11, 2003 to December 31, 2003			Three Months Ended March 31,
	Year Ended December 31, 2002			Period from January 1, 2003 to December 10, 2003			Period from December 11, 2003 to December 31, 2003			2003			2004
										(unaudited)
Cash flows from operating activities
Net income (loss)	$	(12,179,557	)	$	(2,173,996	)	$	(8,789	)	$	(3,702,014	)	$	626,719
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization		6,182,169			6,466,810			418,530			1,509,138			1,483,163
Accretion of asset retirement obligations		—			158,804			9,826			41,066			39,801
Cumulative effect of change in accounting principle		—			1,157,265			—			1,157,265			—
Changes in
Accounts receivable – HELCO		1,244,851			(1,856,173	)		244,511			(416,285	)		96,158
Spare parts inventory		(216,253	)		(2,424,397	)		—			—			—
Other current and non-current assets		145,495			198			(37,122	)		(619	)		(81	)
Accounts payable and accrued expenses		(372,589	)		749,936			(229,334	)		121,396			(832,172	)
COSI – Puna, Inc. payables		399,507			(171,951	)		662,069			—			—
Constellation Power, Inc. payables		198,000			220,000			—			66,000			66,000
Net cash provided by (used in) operating activities		(4,598,377	)		2,126,496			1,059,691			(1,224,053	)		1,479,588
Cash flows from investing activities
Capital expenditures		(9,515,147	)		(8,454,072	)		(349,641	)		(6,798,633	)		—
Decrease (increase) in restricted cash		(3,103,908	)		3,046,688			(1,964	)		3,063,989			(5,772	)
Net cash used in investing activities		(12,619,055	)		(5,407,384	)		(351,605	)		(3,734,644	)		(5,772	)
Cash flows from financing activities
Principal payments on note payable		(3,228,513	)		(2,697,452	)		(980,814	)		(899,079	)		(980,814	)
Capital contributions		15,060,747			9,675,735			—			5,397,753			—
Net cash provided by (used in) financing activities		11,832,234			6,978,283			(980,814	)		4,498,674			(980,814	)
Increase (decrease) in cash and cash equivalents		(5,385,198	)		3,697,395			(272,728	)		(460,023	)		493,002
Cash and cash equivalents
Beginning of period		6,579,492			1,194,294			4,891,689			1,194,294			4,618,961
End of period	$	1,194,294		$	4,891,689		$	4,618,961		$	734,271		$	5,111,963
Other cash flow information
Cash paid during the period for interest	$	3,800,766		$	3,267,676		$	199,480		$	885,427		$	820,496
Noncash investing activity
Accounts payable converted to Partners' capital	$	—		$	964,726		$	—		$	—		$	—

The accompanying notes are an integral part of these financial statements.

F-52

Puna Geothermal Venture
Notes to Financial Statements
December 31, 2002 and 2003 and March 31, 2004


1.	Organization and Operations

Puna Geothermal Venture ("PGV"), a Hawaii General Partnership, operates under the Second Amended and Restated Partnership Agreement dated December 2, 1996 (the "Partnership Agreement"). Prior to December 11, 2003, the partners of PGV were CE Puna Limited Partnership ("CE Puna"), a subsidiary of Constellation Power Corporation and AMOR VIII Corporation ("AMOR"). Each partner had a 50% interest. However, under the Partnership Agreement and other agreements between the partners, CE Puna has provided a larger percentage of PGV's capital and, therefore, is entitled to a greater percentage of PGV's income or loss, tax benefits and cash flow. In particular, CE Puna is to receive 100% of net cash flow until its Preferred Capital, together with a cumulative Preferred Capital Return of 10% per annum, is paid. On December 11, 2003, CE Puna I Corporation ("CE Puna I"), a subsidiary of Constellation Power Corporation, consummated an agreement to purchase the entire partnership interest of AMOR. At December 31, 2003, the partners are CE Puna I and CE Puna, subsidiaries of Constellation Power Corporation.

PGV developed and is operating a geothermal energy project on the island of Hawaii in the State of Hawaii. PGV sells the electricity it generates to Hawaii Electric Light Company, Inc. ("HELCO") under the terms of a long-term power purchase agreement. PGV began generating electricity commercially in 1993.

During 2002, PGV encountered problems with the production capacity and injection wells related to geothermal resources and production levels fell significantly below minimum performance requirements under the Power Purchase Agreement ("PPA") (Note 5) with HELCO. Such non-compliance with the PPA subjected PGV to PPA-based sanctions (Note 5).

In January 2003, PGV finished development of a well which increased the production under the PPA with HELCO and, in April 2003, PGV finished development of another well that further increased production. The costs of completing these projects were funded by capital contributions from CE Puna.

Management expects to generate positive cash flows from operations in fiscal 2004 in amounts sufficient to fund debt service requirements.


2.	Summary of Significant Accounting Policies

Basis of Presentation

On December 11, 2003, Constellation Power Corporation ("Constellation") closed on the purchase of the remaining interest in PGV that it did not already own. As a result, PGV is wholly owned by Constellation Power Corporation, through its subsidiaries. The purchase was accounted for as an acquisition of an asset, as opposed to the acquisition of a business, and is subject to the purchase method of accounting. Starting on December 11, 2003, PGV's financial statements reflected Constellation's (through its subsidiaries) "pushed down" accounting basis. The change in the partnership equity as a result of this acquisition was an approximately $21.2 million decrease in Partners' capital.

The following reconciles PGV's partners' capital as of December 10, 2003 to Constellation's "pushed down" accounting basis as of December 11, 2003:


Partners' capital as of December 10, 2003	$	125,107,607
Acquisition of AMOR VIII Corporation's investment in PGV by Constellation
Constellation's acquisition cost of AMOR VIII's interest		100,000
AMOR VIII's capital account		(21,296,210	)
Constellation's "pushed down" accounting basis at December 11, 2003	$	103,911,397

F-53

Puna Geothermal Venture
Notes to Financial Statements
December 31, 2002 and 2003 and March 31, 2004

PGV's plant and equipment was written down by approximately $21.2 million; there were no other changes in the basis of any other assets and liabilities as a result of the "push down."

Interim Financial Data

The interim financial data for the three months ended March 31, 2004 and 2003 is unaudited; however, in the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results of the interim periods.

Cash Equivalents

PGV considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Restricted Cash

PGV funds reserve accounts for new wells, debt service, working capital and major maintenance repairs as required by its financing agreement.

Spare Parts Inventory

Spare parts inventory is stated at cost determined on a weighted average basis.

Plant and Equipment

Plant and equipment consists of costs incurred during the development and construction of the power plant, the wellfield and transmission lines (the "plant"). Construction period interest totaling $18,423,973 was capitalized in connection with development and construction of the plant and has been allocated to the assets to which it relates. The plant went in service on August 1, 1993.

Plant and equipment is depreciated using the straight-line method over the lesser of the estimated useful lives of the assets (generally 35 years) or the number of years remaining in the power purchase agreement with HELCO (34.33 years at August 1, 1993.)

Deferred Financing Costs

The expense of issuance of the long-term note payable is being amortized over the fifteen-year life of the note payable under the interest method.

Income Taxes

No provision for federal or state income taxes is made in the financial statements as the individual partners are responsible for reporting their respective shares of PGV's income, loss, deductions and credits to taxing authorities. The proforma net income (loss) on the statements of operations reflects a tax provision (benefit) of 38%, the effective rate of the company that acquired CE Puna I and CE Puna's ownership interest (see Note 9).

Financial Instruments

The carrying amount of cash and cash equivalents and restricted cash approximates fair value because of the short maturity of these instruments. The carrying amount of long-term debt approximates fair value because its interest rate is variable. The estimated termination cost associated with the interest rate swap at December 31, 2003, which represents fair value, is approximately $3,692,000.

F-54

Puna Geothermal Venture
Notes to Financial Statements
December 31, 2002 and 2003 and March 31, 2004

Use of Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates involve judgments with respect to, among other things, various future economic factors, which are difficult to predict and are beyond the control of PGV. Therefore, actual amounts could differ from these estimates.

Impairment of Long-Lived Assets

Long-lived assets subject to the requirements of Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of , as amended by SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets , are evaluated for impairment through a review of undiscounted expected future cash flows. If the sum of the undiscounted expected future cash flows is less than the carrying amount of the asset, an impairment loss is recognized. As a result of the change in PGV's ownership in 2003, a detailed impairment analysis was performed. The result of this analysis concluded that the sum of the undiscounted expected future cash flows was more than the carrying amount of its long-lived assets. Accordingly, PGV recognized no impairment losses of its long-lived assets in 2003 or in any other periods presented.

Asset Retirement Obligation

On July 22, 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 143, Accounting for Asset Retirement Obligations ("SFAS 143"). Under SFAS 143, retirement obligations associated with tangible long-lived assets acquired are to be recognized at fair value in the period in which incurred, effective for financial statements issued for fiscal years beginning after June 15, 2002. PGV adopted SFAS 143 beginning January 1, 2003. See Note 8 for further discussion.

Derivative Instruments

On January 1, 2001, PGV adopted SFAS No. 133, as amended by SFAS No. 138, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). Under SFAS 133, all derivative instruments are recognized in the balance sheet at their fair values. PGV's interest rate swap agreements qualify as a cash flow hedge under SFAS 133. See Note 4 for further discussion.

Concentrations of Credit Risk

Financial instruments that potentially subject PGV to a concentration of credit risk primarily consist of cash and cash equivalents and trade accounts receivable.

PGV's cash and cash equivalents are deposited with two financial institutions in the United States of America and may exceed federally insured amounts. PGV has not experienced any losses on its cash and cash equivalents.

PGV's customer base is comprised of one single customer, HELCO. Loss of or default by this customer could have an adverse effect upon PGV's financial position, results of operations and cash flows.

PGV's production wells are subject to volatility and potential shutdown on exhaustion. A shutdown of a well, as occurred in 2002, could have adverse effects on PGV's ability to produce ample power in accordance with the Power Purchase Agreement (see Note 5), subjecting PGV to reduced revenues and sanctions by HELCO in compensation of the inability to meet specified energy production levels.

F-55

Puna Geothermal Venture
Notes to Financial Statements
December 31, 2002 and 2003 and March 31, 2004


3.	Note Payable

PGV has entered into a Credit Agreement dated as of December 2, 1996 with Credit Suisse, which provides for a 15-year term loan in an amount not to exceed $65,387,594. Substantially all of the assets of PGV are pledged as collateral on amounts due under the Credit Agreement. Principal is due quarterly. Amounts outstanding under the Credit Agreement bear interest at LIBOR plus 1.50% or the lender's Base Rate plus .75%, at PGV's option. On the fifth and tenth anniversary of the closing of the Credit Agreement, the interest rate increases by 25 basis points. In addition, the interest rate may be increased by 25 basis points if PGV fails to maintain at least a 1.25:1 debt service coverage ratio. The interest rate at December 31, 2003 and 2002 was 2.94% and 3.56%, respectively.

As required under the Credit Agreement, Constellation Investments, Inc., an affiliate of CE Puna, established several reserves and guarantees in order to fund specific needs of PGV. Under the agreement, a Debt Service Reserve, a New Well Field Reserve and an Underground Injection Control ("UIC") Guaranty were established. PGV is required, per the amended Credit Agreement, to maintain $3.0 million in the New Well Field Reserve for the purpose of funding well improvements as structured in PGV's Restoration Plan. The Debt Service Reserve Guaranty includes a guaranty of $4.5 million by Constellation Investments, Inc. and a Debt Service Reserve to be maintained by PGV of $1.8 million. The reserve balances recorded as restricted cash by PGV as of December 31, 2002, 2003 and March 31, 2004 were as follows:


					March 31,
	2002		2003		2004
					(unaudited)
New Well Field Reserve	$	3,073,759	$	2,224	$	2,224
Debt Service Reserve		1,815,644		1,831,786		1,835,261
Maintenance Reserve		625,990		631,479		632,660
Working Capital Reserve		592,366		597,546		598,662
	$	6,107,759	$	3,063,035	$	3,068,807

These reserve accounts are classified as current restricted cash since they are used and replenished for servicing current debt and for funding current operations.

Under terms of the Revised Credit Agreement, reserve accounts were funded at closing for debt service, working capital and major maintenance repairs. Additional payments into these and other reserve accounts will occur as provided in the Revised Credit Agreement. Distributions to the partners are made after all required funding of reserves.

At December 31, 2003, the scheduled maturities under the Credit Agreement are as follows:


Years Ending
2004	$	4,004,990
2005		4,413,661
2006		5,108,405
2007		5,925,752
2008		6,579,627
Thereafter		18,267,447
	$	44,299,882

See Note 9 for subsequent event.


4.	Derivative Instruments

As required under the Credit Agreement to reduce the impact of changes in interest rates on its variable rate debt, PGV entered into 10-year interest rate swap agreements on approximately 75%

F-56

Puna Geothermal Venture
Notes to Financial Statements
December 31, 2002 and 2003 and March 31, 2004

of the amounts outstanding under the Credit Agreement. The swap agreements qualify for hedge accounting as a cash flow hedge. The average fixed LIBOR is 6.67% under the swap agreements.

For the periods from December 11, 2003 to December 31, 2003, from January 1, 2003 to December 10, 2003, and for the year ended December 31, 2002, unrealized holding gains of $800,333 and $265,699 and unrealized holding loss of $2,163,265, respectively, were recorded in accumulated other comprehensive income/loss to recognize the change in fair value of the swap agreements. An unrealized holding gain of $923,103 was recorded for the three months ended March 31, 2004 (unaudited).

PGV made payments of $1,814,620 under the swap agreements for the year ended December 31, 2002. Payments totaled $1,447,950 for the period January 1, 2003 to December 10, 2003 and $480,157 for the period December 11, 2003 to December 31, 2003. PGV made payments of $231,065 for the three months ended March 31, 2004 (unaudited).

PGV may be exposed to a potential loss in the event of nonperformance by the other parties to the swap agreements, but PGV does not anticipate any such nonperformance. The notional value of the amounts outstanding under the swap agreements is approximately $32 million.

The swap agreements were terminated on June 3, 2004. The unrealized holding loss for the period April 1, 2004 through June 2, 2004 amounted to approximately $31,000 (unaudited).


5.	Power Purchase Agreement

PGV has entered into a long-term non-cancelable power purchase agreement with HELCO. HELCO agreed to purchase up to 30 MW of net output during peak hours and up to 22 MW of net output during off peak hours through the year 2027. The agreement specifies energy rates of the greater of avoided costs of 6.56¢ per kWh for the first 25 MW of peak energy and 5.43¢ per kWh for the first 22 MW of off peak energy. Energy rates for production in excess of 25 MW for peak hours and in excess of 22 MW for off peak hours are greater of the avoided energy payment rates of 4.325¢ per kWh for peak hours and 3.325¢ per kWh for off peak hours. In addition, PGV receives capacity payments for providing peak period energy. Capacity payments are 3.39¢ per kWh for the first 25 MW and 2.14¢ per kWh for the additional 5 MW based on annual capacity payments of $4 million and $504,750, respectively, and 4,718 peak hours in a year.

PGV is subject to sanctions in the power purchase agreement in cases where PGV is not able to provide the agreed upon power output, within a 5% yield. Such sanctions do not result in the agreement becoming cancelable at HELCO's discretion. In 2003 and 2002, PGV was not able to meet the specified goals for power output and as such, was subject to sanctions based on the following: 1) reductions are made to the monthly capacity payments noted above for deficiencies at the above rates and 2) on an annual basis, shortfalls of the on-peak availability provide for payments due of $7,992 per full percentage point below 95% to and including 80% and $11,875 per full percentage point less than 80%. Pursuant to the agreement as summarized above, PGV recognized capacity sanction expenses of $608,831 in fiscal 2002, $313,473 in the period January 1, 2003 to December 10, 2003, and $18,808 in the three-months ended March 31, 2004 (unaudited), based on the capacity shortfalls for these periods.


6.	Royalty and Lease Agreements

PGV has entered into various long-term royalty and lease agreements related to the use of geothermal resources and to the land on which the facility is situated. Such agreements call for PGV to pay royalty payments based on gross revenues derived from energy sales. Royalties are remitted to the State of Hawaii based on steam value at approximately 3% of gross revenue. Royalties to the State of Hawaii were $179,753 in 2002, $497,530 from January 1, 2003 to December 10, 2003 and $30,373 from

F-57

Puna Geothermal Venture
Notes to Financial Statements
December 31, 2002 and 2003 and March 31, 2004

December 11, 2003 to December 31, 2003. Royalties for the three months ended March 31, 2004 were $157,550 (unaudited). Royalties are remitted to Thermal Power based on steam value. Royalties to Thermal Power were $69,988 in 2002, $191,227 from January 1, 2003 to December 10, 2003 and $11,674 from December 11, 2003 to December 31, 2003. Royalties for the three months ended March 31, 2004 were $66,911 (unaudited). Royalties are remitted to the lessor of the facility site and associated properties, Kapoho Land Partnership ("KLP"), at approximately 3% of steam value. Royalty payments to KLP are subject to minimum payments of $260,520 per year with the minimum payment made for 2003 and 2002. In addition, KLP receives operating lease payments of $167,107 annually for the use of the site. Minimum royalty payments are subject to adjustment every five years based upon changes in the CPI. Payments for the use of the site are subject to renegotiation every five years based on rental value of comparable properties.

At December 31, 2003, the total remaining minimum commitments for royalties and operating leases, excluding the effects of future renegotiations, are as follows:


Years Ending
2004	$	427,627
2005		427,627
2006		427,627
2007		427,627
2008		427,627
Thereafter		8,124,913
	$	10,263,048


7.	Related Party Transactions

During December 1996, PGV and COSI Puna, Inc., an affiliate of Constellation Power, Inc., entered into an Operation and Maintenance Agreement effective as of December 2, 1996. COSI Puna, Inc.'s fees under the agreement are 10% of the total labor plus related burden costs. The fee for 2002 was $251,676 and payments to COSI Puna, Inc. for payroll related costs and fees totaled $2,719,084 in 2002. In connection with CE Puna I's acquisition of AMOR's ownership interest in PGV, COSI Puna, Inc. agreed to waive payment of certain fees payable at the acquisition date. Such payable amounted to $480,726. PGV has recognized the forgiveness of this payable as a capital contribution in the period ended December 10, 2003.

Two employees of Constellation Power, Inc. ("CPI") serve as Owner's Representative and Financial Manager of PGV. In addition, other employees of CPI and its affiliates perform human resources, risk management, environmental and safety, financial and consultation services for PGV. The cost for such services in 2002 totaled $264,000. In connection with CE Puna I's acquisition of AMOR's ownership interest in PGV, CPI agreed to waive payment of all fees payable at the acquisition date. Such payable amounted to $484,000. PGV has recognized the forgiveness of this payable as a capital contribution in the period ended December 10, 2003.


8.	Asset Retirement Obligation

Effective January 1, 2003, PGV adopted SFAS No. 143, Accounting for Asset Retirement Obligations . SFAS No. 143 provides the accounting requirements for recognizing an estimated liability for legal obligations associated with the retirement of tangible long-lived assets. PGV measures the liability at fair value when incurred and capitalizes a corresponding amount as part of the book value of the related long-lived assets. The increase in the capitalized cost is included in determining depreciation expense over the estimated useful life of these assets. Since the fair value of the asset retirement obligations ("ARO") is determined using a present value approach, accretion of the liability due to

F-58

Puna Geothermal Venture
Notes to Financial Statements
December 31, 2002 and 2003 and March 31, 2004

the passage of time is recognized each period to "Accretion of asset retirement obligations" in PGV's Statements of Operations until the settlement of the liability. A gain or loss is recorded when the liability is settled after retirement. The adoption of SFAS No. 143 on January 1, 2003 resulted in an increase to plant and equipment of $715,148, net of accumulated depreciation and the establishment of an asset retirement obligation liability of $1,872,413. The cumulative effect of this change for periods prior to January 1, 2003 of $1,157,265 is shown as the cumulative effect of change in accounting principle in the Statements of Operations.

Inherent in the fair value calculation of ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, and timing of settlement. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment will be made to the plant and equipment balance.

The change in the "Asset retirement obligation" liability during 2003 was as follows:


Liability at January 1, 2003	$	1,872,413
Accretion expense through December 31, 2003		158,804
Accretion expense – December 11, 2003 to December 31, 2003		9,826
Liability at December 31, 2003		2,041,043
Accretion expense – January 1, 2004 to March 31, 2004 (unaudited)		39,801
Liability at March 31, 2004 (unaudited)	$	2,080,844

The pro-forma asset retirement obligation PGV would have recognized as of January 1, 2002, had PGV implemented SFAS No. 143 as of that date, was approximately $1,760,146 based on the information, assumptions, and interest rates as of January 1, 2003 used to determine the $1,872,413 liability recognized upon the adoption of SFAS No. 143. The following discloses the pro forma effect of the implementation on the Company's net loss for the year ended December 31, 2002, had SFAS No. 143 been adopted by the Company on January 1, 2002:


Net loss, as reported	$	(12,179,557	)
Effect on net loss had SFAS No. 143 been applied		(129,160	)
Net loss, as adjusted	$	(12,308,717	)


9.	Subsequent Event

Constellation Power Corporation sold its interest in CE Puna I and CE Puna to an unrelated third party on June 3, 2004. In connection with this transaction, the Company's note payable to Credit Suisse was paid in full, and the Credit Agreement and Revised Credit Agreement with Credit Suisse and swap agreements were terminated.

F-59

Combined Heber and Affiliates

(Debtors-in-Possession)
Report on Audits of Combined Financial Statements
As of December 31, 2002 and December 17, 2003,
And for the years ended December 31, 2001 and 2002, and
for the period from January 1, 2003 to December 17, 2003

F-60

Report of Independent Auditors

To the Partners of Combined Heber and Affiliates

In our opinion, the accompanying combined balance sheet and the related combined statements of operations, of partners' capital and of cash flows present fairly, in all material respects, the financial position of Heber Geothermal Company, Heber Field Company, and Second Imperial Geothermal Company (collectively "Heber and Affiliates" or the "Company") at December 31, 2002 and December 17, 2003, and the results of their operations and their cash flows for the years ended December 31, 2001 and 2002, and for the period from January 1, 2003 to December 17, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the combined financial statements, Covanta Energy Corporation and 123 of its subsidiaries, including the Company, filed voluntary petitions on April 1, 2002 with the United States Bankruptcy Court for the Southern District of New York for reorganization under the provisions of Chapter 11 of the Bankruptcy Code. The Company's Debtor's Third Amended Joint Plan of Reorganization Under Chapter 11 (Heber Plan) was substantially consummated on December 18, 2003, and the Company emerged from bankruptcy.

As discussed in Note 1 to the financial statements, on December 18, 2003, OrCal Geothermal, Inc. acquired the partnership interests in the Company.

As discussed in Note 5 to the financial statements, effective January 1, 2003, the Company adopted the provisions of Statement of Financial Accounting Standards No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets .

/s/ PricewaterhouseCoopers LLP

Sacramento, California
July 19, 2004

F-61

Combined Heber and Affiliates
(California Limited Partnerships)
(Debtors-in-Possession)
Balance Sheets (in thousands)


	December 31, 2002			December 17, 2003
Assets
Current assets:
Cash	$	57		$	—
Restricted cash and cash equivalents		2,583			1,897
Accounts receivable		9,815			7,183
Prepaid expenses		811			258
Total current assets		13,266			9,338
Property, plant and equipment, net		78,086			69,713
Restricted cash and cash equivalents		3,003			4,064
Total assets	$	94,355		$	83,115
Liabilities and Partners' Capital
Current liabilities:
Accounts payable and accruals	$	3,570		$	2,729
Notes payable		12,519			—
Current portion of finance obligation		10,736			6,112
Total current liabilities		26,825			8,841

Finance obligation, net of current portion		19,729			13,617
Liabilities subject to compromise		51,386			—
Asset retirement obligation		—			2,101
Total liabilities		97,940			24,559
Commitments and contingencies (Notes 4, 6 and 8)
Partners' Capital		(3,585	)		58,556
Total liabilities and partners' capital	$	94,355		$	83,115

The accompanying notes are an integral part of these financial statements

F-62

Combined Heber and Affiliates
(California Limited Partnerships)
(Debtors-in-Possession)
Statements of Operations (in thousands)


	Year Ended December 31, 2001			Year Ended December 31, 2002			Period from January 1, 2003 to December 17, 2003
Revenues, all from a single customer:
Energy	$	60,140		$	51,291		$	52,417
Capacity		12,570			12,556			12,507
Capacity bonus		1,500			1,230			1,207
		74,210			65,077			66,131
Cost of revenues:
Operating expenses		24,978			26,451			28,775
Depreciation and amortization		9,000			9,088			8,708
		33,978			35,539			37,483
Gross margin		40,232			29,538			28,648
General and administrative expenses		8,515			7,488			29
Income from operations		31,717			22,050			28,619
Other income (expense):
Gain on discharge of liabilities subject to compromise		—			—			31,460
Recovery of bad debt provision		2,109			—			—
Reorganization costs		—			(3,289	)		(4,029	)
Interest income		2,005			141			99
Interest expense		(7,412	)		(3,929	)		(1,794	)
Income before cumulative effect of change in accounting principle		28,419			14,973			54,355
Cumulative effect of change in accounting principle		—			—			(1,660	)
Net income	$	28,419		$	14,973		$	52,695
Pro forma net income reflecting the adoption of SFAS 143 applied retroactively (Note 5) (unaudited)	$	28,268		$	14,822		$	54,355
Pro forma income tax provision (unaudited)	$	9,929		$	5,690		$	20,024
Pro forma net income reflecting tax provision (Note 1) (unaudited)	$	18,490		$	9,283		$	32,671

The accompanying notes are an integral part of these financial statements

F-63

Combined Heber and Affiliates
(California Limited Partnerships)
(Debtors-in-Possession)
Statements of Partners' Capital (in thousands)


Balance, December 31, 2000	$	(23,064	)
Distributions		(11,865	)
Net income		28,419
Balance, December 31, 2001		(6,510	)
Distributions		(12,048	)
Net income		14,973
Balance, December 31, 2002		(3,585	)
Distributions		(2,577	)
Contributions		12,023
Net income		52,695
Balance, December 17, 2003	$	58,556

The accompanying notes are an integral part of these financial statements.

F-64

Combined Heber and Affiliates
(California Limited Partnerships)
(Debtors-in-Possession)
Statements of Cash Flows (in thousands)


	Year Ended December 31, 2001			Year Ended December 31, 2002			Period from January 1, 2003 to December 17, 2003
Cash flows from operating activities:
Net income	$	28,419		$	14,973		$	52,695
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,000			9,088			8,708
Accretion of asset retirement obligation		—			—			150
Gain on discharge of liabilities subject to compromise		—			—			(31,460	)
Recovery of doubtful account		(2,109	)		—			—
Cumulative effect of change in accounting principle		—			—			1,660
Changes in operating assets and liabilities:
Accounts receivable		(21,695	)		24,908			2,632
Prepaid expenses		125			70			553
Accounts payable and accrued expenses		2,254			(3,155	)		(841	)
Liabilities subject to compromise		—			—			(19,926	)
Due to related entities		(11,006	)		13,533			—
Net cash provided by operating activities		4,988			59,417			14,171
Cash flows from investing activities:
Change in restricted cash and cash equivalents		(984	)		(61	)		(375	)
Capital expenditures		(1,458	)		(3,334	)		(44	)
Net cash used in investing activities		(2,442	)		(3,395	)		(419	)
Cash flows from financing activities:
Distributions to partners		(11,865	)		(12,048	)		(2,577	)
Contributions from partners		—			—			12,023
Principal payment on finance obligation		(12,364	)		(13,093	)		(10,736	)
Payments on notes payable		—			(9,141	)		(12,519	)
Proceeds from (payments on) other long-term liabilities		21,691			(21,691	)		—
Net cash used in financing activities		(2,538	)		(55,973	)		(13,809	)
Net increase (decrease) in cash and cash equivalents		8			49			(57	)
Cash and cash equivalents, beginning of period		—			8			57
Cash and cash equivalents, end of period	$	8		$	57		$	—
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	5,052		$	5,890		$	1,792
Supplemental non-cash investing and financing activities:
Effect of adopting of SFAS No. 143:
Asset retirement cost	$	—		$	—		$	291
Asset retirement obligation	$	—		$	—		$	1,951
Reclassification of amounts due to related entities and accounts payable to liabilities subject to compromise	$	—		$	51,386		$	—

The accompanying notes are an integral part of these financial statements.

F-65

Combined Heber and Affiliates
(California Limited Partnerships)
(Debtors-in-Possession)
Notes to Financial Statements (in thousands)

1. Business and Significant Accounting Policies

Basis of combination and presentation

The accompanying financial statements have been prepared by combining the following three legal entities, all of which were under common control, through affiliates, by Covanta Energy Corporation ("CEC") for all periods presented prior to December 18, 2003, and effective December 18, 2003 (see discussion below regarding sale of company), by OrCal Geothermal, Inc. ("OrCal"), a wholly owned subsidiary of Ormat Nevada, Inc. (ONI), which in turn is a wholly owned subsidiary of Ormat Technologies, Inc. (OTI):


•	Second Imperial Geothermal Company ("SIGC" or "Heber 2"), a California limited partnership, that was formed on November 24, 1992 for the purpose of developing, constructing and operating a geothermal electrical generating facility located in Heber, California.


•	Heber Geothermal Company ("HGC" or "Heber 1"), a California general partnership, that was formed on August 12, 1983 for the purpose of designing, constructing and operating a geothermal electrical generating station located in Heber, California.


•	Heber Field Company ("HFC"), a California general partnership, that was formed on November 1, 1991 for the purpose of acquiring and operating a geothermal field located in Heber, California, and selling the geothermal fluid to HGC and to SIGC.

The combination of the above entities is collectively referred to as "Heber and Affiliates" or the "Company". Intercompany accounts and transactions have been eliminated in the combination.

Bankruptcy and sale transaction

On April 1, 2002 ("Petition Date"), CEC and 123 of its domestic subsidiaries (collectively the "Debtors") filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). CEC and these subsidiaries, which include the Company, have been operating their businesses as debtors in possession pursuant to the Bankruptcy Code.

The Company's Financial Statements have been prepared in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7 ("SOP 90-7"), Financial Reporting by Entities in Reorganization under the Bankruptcy Code. Accordingly, all pre-petition liabilities believed to be subject to compromise have been segregated in the balance sheet and classified as liabilities subject to compromise, at the estimated amount of allowable claims. As of December 31, 2002 such liabilities consisted mainly of amounts due to related entities (Note 7). Liabilities not believed to be subject to compromise are separately classified as current and non-current.

On September 29, 2003, the court entered an order approving competitive bidding and auction procedures for the purpose of obtaining the highest or best offer for the sale of the Company. On November 19, 2003 the Debtors held an auction before the Court. As a result of the auction, the Debtors determined that the offer submitted by OrCal, was the best and highest bid.

On November 21, 2003, the Bankruptcy Court confirmed the Debtor's Third Amended Joint Plan of Reorganization Under Chapter 11 (Heber Plan) and approved the sale of interests to OrCal. On December 18, 2003, each of the conditions precedent to the Confirmation Date pursuant to Heber Plan occurred or was waived in accordance with the Heber Plan, and the Company was sold to OrCal for a combined purchase price of approximately $180 million.

F-66

Combined Heber and Affiliates
(California Limited Partnerships)
(Debtors-in-Possession)
Notes to Financial Statements (in thousands)

Cash

Cash consists of deposit accounts with banks.

Restricted cash and cash equivalents

Under the terms of the lease agreement (Note 4), the Company was required to maintain a debt service reserve and operating fund accounts that have been classified as restricted cash and cash equivalents. Such amounts were invested primarily in money market accounts. The Company considers all highly liquid instruments, with an original maturity of three months or less, to be cash equivalents. Due to the revolving nature of the operating fund account, the amounts are classified as current assets. Due to the long-term nature of the debt service reserve account, the amounts are classified as non-current assets.

Concentration of credit risk

Financial instruments which potentially subject the Company to concentration of credit risk consist principally of temporary cash investments and accounts receivable. The Company places its temporary cash investments with high credit quality financial institutions located in the United States of America. At December 31, 2002 and December 17, 2003, the Company maintained all of its deposits in three U.S. financial institutions that were federally insured up to $100 per financial institution. All of the Company's revenues, and the related receivable balances, are earned from one customer, Southern California Edison Company ("SCE"). The Company has historically been able to collect on all of its receivable balances from SCE, accordingly no provision for doubtful accounts has been made.

Property, plant and equipment

Property, plant and equipment are stated at cost. All costs associated with acquisition, development and construction of power plant facilities are capitalized. Major improvements are capitalized, and repairs and maintenance costs are expensed. Power plants were depreciated using the straight-line method over the estimated service period of 24 to 28 years. The cost and accumulated depreciation of items sold or retired are removed from the accounts. Any resulting gain or loss is recognized currently in operating income.

Impairment of long-lived assets and long-lived assets to be disposed of

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. Management believes that no impairment exists for long-lived assets, however future estimates as to the recoverability of such assets may change based on revised circumstances.

Derivative instruments

F-67

Combined Heber and Affiliates
(California Limited Partnerships)
(Debtors-in-Possession)
Notes to Financial Statements (in thousands)

their balance sheets as either assets or liabilities measured at their fair value unless exempted from derivative treatment as a normal purchase and sale. All changes in the fair value of derivatives are recognized currently in earnings unless specific hedge criteria are met, which requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

In June 2003, the FASB issued DIG Issue No. C20, Scope Exceptions: Interpretation of the Meaning of Not Clearly and Closely Related in Paragraph 10(b) regarding Contracts with a Price Adjustment Feature . DIG Issue No. C20 superseded DIG Issue No. C11 Interpretation of Clearly and Closely Related in Contracts That Qualify for the Normal Purchases and Normal Sales Exception , and specified additional circumstances in which a price adjustment feature in a derivative contract would not be an impediment to qualifying for the normal purchases and normal sales scope exception under SFAS No. 133. DIG Issue No. C20 was effective as of the first day of the fiscal quarter beginning after July 10, 2003, (i.e. October 1, 2003, for the Company). In conjunction with initially applying the implementation guidance, DIG Issue No. C20 requires contracts that did not previously qualify for the normal purchases normal sales scope exception, and do qualify for the exception under DIG Issue No. C20, to freeze the fair value of the contract as of the date of the initial application, and amortized such fair value over the remaining contract period. Upon adoption of DIG Issue No. C20, the Company elected the normal purchase and normal sales scope exception under FAS No. 133 related to its power purchase agreements. Such adoption did not have a material impact on the Company's consolidated financial position and results of operations.

Revenue recognition

Revenue from the sale of electricity is recorded based upon output delivered and capacity provided at rates as specified under terms of long-term power purchase agreements (Note 6).

Income taxes

The net income of the Company for income tax purposes is the responsibility of the individual partners. Accordingly, no provision for income taxes has been recorded in the accompanying financial statements. The pro forma net income on the statement of operations reflects a tax provision of 38%, the effective rate of the company that acquired the Company's ownership interest.

Accounting estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of such financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

F-68

Combined Heber and Affiliates
(California Limited Partnerships)
(Debtors-in-Possession)
Notes to Financial Statements (in thousands)

Fair value of financial instruments

The carrying amount of cash, restricted cash and cash equivalents approximates fair value because of the short maturity of those instruments. The fair value of long-term debt is estimated based on the current borrowing rates for similar issues, which approximates carrying amount.

Recently issued accounting pronouncements

In April 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities . SFAS No. 149 amends and clarifies the accounting and reporting for derivative instruments, including certain derivatives embedded in other contracts, and for hedging activities under SFAS No. 133. The amendments in SFAS No. 149 require that contracts with comparable characteristics be accounted for similarly. SFAS No. 149 clarifies under what circumstances a contract with an initial net investment meets the characteristics of a derivative according to SFAS No. 133 and when a derivative contains a financing component that warrants special reporting in the statement of cash flows. In addition, SFAS No. 149 amends the definition of an "underlying" to conform it to language used in FIN No. 45 and amends certain other existing pronouncements. The provisions of SFAS No. 149 that relate to SFAS No. 133 "Implementation Issues" that have been effective for periods that began prior to June 15, 2003 should continue to be applied in accordance with their respective effective dates. The requirements of SFAS No. 149 are effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The Company adopted the provisions of SFAS No. 149 effective July 1, 2003, which did not have a material impact on its results of operations and financial position as of December 17, 2003.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity . SFAS No. 150 establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability because that financial instrument embodies an obligation of the issuer. The requirements of SFAS No. 150 are effective for financial instruments entered into or modified after May 31, 2003. For financial instruments created prior to the issuance date of SFAS No. 150, transition shall be achieved by reporting the cumulative effect of a change in accounting principle. The Company adopted the provisions of SFAS No. 150 effective July 1, 2003, which did not have a material impact on its results of operations and financial position as of December 17, 2003.

2. Property, Plant and Equipment

Property, plant and equipment, consists of the following:


	December 31, 2002			December 17, 2003
Power plant facility	$	154,870		$	154,915
Asset retirement cost		—			527
		154,870			155,442
Less accumulated depreciation		(76,784	)		(85,729	)
	$	78,086		$	69,713

Included in the power plant facility are assets recorded under capital lease, as further discussed in Note 4.

F-69

Combined Heber and Affiliates
(California Limited Partnerships)
(Debtors-in-Possession)
Notes to Financial Statements (in thousands)

3. Notes Payable

On December 17, 1999, the Company entered into a note agreement with General Electric Capital Corporation ("GECC") for $21.7 million. Under the agreement, principal was due by July 31, 2003. Interest was payable quarterly and was computed at 7.5% per annum through March 14, 2001. Then, for the periods from March 14, 2001 to January 31, 2002 and from January 31, 2002 to July 31, 2003, interest was computed at a rate per annum of LIBOR plus 2.75% and LIBOR plus 4.75%, respectively.

The notes were fully paid during the period from January 1, 2003 to December 17, 2003.

4. Finance Obligation

Construction of the Heber 2 project was financed through a $115 million construction loan obtained by SIGC from GECC. On September 1, 1993, SIGC sold the project to GECC for a purchase price equal to the balance of the construction loan and simultaneously agreed to lease back the project under a lease with an initial term that would have expired in 2008.

The lease was collateralized by all of SIGC assets including the power purchase agreement (PPA) (Note 6), geothermal leases, SCE payments and cash reserve through an escrow agreement.

All revenues from the project were required to be deposited into a series of escrow accounts administered by an independent escrow agent. The related project agreements provided for the disbursement of funds by the escrow agent for the project's operating costs and lease payments, as well as the establishment of certain long-term cash escrow accounts. During the initial lease term, these long-term cash escrow accounts could have been used in limited situations to pay current operating and lease expenses to the extent that project revenues were not sufficient to fund such expenses.

In connection with OrCal's purchase of the Company, the lease was cancelled and OTI purchased the lessor position from GECC.

5. Asset Retirement Obligation

The Company adopted SFAS No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets , effective January 1, 2003. Under SFAS No. 143, entities are required to record the fair value of a legal liability for an asset retirement obligation in the period in which it is incurred. The Company's legal liabilities include capping wells and post-closure costs of geothermal power producing sites. When a new liability for asset retirement obligations is recorded, the Company capitalizes the costs of the liability by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. At retirement, an entity settles the obligation for its recorded amount or incurs a gain or loss. On January 1, 2003 the Company recorded a cumulative effect of change in accounting principle of $1,660. As a result of adopting the provisions of SFAS No. 143, the net income for period from January 1, 2003 to December 17, 2003, decreased by approximately $165.

F-70

Combined Heber and Affiliates
(California Limited Partnerships)
(Debtors-in-Possession)
Notes to Financial Statements (in thousands)

The following table summarizes the impact on the Company balance sheet following the adoption of SFAS No. 143:


	Balance at December 31, 2002			Change Resulting From Application of SFAS No. 143			Balance at January 1, 2003
Property, plant and equipment	$	154,870		$	527		$	155,397
Accumulated depreciation		(76,784	)		(236	)		(77,020	)

Net property, plant and equipment	$	78,086		$	291		$	78,377

Non-current asset retirement obligation	$	—		$	1,951		$	1,951

The unaudited pro-forma changes to the non-current asset retirement obligation, based on the information, assumptions, and interest rates as of January 1, 2003, are presented below to show what the Company would have reported if the provisions of SFAS No. 143 had been in effect for the periods presented below:


	Year Ended December 31, 2002		For the Period From January 1, 2003 to December 17, 2003
Balance, beginning of period	$	1,800	$	1,951
Accretion expense		151		150

Balance, end of period	$	1,951	$	2,101

6. Power Purchase Agreements

The Company has two power purchase agreements (PPAs) with SCE. The PPAs provide for the sale of capacity and energy through their respective terms, one expiring in 2015 and the other in 2023. Under the PPAs, the Company receives a fixed energy payment through April 30, 2007, and thereafter an energy payment based on SCE's short-run avoided cost (SRAC). The PPAs provide for firm capacity and bonus payments established by the contracts and are paid to the Company each month through the contracts' term based on plant performance. Bonus capacity payments are earned based on actual capacity available during certain peak hours.

7. Related Party Transactions

Operation and Maintenance Contracts

The Heber plant was operated by Covanta Imperial Power Services, Inc ("CIPS"), an affiliated entity, under a long term agreement, for the same term as the PPA. In return for providing all personnel, equipment, materials, supplies and services to operate and maintain the plant, CIPS received a fixed fee, which escalates by 5% annually, and received reimbursement for its non-labor costs.

HFC was operated by Covanta Geothermal Operations, Inc ("CGO"), an affiliated entity, under a long term agreement similar to CIPS agreement with HGC.

The Heber 2 plant was operated by Covanta SIGC Geothermal Operations, Inc. ("SIGC Operator"), an affiliated entity, under a long term agreement that extended for the life of the PPA. SIGC Operator was responsible for providing all customary operations and maintenance services. SIGC Operator was reimbursed for all costs incurred in running the plant. The contract also provided for an annual bonus to be paid to the operator if electricity production and on-peak capacity factors exceeded specified levels.

F-71

Combined Heber and Affiliates
(California Limited Partnerships)
(Debtors-in-Possession)
Notes to Financial Statements (in thousands)

Amounts recorded for operation and maintenance are as follows:


	Year Ended December 31, 2001		Year Ended December 31, 2002		Period from January 1, 2003 to December 17, 2003
O&M expenses	$	9,935	$	9,316	$	9,375
Operating Bonus		1,642		1,657		1,682
	$	11,577	$	10,973	$	11,057

Management Services

Management services were provided by ERC Energy, Inc (an affiliated entity) to HGC and HFC, and by Amor 14 (an affiliated entity) to SIGC. For the years ended December 31, 2001 and 2002 and for the period from January 1, 2003 to December 17, 2003 the fees relating to those services amounted to $228, $240 and $243, respectively.

Allocated Administrative Costs

Administrative costs incurred by CEC were allocated to the Company. Such costs amounted to $7,226 and $7,337 for the years ended December 31, 2001 and 2002, respectively. No such costs were allocated to the Company in 2003.

As of December 31, 2002, amounts due to related entities was $50,749, which resulted from expenses to be paid under the operations and maintenance contracts, management service fees, and allocated administrative costs. In 2003, all amounts due to related entities were determined to be rejected claims under the bankruptcy proceedings, and as such the balance as of December 31, 2002 has been included in liabilities subject to compromise on the accompanying balance sheet. The outstanding balance of $31,460 as of December 17, 2003, was discharged and recognized as a gain on discharge of liabilities subject to compromise on the accompanying statement of operations.

8. Commitment and contingencies

Contingencies

The lessors owning interest in the Heber Geothermal Area (an area where the Company obtains its geothermal resource) filed a claim in the Company's bankruptcy proceedings totaling approximately $80 million. The Company reached a full and final settlement with a group of the royalty related claims totaling $2.175 million, which was fully executed on October 6, 2003 and approved by the bankruptcy court on October 10, 2003. In addition, it was agreed that the method of calculating royalties would remain the same. The Company also paid legal fees of $550 related to that group. Such amounts have been reflected in operating expenses in the accompanying statement of operations for the period from January 1, 2003 to December 17, 2003.

For those royalty related claims not included in the group settlement, the Company began negotiations to settle such claims. The Company had accrued approximately $744 as of December 17, 2003 as their best estimate of the settlements remaining, including amounts not yet paid for the group settlement mentioned above, which is included in account payable and accruals on the accompanying balance sheet. In 2004, a settlement was reached with most of the remaining parties for approximately $478. The Company believes that the remaining $266 accrued will satisfy the remaining parties not yet fully settled or those for which settlements have been reached but have not yet paid.

F-72

Combined Heber and Affiliates
(California Limited Partnerships)
(Debtors-in-Possession)
Notes to Financial Statements (in thousands)

For lessors with non-royalty surface right related claims, the Company agreed to pay a one time payment of $390, and increase prospective annual rental and/or severance payments by approximately $67 per year, which will be adjusted for the cost of living each year.

In response to an order issued by a California State Court of Appeal, the California Public Utilities Commission ("CPUC"), has commenced an administrative proceeding in order to address short run avoided cost pricing for Qualifying Facilities for the period spanning from December 2000 to March 2001. The court directed that the CPUC modify short run avoided cost pricing on a retroactive basis to the extent that the CPUC determined that short run avoided cost prices were not sufficiently "accurate" or "correct." If the short run avoided cost prices charged during the period in question were determined by the CPUC to not be "accurate" or "correct," retroactive price adjustments could be required for either of the Company's Qualifying Facilities. Currently it is not possible to predict the outcome of such proceeding, however, any retroactive price adjustment required to be made in relation to either of the Company's projects may require such projects to make refund payments or receive less from future revenues, which could materially affect the financial condition, future results and cash flow of the Company.

Commitment

HFC pays monthly royalties under several mineral right leases. The monthly royalties total approximately 5% of the HGC's and SIGC's revenues, respectively, less transmissions and scheduling charges. Royalty expenses recorded for the years ended December 31, 2001 and 2002, and for the period from January 1, 2003 to December 17, 2003 totaled $4,341, $3,194 and $3,509, respectively.

F-73

Mammoth Pacific, L.P.

Report on Audits of Financial Statements
As of December 31, 2002 and September 30, 2003,
and for the year ended December 31, 2002, and for
nine-month period ended September 30, 2003
And
Unaudited Financial Statements
for the nine-month period ended September 30,
2002

F-74

Report of Independent Auditors

To the Partner of Mammoth Pacific, L.P. (OrMammoth, Inc.)

In our opinion, the accompanying balance sheets and the related statements of operations, of partners' capital and of cash flows present fairly, in all material respects, the financial position of Mammoth Pacific, L.P. ("Partnership") at December 31, 2002 and September 30, 2003, and the results of its operations and its cash flows for the year ended December 31, 2002 and for the nine-month period ended September 30, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 3 to the financial statements, effective January 1, 2003, the Partnership adopted the provisions of Statement of Financial Accounting Standards No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets .

/s/ PricewaterhouseCoopers LLP

Sacramento, California
January 26, 2004

F-75

Mammoth Pacific, L.P.
(A California Limited Partnership)
Balance Sheets
December 31, 2002 and September 30, 2003


	December 31, 2002		September 30, 2003
Assets
Current assets:
Cash and cash equivalents	$	4,416,984	$	8,096,196
Accounts receivable		2,705,284		3,140,124
Prepaid expenses and other		1,282,268		902,713
Total current assets		8,404,536		12,139,033

Property, plant and equipment, net		93,198,635		90,144,731
Total assets	$	101,603,171	$	102,283,764

Liabilities and Partners' Capital
Current liabilities:
Accounts payable	$	14,561	$	118,933
Accrued and other liabilities		678,997		296,512
Due to related entities		168,900		238,579
Total current liabilities		862,458		654,024

Due to related entities		752,631		709,210
Asset retirement obligation		—		2,930,664
Total liabilities		1,615,089		4,293,898

Commitments and contingencies (Notes 3, 4, 5 and 6)

Partners' capital		99,988,082		97,989,866
Total liabilities and partners' capital	$	101,603,171	$	102,283,764

The accompanying notes are an integral part of these financial statements.

F-76

Mammoth Pacific, L.P.
(A California Limited Partnership)
Statements of Operations
For the year ended December 31, 2002 and for the nine-month periods ended
September 30, 2002 and 2003


	Year Ended December 31, 2003		Nine Months Ended September 30,
	Year Ended December 31, 2003		2002		2003
			(Unaudited)
Revenues:
Energy	$	10,040,290	$	6,790,268	$	8,624,754
Capacity		4,282,968		3,883,062		3,725,617
Capacity bonus		265,228		177,758		181,116
Total revenues		14,588,486		10,851,088		12,531,487
Cost of revenues:
Operating expenses		4,510,896		3,239,707		3,550,965
Royalties		685,392		490,725		902,012
Property taxes		823,682		606,902		648,346
Depreciation and amortization		5,294,823		3,968,353		4,004,851
Gross margin		3,273,693		2,545,401		3,425,313
General and administrative expenses		114,620		86,110		153,000
Income from operations		3,159,073		2,459,291		3,272,313
Other income:
Interest income		411,036		398,062		36,471
Income before change in accounting principle		3,570,109		2,857,353		3,308,784
Cumulative effect of change in accounting prinicple		—		—		(2,107,000	)
Net income	$	3,570,109	$	2,857,353	$	1,201,784
Proforma net income reflecting the adoption of SFAS No. 143 (Note 3) applied retroactively	$	3,334,109	$	2,680,353	$	3,308,784
Proforma income tax provision (unaudited)	$	1,356,641	$	1,085,794	$	456,678
Proforma net income reflecting tax provision (Note 1) (unaudited)	$	2,213,468	$	1,771,559	$	745,106

The accompanying notes are an integral part of these financial statements.

F-77

Mammoth Pacific, L.P.
(A California Limited Partnership)
Statements of Partners' Capital
For the year ended December 31, 2002 and for the nine-month period ended
September 30, 2003


	General Partners						Limited Partners
	Mammoth Geothermal Company			CD Mammoth Lakes I			Pacific Geothermal Company			CD Mammoth Lakes I			CD Mammoth Lakes II			Total Partners' Capital
Balance, January 1, 2002	$	59,615,568		$	1,216,644		$	1,216,644		$	29,199,462		$	30,416,106		$	121,664,424

Distributions		(12,370,760	)		(252,465	)		(252,465	)		(6,059,148	)		(6,311,613	)		(25,246,451	)

Net income		1,749,354			35,701			35,701			856,826			892,527			3,570,109

Balance, December 31, 2002		48,994,162			999,880			999,880			23,997,140			24,997,020			99,988,082

Distributions		(1,568,000	)		(32,000	)		(32,000	)		(768,000	)		(800,000	)		(3,200,000	)

Net income		588,873			12,018			12,018			288,428			300,446			1,201,784

Balance, September 30, 2003	$	48,015,035		$	979,898		$	979,898		$	23,517,568		$	24,497,466		$	97,989,866

The accompanying notes are an integral part of these financial statements.

F-78

Mammoth Pacific, L.P.
(A California Limited Partnership)
Statements of Cash Flows
For the year ended December 31, 2002 and for the nine-month periods ended
September 30, 2002 and 2003


	Year Ended December 31, 2002			Nine Months Ended September 30,
	Year Ended December 31, 2002			2002			2003
	(Unaudited)
Cash flows from operating activities:
Net income	$	3,570,109		$	2,857,353		$	1,201,784
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		5,294,823			3,968,353			4,004,851
Acccretion of asset retirement obligation		—			—			165,664
Cumulative effect of change in accounting principle		—			—			2,107,000
Changes in operating assets and liabilities:
Accounts receivable		13,072,566			12,370,819			(434,840	)
Other receivables		8,153,363			8,153,363			—
Prepaid expenses and other		(223,864	)		83,091			379,555
Accounts payable		(449,893	)		(169,485	)		104,372
Accrued and other liabilities		(2,725,554	)		(1,856,123	)		(382,485	)
Due to related entities		107,057			(47,369	)		26,258
Net cash provided by operating activities		26,798,607			25,360,002			7,172,159

Cash flows from investing activities:
Change in restricted cash		378,117			378,117			—
Capital expenditures		(1,962,913	)		(1,806,909	)		(292,947	)
Net cash used in operating activities		(1,584,796	)		(1,428,792	)		(292,947	)

Cash flows from financing activities:
Distributions to Partners		(25,246,451	)		(22,846,451	)		(3,200,000	)
Net cash used in financing activities		(25,246,451	)		(22,846,451	)		(3,200,000	)

Net (decrease) increase in cash and cash equivalents		(32,640	)		1,084,759			3,679,212
Cash and cash equivalents, beginning of period		4,449,624			4,449,624			4,416,984
Cash and cash equivalents, end of period	$	4,416,984		$	5,534,383		$	8,096,196

Supplemental disclosure of cash flow information:
Effect of adopting of SFAS No. 143 (Note 3):
Asset retirement cost, net	$	—		$	—		$	658,000
Asset retirement obligation	$	—		$	—		$	2,765,000

The accompanying notes are an integral part of these financial statements.

F-79

Mammoth Pacific, L.P.
(A California Limited Partnership)
Notes to Financial Statements

1. Business and Summary of Significant Accounting Policies

Business

Mammoth Pacific, L.P., a California limited partnership (the Partnership), owns and operates three geothermal electric generation plants located in Mammoth Lakes, California. Such geothermal plants are collectively referred to herein as the "Project".

The partners are Mammoth Geothermal Company (MGC) and Pacific Geothermal Company (PGC), which are both wholly owned subsidiaries of Covanta Energy Corporation (CEC), and CD Mammoth Lakes I (CDI) and CD Mammoth Lakes II (CDII), which are both wholly owned subsidiaries of Constellation Energy Inc., which is a wholly owned subsidiary of Constellation Holdings, Inc., which is a wholly owned subsidiary of Baltimore Gas and Electric Corporation.

The partners' general and limited partnership interests as of December 31, 2002 and September 30, 2003 are as follows

General partners:

MGC 49%
CDI 1%

Limited partners:

PGC            1%
CDI            24%
CDII           25%

All income, loss, tax deductions and credits, cash distributions from operations, and net proceeds from dissolution and liquidation of the Partnership shall be allocated to the partners in percentages equal to their partnership interests.

Interim financial data

The interim financial data for the nine months ended September 30, 2002 is unaudited; however, in the opinion of the Partnership, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim period.

Cash and cash equivalents

The Partnership considers all investments purchased with an original maturity of three months or less to be cash equivalents.

Concentration of credit risk

Financial instruments that potentially subject the Partnership to concentration of credit risk consist principally of temporary cash investments and accounts receivable. The Partnership places its temporary cash investments with high credit quality financial institutions located in the United States of America. At December 31, 2002 and September 30, 2003, the Partnership maintained all of its deposits in one U.S. financial institution that is federally insured up to $100,000. All of the Partnership's revenues, and the related receivable balances, are earned from one power company, Southern California Edison Company.

Property, plant and equipment

F-80

Mammoth Pacific, L.P.
(A California Limited Partnership)
Notes to Financial Statements

repairs and maintenance costs are expensed. Power plants are depreciated using the straight-line method over the estimated service period of 28 years. The other assets are depreciated using the straight-line method over their estimated useful lives ranging from five to seven years. The cost and accumulated depreciation of items sold or retired are removed from the accounts. Any resulting gain or loss is recognized currently.

Impairment of long-lived assets and long-lived assets to be disposed of

Derivative instruments

F-81

Mammoth Pacific, L.P.
(A California Limited Partnership)
Notes to Financial Statements

normal purchases normal sales scope exception, and do qualify for the exception under DIG Issue No. C20, to freeze the fair value of the contract as of the date of the initial application, and amortized such fair value over the remaining contract period. Upon adoption of DIG Issue No. C20, the Company elected the normal purchase and normal sales scope exception under FAS No. 133 related to its power purchase agreements. Such adoption did not have a material impact on the Company's consolidated financial position and results of operations.

Income taxes

The net income of the Partnership for income tax purposes is the responsibility of the individual partners. Accordingly, no provision for income taxes has been recorded in the accompanying financial statements. The proforma net income on the statement of operations reflects a tax provision of 38%, the effective rate of the company that acquired MGC and PGC's ownership interest (Note 7).

Revenue recognition

Revenue from the sale of electricity is recorded based upon output delivered and capacity provided at rates as specified under terms of long-term power purchase agreements (see Note 4).

Accounting estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair value of financial instruments

The fair value of cash and cash equivalents, accounts receivable, and accounts payable approximate their reported carrying amounts because of the short maturity of those instruments.

Recently issued accounting pronouncements

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations , and SFAS No. 142, Goodwill and Other Intangible Assets . They also issued SFAS No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets , and SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets , in August and October 2001, respectively.

SFAS No. 141 requires all business combinations initiated after June 30, 2001 be accounted for under the purchase method. SFAS No. 141 supersedes Accounting Principles Board (APB) Opinion No. 16, Business Combinations , and SFAS No. 38, Accounting for Pre-acquisition Contingencies of Purchased Enterprises , and is effective for all business combinations initiated after June 30, 2001.

SFAS No. 142 addresses the financial accounting and reporting for acquired goodwill and other intangible assets. Under the new rules, the Partnership is no longer required to amortize goodwill and other intangible assets with indefinite lives, but will be subject to periodic testing for impairment. SFAS No. 142 supersedes APB Opinion No. 17, Intangible Assets . The Partnership adopted the provisions of SFAS No. 142 effective January 1, 2002, which did not have a material impact on its results of operations and financial position, as the Partnership did not have any material amounts of goodwill and other intangible assets.

As further discussed in Note 3, the Partnership adopted the provisions of SFAS No. 143 effective January 1, 2003.

F-82

Mammoth Pacific, L.P.
(A California Limited Partnership)
Notes to Financial Statements

SFAS No. 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS No. 144 superseded SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of , and APB Opinion No. 30, Reporting the Results of Operations-- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions . The Partnership adopted the provisions of SFAS No. 144 effective January 1, 2002, which did not have a material impact on its results of operations and financial position.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities . SFAS No. 149 amends and clarifies the accounting and reporting for derivative instruments, including certain derivatives embedded in other contracts, and for hedging activities under SFAS No. 133. The amendments in SFAS No. 149 require that contracts with comparable characteristics be accounted for similarly. SFAS No. 149 clarifies under what circumstances a contract with an initial net investment meets the characteristics of a derivative according to SFAS No. 133 and when a derivative contains a financing component that warrants special reporting in the statement of cash flows. In addition, SFAS No. 149 amends the definition of an "underlying" to conform it to language used in FIN No. 45 and amends certain other existing pronouncements. The provisions of SFAS No. 149 that relate to SFAS No. 133 "Implementation Issues" that have been effective for periods that began prior to June 15, 2003 should continue to be applied in accordance with their respective effective dates. The requirements of SFAS No. 149 are effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The Partnership adopted the provisions of SFAS No. 149 effective July 1, 2003, which did not have a material impact on its results of operations and financial position as of September 30, 2003.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity . SFAS No. 150 establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability because that financial instrument embodies an obligation of the issuer. The requirements of SFAS No. 150 are effective for financial instruments entered into or modified after May 31, 2003. For financial instruments created prior to the issuance date of SFAS No. 150, transition shall be achieved by reporting the cumulative effect of a change in accounting principle. The Partnership adopted the provisions of SFAS No. 150 effective July 1, 2003, which did not have a material impact on its results of operations and financial position as of September 30, 2003.

2. Property, Plant and Equipment

Property, plant and equipment, consists of the following:


	December 31,			September 30,
	2002			2003
Plant and related equipment	$	152,196,497		$	152,181,247
Transportation equipment		181,442			181,442
Furniture and fixtures		117,665			120,667
Asset retirement cost		—			1,097,000
		152,495,604			153,580,356
Less accumulated depreciation		(59,296,969	)		(63,435,625	)
	$	93,198,635		$	90,144,731

3. Asset Retirement Obligation

The Partnership adopted SFAS No. 143 effective January 1, 2003. Under SFAS No. 143, entities are required to record the fair value of a legal liability for an asset retirement obligation in the period in

F-83

Mammoth Pacific, L.P.
(A California Limited Partnership)
Notes to Financial Statements

which it is incurred. The Partnership's legal liabilities include capping wells and post-closure costs of geothermal power producing sites. When a new liability for asset retirement obligations is recorded, the Partnership capitalizes the costs of the liability by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. At retirement, an entity settles the obligation for its recorded amount or incurs a gain or loss. On January 1, 2003 the Partnership recorded a cumulative effect of change in accounting principle of $2,107,000, net of related tax benefit of $0. As a result of adopting the provisions of SFAS No. 143, the net income for the nine-month period ended September 30, 2003 decreased by approximately $166,000. The pro-forma amounts shown on the statements of operations have been adjusted for the effect of retroactive application of SFAS No. 143.

The following table summarizes the impact on the Partnership's balance sheet following the adoption of SFAS No. 143:


				Change
	Balance at			Resulting from			Balance at
	December 31,			Application of			January 1,
	2002			SFAS No. 143			2003
Property, plant and equipment	$	152,495,604		$	1,097,000		$	153,592,604
Accumulated depreciation		(59,296,969	)		(439,000	)		(59,735,969	)
Net property, plant and equipment	$	93,198,635		$	658,000		$	93,856,635
Non-current asset retirement obligation	$	—		$	2,765,000		$	2,765,000

The unaudited pro-forma changes to the non-current asset retirement obligation, based on the information, assumptions, and interest rates as of January 1, 2003, are presented below to show what the Partnership would have reported if the provisions of SFAS No. 143 had been in effect for the periods presented below:


	Year Ended		Nine Months Ended
	December 31,		September 30,
	2002		2003
Balance at beginning of period	$	2,565,000	$	2,765,000
Accretion expense		200,000		165,664
Balance at end of period	$	2,765,000	$	2,930,664

4. Power Purchase Agreements

The Partnership has three power purchase agreements (the PPA's) with Southern California Edison Company (SCE), that provide for the sale of capacity and energy through their respective terms, expiring from 2015 to 2020. Under the PPA's, the Partnership received payments based on SCE's short-run avoided cost (SRAC) and receives a fixed energy payment starting in May 2002 through April 2007, and thereafter based on SCE's SRAC. The PPA's provide for firm capacity and bonus payments established by the contracts and are paid to the Partnership each month through the contracts' term based on plant performance. Bonus capacity payments are earned based on actual capacity available during certain peak hours.

5. Commitments and Contingencies

The geothermal resources being utilized by the Project are owned by unrelated parties, which receive royalties based on a percentage of gross revenues from the sale of energy.

F-84

Mammoth Pacific, L.P.
(A California Limited Partnership)
Notes to Financial Statements

Effective January 1, 1995, the Partnership entered into an operating agreement with a wholly owned subsidiary of CEC (the Operator), for the operation and maintenance of the Project. Operator fees are equal to the Operator's labor costs and overhead, plus a $15,000 annual administration fee. Total expenses incurred under this agreement were approximately $1,851,200, $1,296,300 and $1,396,200 for the year ended December 31, 2002, and for the nine-month periods ended September 30, 2002 (unaudited) and 2003, respectively, of which approximately $147,100 and $203,300 was included in due to related entities at December 31, 2002 and September 30, 2003, respectively.

The Partnership is planning to construct a pipeline and two new production wells for a total expected cost of approximately $5 million to be completed by January 2006.

Subsequent to September 30, 2003, in response to an order issued by a California State Court of Appeal, the California Public Utilities Commission, "CPUC", has commenced a proceeding to address SRAC pricing for Qualifying Facilities for the period December 2000 to March 2001. The court directed that the CPUC modify SRAC pricing on a retroactive basis to the extent the CPUC determined that SRAC prices were not sufficiently "accurate" or "correct." If the SRAC prices during the period in question were determined by the CPUC to not be "accurate" or "correct," retroactive price adjustments could be required. Currently it is not possible to predict the outcome of such proceeding, however, any retroactive price adjustment may require the Partnership to make refund payments or receive less from future revenues, which could materially affect the financial condition, future results and cash flows.

6. Related Party Transactions

MGC has been designated as the managing general partner and is reimbursed for direct expenses and allocated costs incurred on behalf of the Partnership. Total expenses incurred were approximately $73,600, $11,300 and $152,700 for the year ended December 31, 2002, and for the nine-month periods ended September 30, 2002 (unaudited) and 2003, respectively.

Included in the amount due to related entities are amounts due to MGC of approximately $752,600 and $709,200 as of December 31, 2002 and September 30, 2003, respectively, for advances received. Such amounts are to be repaid monthly, subject to available operating cash flow, over a 20-year period beginning January 1, 1996.

7. Subsequent Events

On December 18, 2003, the partnership interests owned by MGC and PGC were sold to an unrelated entity.

F-85

Common Stock

PROSPECTUS
2004

L EHMAN B ROTHERS

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the various expenses, other than the underwriting discounts and commissions, payable by us in connection with the sale and distribution of the securities being registered. All amounts shown are estimates, except the Securities and Exchange Commission registration fee, the National Association of Securities Dealers, Inc. filing fee and the New York Stock Exchange application fee.


SEC registration fee	$	*
NASD filing fee	$	*
New York Stock Exchange application fee	$	*
Accounting fees and expenses	$	*
Legal fees and expenses	$	*
Printing and engraving expenses	$	*
Transfer agent fees and expenses	$	*
Blue sky fees and expenses	$	*
Miscellaneous fees and expenses	$	*
Total	$	*


*	To be filed by amendment.

Item 14. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent to Ormat Technologies, Inc. The Delaware General Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for any breach of the director's duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or for any transaction from which the director derived an improper personal benefit.

Article Eleventh of Ormat Technologies, Inc.'s certificate of incorporation provides that a director of Ormat Technologies, Inc. shall not be liable to Ormat Technologies, Inc. or its stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by Delaware law. In addition, Section 10.1 of Ormat Technologies, Inc.'s by-laws provides that Ormat Technologies, Inc. shall indemnify its directors and officers to the fullest extent permitted by Delaware law, including all expenses liability and loss actually and reasonably incurred or suffered by such director or officer in connection therewith in defending or otherwise participating in any proceeding in advance of its final disposition.

Prior to the completion of this offering, we intend to enter into indemnification agreements with our directors and officers. The indemnification agreements provide indemnification to our directors

II-1

and officers under certain circumstances for acts or omissions which may not be covered by directors' and officers' liability insurance, and may, in some cases, be broader than the specific indemnification provisions contained under Delaware law. We have also obtained directors' and officers' liability insurance, which insures against liabilities that our directors or officers may incur in such capacities.

Item 15. Recent Sales of Unregistered Securities

On June 30, we issued 1,538,462 shares of our common stock to Ormant Industries in connection with the capitalization of an outstanding loan in the amount of $20.0 million with Ormant Industries.

Item 16. Exhibits and Financial Statement Schedules


Exhibit No.		Document
	1.1	Form of Underwriting Agreement*
	3.1	Amended and Restated Certificate of Incorporation
	3.2	Amended and Restated By-laws*
	4.1	Form of Common Share Stock Certificate
	4.2	Form of Preferred Share Stock Certificate
	5.1	Opinion of Chadbourne & Parke LLP, related to the shares of common stock being sold in the initial public offering*
	8.1	Opinion of Chadbourne & Parke LLP, related to tax matters*
	10.1	Financing Agreements
	10.1.1	Foreign Currency Loan Agreement, dated June 1, 2004, between Ormat Technologies, Inc. and United Mizrahi Bank LTD. ^†
	10.1.2	Amended and Restated Bridge Loan Agreement, dated October 2, 2003, by and between Ormat Nevada, Inc. and Bank Leumi USA ^†
	10.1.3	Credit Facility Agreement, dated September 5, 2000, between Ormat Momotombo Power Company and Bank Hapoalim B.M. ^†
	10.1.4	Credit Agreement, dated as of December 31, 2002, among ORMESA LLC, United Capital, a division of Hudson United Bank and the Lenders party to such agreement from time to time ^†
	10.1.5	Credit Agreement, dated as of December 18, 2003, among OrCal Geothermal Inc. and Beal Bank, S.S.B. and the financial institutions party thereto from time to time ^†
	10.1.6	Credit Agreement, dated May 13, 1996 between Ormat-Leyte and Export-Import Bank of the United States ^†
	10.1.7	Indenture, dated February 13, 2004 among Ormat Funding Corp., Brady Power Partners, Steamboat Development Corp., Steamboat Geothermal LLC, OrMammoth Inc., ORNI LLC, ORNI 2 LLC, ORNI 7 LLC, Ormesa LLC and Union Bank of California ^†
	10.1.8	Loan Agreement, dated October 1, 2003, by and between Ormat Technologies, Inc. and Ormat Industries Ltd. ^†
	10.1.9	Capital Note, dated December 22, 2003, by and between Ormat Technologies, Inc. and Ormat Industries Ltd.
	10.1.10	Guarantee Fee Agreement, dated January 1, 1999, by and between Ormat Technologies, Inc. and Ormat Industries Ltd.
	10.1.11	Reimbursement Agreement, dated July 15, 2004, by and between Ormat Technologies, Inc. and Ormat Industries Ltd.

II-2


Exhibit No.		Document
	10.1.12	Services Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd.
	10.2	Purchase Agreements
	10.2.1	Purchase and Sale Agreement, dated April 22, 2004, by and among Constellation Power, Inc. and Cosi Puna, Inc. and ORNI 8 LLC and Ormat Nevada, Inc. ^†
	10.2.2	Purchase Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd.
	10.3	Power Purchase Agreements
	10.3.1	Power Purchase Contract, dated July 18, 1984, between Southern California Edison Company and Republic Geothermal, Inc. ^†
	10.3.2	Amendment No. 1, to the Power Purchase Contract, dated December 23, 1988, between Southern California Edison Company and Ormesa Geothermal
	10.3.3	Power Purchase Contract, dated June 13, 1984, between Southern California Edison Company and Ormat Systems, Inc. ^†
	10.3.4	Power Purchase and Sales Agreement, dated as of August 26, 1983, between Chevron U.S.A. Inc. and Southern California Edison Company
	10.3.5	Amendment No. 1, to Power Purchase and Sale Agreement, dated as of December 11, 1984, between Chevron U.S.A. Inc., HGC and Southern California Edison Company ^†
	10.3.6	Settlement Agreement and Amendment No. 2, to Power Purchase Contract, dated August 7, 1995, between HGC and Southern California Edison Company ^†
	10.3.7	Power Purchase Contract dated, April 16, 1985, between Southern California Edison Company and Second Imperial Geothermal Company ^†
	10.3.8	Amendment No. 1, dated as of October 23, 1987, between Southern California Edison Company and Second Imperial Geothermal Company
	10.3.9	Amendment No. 2, dated as of July 27, 1990, between Southern California Edison Company and Second Imperial Geothermal Company
	10.3.10	Amendment No. 3, dated as of November 24, 1992, between Southern California Edison Company and Second Imperial Geothermal Company
	10.3.11	Amended and Restated Power Purchase and Sales Agreement, dated December 2, 1986, between Mammoth Pacific and Southern California Edison Company ^†
	10.3.12	Amendment No. 1, to Amended and Restated Power Purchase and Sale Agreement, dated May 18, 1990, between Mammoth Pacific and Southern California Edison Company
	10.3.13	Power Purchase Contract, dated April 15, 1985, between Mammoth Pacific and Southern California Edison Company ^†
	10.3.14	Amendment No. 1, dated as of October 27, 1989, between Mammoth Pacific and Southern California Edison Company ^†
	10.3.15	Amendment No. 2, dated as of December 20, 1989, between Mammoth Pacific and Southern California Edison Company
	10.3.16	Power Purchase Contract, dated April 16, 1985, between Southern California Edison Company and Santa Fe Geothermal, Inc. ^†
	10.3.17	Amendment No. 1, to Power Purchase Contract, dated October 25, 1985, between Southern California Edison Company and Mammoth Pacific ^†

II-3


Exhibit No.		Document
	10.3.18	Amendment No. 2, to Power Purchase Contract, dated December 20, 1989, between Southern California Edison Company and Pacific Lighting Energy Systems ^†
	10.3.19	Interconnection Facilities Agreement, dated October 20, 1989, by and between Southern California Edison Company and Mammoth Pacific ^†
	10.3.20	Interconnection Facilities Agreement, dated October 13, 1985, by and between Southern California Edison Company and Mammoth Pacific (II) ^†
	10.3.21	Interconnection Facilities Agreement, dated October 20, 1989, by and between Southern California Edison Company and Pacific Lighting Energy Systems ^†
	10.3.22	Interconnection Agreement, dated August 12, 1985, by and between Southern California Edison Company and Heber Geothermal Company ^†
	10.3.23	Plant Connection Agreement for the Heber Geothermal Plant No.1, dated, July 31, 1985, by and between Imperial Irrigation District and Heber Geothermal Company ^†
	10.3.24	Plant Connection Agreement for the Second Imperial Geothermal Company Power Plant No.1, dated, October 27, 1992, by and between Imperial Irrigation District and Second Imperial Geothermal Company ^†
	10.3.25	IID-SIGC Transmission Service Agreement for Alternative Resources, dated, October 27, 1992, by and between Imperial Irrigation District and Second Imperial Geothermal Company ^†
	10.3.26	Plant Connection Agreement for the Ormesa Geothermal Plant, dated October 1, 1985, by and between Imperial Irrigation District and Ormesa Geothermal ^†
	10.3.27	Plant Connection Agreement for the Ormesa IE Geothermal Plant, dated, October 21, 1988, by and between Imperial Irrigation District and Ormesa IE ^†
	10.3.28	Plant Connection Agreement for the Ormesa IH Geothermal Plant, dated, October 3, 1989, by and between Imperial Irrigation District and Ormesa IH ^†
	10.3.29	Plant Connection Agreement for the Geo East Mesa Limited Partnership Unit No.2, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership ^†
	10.3.30	Plant Connection Agreement for the Geo East Mesa Limited Partnership Unit No.3, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership ^†
	10.3.31	Transmission Service Agreement for the Ormesa I, Ormesa IE and Ormesa IH Geothermal Power Plants, dated, October 3, 1989, between Imperial Irrigation District and Ormesa Geothermal ^†
	10.3.32	Transmission Service Agreement for the Geo East Mesa Limited Partnership Unit No. 2, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership ^†
	10.3.33	Transmission Service Agreement for the Geo East Mesa Limited Partnership Unit No. 3, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership ^†
	10.3.34	IID-Edison Transmission Service Agreement for Alternative Resources, dated, September 26, 1985, by and between Imperial Irrigation District and Southern California Edison Company ^†

II-4


Exhibit No.		Document
	10.3.35	Plant Amendment No. 1, to IID-Edison Transmission Service Agreement for Alternative Resources, dated, August 25, 1987, by and between Imperial Irrigation District and Southern California Edison Company
	10.3.36	Leyte Optimization Project BOT Agreement, dated August 4, 1995, by and between PNOC-Energy Development Corporation and Ormat Inc.
	10.3.37	First Amendment to Leyte Optimization Project BOT Agreement, dated February 29, 1996, by and between PNOC-Energy Development Corporation and Ormat Leyte Co. Ltd.
	10.3.38	Second Amendment to Leyte Optimization Project BOT Agreement, dated April 1, 1996, by and between PNOC-Energy Development Corporation and Ormat Leyte Co. Ltd.
	10.4	Leases
	10.4.1	Ormesa BLM Geothermal Resources Lease CA 966 ^††
	10.4.2	Ormesa BLM License for Electric Power Plant Site CA 24678 ^†††
	10.4.3	Geothermal Resources Mining Lease, dated February 20, 1981, by and between the State of Hawaii, as Lessor, and Kapoho Land Partnership, as Lessee ^†
	10.4.4	Geothermal Lease Agreement, dated October 20, 1975, by and between Ruth Walker Cox and Betty M. Smith, as Lessor, and Gulf Oil Corporation, as Lessee ^† **
	10.4.5	Geothermal Lease Agreement, dated August 1, 1976, by and between Southern Pacific Land Company, as Lessor, and Phillips Petroleum Company, as Lessee ^† **
	10.4.6	Geothermal Resources Lease, dated November 18, 1983, by and between Sierra Pacific Power Company, as Lessor, and Geothermal Development Associates, as Lessee ^† **
	10.4.7	Lease Agreement, dated November 1, 1969, by and between Chrisman B. Jackson and Sharon Jackson, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee ^†
	10.4.8	Lease Agreement, dated September 22, 1976, by and between El Toro Land & Cattle Co., as Lessor, and Standard Oil Company of California, as Lessee ^†
	10.4.9	Lease Agreement, dated February 17, 1977, by and between Joseph L. Holtz, as Lessor, and Chevron U.S.A. Inc., as Lessee ^†
	10.4.10	Lease Agreement, dated March 11, 1964, by and between John D. Jackson and Frances Jones Jackson, also known as Frances J. Jackson, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee ^†
	10.4.11	Lease Agreement, dated February 16, 1964, by and between John D. Jackson, conservator for the estate of Aphia Jackson Wallan, as Lessor, and Standard Oil Company of California, as Lessee ^†
	10.4.12	Lease Agreement, dated March 17, 1964, by and between Helen S. Fugate, a widow, as Lessor, and Standard Oil Company of California, as Lessee ^†
	10.4.13	Lease Agreement, dated February 16, 1964, by and between John D. Jackson and Frances J. Jackson, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee ^†**
	10.4.14	Lease Agreement, dated February 20, 1964, by and between John A. Straub and Edith D. Straub, also known as John A. Straub and Edythe D. Straub, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee ^†
	10.4.15	Lease Agreement, dated July 1, 1971, by and between Marie L. Gisler and Harry R. Gisler, as Lessor, and Standard Oil Company of California, as Lessee ^†

II-5


Exhibit No.		Document
	10.4.16	Lease Agreement, dated February 28, 1964, by and between Gus Kurupas and Guadalupe Kurupas, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee ^†
	10.4.17	Lease Agreement, dated April 7, 1972, by and between Nowlin Partnership, as Lessor, and Standard Oil Company of California, as Lessee ^†
	10.4.18	Geothermal Lease Agreement, dated July 18, 1979, by and between Charles K. Corfman, an unmarried man as his sole and separate property, and Lessor, and Union Oil Company of California, as Lessee ^†
	10.4.19	Lease Agreement, dated January 1, 1972, by and between Holly Oberly Thomson, also known as Holly F. Oberly Thomson, also known as Holly Felicia Thomson, as Lessor, and Union Oil Company of California, as Lessee ^†**
	10.4.20	Lease Agreement, dated June 14, 1971, by and between Fitzhugh Lee Brewer, Jr., a married man as his separate property, Donna Hawk, a married woman as her separate property, and Ted Draper and Helen Draper, husband and wife, as Lessor, and Union Oil Company of California, as Lessee ^†**
	10.4.21	Lease Agreement, dated May 13, 1971, by and between Mathew J. La Brucherie and Jane E. La Brucherie, husband and wife, and Robert T. O'Dell and Phyllis M. O'Dell, husband and wife, as Lessor, and Union Oil Company of California, as Lessee ^†**
	10.4.22	Lease Agreement, dated June 2, 1971, by and between Dorothy Gisler, a widow, Joan C. Hill, and Jean C. Browning, as Lessor, and Union Oil Company of California, as Lessee ^†
	10.4.23	Geothermal Lease Agreement, dated February 15, 1977, by and between Walter J. Holtz, as Lessor, and Magma Energy Inc., as Lessee ^†**
	10.4.24	Geothermal Lease, dated August 31, 1983, by and between Magma Energy Inc., as Lessor, and Holt Geothermal Company, as Lessee ^†**
	10.4.25	Unprotected Lease Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd.
	10.5	General
	10.5.1	Engineering, Procurement and Construction Contract, dated August 23, 2002, by and between Tuaropaki Power Company Limited and Ormat Pacific Inc. ^†
	10.5.2	Amendment No. 1, to Engineering, Procurement and Construction Contract, dated, 2003, by and between Tuaropaki Power Company Limited and Ormat Pacific Inc.
	10.5.3	Engineering, Procurement and Construction Contract, dated, 2003, by and between Contact Energy Limited and Ormat Pacific Inc. ^†
	10.5.4	Patent License Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd. ^†
	10.5.5	Registration Rights Agreement, dated July 15, 2004, by and between Ormat Technologies, Inc. and Ormat Industries Ltd.*
	10.6	Ormat Technologies, Inc. 2004 Incentive Compensation Plan*
	10.7	Form of Executive Employment Agreement*
	21.1	Subsidiaries of the registrant
	23.1	Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm
	23.2	Consent of Chadbourne & Parke LLP (contained in Exhibit 5.1)*
	24.1	Power of attorney (Included on signature page of the registration statement)

II-6


*	To be filed by subsequent amendment.


**	Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been separately filed with the Securities and Exchange Commission.


†	We agree to furnish copies of the Schedules and Exhibits referenced in this agreement to the Securities and Exchange Commission upon request.


††	We have entered into other BLM geothermal resources leases that are substantially similar in terms with this exhibit. Any deviation in terms with this exhibit have been described in Exhibit 99.1.


†††	We have entered into other BLM site leases that are substantially similar in terms with this exhibit. Any deviation in terms with this exhibit have been described in Exhibit 99.2.

Item 17. Undertakings


(a)	The undersigned Registrant hereby undertakes to provide to the underwriters at the closing certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

(b)

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the provisions described in "Item 14—Indemnification of Directors and Officers" above, or otherwise, the Registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification by the Registrant against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.


(c)	The undersigned Registrant hereby undertakes that:


	(1)	For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.


	(2)	For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-7

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York on the 20th day of July, 2004.

ORMAT TECHNOLOGIES, INC.

By: /s/ Yehudit Bronicki

Name: Yehudit Bronicki
Title: President

II-8

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Lucien Bronicki and Yehudit Bronicki, and each of them, with full power to act without the other, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this registration statement, and any registration statement relating to the offering covered by this registration statement and filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated:


Signature	Title	Date

/s/ Lucien Bronicki	Chairman of the Board and Director	July 20, 2004

Lucien Bronicki

/s/ Yehudit Bronicki	Director, President, Treasurer and Secretary (Principal Executive Officer)	July 20, 2004

Yehudit Bronicki

/s/ Connie Stechman	Director (Principal Financial Officer, Controller and Principal Accounting Officer)	July 20, 2004

Connie Stechman

II-9

EXHIBIT INDEX


Exhibit No.				Document
1.1				Form of Underwriting Agreement*
3.1				Amended and Restated Certificate of Incorporation
3.2				Amended and Restated By-laws*
4.1				Form of Common Share Stock Certificate
4.2				Form of Preferred Share Stock Certificate
5.1				Opinion of Chadbourne & Parke LLP, related to the shares of common stock being sold in the initial public offering*
8.1				Opinion of Chadbourne & Parke LLP, related to tax matters*
10.1				Financing Agreements
10.1.1				Foreign Currency Loan Agreement, dated June 1, 2004, between Ormat Technologies, Inc. and United Mizrahi Bank LTD. ^†
10.1.2				Amended and Restated Bridge Loan Agreement, dated October 2, 2003, by and between Ormat Nevada, Inc. and Bank Leumi USA ^†
10.1.3				Credit Facility Agreement, dated September 5, 2000, between Ormat Momotombo Power Company and Bank Hapoalim B.M. ^†
10.1.4				Credit Agreement, dated as of December 31, 2002, among ORMESA LLC, United Capital, a division of Hudson United Bank and the Lenders party to such agreement from time to time ^†
10.1.5				Credit Agreement, dated as of December 18, 2003, among OrCal Geothermal Inc. and Beal Bank, S.S.B. and the financial institutions party thereto from time to time ^†
10.1.6				Credit Agreement, dated May 13, 1996 between Ormat-Leyte and Export-Import Bank of the United States ^†
10.1.7				Indenture, dated February 13, 2004 among Ormat Funding Corp., Brady Power Partners, Steamboat Development Corp., Steamboat Geothermal LLC, OrMammoth Inc., ORNI LLC, ORNI 2 LLC, ORNI 7 LLC, Ormesa LLC and Union Bank of California ^†
10.1.8				Loan Agreement, dated October 1, 2003, by and between Ormat Technologies, Inc. and Ormat Industries Ltd. ^†
10.1.9				Capital Note, dated December 22, 2003, by and between Ormat Technologies, Inc. and Ormat Industries Ltd.
10.1.10				Guarantee Fee Agreement, dated January 1, 1999, by and between Ormat Technologies, Inc. and Ormat Industries Ltd.
10.1.11				Reimbursement Agreement, dated July 15, 2004, by and between Ormat Technologies, Inc. and Ormat Industries Ltd.
10.1.12				Services Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd.
10.2				Purchase Agreements


Exhibit No.				Document
10.2.1				Purchase and Sale Agreement, dated April 22, 2004, by and among Constellation Power, Inc. and Cosi Puna, Inc. and ORNI 8 LLC and Ormat Nevada, Inc. ^†
10.2.2				Purchase Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd.
10.3				Power Purchase Agreements
10.3.1				Power Purchase Contract, dated July 18, 1984, between Southern California Edison Company and Republic Geothermal, Inc. ^†
10.3.2				Amendment No. 1, to the Power Purchase Contract, dated December 23, 1988, between Southern California Edison Company and Ormesa Geothermal
10.3.3				Power Purchase Contract, dated June 13, 1984, between Southern California Edison Company and Ormat Systems, Inc. ^†
10.3.4				Power Purchase and Sales Agreement, dated as of August 26, 1983, between Chevron U.S.A. Inc. and Southern California Edison Company
10.3.5				Amendment No. 1, to Power Purchase and Sale Agreement, dated as of December 11, 1984, between Chevron U.S.A. Inc., HGC and Southern California Edison Company ^†
10.3.6				Settlement Agreement and Amendment No. 2, to Power Purchase Contract, dated August 7, 1995, between HGC and Southern California Edison Company ^†
10.3.7				Power Purchase Contract dated, April 16, 1985, between Southern California Edison Company and Second Imperial Geothermal Company ^†
10.3.8				Amendment No. 1, dated as of October 23, 1987, between Southern California Edison Company and Second Imperial Geothermal Company
10.3.9				Amendment No. 2, dated as of July 27, 1990, between Southern California Edison Company and Second Imperial Geothermal Company
10.3.10				Amendment No. 3, dated as of November 24, 1992, between Southern California Edison Company and Second Imperial Geothermal Company
10.3.11				Amended and Restated Power Purchase and Sales Agreement, dated December 2, 1986, between Mammoth Pacific and Southern California Edison Company ^†
10.3.12				Amendment No. 1, to Amended and Restated Power Purchase and Sale Agreement, dated May 18, 1990, between Mammoth Pacific and Southern California Edison Company
10.3.13				Power Purchase Contract, dated April 15, 1985, between Mammoth Pacific and Southern California Edison Company ^†
10.3.14				Amendment No. 1, dated as of October 27, 1989, between Mammoth Pacific and Southern California Edison Company ^†
10.3.15				Amendment No. 2, dated as of December 20, 1989, between Mammoth Pacific and Southern California Edison Company
10.3.16				Power Purchase Contract, dated April 16, 1985, between Southern California Edison Company and Santa Fe Geothermal, Inc. ^†
10.3.17				Amendment No. 1, to Power Purchase Contract, dated October 25, 1985, between Southern California Edison Company and Mammoth Pacific ^†


Exhibit No.				Document
10.3.18				Amendment No. 2, to Power Purchase Contract, dated December 20, 1989, between Southern California Edison Company and Pacific Lighting Energy Systems ^†
10.3.19				Interconnection Facilities Agreement, dated October 20, 1989, by and between Southern California Edison Company and Mammoth Pacific ^†
10.3.20				Interconnection Facilities Agreement, dated October 13, 1985, by and between Southern California Edison Company and Mammoth Pacific (II) ^†
10.3.21				Interconnection Facilities Agreement, dated October 20, 1989, by and between Southern California Edison Company and Pacific Lighting Energy Systems ^†
10.3.22				Interconnection Agreement, dated August 12, 1985, by and between Southern California Edison Company and Heber Geothermal Company ^†
10.3.23				Plant Connection Agreement for the Heber Geothermal Plant No.1, dated, July 31, 1985, by and between Imperial Irrigation District and Heber Geothermal Company ^†
10.3.24				Plant Connection Agreement for the Second Imperial Geothermal Company Power Plant No.1, dated, October 27, 1992, by and between Imperial Irrigation District and Second Imperial Geothermal Company ^†
10.3.25				IID-SIGC Transmission Service Agreement for Alternative Resources, dated, October 27, 1992, by and between Imperial Irrigation District and Second Imperial Geothermal Company ^†
10.3.26				Plant Connection Agreement for the Ormesa Geothermal Plant, dated October 1, 1985, by and between Imperial Irrigation District and Ormesa Geothermal ^†
10.3.27				Plant Connection Agreement for the Ormesa IE Geothermal Plant, dated, October 21, 1988, by and between Imperial Irrigation District and Ormesa IE ^†
10.3.28				Plant Connection Agreement for the Ormesa IH Geothermal Plant, dated, October 3, 1989, by and between Imperial Irrigation District and Ormesa IH ^†
10.3.29				Plant Connection Agreement for the Geo East Mesa Limited Partnership Unit No.2, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership ^†
10.3.30				Plant Connection Agreement for the Geo East Mesa Limited Partnership Unit No.3, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership ^†
10.3.31				Transmission Service Agreement for the Ormesa I, Ormesa IE and Ormesa IH Geothermal Power Plants, dated, October 3, 1989, between Imperial Irrigation District and Ormesa Geothermal ^†
10.3.32				Transmission Service Agreement for the Geo East Mesa Limited Partnership Unit No. 2, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership ^†
10.3.33				Transmission Service Agreement for the Geo East Mesa Limited Partnership Unit No. 3, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership ^†
10.3.34				IID-Edison Transmission Service Agreement for Alternative Resources, dated, September 26, 1985, by and between Imperial Irrigation District and Southern California Edison Company ^†


Exhibit No.				Document
10.3.35				Plant Amendment No. 1, to IID-Edison Transmission Service Agreement for Alternative Resources, dated, August 25, 1987, by and between Imperial Irrigation District and Southern California Edison Company
10.3.36				Leyte Optimization Project BOT Agreement, dated August 4, 1995, by and between PNOC-Energy Development Corporation and Ormat Inc.
10.3.37				First Amendment to Leyte Optimization Project BOT Agreement, dated February 29, 1996, by and between PNOC-Energy Development Corporation and Ormat Leyte Co. Ltd.
10.3.38				Second Amendment to Leyte Optimization Project BOT Agreement, dated April 1, 1996, by and between PNOC-Energy Development Corporation and Ormat Leyte Co. Ltd.
10.4				Leases
10.4.1				Ormesa BLM Geothermal Resources Lease CA 966 ^††
10.4.2				Ormesa BLM License for Electric Power Plant Site CA 24678 ^†††
10.4.3				Geothermal Resources Mining Lease, dated February 20, 1981, by and between the State of Hawaii, as Lessor, and Kapoho Land Partnership, as Lessee ^†
10.4.4				Geothermal Lease Agreement, dated October 20, 1975, by and between Ruth Walker Cox and Betty M. Smith, as Lessor, and Gulf Oil Corporation, as Lessee ^† **
10.4.5				Geothermal Lease Agreement, dated August 1, 1976, by and between Southern Pacific Land Company, as Lessor, and Phillips Petroleum Company, as Lessee ^† **
10.4.6				Geothermal Resources Lease, dated November 18, 1983, by and between Sierra Pacific Power Company, as Lessor, and Geothermal Development Associates, as Lessee ^† **
10.4.7				Lease Agreement, dated November 1, 1969, by and between Chrisman B. Jackson and Sharon Jackson, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee ^†
10.4.8				Lease Agreement, dated September 22, 1976, by and between El Toro Land & Cattle Co., as Lessor, and Standard Oil Company of California, as Lessee ^†
10.4.9				Lease Agreement, dated February 17, 1977, by and between Joseph L. Holtz, as Lessor, and Chevron U.S.A. Inc., as Lessee ^†
10.4.10				Lease Agreement, dated March 11, 1964, by and between John D. Jackson and Frances Jones Jackson, also known as Frances J. Jackson, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee ^†
10.4.11				Lease Agreement, dated February 16, 1964, by and between John D. Jackson, conservator for the estate of Aphia Jackson Wallan, as Lessor, and Standard Oil Company of California, as Lessee ^†
10.4.12				Lease Agreement, dated March 17, 1964, by and between Helen S. Fugate, a widow, as Lessor, and Standard Oil Company of California, as Lessee ^†
10.4.13				Lease Agreement, dated February 16, 1964, by and between John D. Jackson and Frances J. Jackson, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee ^†**


Exhibit No.				Document
10.4.14				Lease Agreement, dated February 20, 1964, by and between John A. Straub and Edith D. Straub, also known as John A. Straub and Edythe D. Straub, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee ^†
10.4.15				Lease Agreement, dated July 1, 1971, by and between Marie L. Gisler and Harry R. Gisler, as Lessor, and Standard Oil Company of California, as Lessee ^†
10.4.16				Lease Agreement, dated February 28, 1964, by and between Gus Kurupas and Guadalupe Kurupas, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee ^†
10.4.17				Lease Agreement, dated April 7, 1972, by and between Nowlin Partnership, as Lessor, and Standard Oil Company of California, as Lessee ^†
10.4.18				Geothermal Lease Agreement, dated July 18, 1979, by and between Charles K. Corfman, an unmarried man as his sole and separate property, and Lessor, and Union Oil Company of California, as Lessee ^†
10.4.19				Lease Agreement, dated January 1, 1972, by and between Holly Oberly Thomson, also known as Holly F. Oberly Thomson, also known as Holly Felicia Thomson, as Lessor, and Union Oil Company of California, as Lessee ^†**
10.4.20				Lease Agreement, dated June 14, 1971, by and between Fitzhugh Lee Brewer, Jr., a married man as his separate property, Donna Hawk, a married woman as her separate property, and Ted Draper and Helen Draper, husband and wife, as Lessor, and Union Oil Company of California, as Lessee ^†**
10.4.21				Lease Agreement, dated May 13, 1971, by and between Mathew J. La Brucherie and Jane E. La Brucherie, husband and wife, and Robert T. O'Dell and Phyllis M. O'Dell, husband and wife, as Lessor, and Union Oil Company of California, as Lessee ^†**
10.4.22				Lease Agreement, dated June 2, 1971, by and between Dorothy Gisler, a widow, Joan C. Hill, and Jean C. Browning, as Lessor, and Union Oil Company of California, as Lessee ^†
10.4.23				Geothermal Lease Agreement, dated February 15, 1977, by and between Walter J. Holtz, as Lessor, and Magma Energy Inc., as Lessee ^†**
10.4.24				Geothermal Lease, dated August 31, 1983, by and between Magma Energy Inc., as Lessor, and Holt Geothermal Company, as Lessee ^†**
10.4.25				Unprotected Lease Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd.
10.5				General
10.5.1				Engineering, Procurement and Construction Contract, dated August 23, 2002, by and between Tuaropaki Power Company Limited and Ormat Pacific Inc. ^†
10.5.2				Amendment No. 1, to Engineering, Procurement and Construction Contract, dated, 2003, by and between Tuaropaki Power Company Limited and Ormat Pacific Inc.
10.5.3				Engineering, Procurement and Construction Contract, dated, 2003, by and between Contact Energy Limited and Ormat Pacific Inc. ^†
10.5.4				Patent License Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd. ^†


Exhibit No.				Document
10.5.5				Registration Rights Agreement, dated July 15, 2004, by and between Ormat Technologies, Inc. and Ormat Industries Ltd.*
10.6				Ormat Technologies, Inc. 2004 Incentive Compensation Plan*
10.7				Form of Executive Employment Agreement*
21.1				Subsidiaries of the registrant
23.1				Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm
23.2				Consent of Chadbourne & Parke LLP (contained in Exhibit 5.1)*
24.1				Power of attorney (Included on signature page of the registration statement)
99.1				Material terms with respect to BLM geothermal resources leases
99.2				Material terms with respect to BLM site leases


*	To be filed by subsequent amendment.


**	Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been separately filed with the Securities and Exchange Commission.


†	We agree to furnish copies of the Schedules and Exhibits referenced in this agreement to the Securities and Exchange Commission upon request.


††	We have entered into other BLM geothermal resources leases that are substantially similar in terms with this exhibit. Any deviation in terms with this exhibit have been described in Exhibit 99.1.


†††	We have entered into other BLM site leases that are substantially similar in terms with this exhibit. Any deviation in terms with this exhibit have been described in Exhibit 99.2.



                                                                     EXHIBIT 3.1


                              AMENDED AND RESTATED

                          CERTIFICATE OF INCORPORATION

                                       OF

                            ORMAT TECHNOLOGIES, INC.



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

                     Pursuant to Sections 242 and 245 of the
                General Corporation Law of the State of Delaware

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




                  Ormat Technologies, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify as follows:

                  FIRST: The name of the Corporation is Ormat Technologies, Inc.

                  SECOND: The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
September 15, 1994.

                  THIRD: The Certificate of Incorporation of the Corporation is
hereby amended in its entirety and restated and integrated into a single
instrument to read in full as set forth in the Amended and Restated Certificate
of Incorporation of the Corporation attached hereto as Exhibit A and made a part
hereof.

                  FOURTH: The Amended and Restated Certificate of Incorporation
of the Corporation shall become effective at 8:30 a.m., Eastern Time, on June
30, 2004.



                  FIFTH: The Amended and Restated Certificate of Incorporation
of the Corporation was proposed by the Board of Directors of the Corporation and
was duly adopted in accordance with Section 228 of the General Corporation Law
of the State of Delaware by the sole shareholder of the Corporation in the
manner prescribed by Section 242 of the General Corporation Law of the State of
Delaware.

                  SIXTH: The Amended and Restated Certificate of Incorporation
of the Corporation was duly adopted in accordance with the provisions of Section
245 of the General Corporation Law of the State of Delaware.

                  IN WITNESS WHEREOF, the Corporation has caused this
certificate to be signed by its officer thereunto duly authorized this 29th day
of June, 2004.


                                   ORMAT TECHNOLOGIES, INC.





                                   By: /s/ Yehudit Bronicki
                                       -------------------------------------
                                       Name:  Yehudit Bronicki
                                       Title: Secretary


                                       2





                                                                    EXHIBIT A
                                                                    ---------

                              AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                            ORMAT TECHNOLOGIES, INC.
                            ------------------------

                  FIRST: The name of the Corporation is Ormat Technologies, Inc.

                  SECOND: The Corporation's registered office in the State of
Delaware is located at 15 E. North Street, in the City of Dover, County of Kent.
The name and address of its registered agent is HIQ Corporate Services, Inc., 15
E. North Street, Dover, Delaware 19901.

                  THIRD: The nature of the business, or objects or purposes to
be transacted, promoted or carried on, are: To engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.

                  FOURTH: The total number of shares of all classes of stock
which the Corporation shall have the authority to issue is Two Hundred Five
Million (205,000,000), of which (i) Two Hundred Million (200,000,000) shares of
par value of $.001 each are to be of a class designated Common Stock (the
"Common Stock") and (ii) Five Million (5,000,000) shares of par value of $.001
are to be of a class designated Preferred Stock (the "Preferred Stock").

                  The shares of the Corporation outstanding as of June 29, 2004
(consisting of 200 shares of common stock par value $1.00) are divided and
converted into 30,769,230 outstanding shares of Common Stock.

                  In this Article Fourth, any reference to a section or
paragraph, without further attribution, within a provision relating to a
particular class of stock is intended to refer solely to the specified section
or paragraph of the provisions relating to the same class of stock.

COMMON STOCK

                  The Common Stock shall have the following voting powers,
designations, preferences and relative, participating, optional and other
special rights, and qualifications, limitations or restrictions thereof:


                  1. Dividends. Whenever the full dividends upon any outstanding
         Preferred Stock for all past dividend periods shall have been paid and
         the full dividends thereon for the then current respective dividend
         periods shall have been paid, or declared and a sum sufficient for the
         respective payments thereof set apart, the holders of shares of the
         Common Stock shall be entitled to receive such dividends and
         distributions in equal amounts per share, payable in cash or otherwise,
         as may be declared thereon by the Board of Directors from time to time
         out of assets or funds of the Corporation legally available therefor.

                  2. Rights on Liquidation. In the event of any liquidation,
         dissolution or winding-up of the Corporation, whether voluntary or
         involuntary, after the payment or setting apart for payment to the
         holders of any outstanding Preferred Stock of the full preferential
         amounts to which such holders are entitled as herein provided or
         referred to, all of the remaining assets of the Corporation shall
         belong to and be distributable in equal amounts per share to the
         holders of the Common Stock. For purposes of this paragraph 2, a
         consolidation or merger of the Corporation with any other corporation,
         or the sale, transfer or lease of all or substantially all its assets
         shall not constitute or be deemed a liquidation, dissolution or
         winding-up of the Corporation.

                  3. Voting. Except as otherwise provided by the laws of the
         State of Delaware or by this Article Fourth, each share of Common Stock
         shall entitle the holder thereof to one vote.

PREFERRED STOCK

                  The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized to provide for the
issuance of shares of Preferred Stock in series and, by filing a certificate
pursuant to the applicable law of the State of Delaware (hereinafter referred to
as a "Preferred Stock Designation"), to establish from time to time the number
of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations and restrictions thereof. The authority of the Board
of Directors with respect to each series shall include, but not be limited to,
determination of the following:

                  (a) the designation of the series, which may be by
         distinguishing number, letter or title;

                  (b) the number of shares of the series, which number the Board
         of Directors may thereafter (except where otherwise provided in the
         Preferred Stock



                                       2




         Designation) increase or decrease (but not below the number of
         shares thereof then outstanding);

                  (c) whether dividends, if any, shall be cumulative or
         noncumulative and the dividend rate of the series;

                  (d) the dates at which dividends, if any, shall be payable;

                  (e) the redemption rights and price or prices, if any, for
         shares of the series;

                  (f) the terms and amount of any sinking fund provided for the
         purchase or redemption of shares of the series;

                  (g) the amounts payable on shares of the series in the event
         of any voluntary or involuntary liquidation, dissolution or winding up
         of the affairs of the Corporation;

                  (h) whether the shares of the series shall be convertible into
         shares of any other class or series, or any other security, of the
         Corporation or any other corporation, and, if so, the specification of
         such other class or series or such other security, the conversion price
         or prices or rate or rates, any adjustments thereof, the date or dates
         as of which such shares shall be convertible and all other terms and
         conditions upon which such conversion may be made;

                  (i) restrictions on the issuance of shares of the same series
         or of any other class or series; and

                  (j) the voting rights, if any, of the holders of shares of the
         series.

                  Except as may be provided in this Certificate of Incorporation
or in a Preferred Stock Designation, the Common Stock shall have the exclusive
right to vote for the election of directors and for all other purposes, and
holders of Preferred Stock shall not be entitled to receive notice of any
meeting of stockholders at which they are not entitled to vote. The number of
authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the outstanding Common Stock, without a vote of the
holders of the Preferred Stock, or of any series thereof, unless a vote of any
such holders is required pursuant to any Preferred Stock Designation.

                  The Corporation shall be entitled to treat the person in whose
name any share of its stock is registered as the owner thereof for all purposes
and shall not be bound to recognize any equitable or other claim to, or interest
in, such share on the part


                                       3




of any other person, whether or not the Corporation shall have notice thereof,
except as expressly provided by applicable law.

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

                  1.   Designation and Amount. A series of Preferred Stock of
par value $.001 per share is hereby created and shall be designated as "Series A
Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the
number of shares constituting the Series A Preferred Stock shall be Five Hundred
Thousand (500,000). Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.

                  2.   Dividends and Distributions.

                  2.1. Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of Common Stock and of
any other junior stock of the Corporation, shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the second Monday of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share amount of
all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such


                                       4





event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

                  2.2. The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph 2.1 immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.

                  2.3. Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.

                  3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:

                  3.1. Subject to the provision for adjustment hereinafter set
         forth, each share of Series A Preferred Stock shall entitle the holder
         thereof to 100 votes on all matters submitted to a vote of the
         stockholders of the Corporation. In the event the Corporation shall at
         any time declare or pay any dividend on the Common Stock payable in
         shares of Common Stock, or effect a subdivision or combination or
         consolidation of the outstanding shares of Common Stock (by
         reclassification or otherwise than by payment of a dividend in shares
         of Common


                                       5





         Stock) into a greater or lesser number of shares of Common Stock, then
         in each such case the number of votes per share to which holders of
         shares of Series A Preferred Stock were entitled immediately prior to
         such event shall be adjusted by multiplying such number by a fraction,
         the numerator of which is the number of shares of Common Stock
         outstanding immediately after such event and the denominator of which
         is the number of shares of Common Stock that were outstanding
         immediately prior to such event.

                  3.2. Except as otherwise provided herein, in any other
         Preferred Stock Designation creating a series of Preferred Stock or any
         similar stock, or by law, the holders of shares of Series A Preferred
         Stock and the holders of shares of Common Stock and any other capital
         stock of the Corporation having general voting rights shall vote
         together as one class on all matters submitted to a vote of
         stockholders of the Corporation.

                  3.3. Except as set forth herein, or as otherwise provided by
         law, holders of Series A Preferred Stock shall have no special voting
         rights and their consent shall not be required (except to the extent
         they are entitled to vote with holders of Common Stock as set forth
         herein) for taking any corporate action.

                  4.   Certain Restrictions.

                  4.1. Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in paragraph 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:

                  (a) declare or pay dividends, or make any other distributions,
         on any shares of stock ranking junior (either as to dividends or upon
         liquidation, dissolution or winding up) to the Series A Preferred
         Stock;

                  (b) declare or pay dividends, or make any other distributions,
         on any shares of stock ranking on a parity (either as to dividends or
         upon liquidation, dissolution or winding up) with the Series A
         Preferred Stock, except dividends paid ratably on the Series A
         Preferred Stock and all such parity stock on which dividends are
         payable or in arrears in proportion to the total amounts to which the
         holders of all such shares are then entitled;

                  (c) redeem or purchase or otherwise acquire for consideration
         shares of any stock ranking junior (either as to dividends or upon
         liquidation, dissolution or winding up) to the Series A Preferred
         Stock, provided that the Corporation may



                                       6





         at any time redeem, purchase or otherwise acquire shares of any such
         junior stock in exchange for shares of any stock of the Corporation
         ranking junior (either as to dividends or upon dissolution, liquidation
         or winding up) to the Series A Preferred Stock; or

                  (d) redeem or purchase or otherwise acquire for consideration
         any shares of Series A Preferred Stock, or any shares of stock ranking
         on a parity with the Series A Preferred Stock, except in accordance
         with a purchase offer made in writing or by publication (as determined
         by the Board of Directors) to all holders of such shares upon such
         terms as the Board of Directors, after consideration of the respective
         annual dividend rates and other relative rights and preferences of the
         respective series and classes, shall determine in good faith will
         result in fair and equitable treatment among the respective series or
         classes.

                  4.2. The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under subparagraph (c) of
paragraph 4.1, purchase or otherwise acquire such shares at such time and in
such manner.

                  5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein or in
any other Preferred Stock Designation creating a series of Preferred Stock or
any similar stock or as otherwise required by law.

                  6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (i) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series A
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (ii) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on


                                       7




the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(i) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

                  7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

                  8. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.

                  9. Rank. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all series
of any other class of the Corporation's Preferred Stock.

                  10. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of
the outstanding shares of Series A Preferred Stock, voting together as a single
class.

                                       8


                  FIFTH: The Corporation is to have perpetual existence.

                  SIXTH: The private property of the stockholders of the
Corporation shall not be subject to the payment of corporate debts to any extent
whatever.

                  SEVENTH: Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances, the
number of directors of the Corporation shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the whole Board. A director need not be a stockholder. The election
of directors of the Corporation need not be by ballot unless the By-Laws so
require.

                  The directors, other than those who may be elected by the
holders of any series of Preferred Stock or any other series or class of stock,
as provided herein or in any Preferred Stock Designation, shall be divided into
three classes, as nearly equal in number as possible. One class of directors
shall be initially elected for a term expiring at the annual meeting of
stockholders to be held in 2005, another class shall be initially elected for a
term expiring at the annual meeting of stockholders to be held in 2006, and
another class shall be initially elected for a term expiring at the annual
meeting of stockholders to be held in 2007. Members of each class shall hold
office until their successors are duly elected and qualified. At each annual
meeting of the stockholders of the Corporation, commencing with the 2005 annual
meeting, the successors of the class of directors whose term expires at that
meeting shall be elected by a plurality vote of all votes cast for the election
of directors at such meeting to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election.

                  Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock, as provided herein or in
any Preferred Stock Designation, to elect additional directors under specific
circumstances, any director may be removed from office at any time, but only for
cause and only by the affirmative vote of the holders of at least 66 2/3% of the
voting power of the then outstanding capital stock of the Corporation (the
"Capital Stock") entitled to vote generally in the election of directors (the
"Voting Stock"), voting together as a single class.

                  Subject to the rights of the holders of any series of
Preferred Stock, and unless the Board of Directors otherwise determines, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies on the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
may be filled only by a majority vote of the directors then serving on the
Board, though less than a quorum, and directors so chosen shall hold office for
a term expiring at the annual meeting of stockholders at which the term of
office of the


                                       9


class to which they have been elected expires and until such director's
successor shall have been duly elected and qualified. No decrease in the number
of authorized directors constituting the whole Board of Directors shall shorten
the term of any incumbent director.

                  No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. No repeal or modification of this paragraph,
directly or by adoption of an inconsistent provision of this Certificate of
Incorporation, by the stockholders of the Corporation shall be effective with
respect to any cause of action, suit, claim or other matter that, but for this
paragraph, would accrue or arise prior to such repeal or modification.

                  EIGHTH: Unless otherwise determined by the Board of Directors,
no holder of stock of the Corporation shall, as such holder, have any right to
purchase or subscribe for any stock of any class which the Corporation may issue
or sell, whether or not exchangeable for any stock of the Corporation of any
class or classes and whether out of unissued shares authorized by the
Certificate of Incorporation of the Corporation as originally filed or by any
amendment thereof or out of shares of stock of the Corporation acquired by it
after the issue thereof.

                  NINTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them and/or between
this Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof, or on
the application of any receiver or receivers appointed for this Corporation
under the provisions of Section 291 of Title 8 of the General Corporation Law of
the State of Delaware or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 279 of Title 8 of the General Corporation Law of the State of Delaware
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which said application has been made,



                                       10



be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.

                  TENTH:

                  1. Amendment of Certificate of Incorporation. From time to
time any of the provisions of the Certificate of Incorporation may be amended,
altered or repealed, and other provisions authorized by the statutes of the
State of Delaware at the time in force may be added or inserted in the manner at
the time prescribed by said statutes, and all rights at any time conferred upon
the stockholders of the Corporation by its Certificate of Incorporation are
granted, subject to this reservation.

                  2. By-Laws. The Board of Directors is expressly authorized to
make, alter, amend and repeal the By-Laws of the Corporation, in any manner not
inconsistent with the laws of the State of Delaware or of the Certificate of
Incorporation of the Corporation, subject to the power of the holders of the
Capital Stock to alter or repeal the By-Laws made by the Board of Directors.

                  ELEVENTH:

                  1. Written Consent in Lieu of Meeting. Any action which could
be taken at any annual or special meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall (a) be signed by the holders
of outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and (b) be delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the corporation having
custody of the records of proceedings of meetings of stockholders.

                  2. Special Meeting of Stockholders. A special meeting of the
stockholders for any purpose or purposes, unless otherwise provided by law, may
be called by the Chairman of the Board, the President, the Board or the holders
of not less than a majority of all the outstanding shares of the corporation
entitled to vote at the meeting may call special meetings of the stockholders
for any purpose or, at any time that Ormat Industries Ltd. or any OIL Transferee
owns at least 20% of the then outstanding shares of Common Stock, by Ormat
Industries Ltd. or any OIL Transferee. For purposes of this Section 2 of Article
Eleventh, "OIL Transferee" shall mean a transferee of Ormat Industries Ltd. or
any other OIL Transferee that receives at least 20% of the then outstanding
shares of Common Stock that pursuant to an instrument of transfer or related
agreement has been granted rights under this Section 2 of Article Eleventh by
Ormat Industries Ltd. or any OIL Transferee.


                                       11




                                                                     Exhibit 4.1



 NUMBER                                                         SHARES
 ------                                                         ------
SPECIMEN                                                       SPECIMEN

                                                            See Reverse for
                                                          Certain Definitions


              INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

                             ORMAT TECHNOLOGIES, INC.
    The Corporation is authorized to issue 200,000,000 shares of Common Stock
                                 $.001 Par Value

                    (SEE RESTRICTIONS ON TRANSFER ON REVERSE)


This Certifies that ____________________________________________ is the owner of

_________________________________________________________________ fully paid and

non-assessable Shares of the above Corporation transferable only on the books of

the Corporation by the holder hereof in person or by duly authorized Attorney

upon surrender of this Certificate properly endorsed.

In Witness Whereof, the said Corporation has caused this Certificate to be

signed by its duly authorized officers and to be sealed with the Seal of the

Corporation.




Dated _________________________


_______________________________                  _______________________________
Chairman                                         Secretary





NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.

     The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full


according to applicable laws or regulations:


TEN COM  --as tenants in common     UNIF GIFT MIN ACT--......Custodian..........
TEN ENT  --as tenants by the                           (Cust)           (Minor)
           entireties                                  under Uniform Gifts to
JT TEN   --as joint tenants with                       Minors Act...............
           right of survivorship                                     (State)

           and not as tenants
           in common

     Additional abbreviations may also be used though not in the above list.



     For value received, ________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
    IDENTIFYING NUMBER OF ASSIGNEE

______________________________________


________________________________________________________________________________
            (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

________________________________________________________________________________


________________________________________________________________________________


_________________________________________________________________________ Shares

represented by the within Certificate, and do hereby irrevocably constitute and

appoint ________________________________________________________________________

________________________________________________________________________________

Attorney to transfer the said shares on the books of the within-named

Corporation with full power of substitution in the premises.


Dated, ________________________

                                          ______________________________________

            In presence of

__________________________________________




"The securities evidenced by this certificate have not been registered under the
Securities Act of 1933 or applicable state law, and no interest therein may
be sold, distributed, assigned, offered, pledged or otherwise transferred unless
(a) there is an effective registration statement under such Act and applicable
state securities laws covering any such transaction involving said securities or
(b) this corporation receives an opinion of legal counsel for the holder of
these securities (concurred in by legal counsel for this corporation) stating
that such transaction is exempt from registration or this corporation otherwise
satisfies itself that such transaction is exempt from registration. Neither the
offering of the securities nor any offering materials have been reviewed by an
administrator under the Securities Act of 1933 or any applicable state law."




                                                                     Exhibit 4.2



 NUMBER                                                         SHARES
 ------                                                         ------
SPECIMEN                                                       SPECIMEN

                                                            See Reverse for
                                                          Certain Definitions


              INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

                             ORMAT TECHNOLOGIES, INC.
   The Corporation is authorized to issue 5,000,000 shares of Preferred Stock
                                 $.001 Par Value

                    (SEE RESTRICTIONS ON TRANSFER ON REVERSE)


This Certifies that ____________________________________________ is the owner of

_________________________________________________________________ fully paid and

non-assessable Shares of the above Corporation transferable only on the books of

the Corporation by the holder hereof in person or by duly authorized Attorney

upon surrender of this Certificate properly endorsed.

In Witness Whereof, the said Corporation has caused this Certificate to be

signed by its duly authorized officers and to be sealed with the Seal of the

Corporation.




Dated _________________________


_______________________________                  _______________________________
Chairman                                         Secretary




NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.

     The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full


according to applicable laws or regulations:


TEN COM  --as tenants in common     UNIF GIFT MIN ACT--......Custodian..........
TEN ENT  --as tenants by the                           (Cust)           (Minor)
           entireties                                  under Uniform Gifts to
JT TEN   --as joint tenants with                       Minors Act...............
           right of survivorship                                     (State)

           and not as tenants
           in common

     Additional abbreviations may also be used though not in the above list.



     For value received, ________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
    IDENTIFYING NUMBER OF ASSIGNEE

______________________________________


________________________________________________________________________________
            (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

________________________________________________________________________________


________________________________________________________________________________


_________________________________________________________________________ Shares

represented by the within Certificate, and do hereby irrevocably constitute and

appoint ________________________________________________________________________

________________________________________________________________________________

Attorney to transfer the said shares on the books of the within-named

Corporation with full power of substitution in the premises.


Dated, ________________________

                                          ______________________________________

            In presence of

__________________________________________




"The securities evidenced by this certificate have not been registered under the
Securities Act of 1933 or any applicable state law, and no interest therein may
be sold, distributed, assigned, offered, pledged or otherwise transferred unless
(a) there is an effective registration statement under such Act and applicable
state securities law covering any such transaction involving said securities or
(b) this corporation receives an opinion of legal counsel for the holder of
these securities (concurred in by legal counsel for this corporation) stating
that such transaction is exempt from registration or this corporation otherwise
satisfies itself that such transaction is exempt from registration. Neither the
offering of the securities nor any offering materials have been reviewed by an
administrator under the Securities Act of 1933 or any applicable state law."



                                                                  Exhibit 10.1.1


          F O R E I G N  C U R R E N C Y  L O A N  A G R E E M E N T

                                  (ISRAELI LAW)

THIS FOREIGN CURRENCY LOAN AGREEMENT (hereinafter; the "Agreement") is made as
of the 1st day of June, 2004, between UNITED MIZRAHI BANK LTD., 461 Tel-Aviv
main Branch (hereinafter; the "Bank") and ORMAT TECHNOLOGIES INC. *, a Company
incorporated and existing under the laws of DELAWARE, USA having its registered
office at 980 Greg st. Sparks NV, USA (hereinafter; the "Borrower").

(* Kindly indicate whether the Borrower is an individual or a company.)

WHEREAS the Borrower has requested the Bank to grant it a loan in the total
principal sum of 20,000,000$ (Twenty million US dollar) (hereinafter; the
"Loan") with interest, in accordance with the terms and conditions set forth
below; and

WHEREAS the Bank is prepared to grant the Borrower the requested Loan upon the
terms and conditions hereinafter stipulated;

NOW, THEREFORE, IT IS HEREBY AGREED AND DECLARED BETWEEN THE PARTIES AS FOLLOWS:

1.   The Preamble hereto constitutes an integral part hereof.

2.   The Bank hereby agrees to grant a loan to the Borrower and the Borrower
     hereby agrees to borrow from the Bank the total principal sum of
     20,000,000$ (Twenty million US dollar).

3.   The Borrower confirms that the Loan shall be deemed to have been granted by
     the Bank and received by the Borrower upon the Bank crediting the account
     of ORMAT TECHNOLOGIES INC. Account No. 101455 maintained at the 461-Tel
     Aviv main Branch of the Bank with the proceeds of the Loan.

4.   The Borrower undertakes to repay to the Bank the principal amount of the
     Loan in 1 payment of $20,000,000 within 18 months.

5.   (a)  The Borrower shall pay interest as calculated by the Bank on the
          balance of the principal amount of the Loan outstanding from time to
          time as from the date on which such principal amount is granted to the
          Borrower (hereinafter; the "Drawdown Date") at a rate (hereinafter the
          "Interest Rate") which shall be:-

          (i)  Commitment fee at the rate of 0.25% (zero point twenty five per
               cent) per annum, which will be paid at the day of the granted
               loan.

          (ii) at the of the rate of 1.2% (one point two per cent) per annum in
               excess of the London Interbank Offered Rate (hereinafter; the
               "Floating Rate"*)

          such interest to be payable in arrears commencing on the Drawdown Date
          and on the last day of each successive Interest Period, as hereinafter
          defined (hereinafter; the "Interest Payment Date") and at maturity.

          (*Kindly indicate whether the Fixed Rate or the Floating Rate is to
          prevail).

     (b)  In the event that the Floating Rate is to prevail, the Interest
          Rate in respect of the principal amount of the Loan shall be
          determined once every [deleted_text]three*[/deleted_text]/six* months
          in advance, depending on availability, by reference to the London
          Interbank Offered Rate, on the respective Date of Determination, as
          hereinafter defined, and shall be calculated on the balance thereof
          from time to time outstanding during the next period of
          [deleted_text]three* [/deleted_text]/six* months (each such period,
          hereinafter; an "Interest Period").

          (*Kindly delete as applicable).



          For the purpose of determining and calculating the Interest Rate,
          "LIBOR" shall mean the annual rate of interest appearing on the
          Telerate screen Page 3750 or Page 3740 (as appropriate) or any
          equivalent successor to such page or other page as appropriate (as
          determined by the Bank) at or about 11.00 AM (London Time), on the
          Date of Determination as being the interest rate offered in the London
          Interbank Market for deposits in the relevant currency for a period
          equal to the Interest Period

          "Date of Determination" shall mean with regard to all Interest
          Periods, two Business Days prior to the commencement of any such
          Interest Period.

          For the purposes hereof, the term "Business Day" shall mean a day of
          the year other than a Saturday or Sunday or a day on which banks in
          Israel, London or the financial centre of the relevant currency of the
          Loan are authorized or required to remain closed.

     (c)  All computations of interest hereunder shall be made by the Bank on
          the basis of a year of 360 days (consisting of four 90-day quarters)
          or, in the case of interest payable on an amount denominated in
          Sterling or where market practice otherwise dictates 365 days, for the
          actual number of days lapsed (including the first day but excluding
          the last day) occurring in the period for which such interest is
          payable.

     (d)  The Borrower hereby undertakes to pay to the Bank the following
          commissions:

[deleted_text]
     |_|  *(i) A commission at the rate of _____ % (______ per cent) of the
          total amount of the Loan to be paid on the Drawdown Date.
[/deleted_text]
     |_|  *(ii) A commission charged for the opening of the loan file
          [deleted_text] 2500$ at the rate of _____ %( ______ per cent) of the
          total amount of the Loan (being an amount of not less than _________
          and not more than __________) to be paid on the Drawdown Date.
          [/deleted_text]

          (*Kindly indicate as applicable).

     (e)  Whenever any payment to be made hereunder shall be stated to be due,
          or whenever the last day of any Interest Period would otherwise occur
          on a day other than a Business Day, such payments shall be made, and
          the last day of such Interest Period shall occur, on the next
          succeeding Business Day. Any such change in time of payment shall be
          taken into account in the computation of payment of interest.

6.   (a)  On giving not less than 14 (fourteen) Business Days' prior written
          notice, the Borrower may prepay on any Interest Payment Date all or
          any part of the Loan, principal and interest, provided that any amount
          so prepaid shall be in a minimum sum of not less than __2,000,0000$__
          and provided that the Bank shall receive [deleted_text] full
          compensation from the Borrower for costs incurred by the Bank in
          reemploying such prepaid funds.[/deleted_text] Compensation as
          stipulated in clause 31.2.3 in the "General condition for credit
          activity". Each prepayment made pursuant to this Agreement may not be
          reborrowed hereunder and any notice of prepayment given by the
          Borrower shall be irrevocable and the Borrower shall be bound to
          prepay in accordance with such notice.

     (b)  Whenever the Borrower is overdue in repaying any of the payments due
          and payable by it under this Agreement, the Bank shall charge the
          Borrower with respect to any such overdue payment with arrears of
          interest at a rate equal to L+6% (Libor + six _ per centum) per annum.
          [deleted_text] in excess of the Interest Rate determined pursuant to
          Clause 5 herein. [/deleted_text] Arrears of interest may be
          capitalized by the Bank periodically once every three or six months,
          as determined by the Bank at its sole discretion.

7.   (a)  The Borrower's obligation to repay the principal, any amount of
          interest on and/or other amounts in connection with the Loan shall be
          absolute and unconditional, regardless of any law, regulation or
          decree now or hereafter in effect in any country or other jurisdiction
          (including, without limitation, restrictions on payments in any
          currency) which might render

                                       2


          invalid or unenforceable, or otherwise alter or affect in any manner,
          any of the terms and conditions of the Loan of this Agreement or any
          rights or obligations hereunder, and all payments by the Borrower
          shall be made in full without set-off or counterclaim.

     (b)  All payments required to be made under this Agreement shall be made to
          the Bank free of any taxes, deductions or charges and without set-off
          or counterclaim, in lawful and freely transferable currency and in
          funds available to the Bank or at any other place nominated by the
          Bank and not prohibited for that purpose by any applicable law,
          provided that 5 (five) days' prior notice thereof shall have been
          given to the Borrower by the Bank, except for any taxes withheld by
          any relevant authorities at source, in which case the Borrower hereby
          undertakes to furnish to the Bank a certificate setting forth and
          confirming the amount so deducted in accordance thereto, which
          certificate shall be prima facie evidence of the amount set forth
          therein.

     (c)  If the Borrower is prevented by operation of law from effecting
          payment, free of any deduction, taxes, duties, fees, costs or other
          charges,or from paying, causing to be paid or remitting the same, the
          payment of interest under this Agreement shall be increased to such
          amount as is necessary to yield and remit to the Bank interest at the
          rate specified in this Agreement after provision for payment of such
          deduction, taxes, duties, fees, costs or other charges. The Borrower
          shall at the request of the Bank executed and deliver to the Bank such
          instruments as may be necessary or desirable to give full force and
          effect to such increase in the Interest Rate.

     (d)  In the event that any law or regulation shall be interpreted by any
          governmental authority charged with the administration thereof to:

          (i)  Subject the Bank to any form of tax payable in respect of this
               Agreement or to any tax with respect to payments of principal of
               or interest on the Loan or to change the basis of taxation of
               payments to the Bank of principal of or interest on the Loan
               (except for taxes on the overall income of the Bank); or

          (ii) Impose, modify or deem applicable any reserve requirements
               against assets held by, or deposits on or for the account of, or
               loans received by the Bank; or

          (iii)Impose, modify or deem applicable any withholding tax against
               interest payable by the Bank on deposits or loans received by the
               Bank; or

          (iv) Impose on the Bank any other condition with respect to this
               Agreement,

          and the result of any of the foregoing shall in the opinion of the
          Bank be to increase the cost to the Bank of making or funding the Loan
          by an amount which the Bank deems to be material then, upon demand
          being made to the Borrower by the Bank, the Borrower shall pay to the
          Bank that amount which shall compensate the Bank for such additional
          cost in respect of the Loan. The Bank shall use its best efforts
          promptly to notify the Borrower of any event which may entitle the
          Bank to payment pursuant to the preceding sentence but failure by the
          Bank to give any such notification shall in no way prejudice its
          rights hereunder. A certificate by a duly authorised officer of the
          Bank, setting forth the amount of such payment and the basis therefor
          shall be sent by the Bank to the Borrower and shall except in the case
          of manifest error be conclusive evidence of such amount. All mentioned
          above is subject to clause 45.6 in "General conditions for credit
          activity".

8.   If as a result of the introduction of or any change in or in the
     interpretation of any law or regulation, whether by any court, central
     bank, other governmental authority or otherwise, it shall become (or be
     claimed to be) unlawful for the Bank to continue to fund or maintain the
     Loan or to perform any of its obligations in connection therewith, the Bank
     and the Borrower undertake to cooperate in good faith in pursuing any
     reasonable possibility to restructure the Loan so that it will be valid and
     binding. However, if all attempts fail to accomplish such a restructuring
     within a reasonable period of time, upon demand by the Bank, the Borrower
     shall forthwith (and in any event not later than the next Interest Payment
     Date) prepay in full the unpaid principal amount of

                                       3


     the Loan together with accrued interest thereon and all other amounts
     payable by the Borrower hereunder, all without penalty or premium.

9.   (a)  On or before the advancement of the Loan and/or as security for the
          full and punctual payment of all sums now or hereafter to become due
          to the Bank by the Borrower, the Borrower hereby undertakes to furnish
          to the Bank the following securities:

          --------------------------------------------------------------------
          Full Guarantee of ORMAT INDUSTRIES LTD (mother company)_____________
          --------------------------------------------------------------------

     (b)  The full and punctual payment of all sums now or hereafter to become
          due to the Bank from the Borrower hereunder shall be secured by any
          and all securities given or to be given to the Bank from time to time
          by the Borrower and/or for the Borrower.

10.  On the happening of any one of the events specified in section 24 in
     "General conditions for credit activity", the Bank will be entitled to
     demand the immediate repayment of any amount owing to the Bank from the
     Borrower on account of the Loan or in accordance with this Agreement and
     such amount shall thenceforth become immediately due and repayable to the
     Bank until the repayment thereof in full:
[deleted_text]
     (a)  If any sum due from the Borrower to the Bank under this Agreement is
          not paid when and as the same shall become due and payable and such
          sum is not paid within a period of 15 (fifteen) days; or

     (b)  If an order shall be made or a resolution passed for the winding up of
          the Borrower or if the Borrower be otherwise in liquidation; or

     (c)  If a receiver, trustee or similar officer is appointed over any of the
          assets of the Borrower and such appointment is not cancelled within 30
          (thirty) days; or

     (d)  If the Borrower commits an act of bankruptcy, enters into a scheme or
          arrangement with its creditors, or convenes a meeting for the purpose
          of entering into a scheme or arrangement with its creditors, or
          applies to a court for the purpose of approving a scheme or
          arrangement with its creditors, or admits its inability to pay its
          debts when due and shall continue for a period of 30 (thirty) days; or

     (e)  If any representation or warranty or obligation made by the Borrower
          in Clause 11 is or proves to have been incorrect when made or the
          Borrower is in breach of any obligation under Clause 14; or

     (f)  If the Borrower ceases or threatens to cease all or a substantial part
          of its operations or transfers or disposes of (otherwise than in the
          ordinary course of business) all or a substantial part of its assets
          whether by one or a series of transactions related or not.
[/deleted_text]

11.  In the event that the Borrower is a company, the Borrower represents and
     warrants as follows:

     (a)  The Borrower is a corporation duly incorporated, validly existing and
          in good standing under the laws of the jurisdiction indicated at the
          beginning of this Agreement.

     (b)  The execution, delivery and performance by the Borrower of this
          Agreement are within the Borrower's corporate powers, have been duly
          authorized by all necessary corporate action, and do not contravene
          (i) the Borrower's Memorandum and Articles of Association or
          equivalent constitutional documents (ii) any law or any contractual
          restriction binding on or affecting the Borrower.

     (c)  The Agreement is a legal, valid and binding obligation of the Borrower
          enforceable against the Borrower according to its terms, and such
          obligation ranks and will rank at least parri passu in all respects
          with all other unsecured obligations of the Borrower.

                                       4

[deleted_text]
     (d)  No charges, pledges or encumbrances, floating or fixed, exist over all
          or any of the present or future revenues or assets of the Borrower.
[/deleted_text]

     (e)  There is no pending or threatened action or proceeding affecting the
          Borrower before any court, governmental agency or arbitrator, which
          may materially adversely affect the financial condition or operations
          of the Borrower.

     12.  [deleted_text] The Bank shall have a lien and/or a first ranking
          pledge and/or charge on all monies and/or securities and/or claims
          and/or goods, and other property, assets and/or rights of the
          Borrower, that shall be held by the Bank, whether the same shall be
          held directly or indirectly by the Borrower or in any company of which
          the Borrower is a shareholder, until payment in full of all amounts
          due from the Borrower to the Bank hereunder. All mentioned in this
          clause is subject to clause 11 in "General conditions for credit
          activity".[/deleted_text]

[deleted_text]
13.  The Bank shall be entitled to appropriate and/or to discharge any amount
     owed by the Borrower pursuant to this Agreement, any amount had or received
     by the Bank for or on account of the Borrower, notwithstanding that any
     amount so had or received was intended by the Borrower or any third party


     to be appropriated for or on account of any other amount.
[/deleted_text]

14.  (a)  [deleted_text] The Borrower hereby undertakes, at the request of the
          Bank, to execute and deliver to the Bank such instruments which in the
          sole opinion of the Bank shall be necessary or desirable to give full
          force and effect to any clause in this Agreement.[/deleted_text]

     (b)  [deleted_text] The Borrower undertakes not to create or have
          outstanding any charge, pledge or encumbrance, fixed or floating, or

          over any of its present or future reserves or assets[/deleted_text]

15.  Should any undertaking of the Borrower contained in this Agreement be
     contrary to any applicable law, such undertaking shall be severable from
     all remaining parts of this Agreement and the validity of the remainder
     shall not be affected.

16.  [deleted_text] All the costs and expenses (including[/deleted_text]
     stamp duties shall be paid by the Borrower.

17.  Any waiver on the part of either party hereto in favour of the other party
     in respect of a previous breach or non-compliance of one or more of such
     other party's obligations hereunder shall not be deemed to be a
     justification or excuse for an additional breach or noncompliance of any
     provision or obligation of the Agreement. The invalidity or
     unenforceability of any provisions hereof shall not affect or impair the
     validity or enforceability of any other provisions hereof. The remedies


     herein provided are cumulative and not exclusive of any remedies provided
     by law.

18.  (a)  For the purpose of this Agreement, the expression "written" or "in
          writing" shall mean "by letter, facsimile, SWIFT, cable or telex.

     (b)  Any demand for payment of any amounts due and payable under this
          Agreement and any notice in writing required or permitted to be made
          hereunder shall, if made by letter, be deemed to be sufficiently made
          if addressed as follows:

          (i)  In the case of a demand or notice to the Borrower at the address
               set forth above; and _P.O.B 68, Derech Shidlovsky st.,
               Yavne__________________________

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

          (ii) In the case of a demand or notice to the Bank, at: __48
               Lilienblum st. Tel Aviv 65134__________________

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

          and posted to them or served on them personally there or left for them
          there and in proving such service in case of postage it shall be
          sufficient to show that the letter containing such demand or notice
          was properly addressed, stamped and posted by registered airmail for
          service to be deemed to have been effected within 7 (seven) days after
          the date of posting.

                                       5


     (c)  Any demand for payment of any amount due and payable under the
          Agreement and any notice in writing required or permitted to be made
          hereunder shall, if made by cable, facsimile, SWIFT or telex, be
          deemed to be sufficiently made if addressed as follows:

          (i)  In the case of a demand or notice to the Borrower -
               Telex Number:____001-775-356-9079_______________________
               Facsimile Number:__001-775-356-9039______________________

          (ii) In the case of a demand or notice to the Bank -
               Telex Number: 33625, 341225-6 MIZBK IL
               Facsimile Number: 972-3-7557916-1630 or
               972-3-5679916

            and any such facsimile, cable, SWIFT or telex properly addressed and
            sent shall be deemed to have been received within 12 (twelve) hours
            after the time of sending.

     (d)  Each of the parties hereto shall be entitled at any time and from time
          to time to give the other party notice in writing of any change in any
          of the addresses relating to the party giving such notice, and
          paragraphs (b) and (c) of this Clause shall be deemed modified by and

          in accordance with every such notice of change.

19.  This Agreement shall be governed by, and construed in accordance with, the
     laws of the State of Israel.

20.  The parties agree that the Courts of the City of Tel Aviv shall have
     non-exclusive jurisdiction over any dispute arising from or in connection
     with the existence, the interpretation, the performance, enforcement or the
     termination of this Agreement, but nothing herein contained shall derogate
     from the right of the Bank to institute, at its sole choice and discretion,
     proceedings against the Borrower in any other competent courts wheresoever
     situated.

21.  This Agreement shall enter into force as of the day and year first above
     written after having been signed by both parties.

IN WITNESS WHEREOF, the Bank and the Borrower have caused this Agreement to be
duly executed at the respective places and on the respective dates below
written.


       UNITED MIZRAHI BANK LIMITED              ORMAT TECHONOLOGIES, INC.

By: /s/ Avinoam Meoded /s/ Anita Castiel     By: /s/ Yehudit Bronicki
   -------------------------------------         -------------------------------

At: Avinoam Meoded     Anita Castiel         At: Yehudit Bronicki
   -------------------------------------         -------------------------------

This 1st day of June, 2004.                       This 1st day of June, 2004.



                                                                  Exhibit 10.1.2


                   AMENDED AND RESTATED BRIDGE LOAN AGREEMENT
                   ------------------------------------------

              This AMENDED AND RESTATED BRIDGE LOAN AGREEMENT (this "Agreement")
is made as of October 2, 2003 by and between ORMAT NEVADA, INC. (the
"Borrower"), a Delaware corporation having its principal place of business at
980 Greg Street, Sparks, Nevada 89431-6039, and BANK LEUMI USA (the "Bank"), a
New York State chartered banking institution with its office at 564 Fifth
Avenue, New York, NY 10036.

              The Borrower and the Bank heretofore entered into a Bridge Loan
Agreement, made as of May 2, 2002, which was subsequently amended by a First
Amendment made as of July 11, 2002, and letter agreements dated April 30 and
July 2, 2003 (the said Bridge Loan Agreement as so amended is the "Initial
Agreement"). This Agreement amends, restates and supersedes the Initial
Agreement.

                                 1. DEFINITIONS

              Certain capitalized terms are defined below:

              Affiliate: Any individual, corporation, partnership, trust,
unincorporated association, business, or other legal entity that would be
considered to be an affiliate of the Borrower under Rule 144(a) of the Rules and
Regulations of the Securities and Exchange Commission, as in effect on the date
hereof, if the Borrower were issuing securities.

              Agreement: See preamble, which term shall include this Agreement
and the Schedules hereto, all as amended and in effect from time to time.

              Bank: Bank Leumi USA.

              BLITA: Bank Leumi Le-Israel B.M., an Israeli banking institution
and an Affiliate of the Bank.

              Borrower:  Ormat Nevada, Inc.

              Business Day: Any day on which banks in New York, NY, are open for
business generally.

              Charter Documents: In respect of any entity, the certificate or
articles of incorporation or organization and the by-laws of such entity, or
other constitutive documents of such entity.




              Commitment: The undertaking of the Bank, subject to the terms and
conditions of this Agreement, to make Loans to the Borrower up to an aggregate
outstanding principal amount not to exceed the Commitment Amount; provided,
however, that the Bank is in receipt of a Standby Letter of Credit in an amount
which is not less than 105% of the intended outstanding principal amount of each
Loan (which Standby Letter of Credit shall be a condition precedent to making
such Loan).

              Commitment Amount: $20,000,000.

              Consent: In respect of any person or entity, any permit, license
or exemption from, approval, consent of, registration or filing with any local,
state or federal governmental or regulatory agency or authority, required under
applicable law.

              Default: An event or act which with the giving of notice and/or
the lapse of time, would become an Event of Default.

              Drawdown Date: In respect of any Loan, the date on which such Loan
is made to the Borrower.

              Environmental Laws: All laws pertaining to environmental matters,
including without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, in each case
as amended, and all rules, regulations, judgments, decrees and orders arising
under all such laws.

              ERISA: The Employee Retirement Income Security Act of 1974, as
amended, and all rules, regulations, judgments, decrees, and orders arising
thereunder.

              Event of Default: Any of the events listed as such in the Restated
Note or in (section) VIII hereof.

              Federal Funds Effective Rate: For any day, the rate per annum
equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the Bank
from three funds brokers of recognized standing selected by the Bank.

              Financials: In respect of any period, the balance sheet of any
person or entity as at the end of such period, and the related statement of
income and statement of cash

                                       2


flow for such period, each setting forth in comparative form the figures for the
previous comparable fiscal period, all in reasonable detail and prepared in
accordance with GAAP.

              GAAP: Generally accepted accounting principles consistent with
those adopted by the Financial Accounting Standards Board and its predecessor,
as in effect from time to time.

              Indebtedness: In respect of any entity, all obligations,
contingent and otherwise, that in accordance with GAAP should be classified as
liabilities, including without limitation (i) all debt obligations, (ii) all
liabilities secured by Liens, (iii) all guarantees and (iv) all liabilities in
respect of bankers' acceptances or letters of credit.

              Interest Period: As defined in the Restated Note.

              Liens: Any encumbrance, mortgage, pledge, hypothecation, charge,
restriction or other security interest of any kind securing any obligation of
any entity or person.

              Loan: Any loan made or to be made to the Borrower pursuant to
(section) II hereof.

              Loan Documents: This Agreement, the Restated Note and the Standby
Letter of Credit in each case as from time to time amended or supplemented.

              Loan Request:  See (section) 2.1.

              Materially Adverse Effect: Any materially adverse effect on the
financial condition or business operations of the Borrower or material
impairment of the ability of the Borrower to perform its obligations hereunder
or under any of the other Loan Documents.

              Maturity Date: February 2, 2005, or such earlier date on which all
Loans may become due and payable pursuant to the terms hereof.

              Obligations: All indebtedness, obligations and liabilities of the
Borrower to the Bank, existing on the date of this Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Agreement or any other Loan Document or in respect of any of the Loans or the
Restated Note or other instruments at any time evidencing any thereof.

              Requirement of Law: In respect of any person or entity, any law,
treaty, rule, regulation or final and binding determination of an arbitrator,
court, or other

                                       3


governmental authority, in each case applicable to or binding upon such person
or entity or affecting any of its property.

              Restated Note: See (section) 2.1 .

              Standby Letter of Credit: One or more unconditional, irrevocable
standby letters of credit in a total amount of not less than 105% of the
outstanding principal amount of each Loan made up to the Commitment Amount
issued by BLITA in favor of the Bank, and expiring not earlier than thirty (30)
days after the Maturity Date. The Standby Letter of Credit shall be available
for drawing at any given time in an amount equal to the sum of the then
outstanding principal, accrued interest and other amounts payable with respect
to the Loans.

                            2. BRIDGE LOAN FACILITY

              2.1 Commitment to Lend.

              (a) On the terms and subject to the conditions of this Agreement,
the Bank agrees to lend to the Borrower such sums that the Borrower may request,
from the date hereof until, but not including, the Maturity Date, provided that
the sum of the outstanding principal amount of all Loans (after giving effect to
amounts requested) shall at no time exceed the then applicable Commitment
Amount.

              (b) The Commitment Amount is Twenty Million Dollars ($20,000,000).

              (c) Loans shall be in the minimum aggregate amount of $1,000,000
or an integral multiple thereof. The Borrower shall deliver to the Bank and to
BLITA in writing or telephonically a notice of the principal amount of each
requested Loan. Each such notice must be received by the Bank and by BLITA not
later than 12:00 p.m. New York time three Business Days before the Drawdown Date
(which must be a Business Day). Subject to the foregoing, so long as the
Commitment is then in effect and the conditions set forth in Section VI hereof
are fully satisfied as of such Drawdown Date, the Bank shall advance the amount
requested to the Borrower's account at the Bank in immediately available funds
not later than the close of business on such Drawdown Date. The obligation of
the Borrower to repay to the Bank the principal of the Loans and interest
accrued thereon is evidenced by an amended and restated promissory note (the
"Restated Note"), dated as of even date with this Agreement, in the maximum
aggregate principal amount of $20,000,000.00 executed and delivered by the
Borrower and payable to the order of the Bank, in form and substance
satisfactory to the Bank.

                                       4


              2.2 Interest. The Borrower shall pay interest on the Loans in
accordance with the terms of the Restated Note.

              2.3 Repayments, Prepayments and Reborrowings.

              (a) The Borrower shall pay to the Bank on the Maturity Date the
entire unpaid principal of and interest on all Loans.

              (b) The Borrower may elect to prepay the outstanding principal of
all or any part of any Loan, without premium or penalty, in a minimum amount of
$1,000,000 or an integral multiple thereof, upon written notice to the Bank
given by 10:00 a.m. New York time on the Business Day before the date of such
prepayment, of the amount to be prepaid. If prepayment is made on a date other
than the last day of an Interest Period, Borrower shall also pay to the Bank
additional compensation as prescribed in the Restated Note.

              (c) Each repayment or prepayment of principal of any Loan shall be
accompanied by payment of the unpaid interest accrued to such date on the
principal being repaid or prepaid.

              (d) The Borrower may elect to reduce or terminate the Commitment
Amount by a minimum principal amount of $2,000,000 or an integral multiple
thereof, upon written notice to the Bank given by 10:00 a.m. New York time at
least two (2) Business Days prior to the date of such reduction or termination.
The Borrower shall not be entitled to increase or reinstate the Commitment
Amount following such reduction or termination.

                          3. CHANGES IN CIRCUMSTANCES

              If after the date hereof the Bank determines that (i) the adoption
of or any change in any banking law, rule, regulation or guideline or the
administration thereof (whether or not having the force of law), or (ii)
compliance by the Bank or its parent bank holding company with any guideline,
request or directive (whether or not having the force of law), has the effect of
reducing the return on the Bank's or such holding company's capital as a
consequence of the Commitment or the Loans to a level below that which the Bank
or such holding company could have achieved but for such adoption, change or
compliance by any amount deemed by the Bank to be material, the Bank may notify
the Borrower thereof. The Borrower agrees to pay the Bank the amount of the
Borrower's allocable share of the amount of such reduction in the return on
capital as and when such reduction is determined, upon presentation by the Bank
of a statement in the amount and setting forth the Bank's calculation thereof,
which statement shall be deemed true and correct absent manifest error. The Bank
agrees to allocate shares of such

                                       5


reduction among the Borrower and the Bank's other customers similarly situated
on a fair and nondiscriminatory basis.


                              4. FEES AND PAYMENTS

              4.1 Up-front Fees. Contemporaneously with execution and delivery
of this Agreement, the Borrower shall pay to the Bank a one-time total up-front
fee in the amount of $20,000.

              4.2 Commitment Fees. Until the earlier of the Maturity Date or the
date upon which the Commitment is no longer in effect, the Borrower shall pay to
the Bank, on the first day of each calendar quarter hereafter, and upon the
Maturity Date or the date upon which the Commitment is no longer in effect, a
commitment fee calculated at a rate per annum which is equal to one quarter
percent (1/4%) of the average daily difference by which the then applicable
Commitment Amount exceeds the aggregate of the outstanding Loans during the
preceding calendar quarter or portion thereof.

              4.3 Manner of Payment. All payments to be made by the Borrower
under this Agreement shall be made in U.S. dollars in immediately available
funds at the Bank's office at 564 Fifth Avenue, New York, NY 10036 without
set-off or counterclaim and without any withholding or deduction whatsoever. The
Bank shall be entitled to charge any account of the Borrower with the Bank for
any sum due and payable by the Borrower to the Bank hereunder, or under any of
the other Loan Documents. If any payment hereunder is required to be made on a
day which is not a Business Day, it shall be paid on the immediately preceding
Business Day. All computations of interest or of the commitment fee payable
hereunder shall be made by the Bank on the basis of actual days elapsed and on a
360-day year. The aggregate unpaid amount of Loans set forth on the Bank's
internal records shall be prima facie evidence of the principal amount thereof
owing and unpaid to the Bank, but the failure to record, or any error in so
recording, any such amount on the Bank's records shall not affect the
obligations of the Borrower hereunder or under the Restated Note to make
payments of principal of and interest on the Restated Note when due.

                       5. REPRESENTATIONS AND WARRANTIES

              The Borrower represents and warrants to the Bank on the date
hereof, on the date of any Loan Request, and on each Drawdown Date that:

              (a) the Borrower is duly organized, validly existing, and in good
       standing under the laws of the State of Delaware, is duly qualified and
       in good standing in every other jurisdiction where it is doing business,
       and the execution, delivery and performance by the Borrower of the Loan
       Documents (i) are within its corporate

                                       6


       authority, (ii) have been duly authorized, and (iii) do not conflict with
       or contravene its Charter Documents;

              (b) upon execution and delivery thereof, each Loan Document shall
       constitute the legal, valid and binding obligation of the Borrower,
       enforceable in accordance with its terms;

              (c) the Borrower has good and marketable title to all its material
       properties, and possesses all assets, including intellectual properties,
       franchises and Consents, adequate for the conduct of its business as now
       conducted, without known conflict with any rights of others;

              (d) the Borrower has provided to the Bank its unaudited Financials
       as at December 31, 2002, and for the period then ended, and such
       Financials are complete and correct and fairly present the position of
       the Borrower as at such date and for such period in accordance with GAAP
       consistently applied;

              (e) since December 31, 2002, there has been no materially adverse
       change of any kind in the Borrower which would have a Materially Adverse
       Effect;

              (f) there are no legal or other proceedings or investigations
       pending or threatened against the Borrower before any court, tribunal or
       regulatory authority which would, if adversely determined, alone or
       together, have a Materially Adverse Effect;

              (g) the execution, delivery, performance of its obligations, and
       exercise of its rights under the Loan Documents by the Borrower,
       including borrowing under this Agreement (i) do not require any Consents;
       and (ii) are not and will not be in conflict with or prohibited or
       prevented by (A) any Requirement of Law, or (B) any Charter Document,
       corporate minute or resolution, instrument, agreement or provision
       thereof, in each case binding on it or affecting its property; and

              (h) the Borrower is not in violation of (i) any Charter Document,
       corporate minute or resolution, (ii) any instrument or agreement, in each
       case binding on it or affecting its property, or (iii) any Requirement of
       Law, in a manner which could have a Materially Adverse Effect.

                            6. CONDITIONS PRECEDENT

              In addition to the making of the foregoing representations and
warranties, the payment of fees, and the delivery of the Loan Documents, the
obligation of the Bank to

                                       7


make each Loan hereunder shall be subject to the satisfaction, as of the date of
the funding of each such Loan, of the following further conditions precedent:

              (a) BLITA shall have advanced funds to the Bank in the amount of
       such Loan;

              (b) the Standby Letter of Credit shall be in full force and
       effect;

              (c) the representations and warranties of the Borrower to the Bank
       shall be true and correct in all material respects as of the time made or
       claimed to have been made;

              (d) no Default or Event of Default shall be continuing;

              (e) all proceedings in connection with the transactions
       contemplated hereby shall be in form and substance satisfactory to the
       Bank, and the Bank shall have received all information and documents as
       it may have reasonably requested;

              (f) no change shall have occurred in any law or regulation or in
       the interpretation thereof that in the reasonable opinion of the Bank
       would make it unlawful for the Bank to make such Loan; and

              (g) prior to the funding of the first Loan under this Agreement,
       the Bank shall have received the legal opinion of counsel to the
       Borrower, substantially in the form attached as Exhibit A.

                                  7. COVENANTS

              7.1 Affirmative Covenants. The Borrower agrees that until the
termination of the Commitment and the payment and satisfaction in full of all
the Obligations, the Borrower will comply with its obligations as set forth
throughout this Agreement and will:

              (a) furnish the Bank: (i) as soon as available but in any event
       within ninety (90) days after the close of each fiscal year, its
       Financials, prepared in accordance with GAAP, for such fiscal year, in
       such form as is satisfactory for inclusion in the audited Financials of
       Ormat Industries Ltd. (the ultimate parent company), and certified by the
       Borrower's accountants; (ii) as soon as available but in any event within
       sixty (60) days after the end of each fiscal quarter its unaudited
       Financials for such quarter, certified by its chief financial officer;
       and (iii) together with the quarterly and annual audited Financials, a
       certificate of the Borrower certifying that no Default or Event of
       Default has occurred, or if it has, the actions taken by the Borrower
       with respect thereto;

                                       8


              (b) keep true and accurate books of account, maintain its current
       fiscal year and permit the Bank or its designated representatives to
       inspect the Borrower's premises during normal business hours and to
       examine and be advised as to such or other business records upon the
       request of the Bank;

              (c) (i) maintain its corporate existence, business and assets,
       (ii) keep its business and assets adequately insured, (iii) maintain its
       chief executive office in the United States, (iv) continue to engage in
       the same lines of business, and (v) comply with all Requirements of Law,
       including ERISA and Environmental Laws;

              (d) notify the Bank promptly in writing of (i) the occurrence of
       any Default or Event of Default, (ii) any material noncompliance with
       ERISA or any Environmental Law or proceeding in respect thereof which
       could have a Materially Adverse Effect, (iii) any change of address, (iv)
       any threatened or pending litigation or similar proceeding affecting the
       Borrower or any Affiliate which could have a Materially Adverse Effect,
       or any material adverse change in any such litigation or proceeding
       previously reported, and (v) material claims against any assets or
       properties of the Borrower or any of its Affiliates encumbered in favor
       of the Bank; and

              (e) cooperate with the Bank, take such action, execute such
       documents, and provide such information as the Bank may from time to time
       reasonably request in order further to effect the transactions
       contemplated by and the purposes of the Loan Documents.

              7.2 Negative Covenants. The Borrower agrees that until the
termination of the Commitment and the payment and satisfaction in full of all
the Obligations, the Borrower will not, without the prior written consent of the
Bank:

              (a) make any distributions on or in respect of its capital of any
       nature whatsoever to its shareholders in their capacity as shareholders;

              (b) become party to a merger or sale-leaseback transaction, or
       effect any disposition of assets other than in the ordinary course.

                       8. EVENTS OF DEFAULT; ACCELERATION

              Each of the following shall constitute an Event of Default under
this Agreement:

                                       9


              (a) the Borrower shall fail to pay when due and payable any
       principal of the Loans when the same becomes due;

              (b) the Borrower shall fail to pay interest on the Loans or any
       other sum due under any of the Loan Documents within two (2) Business
       Days after the date on which the same shall have first become due and
       payable;

              (c) the Borrower shall fail to perform any term, covenant or
       agreement contained in (sections) 7.1(c)(i) and 7.2;

              (d) the Borrower shall fail to perform any other term, covenant or
       agreement contained in any Loan Document within fourteen (14) days after
       the Bank has given written notice of such failure to the Borrower;

              (e) any representation or warranty of the Borrower in the Loan
       Documents or in any certificate or notice given in connection therewith
       shall have been false or misleading in any material respect at the time
       made or deemed to have been made;

              (f) the Borrower, or any Affiliate of Borrower, shall be in
       default (after any applicable period of grace or cure period) under any
       agreement evidencing Indebtedness owing to the Bank, or shall fail to pay
       such Indebtedness when due (after any applicable period of grace or cure
       period);

              (g) any of the Loan Documents shall cease to be in full force and
       effect;

              (h) the Borrower (i) shall make an assignment for the benefit of
       creditors, (ii) shall be adjudicated bankrupt or insolvent, (iii) shall
       seek the appointment of, or be the subject of an order appointing, a
       trustee, liquidator or receiver as to all or part of its assets, (iv)
       shall commence, approve or consent to, any case or proceeding under any
       bankruptcy, reorganization or similar law and, in the case of an
       involuntary case or proceeding, such case or proceeding is not dismissed
       within forty-five (45) days following the commencement thereof, or (v)
       shall be the subject of an order for relief in an involuntary case under
       federal bankruptcy law;

              (i) the Borrower shall be unable to pay its debts as they mature;

              (j) there shall remain undischarged for more than thirty (30) days
       any final judgment or execution action against the Borrower that,
       together with other outstanding claims and execution actions against the
       Borrower exceeds $200,000 in the aggregate;

              (k) the commencement of a foreclosure proceeding affecting any
       Approved Geothermal Project;

                                       10


              (l) the Borrower, or any Affiliate of Borrower, shall be in
       default (after any applicable period of grace or cure period) under any
       agreement evidencing Indebtedness owing to BLITA, or to any Affiliate of
       BLITA other than the Bank, or shall fail to pay such Indebtedness when
       due (after any applicable period of grace or cure period); or

              (m) a change in the financial condition or affairs of Borrower
       which in the reasonable opinion of the Bank materially reduces Borrower's
       ability to pay all the Obligations.

              If any of the Events of Default shall occur and be continuing,
then, or at any time thereafter:

              (a) In the case of any Event of Default under clause (h) or (i),
       the Commitment shall automatically terminate, and the entire unpaid
       principal amount of the Loans, all interest accrued and unpaid thereon,
       and all other amounts payable thereunder and under the other Loan
       Documents shall automatically become forthwith due and payable, without
       presentment, demand, protest or notice of any kind, all of which are
       hereby expressly waived by the Borrower;

              (b) In the case of any Event of Default under clause (a) or (b),
       the Bank may, by written notice to the Borrower, terminate the Commitment
       and/or declare the unpaid principal amount of the Loans, all interest
       accrued and unpaid thereon, and all other amounts payable hereunder and
       under the other Loan Documents to be forthwith due and payable, without
       presentment, demand, protest or further notice of any kind, all of which
       are hereby expressly waived by the Borrower; and

              (c) In the case of any Event of Default other than (a), (b), (h)
       or (i), the Bank may, by two (2) Business Days' prior written notice to
       the Borrower, and where such Event of Default has not been cured during
       such period, terminate the Commitment and/or declare the unpaid principal
       amount of the Loans, all interest accrued and unpaid thereon, and all
       other amounts payable hereunder and under the other Loan Documents to be
       forthwith due and payable, without presentment, demand, protest or
       further notice of any kind, all of which are hereby expressly waived by
       the Borrower.

              No remedy herein conferred upon the Bank is intended to be
exclusive of any other remedy and each and every remedy shall be cumulative and
in addition to every other remedy hereunder, now or hereafter existing at law or
in equity or otherwise.

                                       11


                                   9. SETOFF

              Regardless of the adequacy of any collateral for the Obligations,
any deposits or other sums credited by or due from the Bank to the Borrower may
be applied to or set off against any principal, interest and any other amounts
due from the Borrower to the Bank at any time without notice to the Borrower, or
compliance with any other procedure imposed by statute or otherwise, all of
which are hereby expressly waived by the Borrower.

                               10. MISCELLANEOUS

              (a) The Borrower agrees to indemnify and hold harmless the Bank,
its officers, employees, affiliates, agents, and controlling persons from and
against all claims, damages, liabilities and losses of every kind, including
reasonable legal fees, arising out of the Loan Documents, and including claims
in respect of the application of Environmental Laws to the Borrower, absent the
gross negligence and willful misconduct of the Bank.

              (b) The Borrower shall pay to the Bank promptly on demand in
accordance with the mutual agreement of the Bank and the Borrower reasonable
costs and expenses (including reasonable legal fees) incurred by the Bank in
connection with the subsequent amendment, administration or enforcement of any
of the Loan Documents, provided that the costs and expenses incurred with
respect to the execution and preparation of this Agreement, and the related
documents by counsel to the Bank shall not exceed the maximum amount of US$
7,000.

              (c) Any communication to be made hereunder shall (i) be made in
writing, but unless otherwise stated, may be made by facsimile transmission or
letter, and (ii) be made or delivered to the address of the party receiving
notice which is identified with its signature below (unless such party has by
five (5) days' written notice specified another address), and shall be deemed
made or delivered, when dispatched, left at that address, or five (5) days after
being mailed, postage prepaid, to such address.

              (d) This Agreement shall be binding upon and inure to the benefit
of each party hereto and its successors and assigns, but the Borrower may not
assign its rights or obligations hereunder. This Agreement may not be amended or
waived except by a written instrument signed by the Borrower and the Bank, and
any such amendment or waiver shall be effective only for the specific purpose
given. No failure or delay by the Bank to exercise any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege preclude any other right, power or privilege. The
provisions of this Agreement are severable and if any one provision hereof shall
be held invalid or unenforceable in whole or in part in any jurisdiction, such

                                       12


invalidity or unenforceability shall affect only such provision in such
jurisdiction. This Agreement, together with all Schedules hereto, expresses the
entire understanding of the parties with respect to the transactions
contemplated hereby. This Agreement and any amendment hereby may be executed in
several counterparts, each of which shall be an original, and all of which shall
constitute one agreement. In proving this Agreement, it shall not be necessary
to produce more than one such counterpart executed by the party to be charged.

              (e) THIS AGREEMENT AND THE RESTATED NOTE ARE CONTRACTS UNDER THE
LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED IN ACCORDANCE THEREWITH AND
GOVERNED THEREBY. THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF ANY
OF THE LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
ANY FEDERAL COURT SITTING THEREIN. The Borrower, as an inducement to the Bank to
enter into this Agreement, hereby waives its right to a jury trial with respect
to any action arising in connection with any Loan Document.

              (f) In the event of inconsistency between this Agreement and any
other Loan Document, the provisions of this Agreement shall control.

              IN WITNESS WHEREOF, the undersigned have duly executed this Bridge
Loan Agreement as a sealed instrument as of the date first above written.



                              ORMAT NEVADA, INC.


                              By:   /s/ Connie Stechman
                                    ---------------------------------
                                    Name: Connie Stechman
                                    Title: Assistant Secretary
                                    Address: 980 Greg Street
                                             Sparks, NV  90431
                                    Phone: 775-356-9029
                                    Fax: 775-356-9039


                                       13


                              BANK LEUMI USA


                              By:   /s/ Michaela Klein
                                    --------------------------------
                                    Name: Michaela Klein
                                    Title: Senior Vice President


                              By:   /s/ Yuval Talmy
                                    --------------------------------
                                    Name: Yuval Talmy
                                    Title: Assistant Vice President
                                    Address: 564 Fifth Avenue
                                             New York, NY 10036
                                    Phone: 212-626-1061
                                    Fax: 212-626-1072




                                                                  Exhibit 10.1.3


================================================================================





                            CREDIT FACILITY AGREEMENT

                          DATED AS OF SEPTEMBER 5, 2000

                                 BY AND BETWEEN

                          ORMAT MOMOTOMBO POWER COMPANY

                                   AS BORROWER

                                       AND

                               BANK HAPOALIM B.M.,

                                    AS LENDER



           MOMOTOMBO FIELD AND POWER PLANT REHABILITATION (NICARAGUA)



================================================================================


                              HOLLAND & KNIGHT LLP
                    2100 PENNSYLVANIA AVENUE, N.W., SUITE 400
                             WASHINGTON, D.C. 20037










                                                       CREDIT FACILITY AGREEMENT
================================================================================

================================================================================




                                TABLE OF CONTENTS

                                                                            Page

ARTICLE 1.         DEFINED TERMS AND PRINCIPLES OF CONSTRUCTION...............1

   SECTION 1.01    DEFINED TERMS AND PRINCIPLES OF CONSTRUCTION...............1


ARTICLE 2.         AMOUNT AND TERMS OF THE CREDIT.............................1

   SECTION 2.01    THE TOTAL COMMITMENT.......................................1

   SECTION 2.02    PROCEDURES FOR DISBURSEMENT OF THE LOANS...................2

   SECTION 2.03    INTEREST...................................................3

   SECTION 2.04    REPAYMENT..................................................4

   SECTION 2.05    FEES.......................................................4

   SECTION 2.06    PAYMENTS...................................................5

   SECTION 2.07    PAYMENT ALLOCATION.........................................5

   SECTION 2.08    CURRENCY OF PAYMENT........................................5

   SECTION 2.09    TAXES......................................................6

   SECTION 2.10    TERMINATION OF TOTAL COMMITMENT............................7

   SECTION 2.11    VOLUNTARY PREPAYMENT.......................................7

   SECTION 2.12    INTENTIONALLY OMITTED......................................7

   SECTION 2.13    FUNDING COSTS..............................................7

   SECTION 2.14    MAINTENANCE AMOUNT.........................................7

   SECTION 2.15    ILLEGALITY.................................................9

   SECTION 2.16    SUBSTITUTE BASIS OF BORROWING..............................9

   SECTION 2.17    MITIGATION PROVISION......................................10

   SECTION 2.18    CERTIFICATE OF LENDER.....................................10

   SECTION 2.19    SURVIVAL..................................................10


ARTICLE 3.         REPRESENTATIONS AND WARRANTIES............................10

   SECTION 3.01    STATUS....................................................10

   SECTION 3.02    POWER AND AUTHORITY.......................................11

   SECTION 3.03    NO VIOLATION..............................................11

   SECTION 3.04    ORGANIZATION..............................................11

   SECTION 3.05    SUBSIDIARIES..............................................12

   SECTION 3.06    SINGLE-PURPOSE BORROWER...................................12


                                       i               CREDIT FACILITY AGREEMENT
================================================================================

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   SECTION 3.07    FINANCIAL STATEMENTS; FINANCIAL CONDITION: UNDISCLOSED
                   LIABILITIES; ETC...........................................12

   SECTION 3.08    LITIGATION; LABOR DISPUTES.................................12

   SECTION 3.09    TRUE AND COMPLETE DISCLOSURE...............................13

   SECTION 3.10    TAX RETURNS AND PAYMENTS...................................13

   SECTION 3.11    GOVERNMENTAL APPROVALS.....................................13

   SECTION 3.12    COMPLIANCE WITH STATUTES, ETC..............................14

   SECTION 3.13    ENVIRONMENTAL MATTERS......................................14

   SECTION 3.14    PATENTS, LICENSES, FRANCHISES AND FORMULAS.................15

   SECTION 3.15    SUBMISSION TO LAW AND JURISDICTION.........................15

   SECTION 3.16    STATUS OF THE LOANS........................................15

   SECTION 3.17    PROJECT DOCUMENTS; SUFFICIENCY OF PROJECT DOCUMENTS........15

   SECTION 3.18    FEES AND ENFORCEMENT.......................................16

   SECTION 3.19    AVAILABILITY AND TRANSFER OF FOREIGN CURRENCY..............16

   SECTION 3.20    BUSINESS PLAN..............................................16

   SECTION 3.21    TITLES; LIENS..............................................16

   SECTION 3.22    TRANSACTIONS WITH AFFILIATES...............................17

   SECTION 3.23    NO ADDITIONAL FEES.........................................17

   SECTION 3.24    REGULATION OF PARTIES......................................17


ARTICLE 4.         CONDITIONS PRECEDENT.......................................17

   SECTION 4.01    CONDITIONS OF FIRST DISBURSEMENT OF LOAN I.................17

   SECTION 4.02    CONDITIONS OF EACH DISBURSEMENT............................20

   SECTION 4.03    NO WAIVERS.................................................22

   SECTION 4.04    CONDITIONS FOR FIRST DISBURSEMENT OF LOAN II...............22


ARTICLE 5.         COVENANTS..................................................23

   SECTION 5.01    INFORMATION COVENANTS......................................23

   SECTION 5.02    BOOKS, RECORDS AND INSPECTIONS; ACCOUNTING AND AUDIT
                   MATTERS....................................................25

   SECTION 5.03    MAINTENANCE OF PROPERTY; INSURANCE.........................26

   SECTION 5.04    MAINTENANCE OF EXISTENCE; PRIVILEGES; ETC..................27

   SECTION 5.05    COMPLIANCE WITH STATUTES...................................27

   SECTION 5.06    PROJECT IMPLEMENTATION.....................................27

   SECTION 5.07    AUDITORS...................................................27

   SECTION 5.08    TAXES, DUTIES, ETC.........................................27

   SECTION 5.09    PERFORMANCE OF OBLIGATIONS.................................28




                                       ii              CREDIT FACILITY AGREEMENT
================================================================================

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   SECTION 5.10    AVAILABILITY AND TRANSFER OF FOREIGN EXCHANGE..............28

   SECTION 5.11    NAME CHANGES; ETC..........................................28

   SECTION 5.12    CONSOLIDATION, MERGER, SALE OF ASSETS......................29

   SECTION 5.13    DISTRIBUTIONS; RESTRICTED PAYMENTS.........................29

   SECTION 5.14    LEASES.....................................................29

   SECTION 5.15    INDEBTEDNESS...............................................29

   SECTION 5.16    LIENS......................................................30

   SECTION 5.17    GUARANTEES.................................................30

   SECTION 5.18    SUBSIDIARIES; ADVANCES, INVESTMENTS AND LOANS..............30

   SECTION 5.19    TRANSACTIONS...............................................31

   SECTION 5.20    OTHER TRANSACTIONS.........................................31

   SECTION 5.21    MODIFICATIONS OF ORGANIZATION DOCUMENTS; ADDITIONAL
                   AGREEMENTS; ASSIGNMENTS AND  MODIFICATIONS OF
                   AGREEMENTS; ETC............................................31

   SECTION 5.22    NO OTHER BUSINESS..........................................32

   SECTION 5.23    ABANDONMENT................................................32

   SECTION 5.24    IMPROPER USE...............................................32

   SECTION 5.25    BUSINESS PLAN EXPENDITURES.................................33

   SECTION 5.26    ISSUANCE OR TRANSFER OF SHARES.............................33

   SECTION 5.27    AMENDMENT OF BUSINESS PLAN.................................33

   SECTION 5.28    BANK ACCOUNTS..............................................33

   SECTION 5.29    PRESS RELEASES; ADVERTISING................................33

   SECTION 5.30    ADDITIONAL DOCUMENTS; FILINGS AND RECORDINGS...............33

   SECTION 5.31    EMPLOYEES AND EMPLOYEE PLANS...............................34

   SECTION 5.32    ACCOUNTING CHANGES.........................................34

   SECTION 5.33    DEBT SERVICE RESERVE ACCOUNT...............................34

   SECTION 5.34    FINANCIAL RATIOS...........................................35

   SECTION 5.35    COMPLETION CERTIFICATE.....................................35

   SECTION 5.36    LENDER'S EXPERTS AND CONSULTANTS...........................35

   SECTION 5.37    REGULATORY STATUS..........................................36

   SECTION 5.38    CHILD LABOR AND FORCED LABOR...............................36

   SECTION 5.39    INSURANCE PROCEEDS.........................................36

   SECTION 5.40    NOTARIZATION, CONSULARIZATION AND REGISTRATION OF CFA......36

   SECTION 5.41    MIGA PREMIUM PAYMENTS......................................36

   SECTION 5.42    PPA AMENDMENT..............................................37




                               iii                     CREDIT FACILITY AGREEMENT
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   SECTION 5.43    MIGA ARBITRATION...........................................37


ARTICLE 6.         EVENTS OF DEFAULT..........................................37

   SECTION 6.01    PAYMENTS...................................................37

   SECTION 6.02    REPRESENTATIONS, ETC.......................................37

   SECTION 6.03    COVENANTS..................................................37

   SECTION 6.04    DEFAULT UNDER OTHER AGREEMENTS.............................38

   SECTION 6.05    BANKRUPTCY, ETC............................................39

   SECTION 6.06    PROJECT EVENTS.............................................39

   SECTION 6.07    MATERIAL ADVERSE EFFECT....................................40

   SECTION 6.08    PROJECT DOCUMENTS; SECURITY DOCUMENTS......................40

   SECTION 6.09    OWNERSHIP OF THE BORROWER..................................40

   SECTION 6.10    JUDGMENTS..................................................40

   SECTION 6.11    GOVERNMENTAL ACTION........................................41

   SECTION 6.12    PERMITS....................................................41

   SECTION 6.13    TRANSFER OF COLLATERAL; EVENT OF LOSS; DIMINUTION OF
                   PROPERTY RIGHTS............................................41

   SECTION 6.14    COMPLETION BY DATE CERTAIN.................................41

   SECTION 6.15    SPONSOR PROJECT FUNDING AGREEMENT..........................42

   SECTION 6.16    CONTINGENT GUARANTEE AGREEMENT.............................42

   SECTION 6.17    MIGA CONTRACTS.............................................42

   SECTION 6.18    REMEDIES...................................................42


ARTICLE 7.         MISCELLANEOUS..............................................42

   SECTION 7.01    NOTICES....................................................42

   SECTION 7.02    ENGLISH LANGUAGE...........................................45

   SECTION 7.03    INDEMNITIES AND EXPENSES...................................45

   SECTION 7.04    SURVIVAL...................................................46

   SECTION 7.05    GOVERNING LAW; SUBMISSION TO JURISDICTION..................47

   SECTION 7.06    SUCCESSORS AND ASSIGNS.....................................48

   SECTION 7.07    COUNTERPARTS...............................................49

   SECTION 7.08    RIGHT OF SETOFF............................................49

   SECTION 7.09    NO WAIVER; REMEDIES CUMULATIVE.............................49

   SECTION 7.10    SEVERABILITY...............................................50

   SECTION 7.11    CALCULATION................................................50

   SECTION 7.12    HEADINGS DESCRIPTIVE.......................................50




                                 iv                    CREDIT FACILITY AGREEMENT
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   SECTION 7.13    AMENDMENT OR WAIVER........................................50

   SECTION 7.14    DISCLAIMER.................................................50

   SECTION 7.15    PAYMENTS SET ASIDE.........................................50

   SECTION 7.16    CONFIDENTIAL INFORMATION...................................51

   SECTION 7.17    NO RECOURSE................................................51

























                                  v                    CREDIT FACILITY AGREEMENT
================================================================================



================================================================================





SCHEDULES, APPENDICES, ANNEXES AND EXHIBITS


                                    SCHEDULES


    SCHEDULE                                     DESCRIPTION
    --------                                     -----------

      2.02                                 Application for Funding
      3.08                                Litigation; Labor Disputes
      3.11                                  Governmental Approvals
      4.04                       Provisions for Alternative Amendment to PPA
     5.01(d)                                Officer's Certificate
      5.03                                    Insurance Policies
      5.43                            Form of Original Amendment to PPA


                                   APPENDICES

    APPENDIX                                                DESCRIPTION
    --------                                                -----------




       A                                                    Definitions



                                     ANNEXES


     ANNEX                                                   DESCRIPTION
     -----                                                   -----------
       A                                                    Business Plan


                                     vi                CREDIT FACILITY AGREEMENT

================================================================================

================================================================================





                            CREDIT FACILITY AGREEMENT


         CREDIT FACILITY AGREEMENT (this "Agreement"), dated as of September 5,
2000 (the "Effective Date"), between ORMAT MOMOTOMBO POWER COMPANY, an exempted
limited liability company incorporated and existing under the laws of the Cayman
Islands, (the "Borrower") and BANK HAPOALIM B.M., a commercial bank organized
and existing under the laws of the State of Israel, as lender ("Lender").
Capitalized terms used herein shall have the meanings set forth in Appendix A,
unless otherwise defined herein.

                                   WITNESSETH:

         WHEREAS, the Borrower has requested the Lender to make a credit
facility (the "Credit") available to it on the terms and subject to the
conditions set forth in this Agreement, for the purpose of financing the Project
in Nicaragua as more fully described in the Agreement of Association in
Participation and in the Business Plan; and

         WHEREAS, the Lender is willing to provide the Credit to the Borrower on
the terms and subject to the conditions set forth in this Agreement, for the
purpose described above;

         NOW, THEREFORE, the parties hereto agree as follows:


ARTICLE 1. DEFINED TERMS AND PRINCIPLES OF CONSTRUCTION

         SECTION 1.01. DEFINED TERMS AND PRINCIPLES OF CONSTRUCTION. For all
purposes of this Agreement, (a) capitalized terms used but not otherwise defined
herein shall have the meanings set forth in Appendix A attached hereto and (b)
the principles of construction set forth in Appendix A shall apply.


ARTICLE 2. AMOUNT AND TERMS OF THE CREDIT

         SECTION 2.01 THE TOTAL COMMITMENT. Subject to the terms and conditions
of this Agreement, the Lender agrees to make available to the Borrower, during
the applicable Availability Period, the Loans not to exceed the Total Commitment
amount of $48,235,000 in two tranches identified as Loan I and Loan II as
follows:

         (a) Loan I. An amount up to $11,435,000 on account of Loan I to finance
up to 70% of the costs of Phase I of the Project; and

         (b) Loan II. An amount up to $36,800,000 on account of Loan II to
finance up to (i) an amount equal to 75% of costs of Phase II of the Project,
plus (ii) an amount equal to 5% of the costs of Phase I of the Project (the
"Additional Amount").

         (c) No Reborrowing. The Loans are not revolving in nature, and any
amounts repaid, prepaid or canceled pursuant to the terms of this Agreement may
not be reborrowed.

         (d) Benefit of Collateral. Any and all amounts due to the Lender with
respect to the Loans under this Agreement and any other Financing Documents are
entitled to the benefit of the Collateral which is held by the Lender pursuant
to the terms of the Security Documents and the Sponsor Project Funding
Agreement.




                                                       CREDIT FACILITY AGREEMENT
================================================================================

================================================================================




         (e) Availability. For the purpose of making Disbursements hereunder:
(i) Loan I will be available during the Loan I Availability Period; and, (ii)
Loan II will be available during the Loan II Availability Period. The Loan I
Availability Period and the Loan II Availability Period shall run consecutively,
but not concurrently, unless otherwise agreed by the Lender.

         SECTION 2.02 PROCEDURES FOR DISBURSEMENT OF THE LOANS.

         (a) Procedure. Subject to the terms specified in this Section 2.02, the
Borrower may submit to the Lender from time to time, but not more frequently
than once per month, a properly executed Application for Funding in the form of
Schedule 2.02 ("Application for Funding") for Disbursements to be made in
accordance with the Business Plan as: (i) reimbursements to the Borrower for
payments previously made to Project contractors, subcontractors, suppliers,
vendors and other Persons; (ii) advances to the Borrower for payment for work
performed or to be performed by Project contractors, subcontractors, suppliers,
vendors and other Persons for amounts payable by the Borrower within thirty (30)
days following the date of Disbursement in each case as budgeted in the Business
Plan; (iii) advances to fund MIGA premium payments in accordance with Section
5.41; (iv) advances to fund the payment of fees under Section 2.05; and (v)
advances to fund payments by the Borrower of Attorney Costs and other expenses
incurred by the Lender pursuant to Section 7.03(b)(i). The Borrower shall use
such Application for Funding to request each Disbursement under (i) Loan I
during the Loan I Availability Period and (ii) Loan II during the Loan II
Availability Period. The Borrower shall submit each such Application for Funding
at least twelve (12) Business Days prior to the date on which a Disbursement is
requested. No Application for Funding shall request a Disbursement (i) in excess
of the then unutilized and uncancelled amount of the Loan I or Loan II
Commitment, respectively, less the amount required to permit the Lender to fund
the Borrower's obligation under Section 5.33 (nor shall the aggregate amount of
the Disbursements exceed the Total Commitment), or (ii) that is less than
$300,000 (except with respect to the last Disbursement in respect of each Loan).
Except in the case of the first Application for Funding submitted under Loan I,
each Application for Funding shall include an implementation report, prepared
and executed by the Borrower's representative in accordance with Section
5.01(f).

         (b) Adherence to Business Plan. All amounts requested under each
Application for Funding shall be consistent with the Business Plan. The Lender
shall not disburse all or any part of the amounts requested in an Application
for Funding (i) for which all conditions precedent for the making of such
Disbursement have not been satisfied or waived pursuant to this Agreement or
(ii) with respect to Disbursements to be made under Loan II, as to which
documentation required to be delivered to the Lender or the Lender's Engineer,
as the case may be, has not been timely delivered by the Borrower. With respect
to Loan II, the making of any Disbursement thereunder shall be contingent on the
Lender's receipt four Business Days prior to the date on which a Disbursement is
requested of a certificate from the Lender's Engineer appointed under Section
5.36(a) hereof to the effect that the costs incurred or to be paid are
reasonable and appropriate for the value of the work performed or to be
performed and that such work is in conformity with the Business Plan.

         (c) Errors in Applications for Funding. If any Application for Funding
shall be disapproved in whole or in part on the basis of errors contained
therein or on the basis of incompleteness of such Application for Funding, the
Lender will cooperate in good faith with the Borrower in the Borrower's efforts
to correct any and all such errors or incompleteness so as to




                                   2                   CREDIT FACILITY AGREEMENT




permit the making of a Disbursement in a timely manner (taking into account the
due date for the payment of Project Costs which are the subject of such
Application for Funding). The Borrower acknowledges that, as a result of any
such disapproval of an Application for Funding, the date on which a Disbursement
is actually approved and/or proceeds actually disbursed may be later than the
date requested in such Application for Funding.

         (d) Fundings under Sponsor Project Funding Agreement. All disbursements
to be made by the Sponsor pursuant to the Sponsor Project Funding Agreement
shall be made in accordance with the terms thereof, and it shall not be
necessary for the Borrower to submit an Application for Funding in connection
therewith. The Borrower shall certify to the Lender in each Application for
Funding that the amounts required to be disbursed to the Borrower in accordance
with the terms of the Sponsor Project Funding Agreement have been made as of the
date of the requested Disbursement.

         (e) Loan Disbursement Account. All Disbursements, irrespective of
whether made as reimbursements or advances shall be made to the Borrower's
current account with the New York Branch of the Lender.


         SECTION 2.03 INTEREST.

         (a) Interest Rate and Payment. Interest shall accrue and be payable in
arrears on each Interest Payment Date on the outstanding balances of Loan I and
Loan II, respectively, at the rate of LIBOR plus 2.5% per annum until the
beginning of the first Interest Period following the completion date of Phase I
with respect to Loan I, and the completion date of Phase II with respect to Loan
II, at which time the interest rate on each such Loan shall be LIBOR plus 2.375%
per annum (the "Interest Rate").

         (b) Capitalized Interest Payment.

            (i) Loan I. On each Interest Payment Date until the first scheduled
Loan I Principal Repayment Date, interest at the Interest Rate due on each such
date with respect to Loan I shall be capitalized by adding such amount to the
outstanding balance of Loan I.

            (ii) Loan II. On each Interest Payment Date until the first
scheduled Loan II Principal Repayment Date, interest at the Interest Rate due on
each such date with respect to Loan II, shall be capitalized by adding such
amount to the outstanding balance of Loan II.

         (c) Additional Interest. With respect to any other interest due to the
Lender, on each Interest Payment Date, the Borrower shall pay to the Lender
interest in respect of each Interest Period, on the daily unpaid principal
amounts of any Loan outstanding during such Interest Period, in arrears, at the
rates per annum equal to the Interest Rates in effect applicable to each such
period (or at such other interest rates as may be specified in this Article 2).

         (d) Overdue Interest. Without prejudice to the remedies available to
the Lender under this Agreement or otherwise, the Borrower shall pay, in
Dollars, interest at the rate of LIBOR Overnight Rate plus 4.50% on any
principal amount of any Loan or any other amount which is due under this
Agreement which is not paid when due (whether by lapse of time, acceleration,
requirement for mandatory prepayment or otherwise), for each day that such
amount remains unpaid until payment in full thereof.





                                       3               CREDIT FACILITY AGREEMENT



         (e) Computation of Interest. Interest shall be computed on the basis of
the actual number of days elapsed in the relevant Interest Period and a year of
360 days.


         SECTION 2.04 REPAYMENT.

         (a) Loan I. The principal of Loan I shall be repaid in 32 consecutive
equal payments, commencing on the Principal Repayment Date occurring on the
earlier of (i) 27 months from the Effective Date or (ii) the last day of the
Interest Period ending not sooner than thirty (30) days following receipt of a
Phase I Completion Certificate, and on each Principal Repayment Date thereafter.

         (b) Loan II. The principal of Loan II shall be repaid in 28 equal
consecutive payments, commencing on the Principal Repayment Date occurring after
the earlier of (i) 63 months from the Effective Date or (ii) the last day of the
Interest Period which ends at least 30 days following receipt of a Phase II
Completion Certificate, but in no event later than 39 months after the Loan II
Closing Date, and on each Principal Repayment Date thereafter.


         SECTION 2.05 FEES.

         (a) Commitment Fee.

            (i) Loan I. The Borrower shall pay to the Lender a commitment fee
(the "Loan I Commitment Fee") which shall be at the rate of 0.25% per annum of
the difference, determined as of the relevant due date, between (A) the Loan I
Commitment and (B) the drawn amount under Loan I. The Loan I Commitment Fee
shall begin to accrue with retroactive effect as of March 15, 2000 and shall be
increased to 0.50% per annum on the Effective Date.

            (ii) Loan II. The Borrower shall pay to the Lender a commitment fee
(the "Loan II Commitment Fee") which shall be at the rate of 0.25% per annum of
the difference, determined as of the relevant due date, between (A) the Loan II
Commitment and (B) the drawn amount under Loan II. The Loan II Commitment Fee
shall begin to accrue with retroactive effect as of March 15, 2000 and shall be
increased to 0.50% per annum on the Loan II Closing Date.

Commitment Fee shall accrue from day to day, beginning on March 15, 2000, and
shall be computed on the basis of the actual number of days elapsed and a year
of 360 days. Commitment Fee shall be due and payable in advance, on March 15,
2000 and every three months thereafter until the first Interest Payment Date and
on every Interest Payment Date thereafter, terminating on the last day of the
Loan II Availability Period or upon such earlier date as the Total Commitment is
reduced to zero or the undisbursed amount thereafter is cancelled or terminated.

         (b) Arrangement Fee. The Borrower shall pay a non-refundable
arrangement fee (the "Arrangement Fee") equal to 0.25% of the Total Commitment
within 30 days of the Effective Date, but in no event later than the first
Disbursement under Loan I.

         (c) Front-End Fee. The Borrower shall pay a non-refundable, front-end
fee (the "Front-End Fee") in the amount of 1.25% of the Total Commitment,
payable in two installments. The first installment shall be due and payable on
the Loan I Closing Date and shall be equal to 1.25%




                                       4               CREDIT FACILITY AGREEMENT



of the Loan I Commitment plus 0.3125% of the Loan II Commitment; the second
installment shall be due and payable on the Loan II Closing Date and shall be
equal to 0.9375% of the Loan II Commitment.


         SECTION 2.06 PAYMENTS.

         (a) Time and Place of Payment. Except as otherwise specifically
provided herein, all payments to be made by the Borrower under this Agreement
shall be made in full in Same Day Funds, without retention, set-off or counter
claim and free and clear of any deductions and charges, not later than 12:00
p.m. (New York time) on the date upon which the relevant payment is due, to the
Lender's account No. 373700001501 with Bank Hapoalim B.M., 1177 Avenue of the
Americas, New York, N.Y., 10036, mentioning "Ormat/Momotombo Project", or to
such other account as the Lender may designate from time to time by written
notice to the Borrower five Business Days prior to the date on which any payment
is made by the Borrower hereunder. The Borrower shall advise the Lender by
facsimile of the payment about to be made by the Borrower.

         (b) Payment on a Business Day. If any date for any payment under this
Agreement shall not be a Business Day then such payment shall be made on the
next succeeding Business Day and interest (or Commitment Fee, as the case may
be) shall continue to accrue for the period from such due date to the next
succeeding Business Day.

         SECTION 2.07 PAYMENT ALLOCATION. Any payment made by the Borrower to
the Lender and any other amount received by the Lender under any of the
Financing Documents (excluding voluntary prepayments received by the Lender
pursuant to Section 2.11) shall be applied as follows: (i) against charges,
fees, costs and expenses due to the Lender; (ii) against interest on interest
which became overdue, if any, with respect to the Loans; (iii) against interest
on principal of the Loans which became overdue, if any; (iv) against interest
due on the Loans; and thereafter, (v) against the principal amount of the Loans
due and payable applied pro-rata to Loan I and Loan II and applied pro-rata to
installments within each such Loan, and any remaining amount shall be paid or
returned to the Borrower unless there is an Event of Default which is
continuing.

         SECTION 2.08 CURRENCY OF PAYMENT. The obligation of the Borrower to pay
all amounts payable under this Agreement shall be in Dollars and shall not be
deemed to have been novated, discharged or satisfied by any tender of (or
recovery under judgment expressed in) any currency other than Dollars, except to
the extent to which such tender (or recovery) shall result in the effective
payment of such aggregate amount in Dollars at the place where such payment is
to be made and, accordingly, the amount (if any) by which any such tender (or
recovery) shall fall short of such aggregate amount shall be and remain due to
the Lender, as a separate obligation, unaffected by judgment having been
obtained (if such is the case) for any other amounts due under or in respect of
this Agreement.

         SECTION 2.09 TAXES.

         (a) Payments Free and Clear of Taxes. Any and all payments by the
Borrower to the Lender under this Agreement and any other Financing Document
shall be made free and clear of




                                       5



and without deduction or withholding for any Taxes. In addition, the Borrower
shall pay all Other Taxes.

         (b) Indemnity. The Borrower agrees to indemnify and hold harmless the
Lender for the full amount of Taxes or Other Taxes (including any Taxes or Other
Taxes imposed on amounts payable under this Section 2.09) paid by the Lender and
any liability (including penalties, interest, additions to tax and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. Payment under this indemnity shall be
made within 30 days after the date the Lender makes written demand therefor.

         (c) Gross-Up. If the Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder or under any Financing Document to the Lender, then:

                  (i) the sum payable shall be increased as necessary so that,
         after making all required deductions and withholdings (including
         deductions and withholdings applicable to additional sums payable under
         this Section 2.09), the Lender receives an amount equal to the sum it
         would have received had no such deductions or withholdings been made;

                  (ii) the Borrower shall make such deductions and withholdings;
         and

                  (iii) the Borrower shall pay the full amount deducted or
         withheld to the relevant taxing authority or other authority in
         accordance with Applicable Law.

         (d) Receipts. Within 30 days after the date of any payment by the
Borrower of Taxes or Other Taxes, the Borrower shall furnish to the Lender the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Lender.

         (e) Mitigation. If the Borrower is required to pay additional amounts
to the Lender pursuant to Section 2.09(c), then the Lender shall endeavor to use
reasonable efforts (consistent with legal and regulatory restrictions) as may be
available to it to mitigate the effect of such circumstances, including booking
the Loans in a different jurisdiction so as to minimize any such additional
payment by the Borrower which may thereafter accrue, if such change in the
judgment of the Lender is not otherwise disadvantageous to the Lender.

         (f) Claims Against Lender. The Lender shall give notice to the Borrower
of the assertion of any claim against the Lender relating to the Lender's Taxes
or Other Taxes as promptly as is practicable after being notified of such
assertion; provided that any failure to notify the Borrower promptly of such
assertion shall not relieve the Borrower of its obligations under this Section
2.09.

         (g) Survival. Without prejudice to the survival of any other agreement
of the Borrower under this Agreement or any other Project Document, the
provisions set forth in this Section 2.09 shall survive the payment of all
amounts due to the Lender under Loan I and Loan II, respectively.

         SECTION 2.10 TERMINATION OF TOTAL COMMITMENT. The Lender may terminate
the Total Commitment upon the occurrence of an Event of Default in accordance
with the provisions of Article 6 hereof. The Borrower may cancel the undisbursed
amount of the Total Commitment





                                       6               CREDIT FACILITY AGREEMENT



with the consent of the Lender upon the Lender's satisfaction that such amounts
are not needed to complete the Project. The Borrower may also cancel the Total
Commitment on account of Loan II either (i) if the Borrower decides not to
commence Phase II and notifies the Lender of its decision and that it does not
plan to commission the Technical Report referred to in Section 4.04, or (ii)
upon delivery to the Lender of a Phase II Completion Certificate in accordance
with Section 5.35 hereof.

         SECTION 2.11 VOLUNTARY PREPAYMENT. Subject to any required Governmental
Approvals having been obtained, the Borrower shall have the right, at any time
on at least 30 but not more than 60 days' prior written notice to the Lender, to
prepay all or a part of the principal amount then outstanding of the Loans,
without premium or penalty; provided that (a) no prepayment of any part of any
Loan shall be made on a day which is not the last day of an Interest Period with
respect thereto, (b) the amount of such prepayment is applied pro rata to Loan I
and Loan II and applied pro rata to outstanding installments of principal within
each Loan, (c) all accrued interest on the principal amount of the Loans to be
prepaid and all other amounts then due to the Lender hereunder are paid at the
same time, and (d) in the case of partial prepayment, such prepayment shall be
in an amount equal to $500,000 or more in integral multiples of $500,000.

         SECTION 2.12 INTENTIONALLY OMITTED.

         SECTION 2.13 FUNDING COSTS. If, as a result of (a) any failure by the
Borrower to pay when due the principal amount of or interest on any Loan (or
portion thereof), (b) any failure by the Borrower to make a borrowing of any
Loan after the Borrower has made a request for disbursement, (c) any failure by
the Borrower to make any prepayment of any Loan after the Borrower has given any
notice required hereunder regarding such prepayment or (d) the making of a
payment or prepayment (including, without limitation, on acceleration) on a day
which is not the last day of an Interest Period with respect thereto, the Lender
shall incur any costs, expenses or losses, then the Borrower shall pay, upon
request by the Lender, the amount which the Lender shall notify the Borrower as
being the aggregate of such costs, expenses and losses. For the purposes of the
preceding sentence, "costs, expenses or losses" shall include, without
limitation, any interest paid or payable to carry any unpaid amount and any
loss, premium, penalty or expense which may be incurred in liquidating or
employing deposits of or borrowings from third parties in order to make,
maintain or fund the Loans or any portion thereof.

         SECTION 2.14 MAINTENANCE AMOUNT.

         (a) Obligation to Pay. On each Interest Payment Date, the Borrower
shall pay in addition to interest on the Loans, the amount which the Lender
shall from time to time notify to the Borrower as the aggregate of the
Maintenance Amount (as defined in subsection (b) below), if any, of the Lender,
accrued and unpaid prior to such Interest Payment Date.

         (b) Definitions. For the purposes of subsection (a) above, the
following terms shall have the following meanings:

            (i) "Maintenance Amount" means the amount, if any, certified in the
Maintenance Amount Certification to be the net incremental costs of the Lender
with respect to the making or maintaining of any Loan which result from (A) any
change in, or introduction of,





                                       7               CREDIT FACILITY AGREEMENT



any Applicable Law and/or (B) any compliance with any request from, guideline or
requirement of, any central bank or other monetary or other comparable authority
or any Governmental Authority (whether or not having the force of law), which in
either case, subsequent to the date of this Agreement, shall:

                  (A) impose, modify or deem applicable any reserve, capital
         adequacy (only to the extent such capital adequacy requirement is
         generally applicable to financial institutions that are subject to the
         same regulatory controls as the Lender), special deposit or similar
         requirements against assets held by, or deposits with or for the
         account of, or Loans by, the Lender;

                  (B) impose a cost on the Lender as a result of its having
         made, funded or maintained any Loan or its commitment to make, fund or
         maintain any Loan, or reduce the rate of return on the overall capital
         of the Lender which it would have been able to achieve if it had not
         made or committed itself to make such Loan;

                  (C) change the basis of taxation on payments received by the
         Lender in respect of its Loans otherwise than by a change in taxation
         of the overall net income of the Lender; or

                  (D) impose on the Lender any other condition regarding the
         making or maintaining of the Loans; and

            (ii) "Maintenance Amount Certification" means a certification
furnished from time to time by the Lender to the Borrower, certifying:

                  (A) the circumstances giving rise to the Maintenance Amount;

                  (B) that such net costs have increased and that such net costs
         are within the definition of Maintenance Amount;

                  (C) that, in the opinion of the Lender it has exercised
         reasonable efforts to minimize or eliminate such increase; and

                  (D) the Maintenance Amount.

         (c) Optional Prepayment. Notwithstanding anything in Section 2.11, and
subject to any Governmental Approvals having been obtained (including from the
Central Bank), the Borrower shall have the right on any Interest Payment Date
for the Loans, upon not less than thirty (30) days' prior written notice to the
Lender (which notice shall be irrevocable and shall bind the Borrower to make
the prepayment specified below) and upon payment of all accrued interest and
Maintenance Amount (if any) on the amount to be prepaid, to prepay all or, as
the case may be, that portion of the Loans with respect to which the Lender
informs the Borrower that Maintenance Amount is then being charged.

         SECTION 2.15 ILLEGALITY.

         (a) Illegality of Total Commitment or Loan. Notwithstanding any other
provision of this Agreement, if, subsequent to the date of this Agreement, the
making, funding or continuance of



                                       8               CREDIT FACILITY AGREEMENT



the Total Commitment or any Loan has been made (i) unlawful by any change made
in any Applicable Law, (ii) impossible by compliance by the Lender with any
request of a Governmental Authority (whether or not having force of law) or
(iii) impracticable as a result of a contingency occurring after the Effective
Date which materially and adversely affects the London interbank dollar market,
the Borrower shall, upon notice by the Lender (but subject to the approval of
the appropriate Governmental Authorities (including the Central Bank), which the
Borrower agrees to take all reasonable steps to obtain as quickly as possible,
if such approval is then required), prepay in full and on the next occurring
Interest Payment Date unless the effect of the Applicable Law, request or
contingency requires earlier or immediate repayment, in which case, on such
earlier date or immediately, as relevant, that portion of the principal amount
of the Loans affected thereby together with all accrued interest and Maintenance
Amount (if any) thereon and all amounts, if any, determined by the Lender to be
payable to it pursuant to Section 2.13 hereof. In addition, the Total Commitment
of the Lender to make Loans similar to those affected by the foregoing shall
terminate immediately.

         (b) Illegality of Interest Rate. Notwithstanding any other provision of
this Agreement, if, subsequent to the date of this Agreement, the making,
funding or continuance by the Lender of a Disbursement or any Loan bearing
interest based on LIBOR has been made (i) unlawful by any change made in any
Applicable Law, (ii) impossible by compliance by the Lender with any request of
a Governmental Authority (whether or not having the force of law), then the
Lender shall promptly give notice thereof to the Borrower and the obligation of
the Lender to make or continue Loans bearing interest based on LIBOR shall be
immediately suspended and during such suspension be converted into an obligation
bearing interest at the rate per annum equal to the Base Rate plus 2.375%;
provided, however, that if the Lender determines that it may lawfully continue
to maintain and fund any outstanding Loans bearing interest based on LIBOR until
the end of the applicable Interest Period then in effect with respect thereto,
upon written notice from the Borrower to the Lender, such outstanding Loans
shall be converted into Loans bearing interest at the rate per annum equal to
the Base Rate plus 2.375% on the last day of the then current Interest Period
applicable to such Loans.

         SECTION 2.16 SUBSTITUTE BASIS OF BORROWING. If, on or before the first
day of any Interest Period relating to the Loans, either (a) the Lender
determines that, for whatever reason, deposits in Dollars for a period equal to
such Interest Period or in the relevant amounts are not being offered to the
Lender in the London interbank market or (b) the Lender gives notice to the
Borrower that the Interest Rate then in effect based on LIBOR for such Interest
Period does not adequately reflect the cost to the Lender of making, funding or
otherwise maintaining the Loans for such Interest Period, the Lender shall
promptly notify the Borrower of such event. Thereafter, the obligations of the
Lender to make or maintain the Loans bearing interest at LIBOR shall be
suspended until the Lender revokes such notice in writing and interest for such
Interest Period with respect to a scheduled Disbursement and for outstanding
Loans for which interest is then scheduled to be determined shall accrue at the
rate per annum equal to the Base Rate plus 2.375%.

         SECTION 2.17 MITIGATION PROVISION. The Lender agrees that (a) as
promptly as practicable after it becomes aware of the occurrence of an event or
the existence of a condition arising after the date hereof that would cause it
to be affected under Section 2.13 and (b) as promptly as practicable after it
has made a determination to make a claim for amounts under Sections 2.13, 2.14
or 2.15, as the case may be, with respect to events or conditions arising after




                                       9              CREDIT FACILITY AGREEMENT



the date hereof, it shall notify the Borrower of the same and use commercially
reasonable efforts (consistent with legal and regulatory restrictions and the
Lender's internal policies) to mitigate the effect of such provisions on the
Borrower, including (i) in the case of Sections 2.13, 2.14 or 2.15, efforts to
make, fund, issue or maintain its Loans, as relevant, through another office of
the Lender, and (ii) in the case of Section 2.15, efforts to reemploy amounts
held by the Lender, (A) if as a result thereof the additional moneys which would
otherwise be required to be paid to the Lender pursuant to any of such
provisions of this Agreement would be reduced, or the illegality or other
adverse circumstances which would otherwise require a prepayment of such Loans
pursuant to any of such provisions would cease to exist, and (B) if, as
determined by the Lender in good faith, the making, funding or maintaining of
the Loan through such other office would not otherwise adversely affect the
Lender.

         SECTION 2.18 CERTIFICATE OF LENDER. If the Lender claims reimbursement
under Sections 2.13, 2.14, 2.15 or 2.16, it shall deliver to the Borrower a
certificate setting forth in reasonable detail, including calculations thereof,
the amount payable to the Lender and such certificate shall be conclusive and
binding on the Borrower in the absence of manifest error.

         SECTION 2.19 SURVIVAL. Without prejudice to the survival of any other
agreement of the Borrower under this Agreement and any other Project Document,
the agreements and obligations of the Borrower set forth in Sections 2.13 2.14,
2.15 and 2.16 shall survive the payment of the Loans.


ARTICLE 3. REPRESENTATIONS AND WARRANTIES.

         In order to induce the Lender to enter into this Agreement and each of
the other Financing Documents to which it is a party and in order to induce the
Lender to make the Loans, the Borrower makes the following representations,
warranties and agreements as of the date of this Agreement, which shall survive
the execution and delivery of this Agreement and the making and repayment of the
Loans:

         SECTION 3.01 STATUS. The Borrower (a) is an exempted limited liability
company duly incorporated, validly existing and in good standing under the laws
of the Cayman Islands, (b) is duly qualified to do business under the laws of
each jurisdiction in which the character of the properties owned by it or in
which the transaction of its business as presently conducted or proposed to be
conducted makes such qualification necessary, and (c) has full power and
authority to own the property and assets owned by it and to transact the
business in which it is engaged or proposes to be engaged and to do all things
necessary or appropriate in respect of the Project and to consummate the
transactions contemplated by the Project Documents in effect or required to be
in effect as of each date this representation is made or deemed made.

         SECTION 3.02 POWER AND AUTHORITY. The Borrower has the full power and
authority to execute and deliver, and to perform the terms and provisions of,
each of the Project Documents to which it is party and has taken all proper and
necessary action to authorize the execution, delivery and performance by it of
each of such Project Documents as have been executed and delivered as of each
date this representation and warranty is made. The Borrower, has, or, in the
case of the Project Documents other than this Agreement, by the Loan I Closing
Date will have, duly executed and delivered each of the Project Documents to
which it is a party, and each of such Project Documents constitutes or, in the
case of each such other Project Document when




                                       10             CREDIT FACILITY AGREEMENT



executed and delivered will constitute, the legal, valid and binding obligations
of the Borrower, enforceable in accordance with its respective terms, except as
the enforceability thereof may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally, and (b) general equitable
principles, regardless of whether the issue of enforceability is considered in a
proceeding in equity or at law.

         SECTION 3.03 NO VIOLATION. Neither the execution and delivery by the
Borrower of the Project Documents to which it is a party, nor the Borrower's
compliance with or performance of the terms and provisions thereof, or the use
of the proceeds of the Loans as contemplated by this Agreement (a) will
contravene or violate any provision of any Applicable Law to which the Borrower,
any of its assets, the Project or any transaction contemplated by the Project
Documents are subject, (b) will conflict or be inconsistent with or result in
any breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien (except any Permitted Liens) upon any
of the property or assets of the Borrower pursuant to the terms of any
indenture, mortgage, deed of trust, credit agreement, loan agreement or any
other agreement, contract or instrument to which the Borrower is a party or by
which it or any of its property or assets is bound or to which it may be
subject, (c) will violate any provision of any other Organization Document of
the Borrower or (d) will require any consent or approval of any Governmental
Authority or any other Person which has not been obtained.

         SECTION 3.04 ORGANIZATION. All of the issued and outstanding shares of
the Borrower are owned by Ormat Holding Corp. except as provided in the Share
Pledge and Sponsor Participation Retention Agreement.

         SECTION 3.05 SUBSIDIARIES. The Borrower has no Subsidiaries and owns no
equity interest in any other Person.

         SECTION 3.06 SINGLE-PURPOSE BORROWER. The Borrower (a) has not incurred
any liabilities other than in connection with its participation in the
transactions contemplated by the Project Documents and (b) has not engaged in
any business other than the Project. The Borrower is not a party to any material
agreement, contract or commitment (other than the ENEL Agreements, the Fiduciary
Account Agreement, the Financing Documents, the Investment Agreement and any
Implementation Agreements).

         SECTION 3.07 FINANCIAL STATEMENTS; FINANCIAL CONDITION: UNDISCLOSED
         LIABILITIES; ETC.

         (a) No Material Adverse Effect. The financial statements of the
Borrower for the Fiscal Year ended December 31, 1999, heretofore furnished to
the Lender, present fairly the financial condition of the Borrower at the date
thereof and the results of the operations of the Borrower for the fiscal period
referred to in such statements. Such financial statements have been prepared in
accordance with GAAP. Since the date of such financial statements, no event,
condition or circumstance (including, without limitation, Force Majeure) has
existed or has occurred which is reasonably likely to have a Material Adverse
Effect.

         (b) No Likelihood of Material Adverse Effect. Except as fully reflected
in the financial statements referred to in Section 3.07(a), there are no
liabilities or obligations with respect to the




                                       11



Borrower (whether absolute, accrued, contingent or otherwise and whether or not
due) for the period to which such financial statements relate which, either
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect. The Borrower does not know of any reasonable basis for the
assertion against the Borrower of any liability or obligation of any nature
whatsoever for such relevant period that is not fully reflected in the financial
statements referred to in Section 3.07(a) which, either individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect.

         SECTION 3.08 LITIGATION; LABOR DISPUTES.

         (a) No Proceedings. Except as disclosed in Schedule 3.08 hereto, there
is no action, suit, investigation or proceeding by or before any court,
arbitrator, administrative agency or other Governmental Authority pending or, to
the best of the Borrower's knowledge, threatened against or affecting the
Borrower or any of its properties, revenues or assets or the Project or the Site
(including Environmental Claims) which has had or is reasonably likely to have a
Material Adverse Effect. The Borrower is not in default with respect to any
order of any court, arbitrator, administrative agency or other Governmental
Authority. There is no injunction, writ, preliminary restraining order or any
order of any nature issued by an arbitrator, court or other Governmental
Authority directing that any of the material transactions provided for in any of
the Project Documents not be consummated as herein or therein provided. To the
best of the Borrower's knowledge, there is no action, suit, investigation or
proceeding by or before any court, arbitrator, administrative agency or other
Governmental Authority pending or threatened against or affecting the Borrower
or any of its properties, revenues or assets, and the Borrower does not have
actual knowledge of any such action, suit, investigation or proceeding pending
or threatened against or affecting any other party to any Project Document or
any of their respective properties, revenues or assets, in each case described
in this sentence which has had or is reasonably likely to have a Material
Adverse Effect.

         (b) No Labor Claims Pending. There are no strikes, slowdowns or work
stoppages by the Borrower's employees ongoing, or, to the knowledge of the
Borrower, threatened which are reasonably likely to have a Material Adverse
Effect. There are no claims pending against the Borrower arising from the
transfer of personnel pursuant to the terms of the ENEL Agreements.

         SECTION 3.09 TRUE AND COMPLETE DISCLOSURE. All factual information
(taken as a whole), which, for the avoidance of doubt (a) shall not include any
information by way of projections, estimates or other expressions of view as to
future circumstances, provided that such projections, estimates or other
expressions of view are expressed in good faith and on the basis of reasonable
assumptions and (b) shall be qualified by any disclaimers with respect to such
factual information provided by the Borrower to the Lender heretofore or
contemporaneously furnished by or on behalf of the Borrower in writing to the
Lender (including without limitation such factual information related to the
Project as is contained in the preliminary business plan dated February 27, 2000
(financial model) previously submitted to the Lender on February 27, 2000 with
respect to the Project and as stated in the Lender's Offer Letter dated March
14, 2000 and in the Business Plan), and all other such factual information
(taken as a whole) hereafter furnished by or on behalf of the Borrower in
writing to the Lender will be, true and accurate in all material respects on the
date as of which such information is stated or certified and not incomplete by
omitting to state any fact necessary to make such information (taken as a whole)
not misleading in any material respect in light of the circumstances and the
time under which or




                                       12              CREDIT FACILITY AGREEMENT



at which such information was provided. There are in existence no documents or
agreements which have not been disclosed to the Lender which are material in the
context of the Project Documents or which have the effect of varying any of the
Project Documents or their meaning.

         SECTION 3.10 TAX RETURNS AND PAYMENTS. Except as disclosed in Schedule
3.11, the Borrower has filed all tax returns required by Applicable Law to be
filed by it and has paid all income taxes payable by it which have become due
pursuant to such tax returns and all other taxes and assessments payable by it
which have become due, other than those not yet delinquent and except for those
contested in good faith and for which adequate reserves have been established.
The Borrower has paid, or has provided adequate reserves for the payment of, all
national, regional or local income taxes applicable for all prior Fiscal Years
and for the current Fiscal Year to the date hereof, except as disclosed under
Schedule 3.11.

         SECTION 3.11 GOVERNMENTAL APPROVALS. All Governmental Approvals
necessary under Applicable Law in connection with (a) the due execution and
delivery of, and performance by the Borrower of its obligations and the exercise
of its rights under, the Project Documents in effect or required to be in effect
as of each date this representation is made or deemed made, (b) the grant by the
Borrower of the Liens created pursuant to the Security Documents and the
validity, enforceability and perfection thereof and the exercise by the Lender
of its rights and remedies thereunder and (c) the construction and operation of
the Project as contemplated by the Project Documents, to be obtained by the
Borrower and to be obtained by any other Person (to the best knowledge of the
Borrower) are set forth in Schedule 3.11 hereto. Except as disclosed in Part C
of Schedule 3.11, each of the Governmental Approvals set forth in Part A and
Part C of Schedule 3.11 hereto and each other Governmental Approval obtained by
the Borrower after the date hereof but on or prior to the date this
representation is made, has been duly obtained or made, is validly issued, is in
full force and effect, is not subject to appeal (it being understood that for
purposes of this Section 3.11, a Governmental Approval shall not be considered
to be subject to appeal if it is being contested or challenged solely by Persons
other than the Governmental Authority which issued the Governmental Approval or
any other Governmental Authority notwithstanding that such contest or challenge
is ongoing) and is free from conditions or requirements compliance with which is
reasonably likely to have a Material Adverse Effect or which the Borrower does
not reasonably expect to be able to satisfy. There is no proceeding pending or,
to the best knowledge of the Borrower, threatened which is reasonably likely to
result in the rescission, termination, material modification, suspension or
determination of invalidity or lack of effectiveness of any such Governmental
Approval. The information set forth in each application and other written
material submitted by the Borrower to the applicable Governmental Authority in
connection with each such Governmental Approval was accurate and complete in all
material respects at that time (provided, that no representation is made
regarding the accuracy and completeness of any projections, estimates or other
expressions of view as to future circumstances, and provided further that any
such information is further qualified by any disclaimers with respect thereto
included therein). The Borrower has no reason to believe that any Governmental
Approval that has not been obtained by the Borrower, but which will be required
in the future, will not be granted to it in due course, on or prior to the date
when required and free from any condition or requirement compliance with which
is reasonably likely to have a Material Adverse Effect or which the Borrower
does not reasonably expect to be able to satisfy. The Project, if constructed
and performed in accordance with the Business Plan, will conform to and comply
in all material respects with all covenants, conditions, restrictions and
reservations in the Governmental Approvals and the Project Documents applicable
thereto and




                                       13              CREDIT FACILITY AGREEMENT



all Applicable Laws. The Borrower has no reason to believe that the Lender will
not be entitled, without undue expense or delay, to the benefit of each
Governmental Approval set forth on Schedule 3.11 hereto upon the exercise of
remedies under the Security Documents. The Lender has received a true and
complete copy of each Governmental Approval heretofore obtained or received by
the Borrower.

         SECTION 3.12 COMPLIANCE WITH STATUTES, ETC.

         (a) Compliance with Applicable Laws. Except as set forth in (b) below,
and in Section 3.13, and in Part C of Schedule 3.11, the Borrower is in
compliance with all Applicable Laws in respect of the conduct of its business
and the ownership of its property (including, without limitation, Applicable
Laws relating to environmental standards and controls and resettlements and
Applicable Laws relating to the maintenance of debt to equity ratios).

         (b) Environmental Compliance. The Borrower's business and the Project
are being carried out in compliance with the Project Remediation Program.

         SECTION 3.13 ENVIRONMENTAL MATTERS. To the best of the Borrower's
knowledge, neither the Site nor the Power Plant (nor any other property with
respect to which the Borrower has retained or assumed liability either
contractually or by operation of the law) has been affected by any Hazardous
Material, other than as described in the Project Remediation Program, in a
manner which does or is reasonably likely to give rise to any material liability
of the Borrower under any Environmental Law or which has had or is reasonably
likely to have a Material Adverse Effect.

         SECTION 3.14 PATENTS, LICENSES, FRANCHISES AND FORMULAS. The Borrower
owns or has the right to use all intellectual property including all the
patents, trademarks, permits, service marks, trade names, copyrights, licenses,
franchises and formulas, or rights with respect thereto, and has obtained
assignments of all leases and other rights of whatever nature, necessary for the
present and proposed conduct of its business and the carrying out of the Project
in the manner contemplated by the Project Documents, without any known conflict
with the rights of others which, or the failure to obtain which, as the case may
be, is reasonably likely to have a Material Adverse Effect.

         SECTION 3.15 SUBMISSION TO LAW AND JURISDICTION. The choice of
governing law for each of the respective Project Documents in effect or required
to be in effect as of the Loan I Closing Date will be recognized in the courts
of Nicaragua, and those courts will recognize and give effect to any judgment in
respect of such Project Document obtained by or against the Borrower in the
courts the jurisdictions of which the Borrower has submitted to.

         SECTION 3.16 STATUS OF THE LOANS. The Loans constitute direct,
unconditional, and general obligations of the Borrower and rank senior as to
priority of payment to any or all Indebtedness of the Borrower except as
permitted under Section 5.15(b). Except as permitted by Section 5.16 of this
Agreement, the Borrower has not secured or agreed to secure any such other
Indebtedness by any Lien upon any of its present or future revenues, assets or
properties or upon any shares of stock of the Borrower.




                                       14              CREDIT FACILITY AGREEMENT



         SECTION 3.17 PROJECT DOCUMENTS; SUFFICIENCY OF PROJECT DOCUMENTS.

         (a) All Project Documents Received. The Lender has received a complete
copy of each Project Document in effect or required to be in effect as of each
date this representation is made or deemed made (including all exhibits,
schedules and disclosure letters referred to therein or delivered pursuant
thereto, if any).

         (b) All Rights Obtained. To the best of the Borrower's knowledge, the
services to be performed, the materials to be supplied and the easements,
licenses and other rights granted or to be granted to the Borrower pursuant to
the terms of the Project Documents provide or will provide the Borrower with all
rights and property interests required to enable the Borrower to obtain all
services, materials or rights (including access) required for the
rehabilitation, operation and maintenance of the Project, including the
Borrower's full and prompt performance of its obligations, and full and timely
satisfaction of all conditions precedent to the performance by others of their
obligations, under the Project Documents, other than those services, materials
or rights that reasonably can be expected to be obtainable in the ordinary
course of business without material additional expense or material delay.

         SECTION 3.18 FEES AND ENFORCEMENT. Other than amounts that have been
paid in full or will have been paid in full by the Loan I Closing Date, no fees
or taxes, including without limitation, stamp, transaction, registration or
similar taxes, are required to be paid for the legality, validity, or
enforceability of this Agreement or any of the other Project Documents in effect
or required to be in effect as of each date this representation is made or
deemed made. This Agreement and each of such Project Documents are each in
proper legal form under the laws of Nicaragua, and under the respective
governing laws selected in such Project Documents, for the enforcement thereof
in such jurisdiction without any further action on the part of the Lender.

         SECTION 3.19 AVAILABILITY AND TRANSFER OF FOREIGN CURRENCY. All
requisite foreign exchange control approvals and other authorizations, if any,
by Nicaragua or any department or agency thereof have been validly obtained and
will be kept current and in full force and effect to assure (a) the ability of
the Borrower to receive any and all payments to the Borrower contemplated by the
Project Documents, (b) the availability of Dollars to enable the Borrower to
perform all of its obligations hereunder and under the other Project Documents,
as the case may be, in accordance with their respective terms, and (c) the
ability of the Borrower to convert into Dollars all sums received in Cordoba
amounts from ENEL, immediately upon receipt thereof, and to use the Dollars as
necessary to perform all of its obligations under the Project Documents, in
accordance with their respective terms. There are no restrictions or
requirements which limit the availability or transfer of foreign exchange, or
the conversion to foreign exchange, for the purpose of the performance by the
Borrower of its obligations under this Agreement or under any of the other
Project Documents.

         SECTION 3.20 BUSINESS PLAN.

         (a) Effectiveness. The Business Plan as in effect on the date hereof is
attached hereto as Annex A. The Business Plan accurately specifies, to the best
of the Borrower's knowledge, all costs and expenses incurred and anticipated to
be incurred prior to the date on which a Phase I Completion Certificate and a
Phase II Completion Certificate will have been issued. In addition, to the best
of the Borrower's knowledge, the amount of all costs and expenses required or



                                       15              CREDIT FACILITY AGREEMENT



expected to be paid or incurred prior to the latest date on which a Phase I
Completion Certificate or a Phase II Completion Certificate, as the case may be,
will have been issued does not exceed the amount reflected in the Business Plan.

         (b) Assumptions. To the best of the Borrower's knowledge, all
projections and budgets furnished to the Lender by or on behalf of the Borrower
and the summaries of significant assumptions related thereto (i) have been
prepared with due care, (ii) fairly present the Borrower's expectations as to
the matters covered thereby as of their date, (iii) are based on reasonable
assumptions as to all factual and legal matters material to the estimates
therein as of their date (including interest rates and costs) and (iv) are in
all material respects consistent with the provisions of the Project Documents.

         SECTION 3.21 TITLES; LIENS. The Borrower has good and valid title to
all of its properties and assets, in each case, free and clear of all Liens
other than Permitted Liens. No mortgage or financing statement or other
instrument or recordation covering all or any part of the property or assets of
the Borrower is on file in any recording office, except such as relate only to
Permitted Liens described in clauses (a) and (b) of Section 5.16 hereof.

         SECTION 3.22 TRANSACTIONS WITH AFFILIATES. The Borrower is not a party
to any contracts or agreements with, or any other commitments to, any Affiliate,
other than in the ordinary course of business on terms at least as favorable to
the Borrower as available on an arm's-length basis from third parties.

         SECTION 3.23 NO ADDITIONAL FEES. Other than as expressly set forth in
the Business Plan, the Borrower has not paid or become obligated to pay any fee
or commission to any agent, broker, finder or intermediary for or on account of
arranging the financing of the transactions contemplated by the Project
Documents.

         SECTION 3.24 REGULATION OF PARTIES. None of the Borrower, its
Affiliates or the Lender is or will be, solely as a result of the participation
by such parties separately or as a group in the transactions contemplated hereby
or by any other Project Document, or as a result of the ownership, use or
operation of the Project, subject to regulation by any Governmental Authority of
the United States as a "public utility", an "electric utility", an "electric
utility holding company", a "public utility holding company", a "holding
company", or an "electrical corporation" or a subsidiary or affiliate of any of
the foregoing under any Applicable Law of the United States (including, without
limitation, PUHCA) or by any Governmental Authority of Nicaragua as a "public
utility" under any Applicable Law of Nicaragua. The Borrower is not a holding
company organized under the laws of the United States or the District of
Columbia. Neither the Borrower nor its Affiliates owns any utility assets
located within any state of the United States or the District of Columbia.


         ARTICLE 4. CONDITIONS PRECEDENT.

         SECTION 4.01 CONDITIONS OF FIRST DISBURSEMENT OF LOAN I. The first
Disbursement of Loan I hereunder shall be subject to the satisfaction in form
and substance of the Lender of the following conditions on or prior to the Loan
I Closing Date:

         (a) Project Documents. (i) Each of the Project Documents shall have
been entered into by the respective parties thereto, shall be unconditional and
fully effective in accordance with



                                       16              CREDIT FACILITY AGREEMENT



their respective terms (except for this Agreement having become unconditional
and fully effective, if that is a condition of effectiveness of any of such
documents) and the Borrower shall deliver to the Lender a certificate signed by
an authorized officer of the Borrower certifying the foregoing, which
certification shall be incorporated into each Application for Funding; and (ii)
the Lender shall have received a copy of the Nicaragua Government Support Letter
and of the ENEL Agreements (which shall be construed, for the purposes of this
Section 4.01(a), as not including the Nicaragua Government Support Letter), in
its escritura publica form, accompanied by a certificate executed by a Financial
Officer of the Borrower certifying that the attached copies are true and correct
copies of the original Nicaragua Government Support Letter and the ENEL
Agreements (as defined for purposes of this Section 4.01(a)).

         (b) Insurance; MIGA Guarantee. Each of the Insurance Contracts and the
MIGA Contracts shall be in full force and effect and in respect of the MIGA
Guarantee, in form and substance satisfactory to the Lender.

         (c) Opinions of Counsel. The Lender shall have received signed legal
opinions, each in form and substance satisfactory to the Lender, of (i) Cayman
Islands counsel to the Borrower, (ii) United States counsel to the Sponsor,
(iii) Israeli counsel to Ormat Industries Ltd., (iv) US and Nicaraguan counsel
to the Lender, and (v) counsel to such other Person as the Lender may reasonably
require.

         (d) Organization Documents; Proceedings.

            (i) The Lender shall have received a certificate, signed by the
Secretary or Assistant Secretary of the Borrower, in form and substance
satisfactory to the Lender, together with copies of Organization Documents of
the Borrower and resolutions of the Borrower's board of directors approving the
financing to be provided pursuant to the terms of this Agreement, certifying
that the documents attached to such certificate are true, correct and complete
copies of such documents.

            (ii) The Lender shall have received a certificate signed by the
Secretary or Assistant Secretary of the Sponsor in form and substance
satisfactory to the Lender, together with copies of the Organization Documents
of the Sponsor and resolutions of the Sponsor's board of directors approving the
documents to which Sponsor is party with respect to the provision of financing
pursuant to the provisions of this Agreement, certifying that the documents
attached to such certificate are true, correct and complete copies of such
Organization Documents and resolutions.

            (iii) The Lender shall have received a letter from the Auditors
confirming the acceptance of their appointment as the Auditors.

            (iv) The Lender shall have received a certificate from each of the
Borrower, the Sponsor, the Shareholder and the Sponsor Parent, in form and
substance satisfactory to the Lender, signed by an authorized officer certifying
the incumbency of the parties executing any Project Document or related document
on behalf of the Borrower, the Sponsor, the Shareholder and the Sponsor Parent,
respectively.

         (e) Auditors. The Lender shall have received a copy of the
authorization to the Auditors referred to in Section 5.02(b).




                                       17              CREDIT FACILITY AGREEMENT



         (f) Security Documents. The Borrower shall have delivered to the Lender
fully executed Security Documents, in full force and effect, with all
registration fees in connection therewith paid in full, and with executed
instruments of transfer delivered by the Borrower if required.

         (g) Consent Letters. The Lender shall have received a letter, in form
and substance satisfactory to the Lender, from CT Corporation System, presently
located 111 Eighth Avenue, New York, New York 10011, indicating the consent of
CT Corporation System to its appointment by the Borrower, the Sponsor, the
Shareholder and the Sponsor Parent as their agent to receive service of process.

         (h) Certificates. The Lender shall have received copies of each
executed Project Document, together with a certificate of a Financial Officer of
the Borrower certifying that the Borrower is not in default in the performance,
observance or fulfillment of any of its material obligations, covenants or
conditions contained therein and, to the best of the Borrower's knowledge, no
other party to any such Project Document is in default in the performance,
observance or fulfillment of any of its material obligations, covenants or
conditions contained therein and the Lender shall have received evidence or
copies of all Governmental Approvals set forth in Schedule 3.11 hereof (other
than those set forth in Parts B and C thereof), certified by a Financial Officer
of the Borrower as being in full force and effect and not subject to appeal,
except as disclosed in Schedule 3.11 hereof. For purposes of this Section
4.01(h), a Governmental Approval shall not be considered to be subject to appeal
if it is being contested or challenged solely by Persons other than the
Governmental Authority who issued the Governmental Approval or any other
Governmental Authority notwithstanding that such contest or challenge is
ongoing.

         (i) Business Plan. The Lender shall have received the Business Plan,
which shall be in form and substance satisfactory to the Lender.

         (j) Financial Statements. The Lender shall have received copies of the
most recent audited financial statements of the Borrower (except that for the
Fiscal Year ending December 31, 1999 financial statements may be submitted
unaudited) and audited financial statements of the Sponsor, and the Lender shall
have received copies of the most recent unaudited financial statements (if
audited financial statements are not otherwise available) of the Borrower and
the Sponsor showing, for each such Person, no material adverse change in the
financial condition of such Person since the date of the last financial
statements provided to the Lender prior to the date of this Agreement, and
certificates dated the Loan I Closing Date signed by a Financial Officer of each
such Person stating that (i) such financial statements are true, complete and
correct and (ii) no material adverse change as to such Person has occurred since
the date of such financial statements.

         (k) Evidence of Authority. The Lender shall have received evidence of
the authority of the Borrower to enter into this Agreement and the names,
specimen signatures and evidences of authority of the Persons signing this
Agreement, and the other documents required by this Agreement as of the date of
execution hereof or who will otherwise act as representatives of the Borrower in
the operation of the Credit.





                                       18              CREDIT FACILITY AGREEMENT



         (l) Accounts. The Borrower shall have established: (i) the Debt Service
Reserve Account with the Lender's New York Branch, fully funded in accordance
with Section 5.33; and (ii) the bank account with the Lender's New York Branch
in accordance with Section 5.28(a).

         (m) Other Instruments, Conditions, Due Diligence, Etc. The delivery of
every other instrument and agreement, and the satisfaction of any other
condition as the Lender may reasonably request, including due diligence reports
satisfactory to the Lender.

         (n) Fees, Costs, Etc. The Fees, and all other fees, costs and expenses
(including any and all Attorney Costs of Lender's outside counsel) due and
payable on or before the Loan I Closing Date shall have been paid.

         (o) MIGA Premium. The Borrower will execute and deliver to the Lender
an irrevocable instruction to the Lender's New York Branch to debit the
Borrower's Account established pursuant to Section 5.28(a) for payment of the
MIGA premium upon the direction of the Lender and the Lender shall deliver to
the Borrower the relevant renewal notice.

         SECTION 4.02 CONDITIONS OF EACH DISBURSEMENT. Each Disbursement
hereunder shall be subject to the satisfaction in form and substance of the
Lender of the following conditions:

         (a) No Default; Representations and Warranties. Immediately before and
after giving effect to such Disbursement:

            (i) no Event of Default shall have occurred and be continuing;

            (ii) all representations and warranties made by the Borrower and
contained herein (other than the representations made pursuant to Section
3.07(b)) or in the other Project Documents shall be true and correct in all
material respects with the same effect as though such representations and
warranties had been made on and as of the date of such Disbursement, except
where expressed to be made only as of an earlier date;

            (iii) the following representations and warranties shall be true and
correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Disbursement: (A) except as fully reflected in each financial statement
delivered prior to such Disbursement pursuant to Sections 5.01(a) and 5.01(b),
there shall have been, as of the date of such financial statement, no
liabilities or obligations with respect to the Borrower of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether or not due)
which, either individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect, and (B) the Borrower does not know of any reasonable
basis for the assertion against the Borrower of any liability or obligation of
any nature whatsoever that is not fully reflected in the financial statements
delivered pursuant to Sections 5.01(a) and 5.01(b) which, either individually or
in the aggregate, is reasonably likely to have a Material Adverse Effect.

         (b) Security. The Security, in form and substance satisfactory to the
Lender, shall have been duly created, perfected and, where appropriate,
registered as required hereunder, to create a first priority security interest
and charge over the Collateral in existence at the date of such Disbursement.
Without limitation to the preceding sentence, the Borrower shall have duly
authorized, executed and delivered or, as the case may be, provided:





                                       19              CREDIT FACILITY AGREEMENT



            (i) acknowledgment copies of proper financing statements or other
instruments duly filed under the Applicable Law of each jurisdiction as may be
necessary or, in the reasonable opinion of the Lender, desirable to perfect the
charges and security interests purported to be created by the Security
Documents;

            (ii) upon the reasonable request of the Lender, certified copies of
requests for information or copies, or equivalent reports, listing the financing
statements and instruments referred to in clause (i) above and all other
effective financing statements that name the Borrower as debtor and that are
filed in the jurisdictions referred to in said clause (i), together with copies
of such other financing statements and instruments (none of which shall cover
the Collateral except to the extent of Permitted Liens);

            (iii) evidence of the completion of all other recordings and filings
of, or with respect to, the Security Documents as may be necessary or, in the
reasonable opinion of the Lender, desirable to perfect the security interests
purported to be created by the Security Documents; and

            (iv) evidence that all other actions necessary or, in the reasonable
opinion of the Lender, desirable to perfect and protect the security interests
purported to be created by the Security Documents have been taken.

         (c) Consents and Approvals. There shall have been obtained, or there
shall have been made arrangements satisfactory to the Lender for obtaining, in
addition to the Project Documents, all other governmental, corporate,
creditors', shareholders' and other necessary licenses, approvals or consents
for: (i) the financing by the Lender under this Agreement; (ii) the carrying on
of the business of the Borrower as it is presently carried on and is
contemplated to be carried on; (iii) the carrying out of Phase I of the Project
with respect to Loan I and Phase II with respect to Loan II; (iv) the due
execution and delivery of, and performance under, each Project Document which
has been entered into at the time of such Disbursement, the Security, and any
documents in implementation of any thereof; and (v) the remittance to the Lender
of all monies payable pursuant to each Project Document which has been entered
into at the time of such Disbursement, and any documents in implementation of
any thereof. In addition, a true and complete copy of each material license,
approval or consent described in this Section 4.02(c) shall have been delivered
by the Borrower to the Lender.

         (d) No Project Document Default. Each of the Project Documents which
has been entered into or which is required to have been entered into at the time
of such Disbursement shall be in full force and effect and no material breach or
default shall have occurred under any such Project Document. No event of Force
Majeure shall have occurred which has had, or in the reasonable judgment of the
Lender is reasonably likely to have, a Material Adverse Effect.

         (e) ENEL Agreements. The Lender shall have received from the Borrower a
certification, in form and substance satisfactory to the Lender, signed by an
authorized representative of the Borrower and expressed to be effective as of
the date of the relevant Disbursement, stating that the Borrower is in
compliance in all material respects with all provisions of the ENEL Agreements.





                                       20



         (f) No Material Adverse Effect. Since the Loan I Closing Date, no event
or events shall have occurred which has had or is reasonably likely to have a
Material Adverse Effect.

         (g) Insurance; Shareholder's MIGA Guarantee. The Borrower shall have
certified to the Lender that each of the Insurance Contracts required pursuant
to Section 5.03 and the Shareholder's MIGA Guarantee, continue to be in full
force and effect on the date of such Disbursement and that the Insurance
Contracts are in compliance and in full accord with the recommendations of the
Lender's Insurance Consultant.

         (h) Fees and Expenses. The Borrower shall have paid all fees, expenses
and other charges then payable by it under this Agreement.

         (i) Debt Service Reserve Account. The Debt Service Reserve Account
shall have been funded in accordance with Section 5.33.

         (j) Disbursements for Additional Amount. In respect of each
Disbursement made in respect of Additional Amounts, the Senior Loan Debt to
Borrower's Equity ratio shall not exceed 3:1 after giving effect to the
requested Disbursement.

         (k) Sponsor Advances. The Sponsor shall have made advances to the
Borrower either as additional equity or subordinated long term loans on the same
terms and conditions as set forth in Section 2.02 of the Sponsor Project Funding
Agreement in an amount which when added to the Borrower's Equity shall be equal
to, as the case may be, (i) forty-two and eight hundred fifty-seven thousandths
percent (42.857%) of the sum of the requested Disbursement to be made under Loan
I plus any Interest to be capitalized pursuant to Section 2.03 plus all amounts
previously disbursed under Loan I, or (ii) thirty-three and three hundred
thirty-three thousandths percent (33.333%) of the sum of the requested
Disbursement to be made under Loan II (including any Disbursement to be made in
respect of an Additional Amount) plus any Interest to be capitalized pursuant to
Section 2.03 plus all amounts previously disbursed.

         (l) Phase II - Approval of Lender's Engineer. With respect to
Disbursements to be made under Loan II, the Lender shall have received the
approval of the Lender's Engineer as required under Section 2.02(b).

         SECTION 4.03 NO WAIVERS. No course of dealing or waiver by the Lender
in connection with any condition of Disbursement under this Agreement shall
impair any right, power or remedy of the Lender with respect to any other
condition of Disbursement, or be construed to be a waiver thereof; nor shall the
action of the Lender in respect of any Disbursement affect or impair any right,
power or remedy of the Lender in respect of any other Disbursement.

         SECTION 4.04 CONDITIONS FOR FIRST DISBURSEMENT OF LOAN II. The Lender
shall have received at the Borrower's expense each of the following on or prior
to the Loan II Closing Date: (a) a Technical Report from a recognized and
independent engineer or consulting firm acceptable to the Lender confirming
costs, technical and commercial feasibility of the Business Plan; (b) an opinion
of Nicaraguan legal counsel acceptable to the Lender confirming the legal
opinion provided pursuant to Section 4.01(c) and such other opinions related to
any changes in Applicable Law that have occurred since the date thereof, in form
and substance satisfactory to the Lender; (c) payment to the Lender of (i) the
Loan II Commitment Fee and (ii) the final installment of the Front-End Fee; and
(d) in the event that the amendment to the PPA referred to




                                       21              CREDIT FACILITY AGREEMENT



in Section 5.43 is not in full force and effect, an executed amendment to the
PPA incorporating substantially the provisions set forth in Schedule 4.04 shall
be in full force and effect and executed in the form of an escritura publica
prepared by a Nicaraguan notary public.


ARTICLE 5. COVENANTS

         The Borrower covenants and agrees that:

         SECTION 5.01 INFORMATION COVENANTS. The Borrower shall furnish to the
Lender:

         (a) Quarterly Financial Statements of Borrower. As soon as available
but, in any event, within 90 days after the close of each of the first three
quarterly accounting periods in each Fiscal Year,

            (i) complete unaudited financial statements of the Borrower as at
the end of such quarterly period with statements of operations and statement of
cash flows for such quarterly period and for the elapsed portion of the Fiscal
Year ended with the last day of such quarterly period, in each case setting
forth comparative figures for the related periods in the prior Fiscal Year,
subject to normal year-end audit adjustments;

            (ii) a report on any event or condition which has had or which is
reasonably likely to have a Material Adverse Effect; and

            (iii) a statement, in form and detail reasonably satisfactory to the
Lender, of all financial transactions in such Quarter between the Borrower and
any Affiliate of the Borrower, including a certification on behalf of the
Borrower by a Financial Officer of the Borrower that such transactions were in
the ordinary course of business on terms at least as favorable to the Borrower
as available on an arm's-length basis from third parties.

         (b) Annual Financial Statements of Borrower. As soon as available but,
in any event, within 120 days after the close of each Fiscal Year, (i) the
financial statements of the Borrower as at the end of such Fiscal Year with
statements of operations and statement of cash flows for such Fiscal Year, in
each case setting forth comparative figures for the preceding Fiscal Year ending
after December 30, 1999 and (except in the case of financial statements of the
Borrower for the Fiscal Year ended December 31, 1999) certified by the Auditors
(all such statements being in agreement with the Borrower's books of account and
prepared in accordance with GAAP), and (ii) for all fiscal years after December
31, 1999 a report of the Auditors stating that in the course of its regular
audit of the financial statements of the Borrower, which audit was conducted in
accordance with generally accepted auditing standards, the Auditors obtained no
knowledge of any Default or Event of Default which has occurred and is
continuing or, if in the opinion of the Auditors such a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof .

         (c) Management Letters. Promptly after the Borrower's receipt thereof,
a copy of any "management letter" or other similar communication received by the
Borrower, from the Auditors, as the case may be, in relation to the Borrower's
financial, accounting and other systems, management and accounts.





                                       22              CREDIT FACILITY AGREEMENT



         (d) Officer's Certificates. Except as required for purposes of the
first Disbursement under Loan I, at the time of the delivery of the financial
statements provided for in Sections 5.01(a) and 5.01(b), a certificate of a
Financial Officer of the Borrower to the effect that, to the best of his
knowledge, no Default or Event of Default has occurred and is continuing or, if
any such Default or Event of Default has occurred and is continuing, specifying
the nature and extent thereof and what action the Borrower is taking or proposes
to take in response thereto.

         (e) Notice of Default, Litigation, etc.

            (i) Immediately upon the Borrower obtaining actual knowledge
thereof, notice, by facsimile, of the occurrence of any Default or Event of
Default or any breach or default under any of the other Project Documents by the
Borrower or any other party thereto, specifying the nature thereof and the
action which the Borrower is taking and proposes to take with respect to the
same; and

            (ii) promptly, and in any event within twenty (20) Business Days
after Borrower obtains actual knowledge thereof, notice of:

                  (A) any litigation or governmental proceeding, pending (1)
         against the Borrower, Sponsor or ENEL (x) involving a claim in excess
         of $100,000 with respect to the Borrower and $5,000,000 with respect to
         the Sponsor or ENEL (or the equivalent thereof in other currency) or
         (y) which is reasonably likely to have a Material Adverse Effect or (2)
         with respect to any Project Document;

                  (B) any proposal by any Governmental Authority to acquire
         compulsorily the Borrower, Sponsor, the Shareholder or ENEL, any
         Collateral or a substantial part of the business or assets of any of
         them;

                  (C) any substantial dispute between or among the Borrower, the
         Sponsor, the Shareholder or ENEL and any Governmental Authority or any
         other of the Borrower, Sponsor, the Shareholder or ENEL;

                  (D) any change in the authorized officers or directors
         referred to in Section 4.01(d) above, giving certified specimen
         signatures of any new officer or director so appointed and, if
         requested by the Lender, satisfactory evidence of the authority of such
         new officer or director;

                  (E) any actual or proposed termination, rescission, discharge
         (otherwise than by performance), amendment or waiver or indulgence
         under, any material provision of any Project Document (other than by
         the Lender);

                  (F) any material notice or correspondence received or
         initiated by the Borrower relating to a Governmental Approval or other
         license or authorization necessary for the performance by it of its
         obligations under the Project Documents;

                  (G) any Lien (including a Permitted Lien) becoming enforceable
         over any of the Borrower's assets;




                                       23              CREDIT FACILITY AGREEMENT



                  (H) any proposed material change in the nature or scope of the
         Project or the business or operations of the Borrower, the Sponsor or
         ENEL and any one or more events, conditions or circumstances (including
         without limitation Force Majeure as defined in the ENEL Agreements)
         that exist or have occurred which are reasonably likely to have a
         Material Adverse Effect; or

                  (I) the occurrence of any event or act which could reasonably
         qualify as the basis for a claim under either of the MIGA Contracts.

         (f) Implementation Reports. Within 21 days of the end of each month,
beginning with the end of the month hereof, a report executed by the Borrower's
chief engineer and attached to each Application for Funding in a form
satisfactory to the Lender, on the implementation and progress of the Project,
including (i) any factors materially and adversely affecting or which are
reasonably likely to materially and adversely affect the carrying out of Phase
II of the Project and (ii) copies of any reports received by the Borrower from
any outside technical consultant identifying any matter that is of material
adverse significance to the rehabilitation or operation of the Power Plant. Upon
reasonable request of the Lender, the Borrower shall provide to the Lender
copies of all reports submitted by the Borrower to ENEL or CNDC under the ENEL
Agreements.

         (g) Fiduciary Account Reports. The Borrower shall provide to the Lender
any and all copies of monthly reports issued by Banco de Credito Centroamericano
("Banco") in accordance with Section 2.2 of the Fiduciary Account Agreement.
Such reports shall be provided no later than the tenth day of each calendar
month. The Borrower shall attach to each copy of such reports a copy of the
notice specified under Section 2.1(c) of such Fiduciary Account Agreement
indicating the amount to be required to be deposited in the account for the
applicable month(s).

         (h) Other Information. Any other information or reports related to the
Borrower, Sponsor, the Shareholder, ENEL or the Project as the Lender may
reasonably request.

         SECTION 5.02 BOOKS, RECORDS AND INSPECTIONS; ACCOUNTING AND AUDIT
MATTERS.

         (a) Maintenance of Books and Records; Inspections. The Borrower will
keep proper books of record and account adequate to reflect truly and fairly the
financial condition and results of operations of the Borrower (including the
progress of the Project) in which full, true and correct entries in conformity
with GAAP shall be made. The Borrower will permit officers and designated
representatives of the Lender to visit and inspect, under guidance of officers
of the Borrower, any of the properties of the Borrower, and to examine and make
copies of the books of record and account of the Borrower and discuss the
affairs, finances and accounts of the Borrower with, and be advised as to the
same by, its officers, all at such reasonable times and intervals and to such
reasonable extent as the Lender may request.

         (b) Consultation with Auditors. The Borrower shall (i) authorize the
Auditors to communicate directly with the representatives of the Lender at
reasonable intervals, but if a Default or Event of Default has occurred or is
continuing, then at any time, regarding the Borrower's accounts and operations
and (ii) furnish to the Lender a copy of such authorization, provided, however,
that the Lender will (i) provide the Borrower with copies of any correspondence
between such representatives and the Auditors; and (ii) provide the Borrower





                                       24              CREDIT FACILITY AGREEMENT



with reasonable notice of any meeting between such representatives and the
Auditors, with a description of the matters to be discussed at such meeting, and
allow the Borrower to attend any such meeting.

         SECTION 5.03 MAINTENANCE OF PROPERTY; INSURANCE.

         (a) Obligation to Maintain Property and Insurances. The Borrower will
(i) keep all property in its business in good working order and condition; (ii)
keep its present and future properties and business insured (with business
interruption coverage in an amount sufficient to cover fixed operating costs
plus Debt Service as set forth in the approved Business Plan for a 24-month
period commencing on the date of loss with financially sound and reputable
insurers satisfactory to the Lender against loss or damage in such manner and to
the same extent as specified in Schedule 5.03 until the expiration of such
policies and continuously immediately thereafter, in each case pursuant to
policies naming the Lender except as otherwise provided in Schedule 5.03 as sole
loss payee thereunder, permitting the Lender to make claims thereunder and
containing cut-through endorsements to reinsurers and provisions requiring that
the Lender shall receive notices of extensions or renewals of insurance policies
and notice of any non-payment of premiums and that such policy may only be
canceled for non-payment of premiums, if cancelable, upon sixty (60) days prior
notice to the Lender. Under no circumstances shall the Lender become liable for
the payment of any premiums or any other amounts due or payable under the
Insurance Contracts. On or prior to the dates required pursuant to this Section
5.03, the Borrower will submit to the Lender certificates of insurance relating
to the insurances specified in Schedule 5.03 (together with copies of such
insurance policies if then available) from the Borrower's insurers and insurance
brokers (including confirmation of premium payments then due), which
certificates shall indicate the properties insured, amounts and risks covered,
names of the beneficiaries, expiration dates, names of the insurers and special
features of the insurance policies. The Borrower shall provide the Lender with
copies of insurance policies relating to the insurances specified in Schedule
5.03 hereto on or prior to the date such policies are required to be delivered
to the Lender such policies to be in form and substance, and issued by
companies, satisfactory to the Lender.

         (b) Compliance with MIGA Contracts. The Borrower shall comply with or
perform and shall procure compliance with or performance of all obligations
specified under the MIGA Contracts as required to be complied with or performed
by the Project Enterprise (as defined in the MIGA Contracts) or by the Guarantee
Holder (as defined in the Shareholder's MIGA Guarantee) and shall not take any
action or fail to take any action which would permit MIGA to terminate any of
the MIGA Contracts.

         (c) Effectiveness of Assignments. In the event that any insurance
whatsoever is purchased, taken or otherwise obtained by the Borrower with
respect to the Project, excluding insurance policies under Section 4.2.1 of the
PPA, otherwise than as required hereunder or if not properly endorsed to the
Lender as the sole loss payee or otherwise made upon the terms required in this
Section 5.03, without limitation to any provision of the Security Documents,
such insurance shall be considered assigned hereunder to the Lender with the
right of the Lender to exercise its rights and remedies under any of the
Financing Documents or under any Applicable Law.





                                       25



         (d) Reinstatement and Renewal of Insurances. Promptly after the
issuance, renewal, expiration or termination of any of the Insurance Contracts
other than the MIGA Guarantee required to be maintained under this Section 5.03,
or upon the reasonable request of the Lender, the Borrower shall cause issuance
of a certificate stating that each of such Insurance Contracts is in full force
and effect.

         SECTION 5.04 MAINTENANCE OF EXISTENCE; PRIVILEGES; ETC. The Borrower
shall at all times (a) preserve and maintain in full force and effect (i) its
existence as an exempted limited liability company and in good standing under
the laws of the Cayman Islands, (ii) its qualification to do business in each
other jurisdiction in which the character of the properties owned or leased by
it or in which the transaction of its business as conducted or proposed to be
conducted makes such qualification necessary and (iii) all of its powers,
rights, privileges and franchises necessary for the construction, ownership,
maintenance and operation of the Project and the maintenance of its existence,
(b) obtain in a timely manner and maintain in full force and effect (or where
appropriate, renew) all Governmental Approvals (including, without limitation,
those under Environmental Laws) and all other licenses, registrations, waivers,
consents and approvals required at any time or advisable in connection with the
construction, maintenance, ownership or good and orderly operation of the
Project and all licenses, consents and approvals necessary for the conversion to
Dollars of all Cordoba amounts payable under the PPA, the Nicaragua Government
Support Letter for the remission to the United States in Dollars of any amounts
paid or payable to the Lender in connection with any Financing Document or the
transactions contemplated thereby, and (c) preserve and maintain good and
marketable title to its properties and assets (it being understood that the
Borrower's rights with respect to the Site are solely as set forth in the
Agreement of Association in Participation) subject to no Liens other than
Permitted Liens.

         SECTION 5.05 COMPLIANCE WITH STATUTES. The Borrower will comply with
all Applicable Laws in respect of the conduct of its business and the ownership,
operation and use of its property.

         SECTION 5.06 PROJECT IMPLEMENTATION. The Borrower shall (i) carry out
the Project and conduct its business with due diligence and efficiency and in
accordance with sound engineering, financial, and business practices; (ii)
obtain, or cause to be obtained, approval by the competent authority of the
Republic of Nicaragua of the Project Remediation Plan; and (iii) use the
proceeds of all Disbursements only for the purposes set forth in Section 2.02(a)
and strictly in accordance with the Business Plan.

         SECTION 5.07 AUDITORS. In the event that PricewaterhouseCoopers,
Nicaragua should cease to be the Auditors of the Borrower for any reason, the
Borrower shall appoint and maintain as the Auditors another firm of independent
public accountants approved by the Lender.

         SECTION 5.08 TAXES, DUTIES, ETC. The Borrower will pay and discharge
all taxes, duties, fees, assessments and other governmental charges (including,
without limitation, any documentary, stamp, registration, transaction or similar
tax or fee) imposed on it, on its income or profits, on any of its property, or
in connection with the execution, issue, delivery, registration, notarization,
assignment or transfer of any interest in or for the legality, validity or
enforceability of any Project Document (including, without limitation, any such
tax or fee imposed in connection with any assignment or transfer by any Lender
of the Loans or any of its





                                       26              CREDIT FACILITY AGREEMENT



interests therein or herein) prior to the date on which penalties attach
thereto, and all claims, levies or liabilities (including, without limitation,
claims for labor, services, materials and supplies) for sums which have become
due and payable and which have or, if unpaid, might become a Lien upon the
property of Borrower (or any part thereof). The Borrower shall have the right,
however, to contest in good faith the validity or amount of any such tax,
assessment, governmental charge or claim by proper proceedings timely
instituted, and may permit the taxes, assessments, governmental charges or
claims so contested to remain unpaid during the period of such contest if: (a)
the Borrower diligently prosecutes such contest; (b) during the period of such
contest the enforcement of any contested item is effectively stayed; (c) the
Borrower sets aside on its books adequate reserves with respect to the contested
items; and, (d) such contest does not, in the reasonable discretion of the
Lender, involve a material risk of the sale, forfeiture or loss of any of the
Collateral. The Borrower will promptly pay or cause to be paid any valid, final
judgment enforcing any such tax, duty, fee, assessment, other governmental
charge or claim and cause the same to be satisfied of record.

         SECTION 5.09 PERFORMANCE OF OBLIGATIONS. The Borrower will perform all
of its material obligations under the terms of each mortgage, indenture,
security agreement and other debt instrument by which it is bound and will
perform (a) all of its obligations under the terms of the Financing Documents,
the PPA and the Agreement of Association in Participation and (b) such of its
obligations under the terms of the Implementation Agreements, the
non-performance of which is reasonably likely to have a Material Adverse Effect.
The Borrower will obtain and maintain in full force and effect at all times the
registration of this CFA with the appropriate Governmental Authorities.

         SECTION 5.10 AVAILABILITY AND TRANSFER OF FOREIGN EXCHANGE. All
requisite foreign exchange control approvals, licenses, consents and
authorizations, if any, by Nicaragua or any department or agency thereof will be
kept current and in full force and effect to assure (a) the ability of the
Borrower to make any and all payments to the Borrower contemplated by the
Project Documents and (b) and availability of Dollars to enable the Borrower to
perform all of its obligations hereunder and under all other Project Documents
in accordance with their respective terms.

         SECTION 5.11 NAME CHANGES; ETC. The Borrower shall not change its name
without the prior written consent of the Lender which shall not be unreasonably
withheld. The Borrower shall not adopt or change any trade name or its business
name without the prior written consent of the Lender which shall not be
unreasonably withheld. The Borrower shall execute and deliver to the Lender any
additional documents necessary or advisable to reflect any permitted adoption of
or change in its name, trade name or fictitious name.

         SECTION 5.12 CONSOLIDATION, MERGER, SALE OF ASSETS. Without the prior
written consent of the Lender, the Borrower will not: (a) wind up, liquidate or
abandon its affairs or enter into any transaction of merger or consolidation;
(b) convey, sell, lease or otherwise transfer (or agree to do any of the
foregoing at any future date) all or any part of its property or assets, except
in the ordinary course of business and except sales of equipment which is
uneconomic or obsolete or sales of assets that are no longer used by or useful
to the Project and which are promptly replaced (if applicable) by substitutes of
substantially equivalent utility to the replaced assets; or, (c) purchase or
otherwise acquire (in one or a series of related transactions) any part of






                                       27              CREDIT FACILITY AGREEMENT



the property or assets of any Person (other than purchases or other acquisitions
of inventory or materials or capital expenditures, each in the ordinary course
of business).

         SECTION 5.13 DISTRIBUTIONS; RESTRICTED PAYMENTS.

         (a) Distributions. Without the prior written consent of the Lender, the
Borrower will not return any capital or pay any profits to holders of any Share
Capital or authorize or make or incur or assume any obligation to make any other
distribution, payment or delivery of property or cash to the Shareholder or the
Sponsor as such or by way of payment on account of Subordinated Indebtedness, or
otherwise acquire, directly or indirectly, for consideration any ownership
interest in the Borrower now or hereafter outstanding, or set aside any funds
for any of the foregoing purposes, except if there is no Default and if at the
time of declaration and after payment of such dividend, the Borrower meets the
requirements of Section 5.34(b).

         (b) Restricted Payments. Without the prior written consent of the
Lender, the Borrower will not (i) make any payment or delivery of property or
cash to any Person on account of any subordinated debt service or (ii) redeem,
retire, purchase or otherwise acquire, directly or indirectly, for
consideration, any third party subordinated indebtedness, or (iii) set aside any
funds for any of the foregoing purposes, except in accordance with the Sponsor
Project Funding Agreement.

         SECTION 5.14 LEASES. Without the Lender's prior written consent, the
Borrower will not enter into any agreement or arrangements to lease any property
or equipment of any kind as lessee, except with respect to which the aggregate
lease payments do not exceed the equivalent of US$1,000,000 in any Fiscal Year
or $3,000,000 in the aggregate with respect to property other than Capital
Expenditures.

         SECTION 5.15 INDEBTEDNESS. Without the prior written consent of the
Lender, the Borrower will not contract, create, incur, assume or suffer to exist
any Indebtedness, except for the following types of Indebtedness ("Permitted
Indebtedness"):

         (a) The Loans. Indebtedness of the Borrower incurred under the
Financing Documents;

         (b) Working Capital. Indebtedness for working capital in the normal
course of business and pari passu with the Loans, which would not exceed at any
one time outstanding the equivalent of an amount equal to the sum of all
revenues received by the Borrower for the three month period prior to the date
such Indebtedness is incurred.

         SECTION 5.16 LIENS. Without the prior written consent of the Lender,
the Borrower will not, and will not agree to, create, incur, assume or suffer to
exist any Lien upon or with respect to any property or assets (real, personal or
mixed, tangible or intangible) of the Borrower, whether now owned or hereafter
acquired, provided that the provisions of this Section 5.16 shall not prevent
the creation, incurrence, assumption or existence of the following Liens (each,
a "Permitted Lien"):

         (a) Liens. Liens for current taxes, assessments and other governmental
charges, the payment of which is not at the time required;

         (b) Liens Hereunder. Liens created pursuant to the Security Documents;
and



                                       28              CREDIT FACILITY AGREEMENT



         (c) Statutory Liens. Mechanics', materialmen's, carrier's and similar
Liens securing obligations incurred in the ordinary course of business which (i)
are not past due or which are the subject of a Good Faith Contest by the
Borrower (unless during the pendency of such contest or as a result thereof the
Liens of the Security Documents could reasonably be expected to be materially
endangered or any material portion of the Site, or the Project could reasonably
be expected to become subject to loss or forfeiture) and (ii) which do not in
the aggregate materially detract from the value of the Site or the Project or
other assets of the Borrower or materially impair the use thereof; provided that
upon the commencement of any proceeding to foreclose or enforce any such
Permitted Lien, the Lender may take such action as it reasonably deems necessary
to protect the Lender's interests in the Site or the Project including, without
limitation, payment of amounts reasonably necessary to release any such Lien,
and in such event the Borrower shall reimburse the Lender upon demand for the
cost thereof together with interest thereon at a rate per annum equal to the
LIBOR Overnight Rate plus 4.50%.

         SECTION 5.17 GUARANTEES. Without the prior written consent of the
Lender, the Borrower will not enter into any Contingent Obligations.

         SECTION 5.18 SUBSIDIARIES; ADVANCES, INVESTMENTS AND LOANS. Without the
prior written consent of the Lender, the Borrower will not form or have any
Subsidiaries, lend money or credit or make deposits (other than deposits with
the Lender or as provided in Section 5.28 of this Agreement or in relation to
the payment for goods and equipment in the ordinary course of business) with or
advances (except as specifically required by any Implementation Agreement) to
any Person, or purchase or acquire any stock, obligations or securities of, or
any other interest in, or make any capital contribution to, any other Person,
except that the Borrower may instruct the Lender to make Permitted Investments
for the account of the Borrower up to amounts available in its current accounts
with the Lender's New York Branch; provided, that such Permitted Investments
shall mature no later than the Business Day prior to the day on which the
Borrower needs the proceeds thereof for payment of Debt Service or for any other
permitted use under this Agreement.

         SECTION 5.19 TRANSACTIONS. The Borrower will not enter into any
transaction or series of related transactions with any Person other than in the
ordinary course of business on terms at least as favorable to the Borrower as
available on an arm's-length basis from third parties and as permitted under the
PPA. The Borrower shall remain at all times the "supplier" and the "operator"
for purposes of the ENEL Agreements and will not, except in accordance with
Sections 4.1.10 and 4.1.11 of the PPA, assign, hire, contract with or otherwise
transfer to any Person the rights, duties and responsibilities under the ENEL
Agreements.

         SECTION 5.20 OTHER TRANSACTIONS. Without prior written consent of the
Lender, the Borrower will not enter into any partnership, profit-sharing, or
royalty agreement or other similar arrangement whereby the Borrower's income or
profits are, or might be, shared with any other Person, or enter into any
management contract or similar arrangement whereby its business or operations
are managed by any other Person, except as permitted under the PPA.

         SECTION 5.21 MODIFICATIONS OF ORGANIZATION DOCUMENTS; ADDITIONAL
AGREEMENTS; ASSIGNMENTS AND MODIFICATIONS OF AGREEMENTS; ETC.



                                       29



         (a) No Modifications. The Borrower will not, without the prior written
consent of the Lender, (i) amend or modify the Organization Documents of the
Borrower, (ii) its filings with the Nicaraguan Foreign Investment Committee in
existence as of the date hereof or (iii) change its Fiscal Year.

         (b) No Amendment or Transfer of Project Documents. Without the prior
written consent of the Lender which shall not be unreasonably withheld or
delayed, the Borrower shall not, directly or indirectly, terminate, cancel or
suspend, or permit or consent to any termination, cancellation or suspension of,
or enter into or consent to or permit the assignment of amend or modify the
terms of the rights or obligations of any party to, any of the Project
Documents. The Borrower shall not, directly or indirectly, amend, modify,
supplement or waive, or permit or consent to the amendment, modification,
supplement or waiver of, any of the provisions of, or give any consent under,
any of the Project Documents without the prior, written consent of the Lender
which shall not be unreasonably withheld or delayed.

         (c) No Assignments of Project Document Rights. Other than the
assignment of the Project Documents to the Lender, the Borrower will not assign
(except with respect to Permitted Liens) any of its rights or obligations under
any Project Document without the prior written consent of the Lender.

         (d) No PPA Termination Without Lender Consent. The Borrower will not
take any action under Section 12.3 of the PPA to require Termination (in terms
of the PPA) without the prior written consent of the Lender, which consent shall
not be unreasonably withheld or delayed.

         (e) No Force Majeure Claims Without Lender Consultation. The Borrower
shall not claim for itself Force Majeure as provided in Clause XI of the PPA
without prior consultation with the Lender.

         SECTION 5.22 NO OTHER BUSINESS. Without the prior written consent of
the Lender, the Borrower will not carry on any business other than in connection
with the completion and operation of the Project and will take no action whether
by acquisition or otherwise which would constitute or result in any material
alteration to the nature of that business or the nature or scope of the Project.

         SECTION 5.23 ABANDONMENT. The Borrower will not abandon or agree to
abandon the Project or place it or agree to place it on a "care and maintenance"
basis provided, however, that (a) nothing in this Section 5.23 shall prevent the
Borrower from making shut-downs necessary for repairs and maintenance at the
Power Plant in accordance with the ENEL Agreements or from placing the Power
Plant or any part thereof on a "maintenance" basis during any Force Majeure (not
within the control of the Borrower, which Force Majeure prevents the Borrower
from rehabilitating, maintaining or operating same); and (b) nothing in this
Section 5.23 shall be deemed to waive or limit in any way the right of the
Lender to declare an Event of Default as provided in Article 6 hereof.

         SECTION 5.24 IMPROPER USE. The Borrower will not use, maintain, operate
or occupy, or allow the use, maintenance, operation or occupancy of, any portion
of the Site or the Project for any purpose:



                                       30



         (a) Danger. Which may be dangerous, unless safeguarded as required by
Applicable Law (provided, however, that this clause (a) shall not be deemed to
prohibit the Borrower from carrying out the Project in accordance with the terms
of the PPA and the Drilling Contracts in a reasonable and prudent manner);

         (b) Violation of Applicable Law. Which violates any Applicable Law in
any material respect;

         (c) Nuisance. Which may constitute a public or private nuisance
resulting in a Material Adverse Effect;

         (d) Effect on Insurance Coverage. Which may make void, voidable, or
cancelable or increase the premium of, any insurance (including, but not limited
to, the MIGA Contracts) then in force with respect to the Site or the Project or
any part thereof unless, in the case of an increase in premium, the Borrower
gives proof of payment of such increase; or

         (e) Other Purposes. Otherwise than for the intended purpose thereof in
the rehabilitation, maintenance and operation of the Power Plant.

         SECTION 5.25 BUSINESS PLAN EXPENDITURES. From and after the Effective
Date the Borrower may accelerate expenditures in any Fiscal Year in excess of
the projected annual costs set forth in the Business Plan provided such
expenditures are conducive to the earlier completion of the Project; the
Borrower shall not delay any such expenditures without the concurrence of the
Lender's Engineer.

         SECTION 5.26 ISSUANCE OR TRANSFER OF SHARES. The Borrower will not
issue any additional Share Capital or permit or consent to the transfer (by
sale, assignment or otherwise) of any Share Capital in the Borrower, except as
permitted under the Share Pledge and Sponsor Participation Retention Agreement.

         SECTION 5.27 AMENDMENT OF BUSINESS PLAN. Other than as provided in
Section 5.25, the Borrower will not, directly or indirectly, amend, modify,
allocate, re-allocate or supplement or permit or consent to the amendment,
modification, allocation, re-allocation or supplement of, any of the provisions
of the Business Plan, except with the prior written approval of the Lender.

         SECTION 5.28 BANK ACCOUNTS. The Borrower shall (a) establish and
maintain at all times bank accounts with the Lender's New York Branch, opening
such accounts with such documents as the Lender may require; and (b) maintain
all its other bank accounts with the Lender, except that the Borrower may
maintain bank accounts with balances not exceeding $1,000,000, plus, for a
period of 5 Business Days from the receipt thereof by the Borrower, an amount
equal to the payments from ENEL, or its equivalent in Cordobas or combination
thereof with Banco de Credito Centroamericano S.A. or such other Nicaraguan
financial institutions that are approved in advance by the Lender; provided,
however, that it shall not be a Default or Event of Default if the balances in
the accounts permitted hereunder exceed such permitted amounts solely as a
result of the Borrower's inability to exchange or transfer local currency, as a
result of disruption in or closure of the foreign exchange market, if and for so
long as such inability to convert or transfer continues and if there is not
otherwise an Event of Default.




                                       31              CREDIT FACILITY AGREEMENT



         SECTION 5.29 PRESS RELEASES; ADVERTISING. Neither the Borrower, the
Lender nor any Affiliate of the Borrower shall issue or consent to the issuance
of any press release or other announcement or advertisement that refers to the
provision of financing by the Lender for the Project without the prior written
consent of the Borrower, which consent shall not be unreasonably withheld or
delayed; except that no consent shall be required where (a) the issuance of such
press release, announcement or advertisement is required by Applicable Law or
(b) such press release, announcement or advertisement discloses only the names
of the parties involved in the provision of financing for the Project, together
with a general description of the Project, without disclosing any of the terms
of such financing.

         SECTION 5.30 ADDITIONAL DOCUMENTS; FILINGS AND RECORDINGS. The Borrower
shall execute and deliver, from time to time as reasonably requested by the
Lender at the Borrower's expense, such other documents as shall be necessary or
advisable or that the Lender may reasonably request in connection with the
rights and remedies granted or provided for by the Project Documents, as
applicable, and to consummate the transactions contemplated therein. The
Borrower shall, at its own expense, take all reasonable actions that have been
or shall be requested by the Lender or that the Borrower knows are necessary to
establish, maintain, protect, perfect and continue the perfection of the first
priority security interests of the Lender created by the Security Documents and
shall furnish timely notice of the necessity of any such action, together with
such instruments, in execution form, and such other information as may be
required to enable the Lender to effect any such action. Without limiting the
generality of the foregoing, the Borrower shall (a) execute or cause to be
executed and shall file or cause to be filed such financing statements,
continuation statements, fixture filings and mortgages or deeds of trust in all
places necessary or advisable (in the opinion of counsel for the Lender) to
establish, maintain and perfect such security interests and in all other places
that the Lender shall reasonably request and (b) do everything necessary in the
reasonable judgment of the Lender to (i) create and perfect the Security with
respect to future assets covered by the Security Documents, (ii) maintain the
Security in full force and effect at all times and (iii) preserve and protect
the Collateral and protect and enforce its rights and title and the rights and
title of the Lender to the Collateral.

         SECTION 5.31 EMPLOYEES AND EMPLOYEE PLANS. The Borrower shall not
adopt, establish, maintain, sponsor, administer, contribute to, participate in,
or incur any liability to provide post-retirement welfare benefits, except such
liability to provide post-retirement welfare benefits as may be required by
Applicable Law, the PPA and the Agreement of Association in Participation.

         SECTION 5.32 ACCOUNTING CHANGES. The Borrower shall not make any
significant change in accounting treatment or reporting, except as permitted by
GAAP.

         SECTION 5.33 DEBT SERVICE RESERVE ACCOUNT. The Borrower will establish
no later than the Loan I Closing Date a separate Debt Service Reserve Account,
maintained with the Lender's New York Branch, funded in Dollars with respect to
each of Loan I and Loan II, on the earlier of (x) the date of the Phase I
Completion Certificate or the Phase II Completion Certificate or (y) the last
day of the Loan I Availability Period or Loan II Availability Period, as the
case may be. The Lender will fund this obligation by drawing on the respective
Loan commitments and by crediting the DSRA with the amount required and adding
such amount to the outstanding balance of the respective Loan I or Loan II, and
with a balance sufficient at all






                                       32              CREDIT FACILITY AGREEMENT



times to cover Indebtedness For Borrowed Money in respect of Loan I and Loan II
falling due on the first and second Principal Repayment Dates of each respective
Loan, and in each case thereafter on the two next successive Principal Repayment
Dates. Notwithstanding the above, in the event the Borrower does not have
sufficient funds in bank accounts other than the DSRA, the Borrower may utilize
balances in the DSRA to make payments as required under Section 2.03 and Section
2.04 of this Agreement on any Principal Repayment Date provided the remaining
balance is not less than the amounts required for the next Principal Repayment
Date. In such a case, the Borrower must deposit funds to the DSRA within 180
days in an amount sufficient to comply with the requirements of this Section
5.33.

         SECTION 5.34 FINANCIAL RATIOS. The Borrower shall maintain at all times
the following financial ratios:

         (a) Leverage. A Senior Loan Debt to Borrower's Equity ratio not to
exceed 7:3 prior to the Loan II Closing Date and 3:1 thereafter; and

         (b) Coverage. A DSCR at a minimum level of 1.25:1, determined on and
reported to Lender on a quarterly basis.

            (i) Prior to the Loan II Closing Date

                  (A) During the first four quarters commencing on the Loan I
         Closing Date the ratio shall be calculated as projected EBITDA during
         the succeeding four quarters divided by the Debt Service for the
         successive four quarters beginning on the first Principal Repayment
         Date, on the basis of the amount outstanding under Loan I on the date
         of calculation.

                  (B) From a date which is one year after the Loan I Closing
         Date the ratio shall be calculated as EBITDA during the previous four
         quarters divided by the Debt Service for the successive four quarters
         beginning on the first Principal Repayment Date, on the basis of the
         amount outstanding under Loan I on the date of calculation.

            (ii) After the Loan II Closing Date:

                  (A) The ratio shall be calculated as EBITDA during the
         previous four quarters divided by the Debt Service for the succeeding
         four quarters in respect of Loan I and for the successive four quarters
         beginning on the first Principal Repayment Date applicable to Loan II
         and, in the event the Borrower declares a dividend, such dividend is
         permitted to be distributed under the terms of this Agreement and the
         Borrower distributes such dividend from Net Cashflow, the Borrower
         shall have reserved or set aside the payment of an amount from Net
         Cashflow as is necessary to maintain the DSCR at a minimum level of
         1.25:1 after such dividend is distributed.

         SECTION 5.35 COMPLETION CERTIFICATE. At the conclusion of each of Phase
I and Phase II, as determined by the Borrower, which determination in the case
of Phase II shall not be made prior to the completion of all geothermal wells
for which drilling has begun unless the Lender's Engineer confirms that no
Material Adverse Effect will result if such drilling is not completed, the
Borrower shall submit to the Lender a Phase I or II Completion Certificate, as
appropriate, certifying to the Lender that Phase I or Phase II, respectively,
has been completed.






                                       33              CREDIT FACILITY AGREEMENT



         SECTION 5.36 LENDER'S EXPERTS AND CONSULTANTS.

         (a) Lender's Engineer. The Lender may appoint an independent engineer
or engineering firm to act as the Lender's engineer (the "Lender's Engineer") to
observe and report on the drilling and construction works related to Phase II of
the Project, to approve each Application for Funding from the Loan II Commitment
as appropriate for the value of the work performed or to be performed, and in
general to report to the Lender on the progress of the Project;

         (b) Insurance Consultant. The Lender may appoint an independent
Insurance Consultant to advise the Lender regarding the adequacy of all
insurance coverage related to the Project and to make recommendations in respect
thereto; and

         (c) Borrower to Reimburse for Costs. All fees, disbursements and all
other related costs of the Lender's Engineer and Insurance Consultant shall be
reimbursed or paid by the Borrower no later than 30 days from the date of the
Borrower's receipt of the relevant invoice.

         SECTION 5.37 REGULATORY STATUS. The Borrower shall remain continuously
exempt from all regulation under PUHCA as a result of being a "foreign utility
company" under Section 33 of PUHCA or otherwise.

         SECTION 5.38 CHILD LABOR AND FORCED LABOR. The Borrower shall refrain
from employing Harmful Child Labor and/or using Forced Labor as defined in the
MIGA Guarantee.

         SECTION 5.39 INSURANCE PROCEEDS. The Borrower shall, in accordance with
Section 4.2.2.2 of the PPA, apply all insurance proceeds received under the
All-Risks property insurance to repair and rebuild the Project. In the event
that ENEL fails to present a claim under such All-Risks property insurance to
the insurers, the Borrower shall present such claim. In the case of business
interruption, insurance proceeds shall be paid to or received by the Lender and
held by it to be applied as if received from the Borrower as payment for amounts
due on the next Principal Repayment Date and, provided no Event of Default has
occurred and is continuing, any remaining amount shall be paid to the Borrower.

         SECTION 5.40 NOTARIZATION, CONSULARIZATION AND REGISTRATION OF CFA

         Within thirty (30) calendar days of the date hereof, this Agreement
shall be translated into Spanish by an official translator, notarized and
consularized as well as delivered for registration with each of the following:

                  (i) Ministerio de Hacienda y Credito Publico, Direccion
         General de Ingresos, for purposes of the Ley de Impuestos sobre la
         Renta of Nicaragua; and

                  (ii) Banco Central de Nicaragua, for purposes of the Ley
         Monetaria of Nicaragua.

         SECTION 5.41 MIGA PREMIUM PAYMENTS

         The Borrower will maintain with the Lender's New York Branch a balance
in Dollars equal to the premium in respect of the MIGA Guarantee, as notified to
the Borrower by either





                                       34              CREDIT FACILITY AGREEMENT



MIGA or the Lender, falling due for the next six-month coverage period not less
than two weeks prior to the due date.

         SECTION 5.42 PPA AMENDMENT.

         The Borrower shall use its reasonable efforts to ensure that an
amendment to the PPA substantially in the form attached as Schedule 5.43 has
been executed and is in full force and effect within 120 days of the date
hereof. Failure to receive such executed amendment shall not constitute a
Default or an Event of Default, but, the provision of Section 4.04(d) shall
apply.

         SECTION 5.43 MIGA ARBITRATION. The Borrower shall cooperate with the
Lender and take such actions as the Lender may request to enable the Lender to
obtain an Award (as such term is defined in the MIGA Guarantee) for purposes of
satisfying the provision of Section 17.2 of the MIGA Guarantee, provided that if
the Borrowers shall also elect to pursue an Award, the Lender shall consult with
the Borrower regarding such actions.


ARTICLE 6. EVENTS OF DEFAULT.

         Each of the following events or conditions set forth in Sections 6.01
through 6.17 (inclusive) shall be an event of default ("Event of Default")
hereunder:

         SECTION 6.01 PAYMENTS. The Borrower shall default in the payment when
due of any principal of any Loan or any interest on any Loan or any other
amounts owing to the Lender hereunder and such default shall continue unremedied
for five (5) or more Business Days.

         SECTION 6.02 REPRESENTATIONS, ETC. Any representation or warranty
confirmed or made in any Project Document by the Borrower or any obligor which
is an Affiliate of the Borrower, or in any writing provided by any of them in
connection with the execution and delivery of, or in connection with any
Application for Funding under this Agreement shall be found to have been
incorrect in any material respect when made or deemed to be made and shall
continue to be incorrect for a period of thirty (30) days after notice thereof
shall have been given to the Borrower by the Lender.

         SECTION 6.03 COVENANTS.

         (a) This Agreement. The Borrower shall fail to perform or observe any
covenant, term or agreement contained in 5.03 (Maintenance of Property;
Insurance), 5.21 (Modifications of Organization Documents; Additional
Agreements; Assignments and Modifications of Agreements; Etc.), 5.22 (No Other
Business), 5.28 (Bank Accounts), and 5.33 (Debt Service Reserve Account) hereof.

         (b) Other Agreements. The Borrower, the Sponsor, Ormat Industries Ltd.
or any other Affiliate of the Borrower shall fail to perform or observe any
other covenant, term or agreement contained in this Agreement or any other
Project Document to which it is a party and such failure shall not be remediable
or, if remediable, shall continue unremedied for a period of 30 days after the
earlier of (i) the date on which such failure shall have first become known to
the Borrower, the Sponsor, Ormat Industries Ltd. or other Affiliate of the
Borrower, as the case may be, and (ii) the date on which written notice thereof
shall have been received by the Borrower, the Sponsor, Ormat Industries Ltd. or
other Affiliate of the Borrower, as the case may be, from the Lender;




                                       35              CREDIT FACILITY AGREEMENT



provided that if (A) such failure cannot be cured within such 30-day period, (B)
such failure, in the reasonable judgment of the Lender, is susceptible of cure,
(C) the Borrower, the Sponsor, Ormat Industries Ltd. or other Affiliate of the
Borrower, as the case may be, is proceeding with diligence and in good faith to
cure such failure, (D) the existence of such failure in the reasonable judgment
of the Lender has not had and is not reasonably likely to have a Material
Adverse Effect and (E) the Lender shall have received an officer's certificate
signed by a Financial Officer of the Borrower, the Sponsor, Ormat Industries
Ltd. or other Affiliate of the Borrower, as the case may be, to the effect of
clauses (A), (B) and (C) above and stating what action the Borrower is taking to
cure such failure, then, such 30-day cure period shall be extended by up to an
additional 60 days as shall be necessary for the Borrower, the Sponsor, Ormat
Industries Ltd. or other Affiliate of the Borrower, as the case may be,
diligently to cure such failure.

         SECTION 6.04 DEFAULT UNDER OTHER AGREEMENTS.

         (a) Borrower. Any Indebtedness For Borrowed Money of the Borrower shall
be declared or for any reason any Person is entitled to declare it to be due and
payable, or required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof taking into account any
applicable grace period.

         (b) ENEL Indebtedness. ENEL shall (i) default in any payment of any
Indebtedness For Borrowed Money in an aggregate principal amount exceeding $5
million beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness For Borrowed Money was created or (ii)
default in the observance or performance of any material condition or provision
of any agreement or condition relating to any Indebtedness For Borrowed Money in
an aggregate principal amount exceeding $10 million or contained in any
instrument or agreement evidencing, securing or relating thereto, the effect of
which default is to cause any such Indebtedness For Borrowed Money to become due
prior to its stated maturity.

         (c) The Sponsor. The Sponsor (i) defaults in any payment of any
Indebtedness For Borrowed Money in an aggregate principal amount exceeding $5
million beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness For Borrowed Money was created or (ii)
defaults in the observance of performance of any material condition or provision
of any agreement or condition relating to any Indebtedness For Borrowed Money in
an aggregate principal amount exceeding $10 million or contained in any
instrument or agreement evidencing, securing or relating thereto, the effect of
which default is to cause any such Indebtedness For Borrowed Money to become due
prior to its stated maturity.

         (d) ENEL Project Obligations. A default shall have occurred in the
performance of any material obligation by (i) ENEL or Nicaragua under any of the
Project Documents to which such Person is a party and such default shall
continue unremedied beyond the period of grace, if any, extended to such Person
with respect to such default, as specified in the Project Document under which
such obligation was created or (ii) any other party (other than the Persons
referred to in clause (i) of this Section 6.04(d)) under any of the Project
Documents and the existence of such default in the reasonable judgment of the
Lender has had or is reasonably likely to have a Material Adverse Effect and
such default has not been cured within 60 days.






                                       36              CREDIT FACILITY AGREEMENT



         SECTION 6.05 BANKRUPTCY, ETC. There shall have been entered against the
Borrower, Ormat Holding Corp., the Sponsor or ENEL a decree or order by a court
adjudging the Borrower or such other Person bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Borrower or such Person under any Applicable
Law; or appointing a receiver, liquidator, assignee, trustee, sequestrator,
special manager or administrator (or other similar official) of the Borrower or
such Person or of any substantial part of its property or other assets, or
ordering the winding up or liquidation of its affairs and the Borrower or such
other Person (w) fails to obtain the dismissal or stay on appeal of any such
proceeding or arrangement within forty-five (45) days of the commencement
thereof against it or (x) any other procedure for the relief of financially
distressed debtors is instituted against it and is not dismissed within
forty-five (45) days of such commencement; or the institution by the Borrower or
such other Person of proceedings to be adjudicated bankrupt or insolvent, or the
consent by it to the institution of bankruptcy or insolvency proceedings against
it; or the filing by it of a petition or answer or consent seeking
reorganization or debt relief under any Applicable Law; or the consent by it to
the filing of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, special manager or administrator (or other
similar official) of the Borrower or any such other Person or of any substantial
part of its property; or the making by it of an assignment or an arrangement for
the benefit of creditors; or the admission by it in writing of its inability to
pay its debts generally as they become due; or any other event shall have
occurred which under any Applicable Law would have an effect analogous to any of
those events listed above in this subsection with respect to the Borrower or
Ormat Holding Corp., the Sponsor or ENEL; or any corporate action is taken by
the Borrower or Ormat Holding Corp., the Sponsor or ENEL for the purpose of
effecting any of the foregoing; provided that any reorganization or
reconstruction of a company while solvent with the prior consent of the Lender,
such consent not to be unreasonably withheld or delayed, shall not be held to
constitute any event mentioned in this paragraph; and provided, further, that
(a) in connection with any other Person, no Event of Default shall be declared
under this Section 6.05 if (y) such Person has fully complied and continues to
fully comply with all of its obligations under all Project Documents to which
such Person is a party and (z) in the reasonable judgment of the Lender, such
Event of Default has not had and is not reasonably likely to have a Material
Adverse Effect.

         SECTION 6.06 PROJECT EVENTS.

         (a) Eviction. The Borrower shall cease to have the right to access and
use the Site; or

         (b) PPA Termination. Any event shall have occurred which entitles (i)
the Borrower to give a notice under Section 12.3 of the PPA, or (ii) ENEL to
give a notice under Section 12.2 of the PPA; or

         (c) Disposition of Interest. The Borrower shall (except as permitted by
Section 6.13 hereof) sell or otherwise dispose of any of its interest in the
Project.

         SECTION 6.07 MATERIAL ADVERSE EFFECT. One or more events, conditions or
circumstances shall exist or shall have occurred which, in the reasonable
judgment of the Lender, is reasonably likely to have a Material Adverse Effect.

         SECTION 6.08 PROJECT DOCUMENTS; SECURITY DOCUMENTS.





                                       37              CREDIT FACILITY AGREEMENT



         (a) Failure of Project Document. This Agreement or any of the other
Financing Documents or any of the Project Documents, or any material provision
hereof or thereof (i) is or becomes invalid, illegal or unenforceable or any
party thereto (other than the Lender) shall so assert, unless a Good Faith
Contest is instituted and the assertion is withdrawn within 30 days thereof and
prior to the next date of Disbursement, or (ii) ceases to be in full force and
effect, or shall cease to give the Lender the Collateral, rights, powers and
privileges purported to be created thereby, therein or hereby or any party
thereto (other than any Lender) shall so assert subject to the last clause of
this Section 6.08 (a)(i).

         (b) Failure of Security Document. Except as permitted by Section 5.16
hereof, the Collateral or any component part thereof for any reason fails to
constitute a valid and perfected first priority Lien or ceases to be in full
force and effect or the Borrower or the grantor or pledgor thereof shall so
assert provided, however, that if and for so long as the Sponsor Project Funding
Agreement and the Contingent Guarantee Agreement remain in full force and
effect, the cancellation, invalidity or termination of the coverage for
Expropriation as provided in Addendum A, Paragraphs 1 and 3 of the MIGA
Guarantee shall not be an Event of Default under this Section 6.08(b).

         SECTION 6.09 OWNERSHIP OF THE BORROWER. The Sponsor shall cease to
maintain Control of the Borrower or shall cease to own, directly or indirectly,
all of the ownership interests in the Borrower free and clear of all Liens other
than as permitted by the Share Pledge and Sponsor Participation Retention
Agreement (it being understood that, for purposes of this Section 6.09, if the
Sponsor owns ownership interests in the Borrower indirectly, the percentage of
its ownership in the Borrower shall be the product of the percentage ownership
it has in any intermediate subsidiary or other entity and the percentage
ownership which the subsidiary or other entity owning ownership interests in the
Borrower directly has in the Borrower).

         SECTION 6.10 JUDGMENTS. One or more judgments or decrees shall be
entered (a) against the Borrower involving in the aggregate a liability (not
paid or fully covered by insurance) of $1 million or more; or (b) prior to the
date on which the Sponsor shall cease to be an obligor, against the Sponsor or
involving in the aggregate a liability (not paid or fully covered by insurance)
of $1 million or more with respect to the Sponsor which liability in the
reasonable judgment of the Lender has had or is likely to have a Material
Adverse Effect; and in any such case all such judgments or decrees shall not
have been vacated, discharged, or stayed or bonded pending appeal within 60 days
after the entry thereof.

         SECTION 6.11 GOVERNMENTAL ACTION. Any government or Governmental
Authority shall have condemned, nationalized, seized, or otherwise expropriated
all or any substantial part of the property or other assets of the Borrower or
shall have assumed custody or control of such property or other assets or of the
business or operations of the Borrower or shall have taken any action for the
dissolution or disestablishment of the Borrower or any action that would prevent
the Borrower or its officers from carrying on its business or operations or a
substantial part thereof.

         SECTION 6.12 PERMITS. The Borrower, ENEL, or any of their respective
Affiliates shall fail to obtain, renew, maintain or comply in all material
respects with any Governmental Approval set forth in Schedule 3.11, except as
noted thereon, or any license, approval or






                                       38              CREDIT FACILITY AGREEMENT



consent referred to in Section 4.02(c); or any such Governmental Approval or
license, approval or consent shall be rescinded, terminated, suspended, modified
or withheld or shall be determined to be invalid or shall cease to be in full
force and effect; or any proceeding shall be commenced by or before any
Governmental Authority for the purpose of rescinding, terminating, suspending,
modifying or withholding any such Governmental Approval or license, approval or
consent and such proceeding is not dismissed within 60 days; and such failure,
rescission, determination of invalidity, termination, suspension, modification,
withholding, cessation or commencement is reasonably likely to have a Material
Adverse Effect.

         SECTION 6.13 TRANSFER OF COLLATERAL; EVENT OF LOSS; DIMINUTION OF
         PROPERTY RIGHTS.

         (a) Transfer; Event of Loss. Title to or any right in all or any part
of the Collateral, covered by the Security Documents (other than as permitted
pursuant to this Agreement, including Section 5.12 hereof) shall become vested
in any party other than the party named as owner and/or holder thereof in the
applicable Security Document, whether by operation of law or otherwise, or (iv)
there shall have occurred an Event of Loss with respect to which adequate
compensation has not been paid, or it is reasonably unlikely that adequate
compensation will be paid.

         (b) Diminution. Except as permitted pursuant to any Financing Document
or this Agreement, the Borrower hereafter grants or permits any easement or
dedication, files any plat, declaration or restriction or enters any lease or
sub-lease concerning the Site, the Collateral or the Power Plant and the effect
thereof is determined by the Lender, in its reasonable discretion, to have a
Material and Adverse Effect.

         SECTION 6.14 COMPLETION BY DATE CERTAIN. A determination by the Lender,
in each case in its reasonable judgment, that the Project is not reasonably
likely to be completed either within the financial budget or on time as
established under the Business Plan; provided that no Event of Default shall be
declared as a result of any such determination if all of the following
conditions are met: (i) within 30 days after notice by the Lender to the
Borrower of such determination, the Borrower submits to the Lender a plan, in
form and substance acceptable to the Lender, specifying the plan of action the
Borrower intends to take to remedy the condition described herein and (ii) the
Borrower proceeds diligently in implementing such plan to the Lender's
reasonable satisfaction and provides reports periodically as the Lender may
request of the status of such implementation and from time to time amends such
plan with the Lender's consent (which shall not be unreasonably withheld) so
that such plan remains likely to achieve its aims.

         SECTION 6.15 SPONSOR PROJECT FUNDING AGREEMENT. The failure of the
Sponsor to make or cause to be made any subordinated loan or equity contribution
or the failure of the Sponsor to pay any amount required to be paid by it under,
or otherwise to comply with any of the terms of, the Sponsor Project Funding
Agreement.

         SECTION 6.16 CONTINGENT GUARANTEE AGREEMENT. The failure of Ormat
Industries Ltd. to pay any amount required to be paid by it under or otherwise
to comply with any of the terms of the Contingent Guarantee Agreement.





                                       39              CREDIT FACILITY AGREEMENT



         SECTION 6.17 MIGA CONTRACTS. Any of the MIGA Contracts shall not be
valid, binding and in full force and effect.

         SECTION 6.18 REMEDIES. Notwithstanding anything herein or in any
Financing Document or elsewhere to the contrary, upon the occurrence of an Event
of Default, and at any time thereafter, if such Event of Default is continuing,
the Lender, by written notice to the Borrower and the Sponsor, may declare
immediately due and payable (i) all or any portion of the principal amounts of
the Loans then outstanding, including accrued interest thereon to the date of
payment, and (ii) all other amounts owing under this Agreement. Except as
expressly provided in this Article 6, presentment, demand, protest, promptness,
dishonor and all other notices of any kind are hereby expressly waived. The
aforementioned right to accelerate is in addition to and not a substitute for
any other rights and remedies, in law or in equity, available to the Lender
under this Agreement and other Applicable Laws, including, without limitation or
prejudice to the Lender's other rights and remedies, the following:

         (a) Suspension. The Lender's right to refuse, and the Lender not to be
obligated, to make any Disbursements or make any payments from any account,
including (but not limited to) the Debt Service Reserve Account;

         (b) Enforcement of Rights. Exercise any and all rights and remedies
available to it under any of the Project Documents.


ARTICLE 7. MISCELLANEOUS

         SECTION 7.01 NOTICES.

         (a) Procedure. All notices, requests and other communications shall be
in writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Borrower by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified below, and (ii) shall be followed promptly by
the mailing or delivery of a hard copy original thereof) and mailed, faxed or
delivered, to the address or facsimile number specified for notices below; or,
as directed to the Borrower or the Lender, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Borrower and the Lender.

         (b) Effectiveness. All such notices, requests and communications shall,
when faxed, be effective when transmitted in legible form by facsimile machine,
or if mailed, upon the seventh day after the date deposited into the national
mail, or if delivered, upon delivery; except that notices pursuant to Article 2
shall not be effective until actually received by the Lender, and notices,
requests and communications received on a day which is not a Business Day, shall
be deemed received on the next following Business Day.

         (c) Lender's Right to Rely. Any agreement of the Lender to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Borrower. The Lender shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by the Borrower to
give such notice and the Lender shall not have any liability to any other Person
on account of any action taken or not taken by the Lender in reliance upon such
telephonic or facsimile notice. The obligation of the Borrower to repay the
Loans shall not be




                                       40              CREDIT FACILITY AGREEMENT



affected in any way or to any extent by any failure by the Lender to receive
written confirmation of any telephonic or facsimile notice or the receipt by the
Lender of a confirmation which is at variance with the terms understood by the
Lender to be contained in the telephonic or facsimile notice.

         (d) Addresses.

         Addresses:

         If to the Borrower:

         ORMAT MOMOTOMBO POWER COMPANY
         c/o Maples and Calder, Attorneys in Law
         Ugland House
         P.O.B. 309, George Town
         Grand Cayman
         Cayman Islands, British West Indies
         Attn: President
         Tel: 1-345-949-8066
         Fax: 1-345-949-8080
         and with a copy to:

         c/o Ormat International, Inc.
         980 Greg Street
         Sparks, Nevada 89431-6039
         Attn: President
         Tel: (775) 356-9029
         Fax: (775) 356-9039

         If to the Lender:

         BANK HAPOALIM B.M.
         Foreign Trade Operations Center, Export Unit
         40 Hamasger Street
         Tel-Aviv 67131, Israel
         Attn: I. Gottlieb
         Tel: 011-972-3-714-6613/6616
         Fax: 011-972-3-714-6619
         Telex: 342342 or 341453

         Copy to:

         BANK HAPOALIM B.M.
         Head Office/Corporate Banking Division
         Trade Finance Department
         41-45 Rothschild Boulevard
         P.O. Box 27
         Tel-Aviv 61000, Israel




                                       41              CREDIT FACILITY AGREEMENT



         Attn:  E. Arnon
         Tel:  011-972-3-567-3628/3622
         Fax:  011-972-3-567-6572/4548
         Telex:  341453 or 342342

         SECTION 7.02 ENGLISH LANGUAGE. All documents to be furnished or
communications to be given or made under this Agreement, or any other Financing
Document shall be in the English language or, if in another language, shall be
accompanied by a translation into English certified by a representative of the
Borrower, which translation shall be the governing version among the Borrower
and the Lender.

         SECTION 7.03 INDEMNITIES AND EXPENSES.

         (a) Indemnity Obligation. Subject to Section 7.03(b), whether or not
the transactions contemplated hereby are consummated, the Borrower shall
indemnify and hold the Lender and each of its respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, claims, suits, costs, charges, expenses and
disbursements (including, without limitation, Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans) be imposed on, incurred by or asserted against any such
Indemnified Person in any way relating to or arising out of this Agreement or
any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, any investigation, litigation or
proceeding (including any bankruptcy, insolvency proceeding or appellate
proceeding) related to or arising out of this Agreement, or any other Project
Documents or the Loans or the use of the proceeds thereof or any Environmental
Claim relating to the Borrower or the Project or arising out of the use of the
Power Plant or Site or any actual or alleged presence of Hazardous Materials on,
under or at the Power Plant or Site, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that the Borrower shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities resulting solely from
the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all amounts due under this
Agreement. The Lender and each other Indemnified Person shall (1) use its
reasonable efforts to, upon its becoming aware of any event which may result in
the Borrower being required to perform any of its obligations under this Section
7.03(a), promptly notify the Borrower (provided that failure to so notify shall
not mitigate the obligations of the Borrower hereunder), (2) upon request from
the Borrower consult the Borrower regarding any step (including any step which
may mitigate the effect of such event) it proposes to take in respect of such
event, and (3) obtain the prior written consent of the Borrower before entering
into any settlement or compromise in relation to any such claims, actions or
suits.

         (b) Expenses. The Borrower shall: (i) subject to the last sentence of
this Section 7.03(b) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Lender as soon as practicable but, in any
event, within 30 days after demand for all reasonable costs and expenses
incurred by the Lender, in connection with the development, preparation,
negotiation, delivery, printing, registration, administration and execution of,
and any amendment, supplement, waiver or modification to (in each case, whether
or not consummated), this




                                       42              CREDIT FACILITY AGREEMENT



Agreement, any Financing Document and any other documents prepared in connection
herewith or therewith, and the consummation of the transactions contemplated
hereby and thereby, including reasonable travel expenses, communication costs,
fees and expenses of outside professional or technical advisers or consultants,
and including Attorney Costs incurred by the Lender, with respect thereto; and
(ii) pay or reimburse the Lender as soon as practicable but, in any event,
within 30 days after demand for all reasonable costs and expenses (including
Attorney Costs) incurred by them in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this Agreement or
any other Financing Document during the existence of an Event of Default or
after acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Loans, and including in any bankruptcy or insolvency
proceeding or appellate proceeding). In addition, the Borrower shall, whether or
not the transactions contemplated hereby are consummated, pay or reimburse the
Lender on the each of the Loan I Closing Date and Loan II Closing Date for all
accrued and unpaid reasonable costs, fees and expenses to the extent then due
and payable on such date of payment (including Attorney Costs, Commitment Fees
and any amounts arising from any indemnities) incurred by the Lender, prior to
such date in connection with the development, preparation, negotiation,
delivery, printing, administration, enforcement and execution of, and any
amendment, supplement, waiver or modification to (in each case whether or not
consummated), this Agreement, any Financing Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, provided that Attorney Costs shall
include such costs to the extent invoiced prior to or on such date of payment.

         (c) Maximum Amount Permitted under Applicable Law. To the extent that
the undertaking in the preceding paragraphs of this Section 7.03 may be
unenforceable because it is violative of any law or public policy, the Borrower
will contribute the maximum portion that it is permitted to pay and satisfy
under Applicable Law to the payment and satisfaction of such undertakings.

         (d) Late Payment. All sums paid and costs incurred by the Lender in
respect to any matter indemnified hereunder shall bear interest at the LIBOR
Overnight Rate plus 4.50% from the date so paid until reimbursed by the
Borrower, and all such sums and costs shall be added to the debt and be secured
by the Security Documents and shall be immediately due and payable on demand.

         (e) Judgment Currency. If any arbitration award, judgment or order is
given or made for the payment of any amount due under this Agreement or any
other Project Document and such arbitration award, judgment or order is
expressed in a currency other than Dollars, the Borrower shall, subject to this
Section 7.03(e), indemnify the Lender against and hold it harmless from all loss
and damage incurred by the Lender as a result of any variation in rates of
exchange between the date of such arbitration award, judgment or order and the
date of payment (or, in the case of partial payments, the date of each partial
payment) thereof. This indemnity shall constitute an obligation separate and
independent from the other obligations contained in this Agreement or any other
Project Document, shall give rise to a separate and independent cause of action,
shall apply irrespective of any indulgence granted by the Lender from time to
time, and shall continue in full force and effect notwithstanding any
arbitration award, judgment or order for a liquidated sum in respect of an
amount due under this Agreement or any other Project Document.





                                       43              CREDIT FACILITY AGREEMENT



         SECTION 7.04 SURVIVAL. All indemnities set forth herein and the
obligations of the Borrower to pay additional costs as set forth in Article 2
hereof shall survive the execution and delivery of this Agreement and the making
and repayment of the Loans.

         SECTION 7.05 GOVERNING LAW; SUBMISSION TO JURISDICTION.

         (a) Governing Law. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
UNITED STATES OF AMERICA WITHOUT REFERENCE TO THE CONFLICTS OF LAWS PROVISIONS
THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

         (b) Submission to Jurisdiction. Any legal action or proceeding against
the Borrower with respect to this Agreement, or any Financing Document may be
brought in the courts of the State of New York in the County of New York or of
the United States for the Southern District of New York and, by execution and
delivery of this Agreement, the Borrower hereby irrevocably accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts. The Borrower agrees that a judgment, after exhaustion
of all available appeals, in any such action or proceeding shall be conclusive
and binding upon the Borrower, and may be enforced in any other jurisdiction,
including without limitation Nicaragua, by a suit upon such judgment, a
certified copy of which shall be conclusive evidence of the judgment. The
Borrower hereby irrevocably designates, appoints and empowers CT Corporation
System, on the date hereof, with offices at 111 Eighth Avenue, New York, New
York 10011, as its designee, appointee and agent to receive, accept and
acknowledge for and on its behalf, and in respect of its property, service of
any and all legal process, summons, notices and documents which may be served in
any such action or proceeding. If for any reason such designee, appointee and
agent shall cease to be available to act as such, the Borrower agrees to
designate a new designee, appointee and agent in New York City on the terms and
for the purposes of this provision satisfactory to the Lender. The Borrower
further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to the Borrower, at
its address set forth in Section 7.01 hereof, such service to become effective
30 days after such mailing. Nothing herein shall affect the right of the Lender
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Borrower in Nicaragua or in any
other jurisdiction.

         (c) Waiver of Procedural Defenses. The Borrower hereby irrevocably
waives any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions or proceedings arising out of or in connection
with this Agreement, or any other Financing Document brought in the courts
referred to in clause (b) above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.

         (d) Waiver of Jury Trial. WITH REGARD TO THIS AGREEMENT, EACH OF THE
BORROWER AND THE LENDER HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY, SUCH WAIVER
ACKNOWLEDGED HEREBY AS BEING A VOLUNTARY, KNOWING AND INTELLIGENT WAIVER BY EACH
PARTY HERETO.



                                       44              CREDIT FACILITY AGREEMENT



         SECTION 7.06 SUCCESSORS AND ASSIGNS.

         (a) Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the parties
hereto except that the Borrower may not assign or otherwise transfer all or any
part of its rights or obligations under this Agreement without obtaining the
prior written consent of the Lender. For the avoidance of doubt, any merger,
reincorporation, corporate restructuring or other business combination involving
any shareholder of any Lender (and any other transaction related to such
shareholder which is undertaken in connection with any such transactions) shall
not be construed as an assignment or transfer requiring any consent under this
Section 7.06(a).

         (b) Disposition of Indebtedness. Subject to the following restrictions,
the Lender may at any time sell, assign, transfer, negotiate, or otherwise
dispose of, in whole or in part, its rights and obligations under this Agreement
or the Loans and such sale, assignment, negotiation or disposition shall be
evidenced by an assignment and acceptance agreement, in form and substance
acceptable to the Lender and to the Borrower, appropriately completed and
executed by the assigning Lender and the assignee. Such executed assignment and
acceptance agreement shall be delivered to the Lender and the Borrower
immediately after execution and shall not be effective until all conditions set
forth therein and in this Section 7.06 shall have been satisfied.

            (i) The Lender may assign its rights and obligations under this
Agreement and/or the Loans only to a Person approved by the Borrower (which
approval in each case shall not be unreasonably withheld) in its sole
discretion; provided, that no Borrower approval shall be required in the event
of such an assignment by a Lender to an Affiliate of the Lender.

            (ii) The exercise of such right by the Lender is subject in all
cases to the conditions that immediately thereafter the Lender shall have given
written notice of any such transfer to the Borrower, and the transferee shall
(a) not have, or shall have effectively waived, any right pursuant to Section
2.09 or 2.14 to claim from the Borrower any additional amounts above and beyond
those which could have been claimed by the transferor had it continued to own
its Loans hereunder and (b) not have any right pursuant to Section 2.09 or 2.14
not possessed by the transferor had it continued to own its Loans hereunder.

         (c) Succession. From and after the date that the Lender has received an
executed assignment and acceptance agreement (in accordance with the terms of
Section 7.06(b) and the conditions set forth in such assignment and acceptance
agreement have been satisfied, (i) the assignee Lender thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such assignment and acceptance agreement, shall have
the rights and obligations of a Lender hereunder and under the other Financing
Documents and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Financing Documents have been assigned
by it pursuant to such assignment and acceptance agreement, relinquish its
rights and be released from its obligations under the Financing Documents.

         (d) Deemed Amendment. Immediately upon the satisfaction of all other
conditions in this Section 7.06 and in such assignment and acceptance agreement,
this Agreement shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the assignee Lender and the
resulting adjustment of the Total Commitment arising therefrom.




                                       45              CREDIT FACILITY AGREEMENT



The Total Commitment allocated to each assignee Lender shall reduce such Total
Commitment of the assigning Lender pro tanto.

         (e) Disposition Acknowledged Upon Notice. The Borrower may treat the
Lender as the owner of the Loans until written notice of transfer or assignment
shall have been received by it.

         (f) Participations. Notwithstanding anything to the contrary contained
in this Section 7.06, each Lender may grant participations, in whole or in part,
in its rights and obligations under this Agreement and the Loans without notice
to the Borrower and without restriction; provided that (i) the Lender's
obligations under this Agreement shall remain unchanged, (ii) the Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, shall continue to deal solely and
directly with the Lender in connection with the Lender's rights and obligations
under this Agreement, and the Lender shall retain the sole right to enforce the
obligations of the Borrower relating to the Loans of the Lender.

         SECTION 7.07 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.

         SECTION 7.08 RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under Applicable Law or otherwise, and not by way of
limitation of any such rights, upon the occurrence of an Event of Default, the
Lender is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and apply any and all deposits (general or special) including,
without limitation, the accounts established under Sections 5.28(a) and 5.33,
and any other Indebtedness at any time held or owing by the Lender (including
without limitation by branches and agencies of the Lender, wherever located), to
or for the credit or the account of the Borrower against and on account of the
Loans and any other Indebtedness of the Borrower to the Lender, under this
Agreement, or any of the other Financing Documents, including, without
limitation, all claims of any nature or description arising out of or connected
with this Agreement, or any other Financing Document, irrespective of whether or
not the Lender shall have made any demand hereunder and although said
liabilities or claims, or any of them, shall be contingent or unmatured.

         SECTION 7.09 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of the Lender in exercising any right, power or privilege hereunder or any
other Financing Document and no course of dealing between the Borrower and the
Lender shall impair any such right, power or privilege or operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or any other Financing Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights, powers and remedies herein, or in any other
Financing Document expressly provided are cumulative and not exclusive of any
rights, powers or remedies which the Lender would otherwise have. No notice to
or demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Lender to any other or further action in any
circumstances without notice or demand.





                                       46              CREDIT FACILITY AGREEMENT



         SECTION 7.10 SEVERABILITY. Any provision of this Agreement and any
other Financing Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability but that shall not invalidate the remaining
provisions of this Agreement or any other Financing Document or affect such
provision in any other jurisdiction.

         SECTION 7.11 CALCULATION. Except as otherwise provided, all accounts,
financial determinations and calculations to be made under, or for the purposes
of, this Agreement shall be determined in accordance with GAAP, applied on a
consistent basis and, except as otherwise required to conform to the definitions
contained in Appendix A of this Agreement or any other provisions of this
Agreement, shall be calculated from the then most recently issued quarterly
financial statements which the Borrower is obligated to furnish to the Lender
from time to time, as provided hereunder; provided, however, that (a) if the
relevant quarterly financial statements should be in respect of the last quarter
of a Fiscal Year then such calculations shall be made from the audited financial
statements for the relevant Fiscal Year, and (b) if there should occur any
material adverse change in the financial condition or results of operations of
the Borrower after the end of the period covered by the relevant financial
statements, then such material adverse change shall also be taken into account
in calculating the relevant figures.

         SECTION 7.12 HEADINGS DESCRIPTIVE. The headings of the several sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.

         SECTION 7.13 AMENDMENT OR WAIVER. Neither this Agreement nor any terms
hereof may be changed, waived, discharged or terminated unless, such change,
waiver, discharge or termination is in a writing signed by the Lender and the
Borrower.

         SECTION 7.14 DISCLAIMER. The Lender shall not be responsible in any way
for the performance of the Project Documents, and no claim with respect to the
performance of the Project Documents will affect the obligations of the Borrower
under this Agreement or any other Financing Document.

         SECTION 7.15 PAYMENTS SET ASIDE. To the extent that the Borrower makes
a payment to the Lender or the Lender exercises its right of set-off, and such
payment or the proceeds of such set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party, in connection with any
bankruptcy or insolvency proceeding or otherwise, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such set-off had not occurred.

         SECTION 7.16 CONFIDENTIAL INFORMATION. The Lender agrees that it (a)
shall hold all non-public information obtained by it pursuant to the
requirements of the Financing Documents, which have been identified in writing
as non-public information by the Sponsor, in accordance with its customary
procedures for handling confidential information of such nature and in
accordance with reasonable internal practices, and (b) may make disclosure
reasonably required by a potential assignee of the Lender or by a potential
participant in the Loans made or to be made by the Lender or of the Collateral
in connection with the contemplated assignment or participation if such
potential assignee or participant executes an agreement to keep such





                                       47              CREDIT FACILITY AGREEMENT



disclosure confidential substantially in accordance with the terms of this
clause; provided, however, no confidentiality obligation shall apply to any
information that (x) is generally available to the public, (y) was already known
to the Lender on a non-confidential basis on the date of receipt, or (z) is
subsequently disclosed to the Lender on a non-confidential basis by a third
party not having a confidential relationship with the Sponsor with respect to
such information. Notwithstanding the foregoing, the Lender shall be free to
disclose any such information or data to its attorneys, outside engineers,
experts and auditors and shall be free to disclose any such information
otherwise (a) to the extent required by Applicable Law or by any Governmental
Authority, except as provided in the last sentence of this Section 7.16, it is
expressly understood that all obligations and liabilities of the Borrower under
this Agreement, and the other Project Documents to which the Borrower is a party
and any other related document, agreement or instrument executed by the Borrower
are solely obligations of the Borrower, provided, that such limitation of
liability shall not apply to any other party hereto if and to the extent that
such party commits fraud or misappropriation of earnings, revenues, profits or
proceeds from the Borrower or the Project. Notwithstanding anything herein to
the contrary, nothing herein shall limit, or be construed or deemed to limit,
the liability of any other party under any Project Document to which such is a
party in its individual capacity.

         SECTION 7.17 NO RECOURSE. Except as provided in the last 2 sentences of
this Section 7.17 neither the Sponsor nor any Affiliate of the Sponsor (other
than the Borrower), nor its or their respective officers, directors,
stockholders, controlling persons or employees (each, a "Non-Recourse Party"),
shall have any personal liability for any amounts payable by the Borrower
hereunder or under any other Project Document or for the performance of any
covenant, agreement or obligation of the Borrower, or for the breach of any
representation, warranty or covenant of the Borrower under this Agreement or any
other Project Document, agreement, undertaking, certificate or other document
delivered by or on behalf of the Borrower in connection with this Agreement, and
therefore no judgment or recourse shall be sought or enforced against any
Non-Recourse Party for the payment or performance of the obligations of the
Borrower under any Project Document or any other such agreement, undertaking,
certificate or document executed by the Borrower. Except as provided in the last
sentence of this Section 7.17, it is expressly understood that all obligations
and liabilities of the Borrower under this Agreement and the other Project
Documents to which the Borrower is a party and any other related document,
agreement or instrument executed by the Borrower are solely obligations of the
Borrower, provided, that such limitation of liability shall not apply to a
Non-Recourse Party if and to the extent that such Non-Recourse Party commits
fraud causing material damage or loss to the Borrower, the Project or the Lender
or misappropriates earnings, revenues, profits or proceeds from the Borrower or
the Project. Notwithstanding anything herein to the contrary, nothing herein
shall limit, or be construed or deemed to limit, the liability of any
Non-Recourse Party under any Project Document to which such Non-Recourse party
is a party in its individual capacity.




                                       48              CREDIT FACILITY AGREEMENT



         IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Agreement to be signed in their
respective names as of the date set forth below.

                                           ORMAT MOMOTOMBO POWER COMPANY,
                                           as Borrower

                                           By: /s/ Connie Stechman
                                               ---------------------------------
                                               Name:  Connie Stechman
                                               Title: Assistant Secretary

                                           BANK HAPOALIM B.M.,
                                           as Lender

                                           By: /s/ Ehud Arnon
                                               ---------------------------------
                                               Name:  Ehud Arnon
                                               Title: Head of Foreign Trade


                                                                  EXHIBIT 10.1.4


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


                                CREDIT AGREEMENT

                                   dated as of

                                December 31, 2002

                                      among

                                   ORMESA LLC,
                                   as Borrower

                                 UNITED CAPITAL,
                        a division of Hudson United Bank,
                  as Administrative Agent and Collateral Agent

                                       and

                       The Lenders party to this Agreement
                                from time to time



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








                                TABLE OF CONTENTS



                                                                                                              Page
                                                                                                              ----


ARTICLE I DEFINITIONS AND INTERPRETIVE MATTERS...................................................................1

         1.01     Certain Defined Terms..........................................................................1
         1.02     Classes and Types of Loans.....................................................................1
         1.03     Rules of Interpretation........................................................................1
         1.04     Accounting Terms...............................................................................3

ARTICLE II COMMITMENTS...........................................................................................4

         2.01     Loans..........................................................................................4
         2.02     Borrowings.....................................................................................5
         2.03     Reduction of Commitments.......................................................................6
         2.04     Fees...........................................................................................6
         2.05     Lending Offices................................................................................7
         2.06     Several Obligations; Remedies Independent......................................................7
         2.07     Notes..........................................................................................7

ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST...................................................................9

         3.01     Repayment of Loans.............................................................................9
         3.02     Interest......................................................................................10
         3.03     Optional Prepayments..........................................................................12
         3.04     Mandatory Prepayments; Etc....................................................................12
         3.05     Prepayment Mechanics..........................................................................13

ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC......................................................14

         4.01     Payments......................................................................................14
         4.02     Pro Rata Treatment............................................................................16
         4.03     Computations..................................................................................16
         4.04     Minimum Amounts...............................................................................16
         4.05     Notices.......................................................................................17
         4.06     Non-Receipt of Funds by the Administrative Agent..............................................18
         4.07     Sharing of Payments; Etc......................................................................18

ARTICLE V YIELD PROTECTION; ETC.................................................................................20

         5.01     Additional Costs..............................................................................20
         5.02     Limitation on Eurodollar Loans................................................................22
         5.03     Illegality....................................................................................23
         5.04     Treatment of Affected Loans...................................................................23
         5.05     Compensation..................................................................................24
         5.06     Taxes.........................................................................................24






         5.07     Mitigation Obligations; Prepayments; Replacement of Lenders...................................27

ARTICLE VI CONDITIONS PRECEDENT.................................................................................29

         6.01     Initial Term Loans............................................................................29
         6.02     Additional Term Loans.........................................................................37

ARTICLE VII REPRESENTATIONS AND WARRANTIES......................................................................39

         7.01     Existence.....................................................................................39
         7.02     Financial Condition...........................................................................39
         7.03     Action........................................................................................40
         7.04     No Breach.....................................................................................41
         7.05     Government Approvals; Government Rules........................................................41
         7.06     Proceedings...................................................................................42
         7.07     Environmental Matters.........................................................................43
         7.08     Taxes.........................................................................................43
         7.09     Tax Status....................................................................................44
         7.10     ERISA.........................................................................................44
         7.11     Nature of Business............................................................................44
         7.12     Title; Security Documents.....................................................................44
         7.13     Subsidiaries..................................................................................45
         7.14     Utility Regulation............................................................................46
         7.15     Financing Documents; Project Documents; Non-Material Project Contracts; Licenses, Etc.........46
         7.16     Utility Services..............................................................................48
         7.17     Disclosure....................................................................................48
         7.18     Use of Proceeds...............................................................................48
         7.19     Fees..........................................................................................48
         7.20     Indebtedness..................................................................................49
         7.21     Investments...................................................................................49
         7.22     No Force Majeure..............................................................................49
         7.23     Assets........................................................................................49

ARTICLE VIII COVENANTS..........................................................................................49

         8.01     Financial Statements and Other Information....................................................49
         8.02     Maintenance of Existence; Etc.................................................................51
         8.03     Compliance with Government Rules; Etc.........................................................52
         8.04     Environmental Compliance......................................................................52
         8.05     Insurance; Events of Loss.....................................................................53
         8.06     Proceedings...................................................................................57
         8.07     Taxes.........................................................................................57
         8.08     Books and Records.............................................................................57
         8.09     Use of Proceeds...............................................................................57
         8.10     Maintenance of Liens..........................................................................57






         8.11     [Intentionally Omitted].......................................................................58
         8.12     Prohibition of Fundamental Changes............................................................58
         8.13     Restricted Payments...........................................................................58
         8.14     Liens.........................................................................................59
         8.15     Investments...................................................................................59
         8.16     Hedging Arrangements..........................................................................59
         8.17     Indebtedness..................................................................................60
         8.18     Transactions with Affiliates..................................................................60
         8.19     Nature of Business............................................................................60
         8.20     Maintenance of Properties.....................................................................60
         8.21     [Intentionally Omitted].......................................................................61
         8.22     Project Documents; Etc........................................................................61
         8.23     Annual Operating Plans and Budgets; Operating Statements......................................63
         8.24     Speculative Activities........................................................................66
         8.25     Status........................................................................................67
         8.26     Updated Surveys and Title Policy Following Upgrade Project....................................67
         8.27     Accounts......................................................................................68
         8.28     No Subsidiaries...............................................................................68
         8.29     SCE Consent...................................................................................68

ARTICLE IX EVENTS OF DEFAULT....................................................................................68

         9.01     Events of Default.............................................................................68
         9.02     Rights upon an Event of Default...............................................................73

ARTICLE X THE AGENTS............................................................................................73

         10.01    Appointment, Powers and Immunities............................................................73
         10.02    Reliance by Agents............................................................................75
         10.03    Defaults......................................................................................75
         10.04    Rights as a Lender............................................................................76
         10.05    Indemnification...............................................................................76
         10.06    Non-Reliance on Agents and Other Lenders......................................................76
         10.07    Failure to Act................................................................................77
         10.08    Resignation or Removal of Agents..............................................................77
         10.09    Consents......................................................................................78
         10.10    Collateral Agent..............................................................................78

ARTICLE XI MISCELLANEOUS........................................................................................79

         11.01    Waiver........................................................................................79
         11.02    Notices.......................................................................................79
         11.03    Expenses; Etc.................................................................................79
         11.04    Amendments; Etc...............................................................................82
         11.05    Successors and Assigns........................................................................83
         11.06    Assignments and Participations................................................................83





         11.07    Marshalling; Recapture........................................................................85
         11.08    Confidentiality...............................................................................85
         11.09    Non-Recourse..................................................................................86
         11.10    Survival......................................................................................87
         11.11    Counterparts; Integration; Effectiveness......................................................87
         11.12    NO THIRD PARTY BENEFICIARIES IN RELATION TO DISBURSEMENTS.....................................87
         11.13    GOVERNING LAW; SUBMISSION TO JURISDICTION, ETC................................................88
         11.14    WAIVER OF JURY TRIAL..........................................................................88
         11.15    SPECIAL EXCULPATION...........................................................................88
         11.16    Service of Process............................................................................89
         11.17    Service of Process............................................................................89
         11.18    Severability..................................................................................89



SCHEDULES

SCHEDULE I                 Definitions
SCHEDULE II                Applicable Lending Offices
SCHEDULE III               Commitments
SCHEDULE IV                Insurance
SCHEDULE V                 Filing Jurisdictions
SCHEDULE VI                Government Approvals
SCHEDULE VII               Deferred Government Approvals
SCHEDULE VIII              Environmental Claims
SCHEDULE IX                Upgrade Acceptance Test Parameters

EXHIBITS

EXHIBIT A-1                Form of Initial Term Loan Note
EXHIBIT A-2                Form of Additional Term Loan Note
EXHIBIT B-1                Form of Borrower Security Agreement
EXHIBIT B-2                Form of Borrower Equity Interest Pledge
EXHIBIT C                  Form of Depositary Agreement
EXHIBIT D                  Form of Notice of Borrowing
EXHIBIT E                  Form of Conversion/Continuation Notice
EXHIBIT F                  Form of Distribution Certificate





     CREDIT AGREEMENT (this "AGREEMENT") dated as of December 31, 2002 among
ORMESA LLC, a limited liability company duly formed and validly existing under
the laws of the State of Delaware (the "BORROWER"), each of the lenders that is
a signatory hereto or which, pursuant to Section 11.06(b), shall become a
"Lender" hereunder (individually, a "LENDER" and, collectively, the "LENDERS"),
UNITED CAPITAL, a division of Hudson United Bank, a New Jersey banking
corporation ("UNITED"), not in its individual capacity, but solely as
administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE
AGENT"), and UNITED, not in its individual capacity, but solely as collateral
agent for the benefit of the Secured Parties (in such capacity, the "COLLATERAL
AGENT").

     WHEREAS, the Borrower directly owns 100% of the assets comprising each
Project and has requested that the Lenders make Loans to it in an aggregate
principal amount not exceeding $27,500,000 in order to enable the Borrower to:
(a) fund the Debt Service Reserve Account as provided herein; (b) fund certain
of its working capital needs in connection with the operation of each Project;
(c) pay costs associated with the transactions contemplated by the Financing
Documents; and (d) make a distribution to the Sponsor;

     WHEREAS, the Lenders are prepared to make the Loans upon the terms and
conditions hereof;



         NOW, THEREFORE, the parties hereto agree as follows:

                                   ARTICLE I

                      DEFINITIONS AND INTERPRETIVE MATTERS

1.01   CERTAIN DEFINED TERMS. Unless otherwise specified herein, capitalized
       terms used in this Agreement shall have the meanings assigned to such
       terms in Schedule I. Capitalized terms and other terms used in this
       Agreement shall be interpreted in accordance with Sections 1.02, 1.03 and
       1.04, as applicable.

1.02   CLASSES AND TYPES OF LOANS. Loans hereunder are distinguished by "Class"
       and by "Type". The "CLASS" of a Loan refers to whether such Loan is an
       Initial Term Loan or an Additional Term Loan, each of which constitutes a
       Class of Loans. Commitments to make Loans and Notes evidencing Loans may
       be correspondingly referred to hereunder by the Class of Loan to which
       such Commitment or Note, as applicable, relates. The "TYPE" of a Loan
       refers to whether such Loan is a Prime Rate Loan or a Eurodollar Loan,
       each of which constitutes a Type of Loan. Loans may be identified by both
       Class and Type.


1.03   RULES OF INTERPRETATION. Unless the context of this Agreement otherwise
       requires:

       (a)    words of any gender include each other gender;


                                      -2-

       (b)    words using the singular or plural form also include the plural or
              singular form, respectively;

       (c)    any reference to any Person in any capacity includes a reference
              to its successors and assigns in such capacity to the extent such
              succession or assignment is permitted or not prohibited hereunder
              and, in the case of any Government Authority, any Person
              succeeding to its functions and capacities;

       (d)    the terms "hereof", "herein", "hereby", "hereto" and similar words
              refer to this entire Agreement and not any particular Section,
              Schedule, Exhibit or other subdivision of this Agreement;

       (e)    references to "Section", "Schedule" or "Exhibit" are to such
              subdivisions contained in or annexed to this Agreement;

       (f)    the words "include" and "including" shall be deemed to be followed
              by "without limitation" or "but not limited to", whether or not
              they are followed by such phrases or words of like import;

       (g)    references to any statute or statutory provision shall be
              construed as a reference to the same as it may have been, or may
              from time to time be, amended, modified or re-enacted;

       (h)    references to any agreement or document (including this Agreement)
              shall (unless otherwise expressly provided) be construed as a
              reference to such agreement or document as amended, modified,
              novated or supplemented (to the extent such amendment,
              modification, novation or supplement is permitted or not
              prohibited by the terms of such agreement or document, this
              Agreement and any other Financing Document) and in effect from
              time to time and shall (unless otherwise expressly provided)
              include a reference to any document that amends, modifies, novates
              or supplements it, or is entered into, made or given pursuant to
              or in accordance with its terms;

       (i)    "this Agreement" and words of similar import shall mean this
              Agreement, together with all Schedules and Exhibits;

       (j)    the headings and table of contents contained in this Agreement are
              inserted for convenience of reference only and shall not affect
              the interpretation of this Agreement;

       (k)    references to days shall refer to calendar days, unless Business
              Days are expressly specified; references to weeks, months or years
              shall be to calendar weeks, months or years, respectively, unless
              expressly specified otherwise; and


                                      -3-


       (l)    to the extent capitalized terms used in this Agreement are defined
              by reference to any other Transaction Document (or by reference in
              such Transaction Document to any other Transaction Document), for
              purposes of this Agreement, such terms shall continue to have
              their original definitions notwithstanding any termination or
              expiration of such agreements, except to the extent the parties
              hereto agree to the contrary.

1.04   ACCOUNTING TERMS.

       (a)    Accounting Principles, Etc. Except as otherwise expressly provided
              in this Agreement, all accounting terms used herein or in any
              other Financing Document shall be interpreted, and all financial
              statements, certificates and reports as to financial accounting
              matters required to be delivered hereunder or thereunder, shall
              (unless otherwise notified as provided in Section 1.04(b)) be
              prepared or made in accordance with the Accounting Principles of
              the relevant Person to which such terms, financial statements,
              certificates and/or reports relate, applied on a basis consistent
              with those used in the preparation of the latest financial
              statements of such Person furnished hereunder or thereunder, as
              the case may be, except for such changes as are required by such
              Accounting Principles.

       (b)    Accounting Variations. In respect of any relevant period, the
              Borrower shall, except to the extent already required by the
              relevant Accounting Principles, deliver (or cause the relevant
              other Person to deliver) to the Administrative Agent, at the same
              time as the delivery of any financial statement for that period
              under Section 8.01, a description in reasonable detail of any
              material variation (and the consequence thereof) between the
              application of the Accounting Principles employed in the
              preparation of such statement and the application of the
              Accounting Principles employed in the preparation of the financial
              statements for the immediately preceding period.

       (c)    Fiscal Periods. To enable the ready and consistent determination
              of compliance with this Agreement, the Borrower shall not change
              the last day of its fiscal year from December 31 of each year, or
              the last days of the first three fiscal quarters in each of its
              fiscal years from March 31, June 30 and September 30 of each year,
              respectively, except to the extent required by any Government
              Rule. The Borrower shall notify the Administrative Agent promptly
              upon becoming aware of such proposed Government Rule requirement
              of the nature and the effective date of such proposed change.
              Promptly after the delivery of such notice, the Borrower and the
              Administrative Agent (acting at the direction or with the consent
              of the Majority Lenders) shall negotiate in good faith any
              amendments to the provisions of the Financing Documents that may
              be necessary to give fair effect to the intention of such
              provisions.




                                      -4-


                                   ARTICLE II

                                   COMMITMENTS

2.01   LOANS.

       (a)    Initial Term Loan Facility. Each Lender severally agrees, on the
              terms and conditions of this Agreement, to make a loan
              (collectively, the "INITIAL TERM LOANS") to the Borrower in
              Dollars on the Closing Date in an aggregate principal amount equal
              to the amount of the Initial Term Loan Commitment of such Lender;
              provided that: (i) there shall be no more than one borrowing of
              Initial Term Loans; and (ii) in no event shall the aggregate
              principal amount of all Initial Term Loans at any one time
              outstanding exceed the aggregate amount of the Initial Term Loan
              Commitments as in effect from time to time. Amounts prepaid or
              repaid in respect of the Initial Term Loans may not be reborrowed.

       (b)    Additional Term Loan Facility. Each Lender severally agrees, on
              the terms and conditions of this Agreement, to make a loan
              (collectively, the "ADDITIONAL TERM LOANS") to the Borrower in
              Dollars during the Additional Term Loan Availability Period in an
              aggregate principal amount at any one time outstanding up to, but
              not exceeding, the amount of the Additional Term Loan Commitment
              of such Lender as in effect from time to time; provided that: (i)
              there shall be no more than one borrowing of Additional Term
              Loans; and (ii) in no event shall the aggregate principal amount
              of all Additional Term Loans at any one time outstanding exceed
              the aggregate amount of the Additional Term Loan Commitments as in
              effect from time to time. Amounts prepaid or repaid in respect of
              the Additional Term Loans may not be reborrowed.

       (c)    Terms Applicable to All Loans; Conversions and Continuations.

              (i)    Borrowings of Loans shall be made and Continued solely in
                     the form of Eurodollar Loans; provided that the Borrower
                     may, subject to all other applicable terms and conditions
                     of this Agreement (including Section 5.04):

                     (A)    Subject to its prior delivery to the Administrative
                            Agent of a Conversion/Continuation Notice, convert
                            any Loans that are Eurodollar Loans into Prime Rate
                            Loans as provided in Sections 5.02 and 5.04;

                     (B)    in any other circumstance where the Borrower and the
                            Administrative Agent concur that, taking account of
                            the expected timing of repayment of any such Loan
                            and the duration of the Interest Periods available
                            for selection by the Borrower, Converting such Loan

                            into a Prime Rate


                                      -5-


                            Loan will enable the Borrower to avoid breakage
                            costs pursuant to Section 5.05, make such
                            Conversion; and

                     (C)    borrow Loans initially as Prime Rate Loans with the
                            consent of the Administrative Agent (not to be
                            unreasonably withheld or delayed) as and to the
                            extent necessary to synchronize the Interest Period
                            of such Loans with other outstanding Loans that are
                            Eurodollar Loans; provided that the Borrower shall,
                            subject to its prior delivery to the Administrative
                            Agent of a Conversion/Continuation Notice, Convert
                            such Prime Rate Loans to Eurodollar Loans as soon as
                            possible to achieve synchronization of such Loans.

              (ii)   Borrowings of Loans may be made initially in the form of
                     Prime Rate Loans if the Borrower is unable to provide
                     sufficient advance notice pursuant to Section 4.05 of the
                     borrowing of such Loans as Eurodollar Loans; provided that
                     such Loans shall be Converted as soon as practicable after
                     the initial borrowing thereof into Eurodollar Loans (unless
                     the Borrower and the Administrative Agent concur that,
                     taking account of the expected timing of repayment of any
                     such Loan and the duration of the Interest Periods
                     available for selection by the Borrower if such Loan were
                     so Converted, the Conversion of such Loan into a Eurodollar
                     Loan will likely subject the Borrower to additional costs
                     pursuant to Section 5.05).

              (iii)  Following the occurrence of any Default or Event of
                     Default, the Administrative Agent may suspend the right of
                     the Borrower to Continue any Loans as, or to Convert any
                     Loans into, Eurodollar Loans.

              (iv)   In connection with any Conversion hereunder, and
                     notwithstanding anything to the contrary contained in this
                     Agreement, a Lender may (in its sole discretion, subject to
                     Section 5.07(a)) change its Applicable Lending Office with
                     respect to the Loan so Converted.



       (d)    Limit on Eurodollar Loans. Only one Interest Period in respect of
              Eurodollar Loans may be outstanding at any one time.

2.02   BORROWINGS. The Borrower shall give the Administrative Agent (which shall
       promptly notify the Lenders) notice of each borrowing hereunder as
       provided in Section 4.05 pursuant to a Notice of Borrowing. Not later
       than 11:00 a.m., New York time, on the date specified for each borrowing
       hereunder, each Lender shall make available the amount of the Loan to be

       made by it on such date to the Administrative Agent at its


                                      -6-


       Principal Office, in immediately available funds, for the account of the
       Borrower. The aggregate principal amount of the Initial Term Loan
       Commitment shall, subject to the terms and conditions of this Agreement,
       be made available to the Borrower by the Administrative Agent's
       depositing the same in immediately available funds to such accounts as
       agreed between the Borrower and the Administrative Agent; provided that
       an amount equal to $724,000 of the proceeds of the Initial Term Loans
       shall, pursuant to said agreement between the Borrower and the


       Administrative Agent, be deposited to the Revenue Account.

2.03   REDUCTION OF COMMITMENTS.

       (a)    Optional Reduction of Additional Term Loan Commitments. Subject to
              Section 2.03(b), the Borrower may at any time reduce the aggregate
              unused amount of the Additional Term Loan Commitments that are
              surplus to the needs of the Borrower; provided that: (i) the
              Borrower shall give notice of each such reduction as provided in
              Section 4.05; and (ii) each partial reduction shall be in an
              aggregate amount at least equal to $500,000 and in integral
              multiples of $500,000 in excess thereof.

       (b)    No Reinstatement. Any Commitments reduced pursuant to paragraph
              (a) above shall for all purposes hereof be terminated and may not
              be reinstated.

       (c)    Termination of Commitments. Unless previously terminated, the
              Commitments of each Class shall terminate at 5:00 p.m., New York
              time, on the last day of the Initial Term Loan Availability Period
              or Additional Term Loan Availability Period, as the case may be.

2.04   FEES.

       (a)    Up-Front Fee. On the Closing Date the Borrower shall pay to the
              Administrative Agent, for the account of each Lender, an up-front
              fee in an amount equal to 2.00% of the sum of such Lender's
              Commitments; provided, however, that such fee payable to United,
              as Lender, shall be reduced by an amount equal to $50,000.

       (b)    Commitment Fees. The Borrower shall pay to the Administrative
              Agent, for the account of each Lender, a commitment fee on the
              daily average unused amount of such Lender's Commitments for the
              period from (and including) the Execution Date through (and
              including): (i) in the case of the Initial Term Loan Commitments,
              the earliest of (A) the Closing Date, (B) the day on which the
              Initial Term Loan Commitments are reduced to zero or terminated,
              and (C) the last day of the Initial Term Loan Availability Period
              and, (ii) in the case of the Additional Term Loan Commitments, the
              earliest of (A) the Second Closing Date, (B) the day on which the
              Additional Term Loan Commitments are reduced to zero or
              terminated, and (C) the last day of the Additional Term Loan

              Availability Period, in each case in the amount of 0.375% per
              annum.



                                      -7-


       (c)    Commitment Fees Generally. All accrued commitment fees payable
              pursuant to Section 2.04(b) shall be payable in arrears on each
              Quarterly Date and, with respect to the Commitments of any Class,
              on the earliest to occur of the date on which of the Commitments
              of such Class expire, the date the Commitments of such Class are
              terminated or reduced to zero, and the Final Maturity Date.



       (d)    Administrative Agency Fees. Commencing on the first anniversary of
              the Closing Date, and annually on each subsequent anniversary
              thereafter, the Borrower shall pay to the Administrative Agent,
              for the account of the Administrative Agent, an annual agency fee
              in an amount equal to $25,000. The Administrative Agent shall not
              be required to refund any fee it has already received.

2.05   LENDING OFFICES. The Loans of each Type made by each Lender shall be made
       and maintained at such Lender's Applicable Lending Office for Loans of
       such Type.

2.06   SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The obligations of the Lenders
       hereunder are several and not joint. The failure of any Lender to make
       any Loan to be made by it, or any payment required to be made by it
       hereunder, on the date specified therefor shall not relieve any other
       Lender of its obligation to make its Loan, or its payment, on such date.
       Neither any Lender nor any Agent shall be responsible for the failure of
       any other Lender to make a Loan, or a payment, to be made by such other
       Lender.

2.07   NOTES.

       (a)    Initial Term Loan Notes. The Initial Term Loan of each Lender
              shall be evidenced by a single promissory note of the Borrower
              (each, an "INITIAL TERM LOAN NOTE") substantially in the form of
              Exhibit A-1, dated the Closing Date, payable to such Lender in a
              principal amount equal to the amount of its Initial Term Loan
              Commitment as in effect on the Closing Date and otherwise duly
              completed.

       (b)    Additional Term Loan Notes. The Additional Term Loan of each
              Lender shall be evidenced by a single promissory note of the
              Borrower (each, an "ADDITIONAL TERM LOAN NOTE") substantially in
              the form of Exhibit A-2, dated the Closing Date, payable to such
              Lender in a principal amount equal to the amount of its Additional
              Term Loan Commitment as in effect on the Closing Date and
              otherwise duly completed.

       (c)    Loan Records. Each Lender shall maintain in accordance with its
              usual practice records evidencing the indebtedness of the Borrower
              to such Lender resulting from each Loan made by such Lender,
              including the amounts of principal and interest payable and paid
              to such Lender from time to time hereunder. The Administrative
              Agent shall maintain records in which it shall record: (i) the
              amount of each Loan made hereunder, the Class and Type thereof and

              each Interest Period therefor; (ii) the amount of any principal or
              interest due and


                                      -8-


              payable or to become due and payable from the Borrower to each
              Lender hereunder; and (iii) the amount of any sum received by the
              Administrative Agent hereunder for the account of the Lenders and
              each Lender's share thereof. The entries made in the records
              maintained pursuant to this paragraph (c) shall be prima facie
              evidence of the existence and amounts of the obligations recorded
              therein; provided that the failure of any Lender or the
              Administrative Agent to maintain such records or any error therein
              shall not in any manner affect the obligation of the Borrower to
              repay the Loans in accordance with the terms of this Agreement.

       (d)    Subdivision. No Lender shall be entitled to have any of its Notes
              subdivided, by exchange for promissory notes of lesser
              denominations or otherwise, except in connection with a permitted
              assignment of all or any portion of such Lender's related
              Commitment, related Loan and related Notes pursuant to Section
              11.06(b).







                                      -9-


                                  ARTICLE III

                       PAYMENTS OF PRINCIPAL AND INTEREST

3.01   REPAYMENT OF LOANS.

       The Borrower hereby promises to pay to the Administrative Agent for the
       account of each Lender the outstanding principal of such Lender's Loan in
       twenty (20) consecutive quarterly installments payable commencing on the
       first Quarterly Date following the Closing Date, on the next eighteen
       succeeding Quarterly Dates and on the Final Maturity Date, each such
       installment in the amount set forth below (a) if prior to the Second
       Closing Date, under the heading "Initial Term Loan Principal Payment" and
       (b) if on or after the Second Closing Date, under the heading "Initial
       and Additional Term Loan Principal Payment", in each case opposite the
       reference to such Quarterly Date, less any portion of any such Initial
       Term Loans prepaid in accordance with Sections 3.03 and 3.04:

                                                               INITIAL AND
                                                              ADDITIONAL TERM
                                      INITIAL TERM LOAN        LOAN PRINCIPAL
         PAYMENT DATE                 PRINCIPAL PAYMENT           PAYMENT

         March 31, 2003                 $  698,000             $  698,000
         June 30, 2003                  $  434,000             $  434,000
         September 30, 2003             $1,696,000             $1,696,000
         December 31, 2003              $1,698,700             $1,698,700
         March 31, 2004                 $  594,171             $  869,000
         June 30, 2004                  $  369,596             $  540,550
         September 30, 2004             $1,446,369             $2,115,375
         December 31, 2004              $1,446,369             $2,115,375
         March 31, 2005                 $  649,177             $  950,000
         June 30, 2005                  $  403,856             $  591,000
         September 30, 2005             $1,579,208             $2,311,000
         December 31, 2005              $1,579,209             $2,311,000
         March 31, 2006                 $  709,544             $1,039,000
         June 30, 2006                  $  441,161             $  646,000
         September 30, 2006             $1,726,399             $2,528,000
         December 31, 2006              $1,726,399             $2,528,000
         March 31, 2007                 $  446,306             $  683,000
         June 30, 2007                  $  277,062             $  424,000
         September 30, 2007             $1,085,379             $1,661,000

         December 31, 2007              $  993,095             $1,661,000


                                      -10-


       Notwithstanding anything to the contrary herein, to the extent not
       otherwise repaid in full prior to the Final Maturity Date, the Borrower
       unconditionally promises to pay to the Administrative Agent for the
       account of each Lender the outstanding principal amount of the Loans made
       by such Lender, and such Loans shall mature, on the Final Maturity Date.

3.02   INTEREST.

       (a)    General. The Borrower hereby promises to pay to the Administrative
              Agent for the account of each Lender, interest on the unpaid
              principal amount of each Loan made by such Lender for the period
              from and including the date of such Loan to but excluding the date
              such Loan shall be paid in full, at the following rates per annum:

              (i)    during such periods as such Loan is a Prime Rate Loan, the
                     Prime Rate (as in effect from time to time) plus the
                     Applicable Margin; and

              (ii)   during such periods as such Loan is a Eurodollar Loan, for
                     each Interest Period relating thereto, the Eurodollar Rate
                     for such Loan for such Interest Period plus the Applicable
                     Margin.

       (b)    Default Interest. Notwithstanding the foregoing, the Borrower
              hereby promises to pay to the Administrative Agent for the account
              of each Lender interest at the applicable Post-Default Rate on any
              principal of any Loan made by such Lender, and on any other amount
              payable by the Borrower hereunder or under any Note held by such
              Lender, to or for the account of such Lender, which shall not be
              paid in full when due (whether at stated maturity, by
              acceleration, by mandatory prepayment or otherwise), for the
              period from and including the due date thereof to but excluding
              the date the same is paid in full.

       (c)    Payment. Accrued interest on each Loan shall be payable: (i) in
              the case of a Prime Rate Loan, quarterly on the Quarterly Dates;
              (ii) in the case of a Eurodollar Loan, on the last day of each
              Interest Period therefor; and (iii) in the case of any Loan, upon
              the payment or prepayment thereof or the Conversion of such Loan
              to a Loan of another Type (but only on the principal amount so
              paid, prepaid or Converted).

              Interest payable at the Post-Default Rate as provided in Section
              3.02(b) shall be payable from time to time on demand (or, if no
              demand is made during any month, on the last day of such month).



                                      -11-


       (d)    Determination of Interest Rate. Promptly after the determination
              of any interest rate provided for herein or any change therein,
              the Administrative Agent shall give notice thereof to the Lenders
              to which such interest is payable and to the Borrower.




                                      -12-


3.03   OPTIONAL PREPAYMENTS.

       (a)    Subject to Section 4.04, the Borrower shall have the right to
              prepay any Loans, at any time and from time to time following the
              second anniversary of the Closing Date; provided that: (a) the
              Borrower shall give the Administrative Agent and the Collateral
              Agent notice of each such prepayment, as provided in Section 4.05
              (and, upon the date specified in any such notice of prepayment,
              the amount to be prepaid shall become due and payable hereunder);
              and (b) Eurodollar Loans may be prepaid only on the last day of
              the Interest Period for such Loans unless the Borrower pays all
              applicable breakage costs pursuant to Section 5.05 at the time of
              such prepayment.

       (b)    Simultaneously with any optional prepayment, in whole or in part,
              of the principal of any Loans pursuant to the foregoing clause (a)
              (other than any prepayment made pursuant to the final sentence of
              Section 5.07(a)) or any mandatory prepayment pursuant to Sections
              3.04(b) or 3.04(c), the Borrower agrees to pay to the
              Administrative Agent for the account of each Lender a prepayment
              commission in respect of each such prepayment in an amount equal
              to that percentage of the principal amount of the Loans so prepaid


              set forth below opposite the period in which such prepayment
              occurs:

         Period in Which Prepayment is Made               Prepayment Commission
         ----------------------------------               ---------------------

         From and including the second anniversary              2.00%
           of the Closing Date through and including the
           day prior to the third anniversary of the
           Closing Date

         From and including the third anniversary               1.00%
           of the Closing Date through and including the
           day prior to the fourth anniversary of the
           Closing Date

         From and including the fourth anniversary              0.00%
           of the Closing Date through and including the
           Final Maturity Date

3.04   MANDATORY PREPAYMENTS; ETC. The Borrower shall make the following
       mandatory payments in the amounts and at the times set out below, in each

       case, except as otherwise provided in Section 3.03(b), without any
       commission, premium or penalty:



                                      -13-


       (a)    Event of Loss.

              (i)    If a Project is declared a Total Loss by its insurers, then
                     on the later of the date of actual receipt of Loss Proceeds
                     with respect thereto and the date of such declaration; and

              (ii)   not later than the date specified for prepayment in
                     accordance with Section 8.05(d) with respect to: (A) any
                     Event of Loss (or upon such earlier date as the Borrower
                     shall have determined not to Restore the related Affected
                     Property); or (B) any period during which any of the
                     conditions of the Restoration under Section 8.05(d) shall
                     have ceased to be satisfied,

              in each case, the Borrower shall prepay the Loans in an amount
              equal to 100% of the Loss Proceeds with respect to such Event of
              Loss (less the amount expended on the Restoration of the related
              Affected Property as permitted by, and as expended in accordance
              with, Section 8.05(d)).

              Nothing in this paragraph (a) shall be deemed to limit any
              obligation of the Borrower to deposit (or cause to be deposited)
              in the Restoration Sub-Account the Loss Proceeds in respect of any
              Event of Loss.

       (b)    Project Documents. If any Project Document at any time is amended
              or terminated by any party thereto and in a manner that could
              reasonably be expected to result in a Material Adverse Effect and
              generate a current cash payment to the Borrower, then the Borrower
              shall, promptly upon receipt of such payment, prepay the Loans in
              an amount equal to the proceeds of such payment.

       (c)    Certain Asset Sales. If the Borrower at any time shall transfer,
              assign, sell or otherwise dispose of any material asset or
              Property pertaining to any Project, other than in accordance with
              Section 8.12 hereof, then the Borrower shall, promptly upon
              receipt of the proceeds of any payment relating to such
              transaction, prepay the Loans in an amount equal to the proceeds
              of such payment.



       (d)    Cash Sweeps. If, as of any Quarterly Date, the Borrower shall fail
              to comply with Section 8.13(iii) hereof, the Borrower shall, at
              its sole option as provided in Section 4.1(e) of the Depositary
              Agreement, prepay the Loans in the amounts set out in, and
              otherwise in accordance with, such Section 4.1(e).

3.05   Prepayment Mechanics. All prepayments described in Sections 3.03 and 3.04
       (other than any prepayment made pursuant to the final sentence of Section
       5.07(a) which prepayment shall be applied in accordance with such Section
       5.07(a)) shall be applied to the Initial Term Loans and the Additional
       Term Loans pro rata, and in the inverse order of the maturities of the

       installments of the Loans then outstanding. Amounts prepaid may


                                      -14-


       not be reborrowed. Any prepayment made or required to be made pursuant to
       Sections 3.03 or 3.04 shall be made together with all accrued but unpaid
       interest thereon and all other amounts (including, without limitation,
       any amounts due pursuant to Article V) then due from the Borrower
       hereunder.

                                   ARTICLE IV

                PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.

4.01   PAYMENTS.

       (a)    General. Except to the extent otherwise provided herein, all
              payments of principal, interest and other amounts to be made by
              the Borrower under this Agreement and the Notes and, except to the
              extent otherwise provided therein, all payments to be made by the
              Borrower under any other Financing Document, shall be made in
              Dollars, in immediately available funds, without deduction,
              set-off or counterclaim, to the Administrative Agent at its
              Principal Office, or to such account as the Administrative Agent
              may specify in writing to the Borrower, not later than 1:00 p.m.,
              New York time, on the date on which such payment shall become due
              (each such payment made after such time on such due date to be
              deemed to have been made on the next succeeding Business Day).

       (b)    Application of Payments. The Borrower shall, at the time of making
              each payment under this Agreement or any Note for the account of
              any Lender, specify to the Administrative Agent (which shall so
              notify the intended recipient(s) thereof) the Loans or other
              amounts owing by the Borrower hereunder to which such payment is
              to be applied. In the event that the Borrower fails to so specify,
              or if an Event of Default has occurred and is continuing, the
              Administrative Agent may distribute such payment to the Lenders
              for application in such manner as the Administrative Agent or the
              Majority Lenders, subject to Section 4.02, may reasonably
              determine to be appropriate.

       (c)    Forwarding of Payments by Administrative Agent. Each payment
              received by the Administrative Agent under this Agreement or any
              Note for the account of any Lender or the Collateral Agent or the
              Depositary Bank shall be paid by the Administrative Agent promptly
              to such Person, in immediately available funds, for the account of
              such Lender's Applicable Lending Office for the Loan or other
              obligation in respect of which such payment is made or for the
              account of the Collateral Agent or the Depositary Bank, as
              applicable.

       (d)    Extensions to Next Business Day. If the due date of any payment
              under this Agreement or any Note would otherwise fall on a day
              that is not a Business Day, such date shall instead be extended to
              the first Business Day thereafter, and interest shall be payable
              for any principal so extended for the period of such


                                      -15-

              extension, unless such Business Day shall fall in a subsequent
              calendar month, in which case such payment shall be due on the
              immediately preceding Business Day.




                                      -16-


4.02   PRO RATA TREATMENT. Except to the extent otherwise provided herein:

       (a)    each borrowing of Loans from the Lenders under Section 2.01 shall
              be made from the relevant Lenders, each payment of commitment fees
              under Section 2.04 in respect of Commitments shall be made for the
              account of the relevant Lenders, and each termination or reduction
              of the amount of the Commitments under Section 2.03 shall be
              applied to the respective Commitments, pro rata according to the
              amounts of their respective Commitments;

       (b)    the making of Loans shall be made pro rata among the relevant
              Lenders according to the amounts of their respective Commitments;

       (c)    except to the extent indicated in Section 4.07(b) and except for
              prepayments made pursuant to the final sentence of Section
              5.07(a), each payment or prepayment of principal of Loans by the
              Borrower shall be made for the account of the relevant Lenders pro
              rata in accordance with the respective unpaid principal amounts of
              the Loans held by them; provided that if immediately prior to
              giving effect to any such payment in respect of any Loan the
              outstanding principal amount of the Loans shall not be held by the
              Lenders pro rata in accordance with their respective Commitments
              in effect at the time such Loans were made (by reason of a failure
              of a Lender to make a Loan hereunder in the circumstances
              described in the penultimate paragraph of Section 11.04), then
              such payment shall be applied to the Loans in such manner as shall
              result, as nearly as is practicable, in the outstanding principal
              amount of the Loans being held by the Lenders pro rata in
              accordance with their respective Commitments; and



       (d)    each payment of interest on Loans by the Borrower shall be made
              for the account of the relevant Lenders pro rata in accordance
              with the amounts of interest on such Loans then due and payable to
              the respective Lenders.

4.03   COMPUTATIONS. Interest on Eurodollar Loans and on other obligations of
       the Borrower or the Lenders that are computed on the basis of the Federal
       Funds Rate shall be computed on the basis of a year of 360 days and
       actual days elapsed (including the first day but excluding the last day)
       occurring in the period for which payable. Interest on Prime Rate Loans,
       on other obligations of the Borrower or the Lenders that are computed on
       the basis of the Prime Rate and commitment fees payable in accordance
       with Section 2.04 shall be computed on the basis of a year of 365 or 366
       days, as the case may be, and actual days elapsed (including the first
       day but excluding the last day) occurring in the period for which
       payable.

4.04   MINIMUM AMOUNTS. Except for mandatory prepayments pursuant to Section
       3.04 and the borrowing of Additional Term Loans, each borrowing and
       partial prepayment of principal of Loans shall be in an amount at least
       equal to $500,000 and in multiples of $100,000 in excess thereof.
       Borrowings or prepayments of Loans of different Types or, in the case of

       Eurodollar Loans, having different Interest Periods, at the same time


                                      -17-


       hereunder shall be deemed separate borrowings and prepayments for
       purposes of the foregoing, one for each Type or Interest Period.

4.05   NOTICES.

       (a)    Certain Notices.

              (i)    Notices by the Borrower to the Administrative Agent (and,
                     as applicable, the Collateral Agent) of optional
                     terminations or reductions of the Commitments, borrowings
                     of Loans, optional prepayments of Loans, Continuations of
                     Eurodollar Loans and Conversions of Loans shall be
                     irrevocable and shall be effective only if received by the
                     Administrative Agent (and, as applicable, the Collateral
                     Agent) not later than 11:00 a.m., New York time, on the
                     number of Business Days prior to the date of the relevant
                     termination, reduction, borrowing, prepayment, Continuation
                     or Conversion or the first day of such Interest Period


                     specified below:



                                                                             Number of
                                                                           Business Days
                                  Notice                                      Prior
      ----------------------------------------------------------------     -------------

      Optional termination or reduction of the Commitments; optional            5
      prepayment of Loans

      Borrowing of, Continuation of, or Conversion into Eurodollar Loans        3


      Borrowing of or Conversion into, Prime Rate Loans                         1


              (ii)   Each such notice of optional termination or reduction of
                     Commitments shall specify the amount of such Commitments to
                     be terminated or reduced.

              (iii)  Each such notice of borrowing, Conversion, Continuation or
                     optional prepayment shall specify the Class and Type of
                     Loans to be borrowed, Converted, Continued or prepaid, the
                     amount (subject to Section 4.04) of each Loan to be
                     borrowed, Converted, Continued or prepaid, and the date of
                     borrowing, Conversion, Continuation or optional prepayment
                     (which shall be a Business Day).

              (iv)   Each such notice of Conversion shall contain a
                     certification of an Authorized Officer of the Borrower that
                     the requirements of




                                      -18-


                     Section 2.01(c) have been satisfied with respect to such
                     Conversion.

              (v)    The Administrative Agent shall promptly notify the Lenders
                     of the contents of each such notice. In the event that the
                     Borrower fails to select the Type of Loan, within the time
                     period and otherwise as provided in this Section 4.05, such
                     Loan will be made or Continued, as applicable, as a
                     Eurodollar Loan having an Interest Period of three months.

4.06   NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT(a). Unless the
       Administrative Agent shall have been notified by the Borrower prior to
       the date on which the Borrower is to make payment to the Administrative
       Agent for the account of one or more of the Lenders hereunder (each such
       payment being herein called the "REQUIRED PAYMENT"), which notice shall
       be effective upon receipt, that the Borrower does not intend to make the
       Required Payment to the Administrative Agent, the Administrative Agent
       may assume that the Required Payment has been made and may, in reliance
       upon such assumption (but shall not be required to), make the amount
       thereof available to the intended recipient(s) on such date. If the
       Borrower has not in fact made the Required Payment to the Administrative
       Agent, the recipient(s) of such payment shall, on demand, repay to the
       Administrative Agent the amount made available by the Administrative
       Agent pursuant to the previous sentence, together with interest thereon
       in respect of each day during the period commencing on the date (the
       "ADVANCE DATE") such amount was so made available by the Administrative
       Agent until the date the Administrative Agent recovers such amount at a
       rate per annum equal to the Federal Funds Rate for such day.

4.07   SHARING OF PAYMENTS; ETC.

       (a)    Right of Set-Off. The Borrower agrees that, in addition to (and
              without limitation of) any right of set-off, banker's lien or
              counterclaim a Lender may otherwise have, each Lender shall be
              entitled, at its option, to offset balances held by it for the
              account of the Borrower at any of its offices, in Dollars or in
              any other currency, against any principal of or interest on any of
              such Lender's Loans, or any other amount payable to such Lender
              hereunder, that is not paid when due (regardless of whether such
              balances are then due to the Borrower), in which case it shall
              promptly notify the Borrower and the Administrative Agent thereof;
              provided that such Lender's failure to give such notice shall not
              affect the validity thereof.

       (b)    Sharing. If any Lender shall obtain from the Borrower payment of
              any principal of or interest on any Loan owing to it or payment of
              any other amount under this Agreement or any Note held by it or
              any other Financing Document through the exercise of any right of
              set-off, banker's lien or counterclaim or similar right or
              otherwise (other than: (i) from the Administrative Agent as
              provided herein; or (ii) in connection with any reimbursement or

              indemnification under Section 11.03


                                      -19-


              or any similar provision of any other Financing Document to which
              less than all of the Lenders are entitled under the terms hereof
              or thereof, as the case may be; or (iii) in connection with any
              assignment or participation pursuant to Section 11.06 or any
              replacement of any Lender pursuant to Article V) and, as a result
              of such payment, such Lender shall have received a greater
              percentage of the principal of or interest on the Loans or such
              other amounts then due hereunder or thereunder to such Lender than
              the percentage received by any other Lender(s) who were also
              entitled to receive such payments, it shall promptly purchase from
              such other Lenders participations in (or, if and to the extent
              specified by such Lender, direct interests in) the Loans or such
              other amounts, respectively, owing to such other Lenders (or in
              interest due thereon, as the case may be) in such amounts, and
              make such other adjustments from time to time as shall be
              equitable, to the end that all the Lenders shall share the benefit
              of such excess payment (net of any expenses that may be incurred
              by such Lender in obtaining or preserving such excess payment) pro
              rata in accordance with the unpaid principal of and/or interest on
              the Loans or such other amounts, respectively, owing to each of
              the Lenders; provided that if at the time of such payment, the
              outstanding principal amount of the Loans shall not be held by the
              Lenders pro rata in accordance with their respective Commitments
              in effect at the time such Loans were made (by reason of a failure
              of a Lender to make a Loan hereunder in the circumstances
              described in the penultimate paragraph of Section 11.04), then
              such purchases of participations and/or direct interests shall be
              made in such manner as will result, as nearly as is practicable,
              in the outstanding principal amount of the Loans being held by the
              Lenders pro rata according to the amounts of such Commitments. To
              such end all the Lenders shall make appropriate adjustments among
              themselves (by the resale of participations sold or otherwise) if
              such payment is rescinded or must otherwise be restored.

       (c)    Consent by the Borrower. The Borrower agrees that any Lender so
              purchasing such a participation (or direct interest) may exercise
              all rights of set-off, banker's liens, counterclaims or similar
              rights with respect to such participation as fully as if such
              Lender were a direct holder of Loans or other amounts (as the case
              may be) owing to such Lender in the amount of such participation.

       (d)    Rights of Lenders; Bankruptcy. Nothing contained in this Section
              4.07 shall require any Lender to exercise any such right or shall
              affect the right of any Lender to exercise, and retain the
              benefits of exercising, any such right with respect to any other
              indebtedness or obligation of the Borrower. If, under any
              applicable bankruptcy, insolvency or other similar law, any Lender
              receives a secured claim in lieu of a set-off to which this
              Section 4.07 applies, such Lender shall, to the extent
              practicable, exercise its rights in respect of such secured claim
              in a manner consistent with the rights of the Lenders entitled
              under this Section 4.07 to share in the benefits of any recovery
              on such secured claim.


                                      -20-


                                   ARTICLE V

                             YIELD PROTECTION; ETC.

5.01   ADDITIONAL COSTS.

       (a)    Costs of Making or Maintaining Eurodollar Loans. The Borrower
              shall pay directly to each Lender from time to time such amounts
              as such Lender may determine to be necessary to compensate it for
              any costs that such Lender determines are attributable to its
              making or maintaining of any Eurodollar Loans or its obligation to
              make any Eurodollar Loans hereunder, or any reduction in any
              amount receivable by such Lender hereunder in respect of any of
              such Loans or such obligation (such increases in costs and
              reductions in amounts receivable being herein called "ADDITIONAL
              COSTS"), resulting from any Regulatory Change that:

              (i)    shall subject any Lender (or its Applicable Lending Office
                     for any of such Loans) to any tax, duty or other charge in
                     respect of such Loans or changes the basis of taxation of
                     any amounts payable to such Lender under this Agreement or
                     the Notes in respect of such Loans (other than taxes
                     imposed on or measured by the overall net income of such
                     Lender or of its Applicable Lending Office for such Loans
                     by the jurisdiction in which such Lender has its principal
                     office or such Applicable Lending Office);

              (ii)   imposes or modifies any reserve, special deposit or similar
                     requirements (other than the Reserve Requirement utilized
                     in the determination of the Eurodollar Rate for any
                     Interest Period for such Loan) relating to any extensions
                     of credit or other assets of, or any deposits with or other
                     liabilities of, such Lender (including any of such Loans or
                     any deposits referred to in the definition of "Eurodollar
                     Base Rate"), or any Commitment of such Lender to make any
                     such Loans hereunder; or

              (iii)  imposes any other condition affecting this Agreement or the
                     Notes (or any of such extensions of credit or liabilities)
                     or its Commitments.

              If any Lender requests compensation from the Borrower under this
              paragraph (a), the Borrower may, by notice to such Lender (with a
              copy to the Administrative Agent), suspend the obligation of such
              Lender to make or Continue Eurodollar Loans or to Convert Prime
              Rate Loans into Eurodollar Loans, until the Regulatory Change
              giving rise to such request ceases to be in effect (in which case
              the


                                      -21-


              provisions of Section 5.04 shall apply); provided that such
              suspension shall not affect the right of such Lender to receive
              the compensation so requested.

       (b)    Election by Lender to Suspend Obligations. Without limiting the
              effect of the provisions of paragraph (a) above, in the event
              that, by reason of any Regulatory Change, any Lender either:

              (i)    incurs Additional Costs based on or measured by the excess
                     above a specified level of the amount of a category of
                     deposits or other liabilities of such Lender that includes
                     deposits by reference to which the interest rate on
                     Eurodollar Loans is determined as provided in this
                     Agreement or a category of extensions of credit or other
                     assets of such Lender that includes Eurodollar Loans; or

              (ii)   becomes subject to restrictions on the amount of such a
                     category of liabilities or assets that it may hold,

              then, if such Lender so elects by notice to the Borrower (with a
              copy to the Administrative Agent), the obligation of such Lender
              to make or Continue, or Convert Prime Rate Loans into, Eurodollar
              Loans hereunder shall be suspended until such Regulatory Change
              ceases to be in effect (in which case the provisions of Section
              5.04 shall apply).

       (c)    Capital Costs. Without limiting the effect of the foregoing
              provisions of this Section 5.01 (but without duplication), the
              Borrower shall pay directly to each Lender from time to time on
              request such amounts as such Lender may determine to be necessary
              to compensate such Lender (or, without duplication, the parent
              company of such Lender) for any costs that it determines are
              attributable to the maintenance by such Lender (or any Applicable
              Lending Office or such parent company) of capital in respect of
              its Commitments or Loans, pursuant to any law or regulation or any
              interpretation, directive or request (whether or not having the
              force of law) of any court, Government Authority or monetary
              authority:

              (i)    following any Regulatory Change; or

              (ii)   implementing any risk-based capital guideline or other
                     requirement (whether or not having the force of law and
                     whether or not the failure to comply therewith would be
                     unlawful) heretofore issued but not implemented, or
                     hereafter issued, by any Government Authority or
                     supervisory authority implementing at the national level
                     the Basle Accord (including the Final Risk-Based Capital
                     Guidelines of the Board of Governors of the Federal Reserve
                     System (12 C.F.R. Part 208, Appendix A; 12 C.F.R. Part 225,
                     Appendix A) and the Final Risk-Based Capital Guidelines of
                     the


                                      -22-


                     Office of the Comptroller of the Currency (12 C.F.R. Part
                     3, Appendix A)).

              Such compensation shall include an amount equal to any reduction
              of the rate of return on assets or equity of such Lender (or any
              Applicable Lending Office or such parent company) to a level below
              that which such Lender (or any Applicable Lending Office or such
              parent company) could have achieved but for such law, regulation,
              interpretation, directive or request.

       (d)    Notification and Certification. Each Lender shall notify the
              Borrower of any event occurring after the date of this Agreement
              that will entitle such Lender to compensation under paragraph (a)
              or (c) above as promptly as practicable after such Lender obtains
              actual knowledge thereof. Each Lender will furnish to the Borrower
              a certificate setting out in reasonable detail the basis and
              amount of each request by such Lender for compensation under
              paragraph (a) or (c) above. Determinations and allocations by any
              Lender, for purposes of this Section 5.01, of the effect of any
              Regulatory Change pursuant to paragraph (a) or (b) above, or of
              the effect of capital maintained pursuant to paragraph (c) above,
              on its costs or rate of return of maintaining Loans or its
              obligation to make Loans, or on amounts receivable by it in
              respect of Loans, and of the amounts required to compensate such
              Lender under this Section 5.01, shall be conclusive absent
              manifest error.



       (e)    Delay in Requests. Failure or delay on the part of any Lender to
              demand compensation pursuant to this Section 5.01 shall not
              constitute a waiver of such Lender's right to demand such
              compensation; provided that the Borrower shall not be required to
              compensate a Lender pursuant to this Section 5.01 for any
              increased costs or reductions incurred more than 60 days prior to
              the date that such Lender notifies the Borrower of the Regulatory
              Change giving rise to such increased costs or reductions and of
              such Lender's intention to claim compensation therefor; provided,
              further, that, if the Regulatory Change giving rise to such
              increased costs or reductions is retroactive, then the 60-day
              period referred to above shall be extended to include the period
              of retroactive effect thereof.

5.02   LIMITATION ON EURODOLLAR LOANS. Anything herein to the contrary
       notwithstanding, if, on or prior to the determination of any Eurodollar
       Base Rate for any Interest Period:

       (a)    the Administrative Agent determines, which determination shall be
              conclusive absent manifest error, that quotations of interest
              rates for the relevant deposits referred to in the definition of
              "Eurodollar Base Rate" are not being provided in the relevant
              amounts or for the relevant maturities for purposes of determining
              rates of interest for Eurodollar Loans as provided herein; or

       (b)    the Majority Lenders determine, which determination shall be
              conclusive absent manifest error, and notify the Administrative

              Agent that the relevant rates of





                                      -23-


              interest referred to in the definition of "Eurodollar Base Rate",
              upon the basis of which the rate of interest for Eurodollar Loans
              for such Interest Period is to be determined, are not likely to
              adequately cover the cost to such Lenders of making or maintaining
              such Eurodollar Loans for such Interest Period,

       then the Administrative Agent shall give the Borrower and each Lender
       prompt notice thereof, and so long as such condition remains in effect,
       the obligation of the Lenders to make additional Eurodollar Loans,
       Continue existing Eurodollar Loans or Convert Prime Rate Loans into
       Eurodollar Loans shall be suspended, in which case the provisions of
       Section 5.04 shall be applicable.

5.03   ILLEGALITY. Notwithstanding any other provision of this Agreement, in the
       event that it becomes unlawful or any central bank or other Government
       Authority asserts that it is unlawful for any Lender or its Applicable
       Lending Office to honor its obligation to make or maintain Eurodollar
       Loans hereunder, and, in the opinion of such Lender (as stated in
       writing), the designation of a different Applicable Lending Office would
       either not avoid such unlawfulness or would be disadvantageous to such
       Lender, then such Lender shall promptly notify the Borrower thereof in
       writing (with a copy to the Administrative Agent) and such Lender's
       obligation to make or Continue, or to Convert Prime Rate Loans into,
       Eurodollar Loans shall be suspended until such time as such Lender may
       again make and maintain Eurodollar Loans (in which case the provisions of
       Section 5.04 shall be applicable).

5.04   TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to make or
       Continue, or to Convert Prime Rate Loans into, Eurodollar Loans shall be
       suspended pursuant to Section 5.01, 5.02 or 5.03 (the "AFFECTED LOANS"),
       such Lender's Affected Loans shall be automatically Converted into Prime
       Rate Loans on the last day(s) of the then-current Interest Period(s) for
       the Affected Loans (or, in the case of a Conversion required by Section
       5.01(b) or 5.03, on such earlier date as such Lender may certify to the
       Borrower with a copy to the Administrative Agent as being the last
       permissible date for such Conversion under, or by reason of, the relevant
       Regulatory Change or circumstances described under Section 5.03, such
       certification to be conclusive absent manifest error) and, unless and
       until such Lender gives notice as provided below that the circumstances
       specified in Section 5.01, 5.02 or 5.03 which gave rise to such
       Conversion no longer exist:

       (a)    to the extent that such Lender's Affected Loans have been so
              Converted, all payments and prepayments of principal that would
              otherwise be applied to such Lender's Eurodollar Loans shall be
              applied instead to its Prime Rate Loans; and

       (b)    all Loans that would otherwise be made by such Lender as
              Eurodollar Loans shall be made instead as Prime Rate Loans.

       If such Lender gives notice to the Borrower with a copy to the
       Administrative Agent that the circumstances specified in Section 5.01,

       5.02 or 5.03 that gave rise to the Conversion




                                      -24-


       of such Lender's Eurodollar Loans of any Class pursuant to this Section
       5.04 no longer exist (which such Lender agrees to do promptly upon such
       circumstances ceasing to exist): (i) at a time when Eurodollar Loans made
       by other Lenders are outstanding, each of such Lender's Prime Rate Loans
       shall be automatically Converted to Eurodollar Loans, on the first day of
       the next succeeding Interest Period for, and having the same Interest
       Period as, such outstanding Eurodollar Loans and to the extent necessary
       so that, after giving effect thereto, all Prime Rate Loans and Eurodollar
       Loans are allocated among the Lenders ratably (as to principal amounts,
       Types and Interest Periods) as nearly as possible in accordance with
       their respective Commitments; and (ii) at any other time, the Borrower
       may thereafter provide to the Administrative Agent a notice of
       Conversion, in accordance with Section 4.05, of such Lender's Prime Rate
       Loans to Eurodollar Loans.

5.05   COMPENSATION. The Borrower shall pay to the Administrative Agent for the
       account of each Lender, upon the request of such Lender through the
       Administrative Agent, such amount or amounts as shall be sufficient (in
       the reasonable opinion of such Lender) to compensate such Lender for any
       loss, cost or expense that such Lender reasonably determines is
       attributable to:

       (a)    any payment, prepayment or Conversion of a Eurodollar Loan made by
              such Lender for any reason (including the acceleration of the
              Loans pursuant to Section 9.02) on a date other than the last day
              of an Interest Period for such Loan; or

       (b)    any failure by the Borrower for any reason (including the failure
              of any of the conditions precedent specified in Article VI to be
              satisfied) to borrow a Eurodollar Loan from such Lender on the
              date for such borrowing specified in the relevant Notice of
              Borrowing given pursuant to Section 2.02.

       Without limiting the effect of the preceding sentence, such compensation
       shall include an amount equal to the excess, if any, of: (i) the amount
       of interest that otherwise would have accrued on the principal amount so
       paid, prepaid, Converted or not borrowed for the period from the date of
       such payment, prepayment, Conversion or failure to borrow to the last day
       of the then-current Interest Period for such Loan (or, in the case of a
       failure to borrow, the Interest Period for such Loan which would have
       commenced on the date specified for such borrowing) at the applicable
       rate of interest for such Loan provided for herein; over (ii) the amount
       of interest that otherwise would have accrued on such principal amount at
       a rate per annum equal to the interest component of the amount such
       Lender would have bid in the London interbank market for Dollar deposits
       of the Reference Banks in amounts comparable to such principal amount and
       with maturities comparable to such period (as reasonably determined by
       such Lender).

5.06   TAXES.

       (a)    General. All payments to be made hereunder and under the Notes and
              any other Financing Document by the Borrower shall be made free

              and clear of and without


                                      -25-


              deduction for or on account of, any Taxes (other than Taxes
              imposed on either Agent or any Lender by the jurisdiction in which
              such Person is organized or has its principal office or, in the
              case of any Lender, by the jurisdiction in which its Applicable
              Lending Office is organized or located or, in each case, any
              political subdivision or taxing authority thereof or therein or
              otherwise imposed by any taxing authority upon, or measured by,
              income or assets as a result of the organization or location of
              such Lender in such taxing authority's jurisdiction (unless such
              organization or location is attributable to the execution of, or
              the exercise of any rights or remedies under or in connection
              with, the Transaction Documents)) (such Taxes being herein
              referred to as the "APPLICABLE TAXES").

              If any Applicable Taxes are imposed and required to be withheld
              from any amount payable by the Borrower hereunder or under the
              Notes or any other Financing Document, the Borrower shall (subject
              to the second sentence of Section 5.06(c)) be obligated to: (i)
              pay such additional amount so that the Agents and the Lenders, as
              applicable, shall receive a net amount (after giving effect to the
              payment of such additional amount and to the deduction of all
              Applicable Taxes) equal to the amount due hereunder; (ii) pay such
              Applicable Taxes to the appropriate taxing authority for the
              account of the Administrative Agent, for the benefit of the Agents
              and the Lenders, as applicable; and (iii) as promptly as possible
              thereafter, send to the Administrative Agent a certified copy of
              any original official receipt showing payment thereof, together
              with such additional documentary evidence as the Administrative
              Agent or such other Agent or Lender (as applicable) may from time
              to time reasonably require.

              If the Borrower fails to pay any Applicable Taxes when due to the
              appropriate taxing authority or fails to remit to the
              Administrative Agent the required receipts or other required
              documentary evidence, the Borrower shall be obligated to indemnify
              each Agent and each Lender for any incremental Taxes, as well as
              interest and penalties that may become payable by such Agent or
              such Lender as a result of such failure. The obligations of the
              Borrower under this Section 5.06(a) shall survive the termination
              of the Commitments and the repayment of the Loans.

       (b)    Evidence of Payment. Within 30 days after paying any amount to
              either Agent or any Lender from which it is required by law to
              make any deduction or withholding, and within 30 days after it is
              required by law to remit such deduction or withholding to any
              relevant taxing or other authority, the Borrower shall deliver to
              the Administrative Agent, for delivery to such Person, evidence
              reasonably satisfactory to such Person of such deduction,
              withholding or payment (as the case may be).

       (c)    Foreign Lenders. Any Foreign Lender that is entitled to an
              exemption from or reduction of withholding tax under the law of
              the jurisdiction in which the Borrower is located, or any treaty
              to which such jurisdiction is a party, with


                                      -26-


              respect to payments by the Borrower under this Agreement, the
              Notes or any other Financing Document shall deliver to the
              Borrower (with a copy to the Administrative Agent), at the time or
              times reasonably requested by the Borrower, such properly
              completed and executed documentation prescribed by applicable law
              as will permit such payments to be made without withholding or at
              a reduced rate. For any period during which a Foreign Lender has
              failed to provide the Borrower with the appropriate documentation
              as required by the preceding sentence, the Borrower shall not be
              obligated to pay, and such Foreign Lender shall not be entitled to
              receive, additional amounts under Section 5.06(a) with respect to
              Applicable Taxes imposed by the United States to the extent that
              such additional amounts would not have arisen but for such failure
              of such Foreign Lender. If a Foreign Lender that is otherwise
              exempt from or subject to a reduced rate of withholding tax
              becomes subject to Applicable Taxes, or a higher amount thereof,
              because of its failure to deliver documentation described in the
              first sentence of this paragraph (c), the Borrower shall take such
              steps as such Foreign Lender shall reasonably request to assist
              such Foreign Lender to recover such Applicable Taxes.

       (d)    Tax Refunds. If an Agent or a Lender receives a refund of, or in
              respect of, any Applicable Taxes with respect to which the
              Borrower has paid additional amounts pursuant to Section 5.06(a)
              and (i) either: (A) such refund (as received by such Agent or such
              Lender) is specifically referable to such Applicable Taxes; or (B)
              such Agent or such Lender determines (in its sole discretion) that
              such refund is in respect of, such Applicable Taxes; and (ii) such
              Agent's or such Lender's (as applicable) tax affairs for its tax
              year in respect of which such refund was obtained have been
              finally settled, then in each case such Agent or such Lender
              shall, to the extent it can do so without prejudice to the
              retention of such refund, pay to the Borrower an amount equal to
              such refund (but only to the extent of additional amounts paid by
              the Borrower under Section 5.06(a) with respect to the Applicable
              Taxes giving rise to such refund), net of all out-of-pocket
              expenses and Taxes incurred by such Agent or such Lender with
              respect thereto and without interest (other than any interest paid
              by the relevant Government Authority with respect to such refund).
              Any such payment by any Agent or any Lender shall be applied
              toward payments of amounts then owed by the Borrower under this
              Agreement if, at the time of such payment, an Event of Default has
              occurred and is continuing.

              The Borrower shall indemnify each Agent and each Lender on an
              after-tax basis for any Taxes that are imposed on such Person as a
              result of the disallowance, unavailability, recapture or reduction
              of any such refund, as to which such Person has already made
              payment in full to the Borrower as required by this paragraph (d).
              Nothing herein shall oblige any Agent or any Lender to disclose
              any of the tax returns, books or other records of such Person, nor
              shall anything herein interfere with the right of any Agent or any
              Lender to arrange its tax and


                                      -27-


              commercial affairs and its dealings with its various customers in
              whatever manner it thinks fit. In particular, no Agent or Lender
              shall be under any obligation to claim credit, relief, remission
              or repayment from or against its corporate profits or similar tax
              liability in respect of the amount of any Tax, deduction or
              withholding as aforesaid in priority to any other claims, reliefs,
              credits or deductions available to it or that it determines in its
              sole discretion to be inadvisable.

5.07   MITIGATION OBLIGATIONS; PREPAYMENTS; REPLACEMENT OF LENDERS.

       (a)    Designation of a Different Lending Office; Prepayments. If any
              Lender requests compensation under Section 5.01 or 5.06, or if the
              Borrower is required to pay any additional amount to any Lender or
              any Government Authority for the account of any Lender pursuant to
              Section 5.06, then such Lender shall use reasonable efforts
              (consistent with its internal policy and legal and regulatory
              restrictions) to designate a different Applicable Lending Office
              for the Loans of such Lender affected by such event or to assign
              its rights and obligations therein to another of its offices,
              branches or Affiliates, if, in the sole opinion of such Lender,
              such designation or assignment: (i) would eliminate or reduce
              amounts payable pursuant to Section 5.01 or 5.06, as the case may
              be, in the future; and (ii) would not be disadvantageous to such
              Lender; provided that such Lender shall have no obligation to
              designate an Applicable Lending Office located in the United
              States if such Lender's Applicable Lending Office is not then
              located in the United States. The Borrower shall pay all
              reasonable costs and expenses incurred by any Lender in connection
              with any such designation or assignment. In the event any such
              Lender requesting compensation is unable or, for any reason,
              declines to so designate a different Applicable Lending Office of
              its Loans, the Borrower shall have the right to prepay such Lender
              in whole or in part pursuant to the terms of Section 3.03(a) and
              Section 3.05, and such prepayment shall be exclusive of the
              prepayment commission described in Section 3.03(b).

       (b)    Replacement of Lenders. If any Lender requests compensation under
              Section 5.01 or 5.06, or if the Borrower is required to pay any
              additional amount to any Lender or any Government Authority for
              the account of any Lender pursuant to Section 5.06, or if any
              Lender exercises its rights under Section 5.03, then the Borrower
              may, at its sole expense and effort, upon notice to such Lender
              and the Administrative Agent, require such Lender to assign and
              delegate (in accordance with and subject to the restrictions
              contained in Section 11.06), without recourse and without
              compensation or payment of any type other than amounts referred to
              in clause (i) below, all its interests, rights and obligations
              under this Agreement to an assignee that shall assume such
              obligations (which assignee may be another Lender, if a Lender
              accepts such assignment); provided that: (i) such Lender shall
              have received payment of an amount equal to the outstanding
              principal of its Loans, accrued interest thereon, accrued fees and
              all other amounts payable to it hereunder, from the assignee (to
              the extent of such outstanding principal and accrued interest and
              fees) or the Borrower (in the case


                                      -28-


              of all other amounts); and (ii) such assignment will: (A) result
              in a reduction in such compensation or payments; or (B) effect the
              availability of Eurodollar Loans, as applicable. A Lender shall
              not be required to make any such assignment and delegation if,
              prior thereto, as a result of a waiver by such Lender or
              otherwise, the circumstances entitling the Borrower to require
              such assignment and delegation cease to apply.





                                      -29-


                                   ARTICLE VI

                              CONDITIONS PRECEDENT

6.01   INITIAL TERM LOANS. The obligation of any Lender to make its Initial Loan
       Term Loan hereunder is subject to the receipt by the Administrative Agent
       of each of the documents and the satisfaction of the conditions precedent
       set out in this Section 6.01, each of which shall be satisfactory to the
       Lenders in form, scope and substance.

       (a)    Certain Financing Documents. Each of the following Financing

              Documents, each such document to be duly executed and delivered by
              each of the intended parties thereto:

              (i)    this Agreement;

              (ii)   each of the Initial Term Loan Notes; and

              (iii)  the Consent and Agreement of each of the Operator and
                     Imperial Irrigation District relating to the Project
                     Documents to which such Project Party is a party or by
                     which it is otherwise bound, except as otherwise agreed in
                     writing by the Administrative Agent on or prior to the
                     Closing Date.

       (b)    Security Documents. Each of the following Security Documents, each
              such document to be duly executed and delivered by each of the
              intended parties thereto:

              (i)    the Borrower Security Agreement;

              (ii)   the Borrower Equity Interest Pledge;

              (iii)  the Deed of Trust; and

              (iv)   the Depositary Agreement.

       (c)    Project Documents. A copy (which, in the case of the Project
              Documents referred to in clauses (v), (viii), (ix) and (x) below,
              may be in electronic, CD-ROM format), certified by an Authorized
              Officer of the Borrower to be true, correct and complete, of each
              of the following Project Documents, each such document to be duly
              executed and delivered by each of the intended parties thereto:

              (i)    each PPA;

              (ii)   each Plant Connection Agreement;



                                      -30-


              (iii)  the O&M Contract;

              (iv)   each Transmission Services Agreement;

              (v)    each Real Property Document;

              (vi)   the Water Supply Agreement;

              (vii)  the Energy Services Agreement;

              (viii) each Acquisition Document;

              (ix)   each Restructuring Document;

              (x)    each Merger Document;

              (xi)   the Funding and Construction Agreement; and

              (xii)  the Unit Agreement.

       (d)    Limited Liability Company Documents. A certificate of the
              Secretary or Assistant Secretary of the Borrower or of its
              managing member, dated as of the Closing Date, certifying: (A)
              that attached thereto is a true, correct and complete copy of the
              Charter Documents (including the LLC Agreement) of the Borrower as
              in effect on the date of such certificate; (B) that attached
              thereto is a true, correct and complete copy of resolutions duly
              adopted by the managers or member of the Borrower, authorizing the
              execution, delivery and performance of the Financing Documents to
              which the Borrower is or is intended to be a party, and that such
              resolutions have not been modified, rescinded or amended and are
              in full force and effect; and (C) as to the incumbency and
              specimen signature of each officer of the Borrower executing each
              of the Financing Documents, to which the Borrower is or is
              intended to be a party and each other document to be delivered by
              the Borrower from time to time in connection therewith (and each
              Financing Party may conclusively rely on such certificate until it
              receives notice in writing to the contrary from the Borrower).

       (e)    Officers' Certificates. A certificate of an Authorized Officer of
              the Borrower, dated as of the Closing Date, certifying that: (A)
              the representations and warranties of the Borrower contained in
              Article VII and the material representations and warranties of the
              Borrower in each other Transaction Document to which it is a party
              are true and correct in all material respects as if made on and as
              of such date (or, if stated to have been made solely as of an
              earlier date, were true and correct as of such date); (B) the
              Borrower is in compliance with all of its covenants and
              obligations under each of the Financing Documents to which it is a
              party, and is in compliance in all material respects with all of
              its covenants and obligations under each of the Project Documents
              to which it is a


                                      -31-


              party; (C) all Transaction Documents are in full force and effect;
              and (D) no Default or Event of Default has occurred and is
              continuing on such date, in each case, both immediately prior to
              the initial extension of credit hereunder and after giving effect
              thereto and to the intended use thereof.

       (f)    Real Property Documents; Title Insurance; Survey.

              (i)    Title Insurance. A title policy or policies issued by the
                     relevant Title Company or Title Companies which is in ALTA,
                     extended coverage, Lender's Fee Policy form 1970 (revised
                     10/17/84) or such other form approved by the Lenders, or a
                     binding marked commitment to issue such policy or policies,
                     in form, scope and substance satisfactory to the Lenders,
                     insuring the Collateral Agent for the benefit of the
                     Secured Parties, in an amount satisfactory to the Lenders,
                     that the Borrower is lawfully seized and possessed of a
                     valid and subsisting leasehold interest in the Leasehold
                     Properties and estate or interest in the ROW and the Site
                     Licenses, as the case may be, in the Project and that such
                     interests are free and clear of all defects and
                     encumbrances except those approved by the Lenders.

                     Each Title Policy shall contain:

                     (A)    full coverage against Mechanics' Liens (filed and
                            inchoate);

                     (B)    a reference to the relevant Initial Survey with no
                            survey exceptions except those theretofore approved
                            by the Lenders; and

                     (C)    such affirmative insurance and endorsements as the
                            Lenders may require.

              (ii)   Initial Survey. An as-built survey of the Site current to
                     within 90 days of the Closing Date (each such survey, an
                     "INITIAL SURVEY"), which survey shall:

                     (A)    be a current "as-built" metes and bounds survey of
                            the Site, including easements that benefit such
                            Site;

                     (B)    be made in accordance with the "Minimum Standard
                            Detail Requirements for ALTA/ACSM Land Title
                            Surveys" jointly established and adopted by ALTA,
                            ACSM and NSPS in 1999 with all measurements made in
                            accordance with the "Minimum Angle, Distance and
                            Closure


                                      -32-


                            Requirements for Survey Measurements Which Control
                            Land Boundaries for ALTA/ACSM Land Title Surveys";

                     (C)    be prepared by a surveyor satisfactory to the
                            Lenders;

                     (D)    contain "Optional Survey Responsibilities and
                            Specifications" 2, 3, 8, 10 and 16 as specified on
                            Table A to the "Minimum Standard Detail Requirements
                            for ALTA/ACSM Land Title Surveys"; and

                     (E)    contain a certification from said surveyor
                            satisfactory to the Lenders.

              (iii)  Fees. Evidence that the Borrower shall have paid to each
                     Title Company all of its expenses and premiums in
                     connection with the issuance of the Title Policy and in
                     addition shall have paid to each Title Company an amount
                     equal to the relevant recording and stamp taxes payable in
                     connection with recording the Deed of Trust in the
                     appropriate county land offices.

       (g)    Financial Statements. The most recent unaudited quarterly
              financial statements (consolidated as appropriate) of the
              Borrower, prepared in accordance with the relevant Accounting
              Principles, together with a certificate from an Authorized Officer
              of the Borrower stating that: (A) no material adverse change in
              its consolidated assets, liabilities and operations or financial
              condition has occurred from those set out in such most recent
              financial statements; and (B) such financial statements fairly
              present in all material respects the financial condition of the
              Borrower.

       (h)    Government Actions.

              (i)    Government Approvals. Copies, certified by an Authorized
                     Officer of the Borrower to be true, correct and complete,
                     of all Government Approvals referred to in Schedule VI
                     (other than those listed on Schedule VII or otherwise
                     designated on such Schedule VII as unavailable), all of
                     which shall be in form and substance satisfactory to the
                     Lenders, together with a certificate from an Authorized
                     Officer of the Borrower stating that all such Government
                     Approvals, other than those listed on Schedule VII, are in
                     full force and effect.

              (ii)   Status. Evidence in form and substance satisfactory to the
                     Lenders that each of the Projects is a QF.

                                      -33-


       (i)    Independent Engineer's Report and Certificate. A report of the
              Independent Engineer, dated as of a recent date and in form, scope
              and substance satisfactory to the Lenders addressing (among other
              matters reviewed at the request of the Lenders as determined in
              their sole discretion): (i) the historical and projected operating
              and maintenance costs; (ii) the historic operation of the Project,
              including capacity ratings and actual energy production; (iii) the
              capability of the Resource, including (A) a review of Resource
              temperature, well production and operation and maintenance costs
              associated with the production and injection wells; (B) the
              historic production and injection volumes and temperature; (C) the
              ability of the Resource to continually provide sufficient
              temperatures and volumes of geothermal fluid to maintain the
              Project's electricity production and costs as set forth in the
              Closing Pro Forma; (D) the expected degradation of the Resource
              during the period beginning on the Closing Date and ending on the
              Final Maturity Date; (E) a review of the Resource management and
              well drilling plans, and the capabilities of the Operator to
              operate and maintain the Resource; (F) a review of the costs
              associated with management, maintenance, and development of the
              Resource to maintain temperature and production; and (G) the
              expected useful life of the Resource as currently used and as
              anticipated to be used following the Upgrade Project; (iv) the
              assumptions, formulae, methodologies and structure of the Closing
              Pro Forma; (v) the technical and economic ability and feasibility
              of the Project to produce and transmit the capacity and energy,
              and generate Project Cash Flow, in accordance with the Closing Pro
              Forma; (vi) the technical ability and feasibility of the Project
              to supply capacity and energy and otherwise fulfill its
              obligations under the PPAs; (vii) the projected availability of
              the Project; (viii) the Borrower's ability to perform under the
              Project Documents; (ix) the adequacy of the Plant Connection
              Agreements, the Transmission Services Agreements, and all other
              arrangements relating to interconnection; (x) the adequacy of the
              O&M Contract and the reasonableness of the costs and expenses of
              the Operator for performing services under the O&M Contract; (xi)
              the existence of skilled third party operators capable of
              performing such services at a comparable cost to the fees paid to
              the Operator under the O&M Contract; (xii) any environmental
              matters at or in relation to the Site, including (A) the
              Borrower's and the Project's compliance with all applicable
              Government Rules, including all Environmental Laws and all
              applicable Government Rules relating to health and safety; (B)
              whether the Borrower or the Project is subject to any federal,
              state or local investigation regarding any actual or potential
              remedial action or involving any actual or potential expenditure
              in excess of $100,000 in the aggregate with respect to any
              Environmental Law or in response to any Release; and (C) whether
              the Borrower or the Project has any contingent liability in excess
              of $100,000 in the aggregate in connection with any Release;
              (xiii) the adequacy of the plans relating to the Upgrade Project
              and an opinion that the expectations of the Upgrade Project are
              obtainable within the cost and time frame anticipated; and (xiv)
              any other technical or regulatory issue that may arise in


                                      -34-


              connection with the Independent Engineer's review of the Project
              on behalf of the Lenders.

       (j)    Closing Pro Forma. The Closing Pro Forma.

       (k)    Insurance.

              (i)    Acceptable Insurance Broker Certificate. A certificate of
                     an Acceptable Insurance Broker as to the Borrower's
                     compliance with Section 8.05(a) and Schedule IV, such
                     certificate to be in form and substance satisfactory to the
                     Administrative Agent.

              (ii)   Compliance Certificate. A certificate of an Authorized
                     Officer of the Borrower, dated as of the Closing Date,
                     certifying that insurance complying with Section 8.05(a)
                     and Schedule IV, covering the risks referred to therein,
                     has been obtained and is in full force and effect and, as
                     of the date thereof, no notice of cancellation has been
                     issued thereunder.

              (iii)  Insurance Advisor's Report. A report of the Insurance
                     Advisor, dated as of a recent date and satisfactory in
                     form, scope and substance: (A) addressing (among other
                     matters reviewed at the request of the Lenders as
                     determined in their sole discretion): (I) the adequacy of
                     the insurance required by Section 8.05 and Schedule IV and
                     confirming that such insurance and reinsurance provides
                     adequate cover for the Project and adequately protects the
                     interests of the Agents and the Lenders; and (II) the
                     comparability of such insurance with insurance maintained
                     with respect to similar projects by prudent power
                     producers; and (B) confirming that insurance complying with
                     Section 8.05 and Schedule IV, covering the risks referred
                     to therein: (I) is reasonably likely to remain available
                     through the Final Maturity Date; and (II) has been obtained
                     and is in full force and effect and as of the date thereof,
                     no notice of cancellation has been issued thereunder.

       (l)    Filings, Registrations and Recordings; Fees and Taxes.

              (i)    Financing Statements. Acknowledgment copies of all
                     financing statements under the Uniform Commercial Code (and
                     copies of Uniform Commercial Code search reports and tax
                     lien, judgment and litigation search reports) with respect
                     to the Borrower, in each jurisdiction (and, to the extent
                     applicable, county land offices) listed under the name of
                     such Person on Schedule V and in each other jurisdiction in
                     which such financing statements are necessary or, in the
                     opinion of special counsel to the Lenders, desirable to



                                      -35-


                     perfect the Liens created by the Security Documents
                     (including Liens in fixtures created by the Deed of Trust
                     and all other instruments to be recorded or filed or
                     delivered in connection with the Security Documents).

              (ii)   Recordation. Evidence satisfactory to the Administrative
                     Agent that the Security Documents have been duly recorded
                     and filed in all places wherein such recording and filing
                     are necessary to perfect the interests of the
                     Administrative Agent in and to the Collateral covered
                     thereby.

              (iii)  Fees and Taxes. Evidence that all filing, recordation,
                     subscription and inscription fees and all recording and
                     other similar fees, and all recording, stamp and other
                     taxes and other expenses related to such filings,
                     registrations and recordings necessary for the consummation
                     of the transactions contemplated by this Agreement and the
                     other Financing Documents have been paid in full by or on
                     behalf of the Borrower or otherwise provided for.

              (iv)   Other Action. Evidence satisfactory to the Administrative
                     Agent that all other action necessary in order to
                     effectively establish, create and perfect the Liens,
                     charges and security interests contemplated by the Security
                     Documents shall have been duly taken or made and remains in
                     full force and effect.

       (m)    No Proceedings.

              (i)    As of the Closing Date there is no: (I) injunction, writ,
                     preliminary restraining order or any order of any nature
                     issued by any Government Authority, arbitral tribunal or
                     other body directing that any of the transactions provided
                     for herein or in the other Transaction Documents not be
                     consummated as herein or therein provided; or (II)
                     litigation, proceeding or, to the Borrower's knowledge,
                     investigation, of or before any Government Authority,
                     arbitral tribunal or other body pending or, to the
                     Borrower's knowledge, threatened with respect to or
                     affecting any Project, this Agreement or any other
                     Transaction Document or any of the transactions
                     contemplated hereby or thereby.

              (ii)   A certificate of an Authorized Officer of the Borrower,
                     dated as of the Closing Date, certifying as to such effect.

       (n)    No Material Adverse Change.



                                      -36-


              (i)    As of the Closing Date, there has been no Material Adverse
                     Effect since November 7, 2002, and no act, event or
                     circumstance affecting the Borrower has arisen since such
                     date that could reasonably be expected to result in a
                     Material Adverse Effect.

              (ii)   A certificate of an Authorized Officer of the Borrower,
                     dated as of the Closing Date, certifying as to such effect.

       (o)    Opinions of Counsel. The following opinions of counsel, each
              acceptable in form and substance to the Agents and the Lenders:

              (i)    An opinion of Chadbourne & Parke LLP, as special New York
                     counsel to the Borrower and the Sponsor, and addressing
                     certain New York State and Federal law matters;

              (ii)   An opinion of David Chanover, special California counsel to
                     the Borrower; and

              (iii)  An opinion of Morris, Nichols, Arsht & Tunnell, as special
                     Delaware counsel to the Borrower and the Sponsor and
                     addressing certain general Delaware corporate, limited
                     liability Company, and Uniform Commercial Code matters.

       (p)    Fees and Expenses. Evidence that the Borrower shall have paid in
              full, on or before the Closing Date, all fees and expenses then
              due under or pursuant to this Agreement.

       (q)    Establishment and Funding of the Accounts. Each of the Accounts
              shall have been established as of the Closing Date in accordance
              with the terms of the Depositary Agreement. The Debt Service
              Reserve Account shall have on deposit a credit balance of
              immediately available funds in an amount not less than the Debt
              Service Reserve Required Amount, provided that the initial funding
              of the Debt Service Reserve Account may be made with the proceeds
              of the Initial Term Loans.

       (r)    Borrower's LLC Agreement. The Borrower's LLC Agreement shall be in
              form and substance satisfactory to the Administrative Agent.

       (s)    No Default. Immediately before and after giving effect to such
              proposed Loan, no Default or Event of Default shall have occurred
              and be continuing and no Default would result therefrom.

       (t)    Representations and Warranties. Immediately before and after
              giving effect to such proposed extension of credit, all
              representations of the Borrower and the Sponsor contained in the
              Financing Documents shall be true and correct on and as


                                      -37-


              of the Closing Date in all material respects as if made on and as
              of such date except for any such representations and warranties
              that were initially stated to have been made solely as of an
              earlier date, in which case such representations shall have been
              true and correct in all material respects as of such earlier date.

       (u)    Absence of Material Adverse Effect. Immediately before and after
              giving effect to such proposed extension of credit, no Material
              Adverse Effect shall have occurred and be continuing or would
              result therefrom.

       (v)    Government Approvals. All Government Approvals that are necessary
              for each Project as of the Closing Date shall have been obtained
              on or prior to the Closing Date and shall be in full force and
              effect and not subject to appeal. (w) Notice of Borrowing. The
              Borrower shall have delivered to the Administrative Agent (with a
              copy to the Collateral Agent) a Notice of Borrowing with respect
              to Initial Term Loans in an amount equal to the aggregate Initial
              Term Loan Commitments.



       (x)    Payment Instructions. Evidence that the Borrower shall have
              irrevocably instructed in writing each of SCE and Imperial
              Irrigation District to make all payments owing to the Borrower
              under any Project Document to which either SCE or Imperial
              Irrigation District is party to the Depositary Bank for deposit
              into the Revenue Account.

6.02   ADDITIONAL TERM LOANS. The obligation of any Lender to make its
       Additional Term Loan is subject to the receipt by the Administrative
       Agent of the documents and the satisfaction of the conditions precedent
       set out below on the date of such Loan, each of which shall be in form
       and substance satisfactory to the Administrative Agent and the Majority
       Lenders.

       (a)    No Default. Immediately before and after giving effect to such
              proposed extension of credit, no Default or Event of Default shall
              have occurred and be continuing and no Default would result
              therefrom.

       (b)    Representations and Warranties. Immediately before and after
              giving effect to such proposed extension of credit, all
              representations of the Borrower and the Sponsor contained in the
              Financing Documents shall be true and correct on and as of the
              date of such Additional Term Loan in all material respects as if
              made on and as of such date except for any such representations
              and warranties that were initially stated to have been made solely
              as of an earlier date, in which case such representations shall

              have been true and correct in all material respects as of such
              earlier date.



                                      -38-


       (c)    Absence of Material Adverse Effect. Immediately before and after
              giving effect to such proposed extension of credit, no Material
              Adverse Effect shall have occurred and be continuing or would
              result therefrom.

       (d)    Government Approvals. All Government Approvals that are necessary
              for the then current stage of the Development of each Project
              shall have been obtained on or prior to the date of such extension
              of credit and shall be in full force and effect and not subject to
              appeal.

       (e)    Upgrade Acceptance Test. The Project has successfully passed the
              Upgrade Acceptance Test on or before December 31, 2003.

       (f)    Upgrade Pro Forma. The Upgrade Pro Forma, containing assumptions
              and otherwise in form and substance satisfactory to the Lenders
              and the Independent Engineer, taking into account the effect of
              the Upgrade Project on the Projects' performance, and
              demonstrating an annual Debt Service Coverage Ratio of at least
              1.5:1.

       (g)    Independent Engineer's Upgrade Report; Defective Tower Repair. An
              update to the report of the Independent Engineer that was
              delivered on the Closing Date, confirming that the Upgrade
              Acceptance Test has been satisfied in all material respects in
              form and substance satisfactory to the Lenders, and a certificate
              of an Authorized Officer of the Borrower, dated no later than July
              1, 2003 certifying that the Tower Repairs have been substantially
              completed and that, as a result, the cooling towers subject
              thereof are, as of such date, in good working order and condition
              in accordance with generally accepted prudent utility practices.

       (h)    Title Policy Endorsement. An endorsement to the Title Policy to
              the date of such extension of credit, in the form approved by the
              Administrative Agent and setting out no additional exceptions
              (including survey exceptions).

       (i)    Notice of Borrowing. The Borrower shall have delivered to the
              Administrative Agent (with a copy to the Collateral Agent) a
              Notice of Borrowing with respect to Additional Term Loans in an
              amount not exceeding the present value, as calculated by the
              Administrative Agent, discounted at ten percent (10%), of
              two-thirds (2/3) of Additional Project Cash Flow, as set forth in
              the Upgrade Pro Forma, for the period from the date the Project
              passes the Upgrade Acceptance Test to the Final Maturity Date, but
              not to exceed the aggregate Additional Term Loan Commitments.

       (j)    Other. Such other statements, certificates, documents and
              information with respect to any Project or matters contemplated by
              this Agreement as either Agent or the Majority Lenders may
              reasonably request.




                                      -39-


                                  ARTICLE VII

                         REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders and each Agent that:

7.01   EXISTENCE. The Borrower is duly organized or formed, validly existing and
       in good standing under the laws of the State of Delaware. The Borrower is
       duly qualified to do business and is in good standing in the State of
       California. The Borrower is duly qualified to do business and is in good
       standing in all other places where necessary in light of the business it
       conducts and the Property it owns and intends to conduct and own and in
       light of the transactions contemplated by this Agreement and the other
       Transaction Documents, except where the failure to so qualify or be in
       good standing could not reasonably be expected to have a Material Adverse
       Effect. No filing, recording, publishing or other act that has not been
       made or done is necessary in connection with the existence or good
       standing of the Borrower or the conduct of its business.

7.02   FINANCIAL CONDITION.

       (a)    Financial Statements. The financial statements delivered to the
              Administrative Agent pursuant to Section 8.01, and any related
              statements of income, owner's equity and cash flows: (i) fairly
              present, in all material respects, the financial condition of the
              Borrower as of the date delivered and the results of its
              operations for the period covered thereby (subject, in the case of
              any quarterly financial statements to normal year-end audit
              adjustments); and (ii) have been prepared in accordance with the
              Accounting Principles applicable to such Person.

       (b)    No Material Contingent Liabilities. As of the date of the relevant
              balance sheet included in such financial statements, the Borrower
              has no contingent liabilities, liabilities for taxes, unusual
              forward or long-term commitments or unrealized or anticipated
              losses from any unfavorable commitments or any other liabilities
              or obligations of a nature required to be reflected in a balance
              sheet for the period to which such financial statements relate
              that were not disclosed in such balance sheet and, either
              individually or in the aggregate would be material to the
              Borrower.

       (c)    No Material Adverse Change. The Borrower knows of no reasonable
              basis existing as of the date of its most recent balance sheet in
              accordance with Section 8.01 for the assertion against it of any
              liability or obligation of a nature required to be reflected in a
              balance sheet that is not fully reflected in its most recent
              balance sheet. Since the date of delivery of such balance sheet,
              there has been no material adverse change in the financial
              condition, operations or business of the Borrower from that set

              out in such financial statements as at such date.




                                      -40-


7.03   ACTION.

       (a)    Borrower. The Borrower has full limited liability company power,
              authority and legal right to execute and deliver the Transaction
              Documents to which it is or is intended to be a party and to
              perform its obligations thereunder. The execution, delivery and
              performance by the Borrower of each of the Transaction Documents
              to which it is or is intended to be a party and the consummation
              of the transactions contemplated thereby have been duly authorized
              by all necessary limited liability company action on its part.
              Each of the Transaction Documents to which the Borrower is a party
              has been duly executed and delivered by or on behalf of such
              Person and constitutes its legal, valid and binding obligation
              enforceable against it in accordance with its terms, except as the
              enforceability thereof may be limited by: (i) applicable
              bankruptcy, insolvency, moratorium or other similar laws affecting
              the enforcement of creditors' rights generally; and (ii) the
              application of general principles of equity (regardless of whether
              such enforceability is considered in a proceeding at law or in
              equity).

       (b)    Other Major Project Parties.

              (i)    Each of the other Major Project Parties has full corporate,
                     limited liability company or partnership power, authority
                     and legal right to execute and deliver each of the
                     Transaction Documents to which it is or is intended to be a
                     party and to perform its obligations thereunder;

              (ii)   the execution, delivery and performance by each other Major
                     Project Party of each of the Transaction Documents to which
                     it is or is intended to be a party and the consummation of
                     the transactions contemplated thereby have been duly
                     authorized by all necessary corporate, limited liability
                     company or partnership action on the part of such other
                     Major Project Party; and

              (iii)  each of the Transaction Documents to which any other Major
                     Project Party is a party has been duly executed and
                     delivered by such other Major Project Party and constitutes
                     the legal, valid and binding obligation of such other
                     Project Party enforceable against such other Major Project
                     Party in accordance with its terms, except as the
                     enforceability thereof may be limited by: (A) applicable
                     bankruptcy, insolvency, moratorium or other similar laws
                     affecting the enforcement of creditors' rights generally;
                     and (B) the application of general principles of equity
                     (regardless of whether such enforceability is considered in

                     a proceeding at law or in equity);


                                      -41-


              provided that these representations shall be made only to the
              knowledge of the Borrower with respect to any other Major Project
              Party that is not an Affiliate of the Borrower.

7.04   NO BREACH.

       (a)    Execution, Etc. of Transaction Documents. The execution, delivery
              and performance by the Borrower of each of the Transaction
              Documents to which it is or is intended to be a party and the
              consummation of the transactions contemplated thereby do not and
              will not: (i) require any consent or approval of any Person that
              has not been obtained (except for consents from the BLM, SCE and
              for certain consents by third parties to the right of the
              Collateral Agent on behalf of the Secured Parties under the
              Security Documents to step into, cure defaults under or substitute
              a counterparty to, certain Project Documents) and each such
              consent and approval that has been obtained is in full force and
              effect; (ii) violate any material Government Rule or material
              Government Approval applicable to any Project; (iii) conflict
              with, result in a breach of or constitute a default under: (A) the
              Borrower's Charter Documents or any corporate, limited liability
              company action or any resolution of the member of the Borrower; or
              (B) any Project Document other than with respect to the Consents
              described in clause (i) above that have not been obtained or any
              indenture or loan or credit agreement or any other material
              agreement, lease or instrument to which the Borrower is a party or
              by which it or its Property may be bound or affected in any
              material respect; or (iv) result in, or create any Lien (other
              than a Permitted Lien) upon or with respect to any of the
              properties now owned or hereafter acquired by the Borrower.

       (b)    No Breach. The Borrower is not in violation of any Government Rule
              or Government Approval that could reasonably be expected to result
              in a Material Adverse Effect. The Borrower is not in breach of or
              default under any indenture, loan or credit agreement or any other
              agreement, lease or instrument referred to in paragraph (a)(iii)
              above, except such breaches or defaults that, in the aggregate
              could not reasonably be expected to result in a Material Adverse
              Effect.

7.05   GOVERNMENT APPROVALS; GOVERNMENT RULES.

       (a)    Borrower. All Government Approvals necessary under Government
              Rules to be obtained by or on behalf of the Borrower on or prior
              to the Closing Date are set out in Schedules VI and, except for
              those Government Approvals set out in Schedule VII which are not
              currently required for any Project, have been duly obtained, were
              validly issued, are in full force and effect, are not subject to
              appeal, are held in the name, or on behalf of, such Person and are
              free from conditions or requirements compliance with which could
              reasonably be expected to result in a Material Adverse Effect or
              which such Person does not reasonably expect to be able to satisfy
              on or prior to the time when necessary.

                                      -42-


       (b)    Other Major Project Parties. To the Borrower's knowledge: (i) each
              other Major Project Party has obtained all Government Approvals
              necessary under Government Rules that are required to be obtained
              on or prior to the Closing Date in order for such other Major
              Project Party to perform its obligations under the Transaction
              Documents to which it is or is intended to be a party, other than
              those Government Approvals not currently required for any Project;
              and (ii) such Government Approvals are in full force and effect,
              are not subject to appeal, are held in the name of such other
              Major Project Party and are free from conditions or requirements
              compliance with which could reasonably be expected to result in a
              Material Adverse Effect or which the Borrower does not reasonably
              expect such other Major Project Party to be able to satisfy on or
              prior to the time when necessary.

       (c)    No Material Omission. The information set out in each application
              and all other written materials submitted by the Borrower (and to
              the Borrower's knowledge, each other Major Project Party) to the
              applicable Government Authority in connection with each of its
              Government Approvals is accurate and complete in all material
              respects as of the date submitted to such Government Authority and
              does not omit to state any material fact necessary to make such
              information not misleading.

       (d)    Future Government Approvals. The Borrower has no reason to believe
              that any Government Approvals that have not been obtained by it or
              any other Major Project Party as of the date of this Agreement,
              but which will be required in the future, will not be obtained in
              due course on or prior to the time when necessary and will be free
              from any condition or requirement, compliance with which could
              reasonably be expected to have a Material Adverse Effect.

       (e)    Compliance of Upgrade Project. The Upgrade Project, if constructed
              in accordance with the Plans and Specifications therefor and
              otherwise Developed as contemplated by the Project Documents, will
              conform to and comply, in all material respects, with all
              covenants, conditions, restrictions and reservations in the
              Government Approvals applicable thereto and all Government Rules.



       (f)    Copies Provided to Administrative Agent. In accordance with
              Section 6.01(h), the Administrative Agent has received a certified
              copy of each Government Approval heretofore obtained.

7.06   PROCEEDINGS. There is no action, suit or proceeding at law or in equity
       or by or before any Government Authority, arbitral tribunal or other body
       now pending or, to the knowledge of the Borrower, threatened against or
       affecting it, any of its Property (including any Project) or, to the
       knowledge of the Borrower, any other Major Project Party, that could
       reasonably be expected to result in a Material Adverse Effect. No winding
       up, dissolution or similar process is pending or threatened against the

       Borrower or (to the knowledge of the Borrower) any other Major Project
       Party except, after the


                                      -43-


       Closing Date, to the extent such process, if adversely determined, could
       not reasonably be expected to result in an Event of Default.

7.07   ENVIRONMENTAL MATTERS.

       (a)    Environmental Claims. Except as described in Part A of Schedule
              VIII, to the knowledge of the Borrower, there are no facts,
              circumstances, conditions or occurrences regarding any Project
              that could reasonably be expected to form the basis of an
              Environmental Claim arising with respect to any Project or against
              such Project, the Borrower or, in connection with its involvement
              in any Project, any other Environmental Party, that individually
              or in the aggregate could reasonably be expected to result in a
              Material Adverse Effect.

       (b)    Threatened Environmental Claims. Except as set out in Part B of
              Schedule VIII, there are no pending or, to the knowledge of the
              Borrower no past or, threatened Environmental Claims arising with
              respect to any Project or against such Project, the Borrower or,
              in connection with its involvement in the Development of any
              Project, any other Environmental Party, that individually or in
              the aggregate could reasonably be expected to result in a Material
              Adverse Effect.

       (c)    Hazardous Materials. Except as set out in Part C of Schedule VIII,
              to the Borrower's knowledge no Hazardous Materials have been Used
              or Released at, on, under or from any Project in an amount or
              concentration that is not otherwise in compliance with applicable
              Environmental Law and that individually or in the aggregate could
              reasonably be expected to result in a Material Adverse Effect.

       (d)    Other Materials. There are not now and, to the knowledge of the
              Borrower, never have been any underground storage tanks located at
              any Project. There is no asbestos contained in, forming part of,
              or contaminating any part of any Project, and no polychlorinated
              biphenyls are used, stored, located at or contaminate any part of
              any Project.



       (e)    Investigations. There have been no environmental investigations,
              studies, audits, reviews or other analyses conducted by or that
              are in the possession of the Borrower (or, with respect to such
              investigations, studies, audits, reviews and other analysis
              conducted prior to April 15, 2002, known by the Borrower to be in
              its possession) in relation to any Project that have not been
              provided to the Administrative Agent and the Lenders.

7.08   TAXES. The Borrower has filed or caused to be filed all tax returns that
       are required by applicable law to be filed, and has paid all Taxes shown
       to be due and payable on said returns or on any assessments made against
       the Borrower or any of its Property and all other Taxes imposed on the
       Borrower by any Government Authority (other than Taxes the payment of
       which are not yet due or that are being Contested) except, in each case,

       where such failure could not reasonably be expected to have a Material
       Adverse Effect.


                                      -44-


       No Liens for Taxes (other than Permitted Liens) against the Borrower or
       any of its Property exist and no claims are being asserted against the
       Borrower or any of its Property with respect to any Taxes. The aggregate
       amount of sales, excise or property taxes imposed or reasonably expected
       to be imposed on the Borrower or any of its Property does not exceed the
       amounts provided therefor in the Closing Pro Forma. The charges, accruals
       and reserves on its books in respect of Taxes are, in the opinion of the
       Borrower, adequate.

7.09   TAX STATUS.

       (a)    For Federal and state income tax purposes, the Borrower is
              disregarded as an entity separate from its owner.



       (b)    Neither the execution and delivery of this Agreement, the other
              Transaction Documents or the Non-Material Project Contracts nor
              the consummation of any of the transactions contemplated hereby or
              thereby shall affect the classification of the Borrower as set out
              in paragraph (a) above.

7.10   ERISA. No ERISA Event has occurred or is reasonably expected to occur
       that, when taken together with all other such ERISA Events for which
       liability is reasonably expected to occur, could reasonably be expected
       to result in a Material Adverse Effect. The present value of all
       accumulated benefit obligations under each Plan (based on the assumptions
       used for purposes of Statement of Financial Accounting Standards No. 87)
       did not, as of the date of the most recent financial statements
       reflecting such amounts, materially exceed the fair market value of the
       assets of such Plan, and the present value of all accumulated benefit
       obligations of all underfunded Plans (based on the assumptions used for
       purposes of Statement of Financial Accounting Standards No. 87) did not,
       as of the date of the most recent financial statements reflecting such
       amounts, materially exceed the fair market value of the assets of all
       such underfunded Plans.

7.11   NATURE OF BUSINESS. The Borrower has not engaged in any business other
       than the Development of the Projects and with respect to the SIGC Lease.
       Neither the business nor any Properties of the Borrower are or have been
       affected by any fire, explosion, accident, strike, lockout or other labor
       dispute, drought, storm, hail, earthquake, embargo, act of God or of the
       public enemy or other casualty (whether or not covered by insurance) that
       could reasonably be expected to have a Material Adverse Effect.

7.12   TITLE; SECURITY DOCUMENTS.

       (a)    Title. The Borrower owns and has good, legal and marketable title
              to the Collateral purported to be covered by the Security
              Documents to which it is a party, except for that portion of the
              Collateral which is Real Property, in which the Borrower has a
              valid estate or interest, and all such interests of the Borrower

              are free and clear of all Liens other than Permitted Liens.



                                      -45-


              (i)    The Borrower is lawfully possessed of a valid and
                     subsisting estate in and to the Real Property and rights to
                     the Real Property described in the Deed of Trust free and
                     clear of all Liens other than the Liens granted to the
                     Collateral Agent for the benefit of the Secured Parties
                     under the Security Documents and:

                     (A)    as at the Closing Date, exceptions shown on the
                            Title Policy delivered on the Closing Date in
                            relation thereto; and

                     (B)    Permitted Liens.

              (ii)   The Borrower enjoys peaceful and undisturbed possession of,
                     all of its Properties (subject only to the Permitted Liens
                     described above) that are necessary for the Projects.

       (b)    Security Documents. The provisions of the Security Documents are
              effective to create, in favor of the Collateral Agent for the
              benefit of the Secured Parties, a legal, valid and enforceable
              Lien on and security interest in all of the Collateral purported
              to be covered thereby in accordance with state law and as
              permitted pursuant to the rules and regulations of the BLM. All
              necessary and appropriate recordings and filings have been made,
              or are being made concurrently herewith, in all necessary and
              appropriate public offices (including in the jurisdictions set out
              in Schedule V), and all other necessary and appropriate action has
              been, or is concurrently herewith being, taken, so that, subject
              to the rules and regulations of the BLM, each such Security
              Document creates, or as to after-acquired property will create, to
              the extent set forth in such Security Document, a perfected Lien
              on and security interest in all right, title, estate and interest
              in the Collateral covered thereby, prior and superior to all other
              Liens other than Permitted Liens. Except as otherwise agreed by
              the Lenders, all necessary and appropriate consents to the
              creation, perfection and enforcement of such Liens have been
              obtained from each of the parties to the Project Documents except
              for the BLM and SCE. Subject to the rules and regulations of the
              BLM, no mortgage or financing statement or other instrument or
              recordation covering all or any part of the Collateral purported
              to be covered by the Security Documents is on file in any
              recording office, except such as may have been filed in favor of
              the Collateral Agent for the benefit of the Secured Parties or in
              respect of any Permitted Lien.

7.13   SUBSIDIARIES.

       (a)    No Subsidiaries. The Borrower has no subsidiaries.

       (b)    Ownership Interests in Borrower. There are no ownership interests
              in the Borrower other than the 100% member interest held by the
              Sponsor.



                                      -46-


7.14   UTILITY REGULATION.

       (a)    Holding Company. The Borrower is not a "public-utility company" or
              a "holding company", or an "affiliate" of a "holding company" or
              of a "public-utility company", or a "subsidiary company" of a
              "holding company", within the meaning of PUHCA nor is Borrower
              subject to regulation under PUHCA. None of the Projects is a
              "public-utility company" or a "holding company", or an "affiliate"
              of a "holding company" or of a "public-utility company", or a
              "subsidiary company" of a "holding company" within the meaning of
              PUHCA.

       (b)    Status. Each of the Projects is a QF. The Borrower is not, nor
              will any of the Secured Parties (solely as a result of its
              execution, delivery or performance of this Agreement or the other
              Financing Documents or the transactions contemplated thereby,
              other than the exercise of remedies under the Security Documents
              except to the extent that, following such exercise of remedies,
              the Borrower will remain as the owner of the Projects, and the
              Operator will remain as the operator thereof) be, subject to
              regulation as a "public-utility company", a "holding company" or a
              "subsidiary company" or an "affiliate" of any of the foregoing,
              under PUHCA.

       (c)    Public Utility. Except as set out on Schedule VII and provided in
              the Government Approvals identified therein, the Borrower is not,
              nor will any of the Secured Parties be (solely as a result of its
              execution, delivery or performance of this Agreement or the other
              Financing Documents or the transactions contemplated thereby,
              other than the exercise of remedies under the Security Documents
              except to the extent that, following such exercise of remedies,
              the Borrower will remain as the owner of the relevant Projects,
              and the Operator will remain as the operator thereof), subject to
              regulation: (i) respecting the rates of electric utilities or
              material financial and organizational regulation of electric
              utilities under the FPA or the applicable Government Rules of the
              State of California other than, solely with respect to the Secured
              Parties' exercise of remedies under the Security Documents,
              Section 203 of the FPA; or (ii) otherwise as a gas or other
              regulated utility, however denominated, under applicable
              Government Rules of the United States of America or the State of
              California.



       (d)    Investment Company. The Borrower is not an "investment company" or
              a company "controlled" by an "investment company" within the
              meaning of the Investment Company Act of 1940 or an "investment
              advisor" within the meaning of the Investment Company Act of 1940.

7.15   FINANCING DOCUMENTS; PROJECT DOCUMENTS; NON-MATERIAL PROJECT CONTRACTS;
       LICENSES, ETC.

       (a)    Financing Documents; Project Documents; Non-Material Project
              Contracts. The Financing Documents, Project Documents and the
              Non-Material Project Contracts constitute and include all

              contracts and agreements relating to the Projects. As at


                                      -47-


              the Closing Date, all Project Documents are set out in the
              definition thereof in Schedule I. There are no material services,
              materials or rights (other than Government Approvals) required for
              any Project other than those granted by, or to be provided to the
              Borrower pursuant to, the Project Documents. The Borrower has no
              reason to believe that any services, materials or rights (other
              than Government Approvals) that have not been obtained as of the
              date of this Agreement, but that will be required for a future
              stage of the Development of any Project (including, without
              limitation, the Upgrade Project), will not be obtained in due
              course on or prior to the commencement of the appropriate stage of
              Development of such Project and will not contain any condition or
              requirement compliance with which could reasonably be expected to
              have a Material Adverse Effect.

       (b)    Copies of Documents. The Administrative Agent has received a copy
              (certified by the Borrower) of each Project Document, in
              accordance with Section 6.01(c), in each case as in effect on the
              date of delivery and each amendment, modification or supplement
              thereto.

       (c)    No Amendment. Since their certification and delivery in accordance
              with Section 6.01(c) and except as permitted pursuant to Section
              8.22, none of the Project Documents has been amended, modified or
              supplemented or has been Impaired and all of the Project Documents
              are in full force and effect in all material respects. All
              conditions precedent to the obligations of the respective parties
              under the Project Documents have been satisfied or waived except
              for such conditions precedent that need not and cannot be
              satisfied until a later stage of Development of the relevant
              Project, and the Borrower has no reason to believe that any such
              condition precedent cannot be satisfied on or prior to the
              commencement of the appropriate stage of Development of such
              Project.

       (d)    Representations and Warranties. All material representations,
              warranties and other factual statements made by the Borrower and,
              to the knowledge of the Borrower, made by each other Person in the
              Project Documents are true and correct in all material respects
              (or, if stated to have been made solely as of an earlier date,
              were true and correct as of such date) and do not omit to state
              any material fact necessary to make such representations,
              warranties and other factual statements not misleading.

       (e)    No Default. The Borrower is not in default in the performance of
              any covenant or obligation set out in any Project Document in a
              manner that could reasonably be expected to result in a Material
              Adverse Effect. To the knowledge of the Borrower, no other party
              to any Project Document is in default in the performance of any
              covenant or obligation set out therein in a manner that could
              reasonably be expected to result in a Material Adverse Effect. No
              Default or Event of Default has occurred and is continuing.



                                      -48-




       (f)    Licenses. All material permits, licenses, trademarks, patents or
              agreements with respect to the usage of technology or other
              property (other than those constituting Government Approvals) that
              are necessary for each Project have been obtained, are final and
              are in full force and effect in all material respects and any such
              permits, licenses, trademarks, patents or agreements not currently
              necessary for each Project can reasonably be expected to be
              obtained when needed, free from conditions or requirements,
              compliance with which could reasonably be expected to result in a
              Material Adverse Effect.

7.16   UTILITY SERVICES. All utility services necessary for the Development of
       each Project, including, as necessary, water supply, storm and sanitary
       sewer, electric and telephone services and facilities, are available to
       such Project.

7.17   DISCLOSURE. All factual information in writing (taken as a whole)
       furnished by the Borrower or any Affiliate of the Borrower on its behalf,
       whether in print or electronic form, to any Financing Party was true and
       accurate in all material respects: on the dates as of which such
       information was furnished, and was not incomplete by omitting to state
       any material fact necessary to make such information (taken as a whole)
       not misleading in any material respect at such time in light of the
       circumstances under which such information was provided; provided,
       however, that, except as otherwise expressly provided in this Agreement,
       the Borrower's sole representation with respect to projections, estimates
       or other expressions of view as to future circumstances shall be that
       such projections, estimates or other expressions of view as to future
       circumstances: (i) were prepared in good faith and with due care; (ii)
       fairly present in all material respects the Borrower's expectations as to
       the matters covered thereby as of their respective date(s) of delivery;
       (iii) were based on reasonable assumptions as to all factual and legal
       matters material to the estimates therein as of their respective date(s)
       of delivery; (iv) were in all material respects consistent with the
       provisions of the Transaction Documents as of their respective date(s) of
       delivery; and (v) contain no statements or conclusions that are based
       upon or include information known to the Borrower to be misleading or
       that fail to take into account material information regarding the matters
       reported therein as of their respective date(s) of delivery. There are in
       existence no documents or agreements that have not been disclosed to the
       Lenders that are material in the context of the Transaction Documents or
       that have the effect of varying any of the Transaction Documents or the
       Projects. There is no fact known to the Borrower that has not been
       disclosed in writing to the Lenders and that has had, or that could
       reasonably be expected in the future to have, a Material Adverse Effect.

7.18   USE OF PROCEEDS. The proceeds of each Loan will be used solely in
       accordance with, and solely for the purposes contemplated by, Section
       8.09. No part of the proceeds of any Loan hereunder will be used for the
       purpose, whether immediate, incidental or ultimate, of buying or carrying
       any Margin Stock or to extend credit to others for such purpose.

7.19   FEES. On the Closing Date, except with respect to the financial advisor

       to the Borrower in connection with the transactions contemplated hereby,
       the Borrower does not have any




                                      -49-


       obligation to any Person in respect of any finder's, broker's, investment
       banking, legal or accounting or other similar fee (including any fee
       payable to engineers, environmental consultants, fuel consultants or
       similar experts) in connection with any of the transactions contemplated
       by the Transaction Documents for services rendered more than 60 days
       prior to the Closing Date other than fees payable to Lenders or fees
       specifically contemplated in the Closing Pro Forma.

7.20   INDEBTEDNESS. The Borrower is not directly or indirectly liable with
       respect to any Indebtedness outstanding as of the Closing Date other than
       Permitted Indebtedness.

7.21   INVESTMENTS. The Borrower has no Investments except Permitted
       Investments.

7.22   NO FORCE MAJEURE. No event, condition or circumstance has occurred on the
       basis of which the Borrower has either given a notice of "force majeure"
       or received such notice from any other Person that could reasonably be
       expected to entitle the Borrower or such notifying Person to excuse,
       defer or suspend the performance of any of the material obligations of
       the Borrower or such notifying Person under any Transaction Document to
       which it is a party on the basis of "force majeure."

7.23   ASSETS. The Borrower owns, leases and otherwise has full legal right to
       use all Real Property, subject to the rules and regulations of the BLM,
       buildings, machinery, equipment and other assets, whether tangible or
       intangible, that are necessary or useful for the conduct of its business
       as presently conducted and as proposed to be conducted through the Final
       Maturity Date. On and as of the Closing Date, each such asset is, except
       for the assets to be repaired and/or upgraded as part of the Upgrade
       Project and the Tower Repairs, free from defects (patent and latent), is
       in good operating condition and repair (subject to normal wear and tear),
       and is suitable for the purposes for which it is presently used and as
       proposed to be used through the Final Maturity Date. Since April 15,
       2002, each such asset, except for the assets to be repaired and/or
       upgraded as part of the Upgrade Project and the Tower Repairs, has been



       maintained in accordance with prudent and good industry practice.

                                  ARTICLE VIII

                                    COVENANTS

The Borrower covenants and agrees with the Lenders and the Agents that until the
Termination Date:

8.01   FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrower shall deliver to
       the Administrative Agent (in sufficient copies for distribution to each
       of the Lenders):

       (a)    as soon as available and in any event within 60 days after the end
              of each quarterly fiscal period of each fiscal year of the

              Borrower, unaudited statements


                                      -50-


              of income, owners' equity and cash flows of the Borrower, for such
              period and for the period from the beginning of the respective
              fiscal year to the end of such period, and the related unaudited
              balance sheet as at the end of such period, setting out in each
              case in comparative form the corresponding figures for the
              corresponding period in the preceding fiscal year, accompanied by
              any material accounting variation report required by Section
              1.04(b) and a certificate of a senior financial officer of the
              Borrower, which certificate shall state that said financial
              statements fairly present in all material respects the financial
              condition and results of operations of the Borrower, in accordance
              with the Accounting Principles applicable to the Borrower as at
              the end of, and for, such period (subject to normal year-end audit
              adjustments);

       (b)    as soon as available and in any event within 120 days after the
              end of each fiscal year of the Borrower, audited statements of
              income, owners' equity and cash flows of the Borrower for such
              year and the related audited balance sheets as at the end of such
              year, setting out in each case in comparative form the
              corresponding figures for the preceding fiscal year, and
              accompanied by any material accounting variation report required
              by Section 1.04(b) and an opinion thereon of independent certified
              public accountants of recognized standing reasonably acceptable to
              the Lenders, which opinion shall state that said financial
              statements fairly present in all material respects the financial
              condition and results of operations of the Borrower as at the end
              of, and for, such fiscal year in accordance with the Accounting
              Principles applicable to the Borrower, and a certificate of such
              accountants stating that, in making the examination necessary for
              their opinion, they obtained no knowledge, except as specifically
              stated, of any Default or Event of Default (which certificate may
              be limited to the extent required by accounting rules or
              guidelines or customary accounting practice);

       (c)    promptly upon their becoming available, copies of all registration
              statements and regular periodic reports, if any, that the Borrower
              shall have filed with the Securities and Exchange Commission or
              any national securities exchange;

       (d)    prompt written notice of receipt by the Borrower of written notice
              of the occurrence of any ERISA Event that, alone or together with
              any other ERISA Events that have occurred, could reasonably be
              expected to result in liability of the Borrower in an aggregate
              amount that could reasonably be expected to result in a Default or
              have a Material Adverse Effect;

       (e)    promptly after the Borrower knows or has reason to believe that
              any Default or Event of Default has occurred, a notice of such
              event describing the same in reasonable detail and, together with
              such notice or as soon thereafter as practicable, a description of
              the action that the Borrower has taken or proposes to take with
              respect thereto;



                                      -51-


       (f)    promptly after the Borrower knows or has reason to believe that
              any fact, event, circumstance, condition or occurrence has
              occurred that results in, or could reasonably be expected to
              result in, a Material Adverse Effect, a notice of such fact,
              event, circumstance, condition or occurrence describing the same
              in reasonable detail and, together with such notice or as soon
              thereafter as practicable, a description of the action that the
              Borrower has taken or proposes to take with respect thereto;

       (g)    promptly after the Borrower knows or has reason to believe that
              any event, circumstance or condition in the nature of force
              majeure has occurred which could reasonably be expected to result
              in a materially adverse change from the Closing Pro Forma or, if
              the Second Closing Date has occurred, the Upgrade Pro Form, a
              notice of such event, describing the same in reasonable detail
              and, together with such notice or as soon thereafter as
              practicable, a description of the action that the Borrower has
              taken or proposes to take with respect thereto;

       (h)    promptly upon their becoming available, copies of all material
              notices or material documents received by the Borrower pursuant to
              any Project Document (including any notice or other document
              relating to a failure by the Borrower to perform any of its
              covenants or obligations under such Project Document);

       (i)    promptly upon their becoming available, copies of all material
              periodic reports received from the Operator and other material
              notices relating to any Project received from any Project Party;

       (j)    the notices required by Section 8.06;

       (k)    as soon as practicable as they are available, copies of each
              insurance policy relating to the Projects, together with a
              certificate of an Authorized Officer of the Borrower, dated as of
              the date of such delivery, certifying that the policies comply
              with Section 8.05(a) and Schedule IV, cover the risks referred to
              therein, are in full and effect, as of the date of such delivery,
              no notice of cancellation has been issued thereunder, and that all
              premiums then due and payable thereon have been paid; and



       (l)    from time to time such other information regarding the financial
              condition, operations, business or prospects of the Borrower
              (including any Plan or Multiemployer Plan and any reports or other
              information required to be filed under ERISA) as any Lender
              (through the Administrative Agent) or Agent may reasonably
              request.

8.02   MAINTENANCE OF EXISTENCE; ETC.The Borrower shall: (a) preserve and
       maintain its legal existence; (b) preserve and maintain its good standing
       and all material licenses, rights, privileges and franchises necessary
       for the proper operation of each Project and its qualification to do

       business; and (c) conduct its business in an orderly, efficient and



                                      -52-


       regular manner, unless the failure to so comply could not reasonably be
       expected to result in a Material Adverse Effect.

8.03   COMPLIANCE WITH GOVERNMENT RULES; ETC.

       (a)    Compliance with Government Rules. The Borrower shall comply with
              all applicable Government Rules and from time to time obtain,
              maintain, comply with and renew all Government Approvals as shall
              now or hereafter be necessary under applicable Government Rules
              (except any thereof the non-compliance with or non-renewal of
              which could not reasonably be expected to result in a Material
              Adverse Effect). The Borrower shall promptly upon receipt or
              publication furnish a copy (certified by the Borrower or, if
              available, the applicable Government Authority) of each such
              Government Approval to the Administrative Agent.

       (b)    No Amendment. Except as provided in Section 8.22(b)(vi), the
              Borrower shall not petition, request or take any legal or
              administrative action that seeks to amend, supplement or modify
              any Government Approval unless: (i) the Borrower theretofore shall
              have furnished to the Administrative Agent and the Lenders a
              detailed description of the proposed amendment, supplement or
              modification and the actions that the Borrower proposes to take
              with respect thereto; and (ii) such amendment, supplement or
              modification could not reasonably be expected to result in a
              Material Adverse Effect. The Borrower shall promptly upon receipt
              or publication thereof furnish a copy (certified by the Borrower
              or the applicable Government Authority) of each amendment,
              supplement or modification to any Government Approval to the
              Administrative Agent.

       (c)    QF Status. The Borrower shall maintain the status of the Projects
              as QFs.

8.04   ENVIRONMENTAL COMPLIANCE.

       (a)    No Use or Release. The Borrower shall not Use or Release, or
              permit the Use or Release of, Hazardous Materials at any Project
              other than in compliance with all applicable Environmental Laws
              and where such Use or Release could not reasonably be expected to
              result in a Material Adverse Effect.

       (b)    Investigation. The Borrower shall conduct and complete any
              investigation, study, sampling and testing and undertake any
              cleanup, removal, remedial or other action necessary to remove and
              clean up all Hazardous Materials Released at, on, in, under or
              from any Project, to the extent required by and consistent with
              the requirements of all applicable Environmental Laws except where
              failure to conduct or complete such clean-up, removal, remedial or
              other action could not reasonably be expected to result in a
              Material Adverse Effect.

       (c)    Environmental Claim. The Borrower shall deliver to the
              Administrative Agent and each Lender:


                                      -53-


              (i)    promptly upon obtaining knowledge of: (A) any fact,
                     circumstance, condition or occurrence that could form the
                     basis of an Environmental Claim arising with respect to any
                     Project or against such Project, the Borrower or, in
                     connection with its involvement in any Project, any other
                     Environmental Party, in each case, which could reasonably
                     be expected to have a Material Adverse Effect; or (B) any
                     pending or threatened material Environmental Claim arising
                     with respect to any Project or against such Project, the
                     Borrower or, in connection with its involvement in any
                     Project, any other Environmental Party, a notice thereof
                     describing the same in reasonable detail and, together with
                     such notice or as soon thereafter as practicable, a
                     description of the action that the Borrower has taken or
                     proposes to take with respect thereto and, thereafter, from
                     time to time such detailed reports with respect thereto as
                     the Administrative Agent or any Lender (through the
                     Administrative Agent) may reasonably request; and

              (ii)   promptly upon their becoming available, copies of all
                     material written communications with any Government
                     Authority relating to any violation or alleged violation of
                     any Environmental Law or any Environmental Claim relating
                     to any Project.

8.05   INSURANCE; EVENTS OF LOSS.

       (a)    Insurance Maintained by the Borrower. The Borrower shall keep its
              present and future properties and business insured as required by
              and in accordance with the terms and conditions described in
              Schedule IV.

       (b)    Compromise, Adjustment or Settlement. The Administrative Agent
              shall be entitled at its option to participate in any compromise,
              adjustment or settlement in connection with any Event of Loss
              under any policy or policies of insurance or any proceeding with
              respect to any condemnation (including a Condemnation) or other
              taking of Property of the Borrower in excess of $1,000,000. The
              Borrower shall, within five Business Days after request therefor,
              reimburse the Administrative Agent for all reasonable
              out-of-pocket expenses (including reasonable attorneys' and
              experts' fees) incurred by the Administrative Agent in connection
              with such participation. The Borrower shall not make any
              compromise, adjustment or settlement in connection with any such
              claim without the approval of the Administrative Agent, which
              approval shall not unreasonably be withheld, conditioned or
              delayed. The Borrower shall diligently pursue all claims and
              rights to compensation against all relevant insurers and/or
              Government Authorities, as applicable, in respect of any Event of
              Loss.

       (c)    Loss Proceeds. In the event that the Borrower receives any amount
              of Loss Proceeds in respect of any Event of Loss, the Borrower
              shall deposit the amount


                                      -54-


              of such Loss Proceeds in the Restoration Sub-Account. In the event
              that the Borrower receives any amount of proceeds of business
              interruption insurance and other payments received for
              interruption of operations in respect of any Event of Loss, the
              Borrower shall deposit the amount of such proceeds in the Revenue
              Account. In the event that the amount of such Loss Proceeds with
              respect to any Event of Loss is $2,500,000 or less, such amounts
              shall be made available to the Borrower for the purpose of
              Restoring the Affected Property and shall be applied by the
              Borrower to the payment of the cost of the Restoration of the
              Affected Property. In the event that the amount of such Loss
              Proceeds with respect to any Event of Loss is greater than
              $2,500,000, such amounts shall be made available to the Borrower
              from time to time in accordance with paragraph (d) and shall be
              applied by the Borrower to the payment of the cost of the
              Restoration of the Affected Property.

              In the event that the relevant Event of Loss has caused a Project
              to be declared a total loss by its insurers, the Loss Proceeds
              with respect to such Event of Loss shall be promptly applied by
              the Administrative Agent in accordance with Section 3.04.

       (d)    Restoration. Amounts to be made available to the Borrower from the
              Restoration Sub-Account to be applied to the Restoration of
              Affected Property following any Event of Loss ("RESTORATION WORK")
              shall be remitted to the Borrower by the Administrative Agent, in
              the event that the amount of Loss Proceeds with respect to such
              Event of Loss is greater than $2,500,000, subject to the
              satisfaction of the following conditions:

              (i)    in the event that the amount of Loss Proceeds with respect
                     to such Event of Loss is less than or equal to $5,000,000,
                     the Borrower has delivered to the Administrative Agent
                     plans and specifications for the Restoration Work,
                     including reasonable estimates of the costs and time
                     required to complete such Restoration Work ("RESTORATION
                     PLANS") and has certified in writing to the Administrative
                     Agent that the conditions set out in paragraphs (ii)(B),
                     (C), (E) and (F) below have been satisfied; and

              (ii)   in the event that the amount of Loss Proceeds with respect
                     to such Event of Loss is greater than $5,000,000:

                     (A)    the Borrower shall have delivered the relevant
                            Restoration Plan to the Administrative Agent and the
                            Independent Engineer;

                     (B)    the Restoration Plans provide for Restoration Work
                            that is technically feasible and will, upon
                            completion thereof, result in the Project being at
                            least equal in value, general


                                      -55-


                            utility and levels of performance as the Project
                            prior to the Event of Loss;

                     (C)    the Restoration Plans provide for the Restoration
                            Work to be completed within the period covered by
                            business interruption insurance, plus any additional
                            period agreed between the Borrower and the
                            Administrative Agent (after consultation with the
                            Independent Engineer) for a cost not to exceed the
                            relevant Loss Proceeds plus any necessary additional
                            funds ("ADDITIONAL RESTORATION FUNDS") to be
                            contributed towards such Restoration from: (I)
                            amounts then on deposit in the Revenue Account that
                            are distributable in accordance with Section 8.13,
                            which amounts shall be transferred to the
                            Restoration Sub-Account; or (II) cash actually
                            deposited into the Restoration Sub-Account by a
                            Person other than the Borrower;

                     (D)    the Independent Engineer shall have delivered to the
                            Administrative Agent and the Lenders a certificate
                            to the effect that the amount of Loss Proceeds with
                            respect to such Event of Loss that has been
                            deposited in the Restoration Sub-Account together
                            with any Additional Restoration Funds, business
                            interruption insurance proceeds relating thereto and
                            any projected revenues from the Project are
                            sufficient to Restore the Affected Property and to
                            pay all Operation and Maintenance Expenses and all
                            maintenance expenditures for such affected Project
                            and Debt Service, in each case during the period of
                            time that is required, in the opinion of the
                            Independent Engineer, to Restore the Affected
                            Property (the "RECONSTRUCTION PERIOD");

                     (E)    no Event of Default could reasonably be expected to
                            occur during Restoration as a consequence of
                            Restoration Work, assuming that Restoration Work on
                            such Project proceeds in accordance with the
                            Restoration Plan;

                     (F)    the Property constituting the Restoration Work shall
                            be subject to the Lien of the Security Documents
                            (whether by amendment to the Security Documents or
                            otherwise) free and clear of all Liens other than
                            Permitted Liens; and

                     (G)    Each request by the Borrower for a disbursement of
                            funds from the Restoration Sub-Account shall be made
                            on 10 days' prior written notice to the
                            Administrative Agent,


                                      -56-


                            Collateral Agent and the Depositary Bank and shall
                            be accompanied by: (I) a certificate of each of an
                            Authorized Officer of the Borrower and the
                            Independent Engineer that: (1) all of the
                            Restoration Work completed has been done
                            substantially in compliance with the Restoration
                            Plan therefor; (2) the sum requested is required to
                            pay, or to reimburse the Borrower for, costs
                            incurred in connection with such Restoration Work
                            (giving a brief description of the services and
                            materials provided in connection with such
                            Restoration Work); (3) the sum requested, when added
                            to all Loss Proceeds and Additional Restoration
                            Funds with respect to the relevant Event of Loss
                            previously paid out by the Depositary Bank, does not
                            exceed the cost of the Restoration Work done as of
                            the date of such certificate; and (4) the amount of
                            Loss Proceeds with respect to the relevant Event of
                            Loss remaining in the Restoration Sub-Account,
                            together with any remaining Additional Restoration
                            Funds, will be sufficient to complete the
                            Restoration Work (giving an estimate of the cost of
                            such completion in such reasonable detail as the
                            Administrative Agent may reasonably request); (II) a
                            certificate of an Authorized Officer of the Borrower
                            certifying that no Default or Event of Default shall
                            have occurred and is continuing at such date; and
                            (III) partial lien waivers executed by each
                            contractor and major subcontractor involved in the
                            Restoration Work that shall cover all labor,
                            materials (including equipment and fixtures of all
                            kinds), supplies or services done, performed or
                            furnished at, for or to the relevant Project in
                            connection with the Restoration Work performed to
                            the date of such payment.

              Once such Restoration Work is complete (such completion to be
              evidenced by a certificate of the Borrower delivered to the
              Administrative Agent, the Collateral Agent and the Depositary
              Bank), any remaining relevant Loss Proceeds shall be applied as
              set out in Section 4.3 of the Depositary Agreement.

              If the Borrower shall at any time abandon the Restoration Work or
              otherwise fail to pursue the Restoration Work substantially in
              accordance with the Restoration Plans, then, to the extent that
              such Loss Proceeds shall not otherwise have been remitted as
              aforesaid to the Borrower, such Loss Proceeds shall promptly (at
              the direction of the Majority Lenders) be applied by the
              Administrative Agent in accordance with Section 3.04(a). Anything
              to the contrary in this Section 8.05 notwithstanding, if as the
              result of such Event of Loss or Restoration Work an Event of
              Default shall have occurred and be continuing, the Administrative
              Agent




                                      -57-


              may instruct the Depositary Bank to apply any amount of such Loss
              Proceeds in the Restoration Sub-Account in accordance with Section
              3.05.

8.06   PROCEEDINGS. The Borrower shall, promptly upon: (a) obtaining knowledge
       of any action, suit or proceeding at law or in equity by or before any
       Government Authority, arbitral tribunal or other body pending or
       threatened against or otherwise affecting the Borrower or any other Major
       Project Party or any of such Person's Property, any Transaction Document,
       any Project or the Collateral, in each case that could reasonably be
       expected to result in a Material Adverse Effect; or (b) becoming aware of
       any other circumstance, act or condition (including the adoption,
       amendment or repeal of any Government Rule or the Impairment of any
       Government Approval or notice (whether formal or informal, written or
       oral) of the failure to comply with the terms and conditions of any
       Government Approval) that could reasonably be expected to result in a
       Material Adverse Effect, in each case, furnish to the Administrative
       Agent a notice of such event describing the same in reasonable detail
       and, together with such notice or as soon thereafter as practicable, a
       description of the action that the Borrower or such other Major Project
       Party has taken and, with respect to the Borrower, proposes to take with
       respect thereto.

8.07   TAXES. The Borrower shall pay and discharge all Taxes imposed on it or on
       its income or profits or on any of its Property or on any Transaction
       Document prior to the date on which penalties attach thereto and prepare
       and file Tax returns on or before their due date.

8.08   BOOKS AND RECORDS. The Borrower shall keep proper books of record and
       accounts in accordance with Accounting Principles applicable to it and
       permit representatives of either Agent, upon reasonable notice, to visit
       and inspect its properties, to examine, copy or make excerpts from its
       books, records and documents and to discuss its affairs, finances and
       accounts with its principal officers during normal business hours and at
       such intervals as either Agent may reasonably request. The Borrower shall
       notify the Agents of any change in its independent accountants. The
       Independent Engineer shall have the right to inspect any Project in order
       to perform its obligations under the Financing Documents, including, to
       witness and verify any acceptance tests and to discuss the Borrower's
       affairs with its principal officers and engineers, all at such reasonable
       times and at such intervals as the Independent Engineer may reasonably
       request. The Borrower shall at all times maintain and preserve a complete
       set of Plans and Specifications for each Project (and any Restoration
       Plans with respect to such Project) at such Project's Site, available for
       inspection by the Independent Engineer (in order to perform its
       obligations under the Financing Documents), the Agents and any Lender.

8.09   USE OF PROCEEDS. The Borrower shall utilize the proceeds of the Loans as
       provided in the second paragraph of this Agreement.

8.10   MAINTENANCE OF LIENS. The Borrower shall maintain and preserve the Liens

       created by the Security Documents and the priority thereof and shall from
       time to time execute or




                                      -58-


       cause to be executed any and all further instruments (including financing
       statements, continuation statements and similar statements with respect
       to any Security Document) reasonably requested by the Collateral Agent
       for such purposes. The Borrower shall promptly discharge, at the
       Borrower's cost and expense, any Lien (other than Permitted Liens) on the
       Collateral.

8.11   [INTENTIONALLY OMITTED].

8.12   PROHIBITION OF FUNDAMENTAL CHANGES.

       (a)    Merger or Consolidation. The Borrower shall not merge into or
              consolidate with, or acquire all or any substantial part of the
              assets or any class of stock or other ownership interests of, any
              other Person without the prior written consent of the Majority
              Lenders. The Borrower shall not convey, sell, lease, transfer or
              otherwise dispose of, in one transaction or a series of
              transactions, any assets except sales of (without duplication) (A)
              electrical energy or capacity or ancillary services pursuant to a
              PPA or otherwise in the ordinary course of its business; (B)
              assets in the ordinary course of its business, the proceeds of
              which do not in any year exceed the aggregate sum of $250,000 as
              to all Projects; and (C) assets made redundant by the Upgrade
              Project.

       (b)    No Acquisition. The Borrower shall not purchase or acquire any
              assets other than: (i) the purchase of assets reasonably required
              for the repair of the Defective Towers, and the Upgrade Project,
              in each case, in accordance with the respective plans therefor;
              (ii) the purchase of assets reasonably required in connection with
              Restoration of the Project in accordance with Section 8.05(d);
              (iii) the purchase of assets in the ordinary course of business as
              reasonably required in connection with the Project in accordance
              with the Project Documents and the Non-Material Project Contracts
              and as contemplated by the Closing Pro Forma or, if the Second
              Closing Date has occurred, the Upgrade Pro Forma; and (iv)
              Permitted Investments.

8.13   RESTRICTED PAYMENTS(a).

       The Borrower shall not, directly or indirectly, declare or make any other
       Restricted Payment unless each of the following conditions is satisfied
       both immediately before and after the date of payment thereof:

       (i)    the date of payment of such Restricted Payment shall be on or
              within 30 days after a Quarterly Date; provided that, if the
              Borrower has been precluded from making any Restricted Payment
              within such 30-day period solely as a consequence of the condition
              set out in paragraph (ii) below being unsatisfied during such
              period and such condition is subsequently satisfied, the Borrower

              may make such Restricted Payment on any date (the "EXTENDED



                                      -59-


              RESTRICTED PAYMENT DATE") within 10 days after the date such
              condition is first satisfied as long as all other conditions of
              this Section 8.13 are satisfied on and as of such Extended
              Restricted Payment Date;

       (ii)   no Default (other than any Default that (i) provides a cure period
              therefor of not less than 30 days, (ii) is reasonably capable of
              being remedied during such 30-day period, (iii) as to which the
              Borrower is diligently prosecuting or pursuing such remedy, and
              (iv) following the occurrence of which not more than 30 days have
              elapsed), or an Event of Default shall have occurred and shall be
              continuing or would result from the making of such Restricted
              Payment;

       (iii)  for any Quarterly Date on or prior to March 31, 2004, the
              Projected Debt Service Coverage Ratio shall be at least 1.20:1,
              and for any corresponding Quarterly Date thereafter, the Debt
              Service Coverage Ratio for the relevant Historical Computation
              Period shall be at least 1.20:1;

       (iv)   the balance on deposit in the Debt Service Reserve Account shall,
              on the date of payment of such Restricted Payment after giving
              effect thereto, be at least equal to the Debt Service Reserve
              Required Amount;

       (v)    the Restricted Payment shall only be made from and to the extent
              of Distributable Cash (as defined in the Depositary Agreement);
              and



       (vi)   each of the Administrative Agent and the Depositary Bank has
              received: (i) at least 10 days prior to the corresponding
              Quarterly Date and, if applicable, Extended Restricted Payment
              Date, a Distribution Certificate substantially in the form of
              Exhibit G.

       If any of the foregoing conditions to distribution are not satisfied, the
       relevant monies shall be applied as set out in Section 4.1 of the
       Depositary Agreement.

8.14   LIENS. The Borrower shall not create, incur, assume or suffer to exist
       any Lien on any of the Collateral or any of the other Property of the
       Borrower except Permitted Liens.

8.15   INVESTMENTS. The Borrower shall not make any Investments except Permitted
       Investments.

8.16   HEDGING ARRANGEMENTS. The Borrower shall, not later than 30 days
       following the Closing Date, enter into and at all times thereafter

       maintain in full force and effect one or




                                      -60-


       more Interest Rate Cap Agreements providing for the payment to the
       Borrower of an amount equal to the excess of the Eurodollar Rate minus
       (b) six percent (6%), and otherwise on terms reasonably acceptable to the
       Administrative Agent and the Borrower, with one or more hedge providers
       reasonably acceptable to the Administrative Agent and the Borrower, and
       in a notional equivalent amount at least equal to 60% of the principal
       amount of all Loans outstanding on any Quarterly Date prior to the Final
       Maturity Date.

8.17   INDEBTEDNESS. The Borrower shall not, directly or indirectly, create,
       incur, assume or otherwise be or become liable with respect to any
       Indebtedness except Permitted Indebtedness.

8.18   TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by this
       Agreement, the Borrower shall not, directly or indirectly, enter into any
       transaction directly or indirectly with or for the benefit of an
       Affiliate other than transactions that: (a) are in the ordinary course of
       business, including, without limitation, the Upgrade Project; (b) are on
       terms and conditions at least as favorable to the Borrower as would be
       obtainable at the time in a comparable "arm's-length" transaction with a
       Person other than an Affiliate; (c) would not result in any Default
       hereunder; and (d) are not otherwise prohibited hereunder.

8.19   NATURE OF BUSINESS. The Borrower shall not engage in any business other
       than the operation of the Projects as contemplated by the applicable
       Project Documents and Non-Material Project Contracts and as contemplated
       by the SIGC Lease.

8.20   MAINTENANCE OF PROPERTIES.

       (a)    Properties. The Borrower shall maintain and preserve all of its
              Properties necessary or useful in the proper conduct of its
              business in good working order and condition, ordinary wear and
              tear excepted, and in accordance with generally accepted prudent
              utility practices (and all other standards and requirements, to
              the extent more stringent, set out in any Project Document).

       (b)    Restoration. The Borrower shall Restore any of its Property now or
              hereafter the subject of an Event of Loss (whether or not insured
              against or insurable) except any of its Property that has been the
              subject of an Event of Loss that the Borrower determines in good
              faith (and, in relation to any Event of Loss for which the amount
              of the Loss Proceeds exceeds $2,000,000, with the approval of the
              Majority Lenders) not to be necessary to the conduct of its
              business.

       (c)    No Removal. The Borrower shall not permit all or any portion of
              any Project to be removed from such Project's Site (except in the
              ordinary course of business with respect to maintenance of
              components of such Project that is required to be conducted off of
              such Project's Site), demolished or materially altered; provided
              that spare parts and similar individual items of equipment may be

              moved from one Project to another Project as the Borrower may
              reasonably believe necessary.





                                      -61-


8.21   [INTENTIONALLY OMITTED]

8.22   PROJECT DOCUMENTS; ETC.

       (a)    Project Documents. The Borrower shall, unless prior written
              consent is obtained from the Majority Lenders: (i) perform and
              observe in all material respects all of its material covenants and
              obligations contained in each of the Project Documents to which it
              is a party; and (ii) except as permitted by Section 8.22(b): (A)
              take all reasonable and necessary action to prevent the
              termination or cancellation of any Project Documents in accordance
              with the terms thereof or otherwise; and (B) enforce against the
              relevant Project Party each material covenant or obligation of
              such Project Document in accordance with its terms, unless the
              failure to so comply could not reasonably be expected to result in
              a Material Adverse Effect. Anything in the foregoing to the
              contrary notwithstanding, the Borrower shall pay, or cause to be
              paid, when due, all claims for labor, material, supplies or
              services (under the Project Documents or otherwise) that, if
              unpaid, could by law result in a Mechanics' Lien; provided that:
              (A) in the event that, in accordance with the provisions of the
              relevant Project Document, any such claim may be paid in
              installments or may be deferred (whether or not interest shall
              accrue on the unpaid balance thereof), the Borrower may pay such
              claim in installments (together with accrued interest on the
              unpaid balance thereof, if any) as the same become due or prior to
              the end of such period of deferral; and (B) the Borrower shall
              have the right to contest the validity or amount of such claim.

       (b)    No Cancellation, Assignment, Etc. The Borrower shall not, without
              the prior written consent of the Majority Lenders:

              (i)    cancel or terminate any Project Document to which it is a
                     party or consent to or accept any cancellation or
                     termination thereof;

              (ii)   sell, assign (other than pursuant to the Security
                     Documents) or otherwise dispose of (by operation of law or
                     otherwise) any part of its interest in any Project
                     Document, except as permitted by Section 8.12;

              (iii)  waive any default under, or material breach of, any Project
                     Document or waive, fail to enforce, forgive, compromise,
                     settle, adjust or release any material right, interest or
                     entitlement, howsoever arising, under or in respect of any
                     Project Document or in any way vary, or agree to the
                     variation of, any material provision of such Project
                     Document or of the performance of any material covenant or

                     obligation by any other Person under any Project Document;



                                      -62-


              (iv)   exercise any "price reopener" or quantity adjustment
                     provisions or similar contractual adjustment provisions
                     (whether or not such provisions relate to price or
                     quantity) under any Project Document or act upon any "price
                     reopener" or quantity adjustment provisions or any such
                     similar contractual adjustment provisions under any Project
                     Document exercised by any other Project Party (except, in
                     each case, upon instructions of the Majority Lenders (after
                     Expert Consultation));

              (v)    petition, request or take any other legal or administrative
                     action that seeks, or may reasonably be expected, to Impair
                     any Project Document or amend, modify or supplement any
                     Project Document; or

              (vi)   amend, supplement or modify any Project Document (in each
                     case as in effect on the Closing Date (or if executed
                     subsequently, its execution date) other than as
                     contemplated by the Energy Services Agreement and as
                     thereafter amended, supplemented or modified in accordance
                     with this paragraph (b)) in any material respect.

       (c)    Additional Project Documents. The Borrower shall not enter into
              any Additional Project Document (other than Interest Rate Cap
              Agreements) without the prior approval of the Majority Lenders
              (such consent not to be unreasonably withheld or delayed) unless:
              (i) the terms of such Additional Project Document are in
              accordance with the terms of the then-current Annual Operating
              Plan and Budget; (ii) entering into such Additional Project
              Document could not reasonably be expected to have a Material
              Adverse Effect; (iii) the terms and conditions of such Additional
              Project Document are consistent with the Financing Documents; and
              (iv) the Borrower shall take (or cause to be taken) all action
              necessary to create and perfect the Lien and security interests of
              the Secured Parties thereon (including execution of all Ancillary
              Documents).

       (d)    Restrictions. The Borrower shall not enter into any contract or
              agreement (other than the Financing Documents and any Project
              Document related to the Upgrade Project) or take any other action
              that, directly or indirectly, restricts its ability to: (i) enter
              into amendments, modifications, supplements or waivers of any of
              the Transaction Documents; (ii) sell, transfer or otherwise
              dispose of its assets other than in the ordinary course of its
              business; (iii) create, incur, assume or suffer to exist any Lien
              upon any of its Property other than Permitted Liens; (iv) create,
              incur, assume, suffer to exist or otherwise become liable with
              respect to any Indebtedness other than Permitted Indebtedness; or
              (v) declare or make any Restricted Payment except in accordance
              with Section 8.13.

       (e)    Delivery of Documents. Promptly after the execution and delivery
              thereof, the Borrower shall furnish each Agent and the Lenders
              with: (i) copies (certified by


                                      -63-


              the Borrower) of: (A) all amendments, supplements, change orders
              or modifications of any Project Document to which such Person is a
              party; and (B) all Additional Project Documents to which it is a
              party; and (ii) all Ancillary Documents to which it is a party
              relating to any Additional Project Document.

       (f)    Fees Under O&M Contract. The Borrower and the Operator shall not,
              without the prior written consent of the Majority Lenders, permit
              "Extraordinary Operation Expenses" under and as defined in the O&M
              Contract to exceed $750,000 in any fiscal year of the Borrower.

8.23   ANNUAL OPERATING PLANS AND BUDGETS; OPERATING STATEMENTS.

       (a)    Annual Operating Plan and Budget.

              (i)    Scope of Annual Operating Plan and Budget. The Borrower
                     shall prepare and submit to the Administrative Agent (with
                     sufficient copies to permit distribution to each Lender and
                     the Independent Engineer), as and when required by this
                     Agreement, a consolidated annual operating plan and budget
                     for the Borrower for the upcoming Operating Year, including
                     operating and maintenance programs, capital expenditure
                     programs, and budgeted statements of income and sources and
                     uses of cash and balance sheets (the "ANNUAL OPERATING PLAN
                     AND BUDGET"). The Annual Operating Plan and Budget shall be
                     accompanied by a statement of a financial officer of the
                     Borrower to the effect that, to the best of such officer's
                     knowledge, such budget is a reasonable estimate for the
                     period covered thereby and is in compliance with the
                     requirements of this Section 8.23(a).

              (ii)   Contents. Each Annual Operating Plan and Budget shall
                     contain reasonable estimates of Project Revenues (broken
                     out by source), Operation and Maintenance Expenses,
                     Extraordinary Operation Expenses (as defined in the O&M
                     Contract (including a monthly breakdown thereof), capital
                     expenditures, projected working capital requirements of the
                     Borrower and production goals, including detailed
                     assumptions regarding the dispatch of each Project and
                     power prices, in each case, for each calendar month covered
                     by such Annual Operating Plan and Budget, based on the
                     reasonable projections at such time. Such projections shall
                     be based on all facts and circumstances then existing and
                     known to the Borrower and that reflect a reasonable
                     estimate of its future results for the upcoming Operating
                     Year and, in the case of its net income, the next
                     succeeding three (3) Operating Years. Each Annual Operating
                     Plan and Budget shall also address each Project's interface
                     requirements in relation to local utilities,


                                      -64-


                     proposed staffing levels and safety, regulatory and
                     environmental compliance programs. Each Annual Operating
                     Plan and Budget shall be prepared in good faith on the
                     basis of written assumptions stated therein which the
                     Borrower believes to be reasonable as to all factual and
                     legal matters material to such estimates.

              (iii)  Form of Annual Operating Plan and Budget. Unless otherwise
                     consented to by the Administrative Agent, which consent
                     shall not be unreasonably withheld, conditioned or delayed,
                     each Annual Operating Plan and Budget from year to year
                     shall be based on the same format as the "Data Import"
                     worksheet that is a part of the Closing Pro Forma and be
                     maintained on the same basis and provide sufficient detail
                     to permit a meaningful comparison to previous years.

              (iv)   At least 45 (but no more than 90) days prior to the end of
                     each Operating Year, the Borrower shall prepare and submit
                     to the Administrative Agent a draft Annual Operating Plan
                     and Budget for the upcoming Operating Year.

              (v)    Effectiveness and Approval of Annual Operating Plans and
                     Budgets. Subject to the following sentence, a draft Annual
                     Operating Plan and Budget shall become effective on the
                     first day of the relevant Operating Year. In relation to
                     any draft Annual Operating Plan and Budget delivered
                     pursuant to paragraph (iv) above in relation to a new
                     Operating Year, if: (A) expenses for the Operating Year
                     covered thereby for any Project exceed those set out for
                     such Project in the then-current Annual Operating Plan and
                     Budget by more than 10% on a consolidated basis; or (B)
                     actual expenditures for any Project in respect of Operation
                     and Maintenance Expenses in the then-current Operating Year
                     met the conditions set out in paragraph (b)(i)(B) below, in
                     each case: (I) the Borrower shall notify the Administrative
                     Agent thereof when submitting the draft Annual Operating
                     Plan and Budget pursuant to paragraph (a)(iv) above or (b)
                     below; and (II) Majority Lender approval of such draft
                     Annual Operating Plan and Budget shall be required, which
                     approval shall not unreasonably be withheld, conditioned or
                     delayed. If the Administrative Agent does not inform the
                     Borrower of the Majority Lenders' disapproval of the
                     submitted Annual Operating Plan and Budget within 30 days
                     after submission thereof to the Administrative Agent, such
                     Annual Operating Plan and Budget shall be deemed approved
                     by the Majority Lenders. If the Majority Lenders do not
                     approve an Annual Operating Plan and Budget, the
                     Administrative Agent shall


                                      -65-


                     advise the Borrower of the items that are disapproved and
                     the reason for such disapproval.

                     If all or any portion of an Annual Operating Plan and
                     Budget is disapproved, the Borrower shall adhere to all
                     approved aspects of such Annual Operating Plan and Budget.
                     With respect to those aspects of any Annual Operating Plan
                     and Budget that are not approved, the Annual Operating Plan
                     and Budget for the preceding Operating Year (if
                     applicable), adjusted (in relation to budgeted
                     expenditures) for inflation in a manner mutually acceptable
                     to the Borrower and the Administrative Agent (after Expert
                     Consultation), shall be applicable thereto (and shall for
                     all purposes hereof be deemed to be part of the approved
                     Annual Operating Plan and Budget for such Operating Year)
                     until such time as such aspects of the Annual Operating
                     Plan and Budget therefor have been approved by the Majority
                     Lenders.

              (vi)   O&M Contract Consistency. The Borrower shall ensure that
                     any budget or other applicable projection under the O&M
                     Contract is consistent with the Annual Operating Plan and
                     Budget hereunder (as modified from time to time hereunder).

       (b)    Operation and Maintenance Expenses.

              (i)    The Borrower shall not at any time during any Operating
                     Year make expenditures for any Project in respect of any
                     Operation and Maintenance Expenses for such Project in
                     excess of:

                     (A)    in the case of any line item or category of the
                            proposed Annual Operating Plan and Budget which is
                            not approved by the Majority Lenders (and until such
                            time as such amounts are so approved), the amounts
                            applicable thereto pursuant to the second paragraph
                            of paragraph (a)(v) above for the period from the
                            beginning of such Operating Year to the end of the
                            current month thereof;

                     (B)    in respect of all other such Operation and
                            Maintenance Expenses, any amount which would cause
                            the aggregate amount of such other expenditures to
                            exceed $250,000; or

                     (C)    solely in respect of the "Compromise Payment" under
                            and as defined in the Energy Services Agreement, an
                            aggregate amount exceeding $724,000;

                     in the case of (A) and (B), without having first proposed
                     an amendment to the then-current Annual Operating Plan and
                     Budget and the Majority


                                      -66-


                     Lenders having approved such amendment in accordance with
                     paragraph (ii) below; provided, however, that no such
                     approval shall be required for the "Compromise Payment"
                     referred to in the foregoing clause (C) or for Emergency
                     Operating Costs up to $1,000,000 per Project in any
                     Operating Year (prorated on the basis of a 365-day year for
                     any Operating Year which is less than a full calendar
                     year).

              (ii)   If at any time during any Operating Year: (A) Operation and
                     Maintenance Expenses to be paid by the Borrower during the
                     balance of such Operating Year exceed or could reasonably
                     be expected to exceed the allowance provisions of paragraph
                     (i) above; or (B) the Borrower believes such costs for the
                     balance of such year will exceed such allowance provisions,
                     in each case, the Borrower shall propose an amendment to
                     the then-current Annual Operating Plan and Budget (with
                     copies thereof delivered to the Administrative Agent and
                     the Independent Engineer). Such amendment shall become
                     effective on the date that such proposal is approved by the
                     Majority Lenders. At the time the Borrower submits such
                     proposal, the Borrower shall certify the purpose of such
                     amendment and that such amendment is reasonably necessary
                     or desirable for the operation and maintenance of the
                     Projects. If the Majority Lenders do not approve a proposed
                     amendment, the Administrative Agent shall advise the
                     Borrower of the items that are disapproved and the reason
                     for such disapproval. If all or any portion of a proposed
                     amendment is disapproved, the Borrower shall adhere to the
                     Operation and Maintenance Expenses included in the approved
                     Annual Operating Plan and Budget (subject to the allowance
                     provisions of paragraph (i) above).

      (c)     O&M Contract Operating Reports. The Borrower shall furnish to the
              Administrative Agent a copy of each Quarterly Operations Reports
              received by it pursuant to the terms of the O&M Contract which
              include: (i) technical performance of the Projects, including
              production, (ii) an accident incident report, (iii) safety and
              environmental compliance status, (iv) equipment operational
              status, (v) a summary of all major maintenance performed in the
              preceding quarter and that planned for the coming quarter,
              including a summary of Major Corrective Maintenance Work (as
              defined in the O&M Contract) performed in the preceding quarter,
              (vi) any other known conditions which may adversely affect the
              technical or financial performance of the Projects, and (vii) the


              incurrence or payment of any "Extraordinary Operation Expenses"
              under and as defined in the O&M Contract.

8.24   SPECULATIVE ACTIVITIES.


                                      -67-


       The Borrower shall not engage in any speculative activities. Nothing in
       this Section 8.24 shall prohibit the Borrower from entering into the
       Interest Rate Cap Agreements.

8.25   STATUS.

       (a)    The Borrower shall take, or cause to be taken, all action required
              to maintain the status of each of the Projects as a QF.

       (b)    The Borrower shall not take or permit any Affiliate to take, any
              action that would cause the Borrower: (i) to become regulated as a
              public utility under: (A) the FPA in a manner different than that
              contemplated by its Government Approvals set out on Schedule VI or
              any of its future Government Approvals regarding the rates of
              public utilities granted by FERC, such future Government Approvals
              not to be sought without the prior written consent of the Majority
              Lenders; or (B) any other material utility regulation under any
              Government Rule (excluding the FPA and the Government Rules
              promulgated thereunder), other than as set out on Schedule VI; or
              (ii) to become subject to any material utility regulation under
              any Government Rule, other than as set out on Schedule VI.

       (c)    Neither the Borrower nor any of its Affiliates shall take, or
              permit to be taken, any action that would cause the Borrower to be
              an "investment company" or a company "controlled" by an
              "investment company" within the meaning of the Investment Company
              Act of 1940.

8.26   UPDATED SURVEYS AND TITLE POLICY FOLLOWING UPGRADE PROJECT.

       (a)    Surveys. The Administrative Agent shall have received, no later
              than 100 days following completion of the Upgrade Project, a
              survey of the Site certified to the Borrower, the relevant Title
              Company and the Administrative Agent, updated, with respect to all
              relevant requirements and information required for the Initial
              Surveys under Section 6.01(f)(ii), to within 60 days of the date
              of receipt by the Administrative Agent.

       (b)    Title Policy. Promptly and in any event within 100 days after
              completion of the Upgrade Project, the Borrower shall cause the
              relevant Title Company to deliver to the Administrative Agent:

              (i)    an endorsement of the Title Policy issued in connection
                     with such Project deleting from the Title Policy: (A) any
                     exception in connection with pending disbursements; (B) any
                     exception with respect to unrecorded mechanics' and
                     materialmen's liens; and (C) any exception with respect to
                     survey matters; and

              (ii)   an abstractor's certificate or other title evidence showing

                     no Liens or other exceptions to the title of the Deed of


                     Trust Estate, other


                                      -68-

                     than Permitted Liens and those previously approved in
                     writing by the Administrative Agent.

8.27   ACCOUNTS. The Borrower shall not establish or maintain any account other
       than (a) the Accounts established and maintained pursuant to the
       Depositary Agreement and (b) any account that does not hold Project
       Revenues.

8.28   NO SUBSIDIARIES. The Borrower shall not form, establish, acquire or
       suffer to exist any Subsidiaries of the Borrower.

8.29   SCE CONSENT. The Borrower shall use commercially reasonable efforts to
       obtain and deliver to the Administrative Agent, on or prior to the date
       60 days following the Closing Date, an agreement among the Borrower, SCE
       and the Collateral Agent providing for the consent by SCE to the



       collateral assignment by the Borrower to the Collateral Agent of the
       Borrower's rights under each PPA.

                                   ARTICLE IX

                                EVENTS OF DEFAULT

9.01   EVENTS OF DEFAULT. Each of the following events shall be and constitute
       an "EVENT OF DEFAULT":

       (a)    The Borrower shall default in the payment when due hereunder of
              any principal of or interest on any Loan and such default shall
              continue unremedied for a period of three (3) Business Days after
              such amount first became due.

       (b)    The Borrower shall default in the payment when due of any amount
              payable by it hereunder or under any other Financing Document
              (other than amounts described in paragraph (a) above) and such
              default shall continue unremedied for a period of 30 days after
              such amount first became due.

       (c)    Any material representation, warranty or statement confirmed or
              made by the Borrower, the Sponsor or any other Major Project Party
              under any Financing Document or contained in any certificate,
              statement, notice or other document provided to any Financing
              Party under or pursuant to any Financing Document shall have been
              incorrect or misleading in any material respect when made or
              deemed to be made or (except if stated to have been made solely as
              of an earlier date) repeated.

       (d)    The Borrower shall default in the performance of any of its
              obligations under any of:

              (i)    Section 8.02(a); (solely in relation to the maintenance of

                     its existence); 8.03(a) (in relation to the first sentence
                     thereof);


                                      -69-


                     8.03(b) (solely in relation to the first sentence thereof);
                     8.03(c); 8.04(a); 8.04(b); 8.04(c); 8.05(a); 8.05(b) (other
                     than in relation to the provisions of the second sentence
                     thereof); 8.05(d) (solely in relation to the provisions of
                     the first and second sentences thereof); 8.07; 8.09; 8.12;
                     8.13 (and such default shall continue for a period of five
                     (5) consecutive Business Days); 8.15 (and such default
                     shall continue for a period of five (5) consecutive
                     Business Days); 8.16; 8.17; 8.19; 8.22(b); 8.22(c);
                     8.22(d); 8.24; 8.25; 8.26; 8.27; or 8.28; or any other
                     provision of any Financing Document and such continues for
                     more than thirty (30) consecutive days after the Borrower
                     should reasonably become aware of such default;

              (ii)   Section 4.01(a), (b),(c) and(g); 4.02 (provided, that
                     solely if the Borrower has no knowledge of the existence of
                     any financing statement referred to therein, no Event of
                     Default shall occur until the date 30 days after the filing
                     of such financing statement); 4.04(a), 4.09, or 4.15 of the
                     Borrower Security Agreement;

              (iii)  Section 1.2, 1.3, 1.6, 1.7, 1.8, 1.9, 1.14 or 1.18 of the
                     Deed of Trust; or

              (iv)   Sections 3.1(a), 3.1(b) or 4.3 of the Depositary Agreement.

       (e)    The Sponsor shall default in the performance of any of its
              obligations under Sections 4.01(a), 4.02, 4.03, 4.05, 4.06, 4.07,
              4.09 or 4.10 of the Pledge Agreement; or any other provision of
              the Pledge Agreement and such continues for more than thirty (30)
              consecutive days after the Borrower should reasonably become aware
              of such default.

       (f)    The Borrower or any other Major Project Party shall default in the
              performance of any material covenant or undertaking contained in
              any Project Document other than any obligation for the payment of
              money, which default continues beyond the shorter of the
              applicable period of grace specified therefor in such document or
              (i) ten (10) days, in the case of a payment default, or (ii) 30
              days, in the case of any other default provided that, if such
              other default (x) is not capable of being remedied with diligent
              effort within such 30-day period, and (y) is reasonably capable of
              being remedied and the Borrower is diligently prosecuting or
              pursuing such remedy, such other default shall not give rise to an
              Event of Default unless such other default shall continue
              unremedied for a period of ninety (90) days after an Authorized
              Officer of the Borrower becomes aware or reasonably should have
              become aware of such other default.

       (g)    The Borrower or the Sponsor shall: (i) admit in writing its
              inability to, or be generally unable to, pay its debts as such
              debts become due; (ii) apply for or consent to the appointment of,
              or the taking of possession by, a receiver,


                                      -70-


              custodian, trustee or liquidator of itself or of all or a
              substantial part of its Property; (iii) make a general assignment
              for the benefit of its creditors; (iv) commence a voluntary case
              under the Bankruptcy Code; (v) file a petition seeking to take
              advantage of any other law relating to bankruptcy, insolvency,
              reorganization, winding-up, or composition or readjustment of
              debts; (vi) fail to controvert in a timely and appropriate manner,
              or acquiesce in writing to, any petition filed against it in an
              involuntary case under the Bankruptcy Code; or (vii) take any
              corporate, limited liability company or partnership action for the
              purpose of effecting any of the foregoing.

       (h)    (i) A proceeding or case shall be commenced against the Borrower
              or the Sponsor, in each case without the application or consent of
              such Person, in any court of competent jurisdiction, seeking: (A)
              its liquidation, reorganization, dissolution or winding-up, or the
              composition or readjustment of its debts; (B) the appointment of a
              trustee, receiver, custodian, liquidator or the like of such
              Person or of all or any substantial part of its Property; or (C)
              similar relief in respect of such Person under any law relating to
              bankruptcy, insolvency, reorganization, winding-up, or composition
              or adjustment of debts, and, in each case, such proceeding or case
              shall continue undismissed, or an order, judgment or decree
              approving or ordering any of the foregoing shall be entered and
              continue unstayed and in effect, for a period of 90 or more days;
              or (ii) an order for relief against such Person shall be entered
              in an involuntary case under the Bankruptcy Code.

       (i)    Prior to the completion of its duties under all Transaction
              Documents to which it is a party, any of SCE, the Operator or
              Imperial Irrigation District shall: (i) admit in writing its
              inability to, or be generally unable to, pay its debts as such
              debts become due; (ii) apply for or consent to the appointment of,
              or the taking of possession by, a receiver, custodian, trustee or
              liquidator of itself or of all or a substantial part of its
              Property; (iii) make a general assignment for the benefit of its
              creditors; (iv) commence a voluntary case under the Bankruptcy
              Code; (v) file a petition seeking to take advantage of any other
              law relating to bankruptcy, insolvency, reorganization,
              winding-up, or composition or readjustment of debts; (vi) fail to
              controvert in a timely and appropriate manner, or acquiesce in
              writing to, any petition filed against it in an involuntary case
              under the Bankruptcy Code; or (vii) take any corporate or
              partnership action for the purpose of effecting any of the
              foregoing.

       (j)    (i) Prior to the completion of its duties under all Transaction
              Documents to which it is a party, a proceeding or case shall be
              commenced against any of SCE, the Operator or Imperial Irrigation
              District, without the application or consent of such Person, in
              any court of competent jurisdiction, seeking: (A) its liquidation,
              reorganization, dissolution or winding-up, or the composition or
              readjustment of its debts; (B) the appointment of a trustee,
              receiver, custodian, liquidator or the like of such Person or of
              all or any substantial part of its Property; or (C) similar relief
              in respect of such Person under any law relating to bankruptcy,
              insolvency,


                                      -71-


              reorganization, winding-up, or composition or adjustment of debts,
              and, in each case, such proceeding or case shall continue
              undismissed, or an order, judgment or decree approving or ordering
              any of the foregoing shall be entered and continue unstayed and in
              effect, for a period of 90 or more days; or (ii) an order for
              relief against such Person shall be entered in an involuntary case
              under the Bankruptcy Code.

       (k)    Any Person referred to in paragraph (g) or (h) above shall be
              terminated or dissolved (as a matter of Government Rule or
              otherwise), or proceedings shall be commenced by any Person
              seeking the termination or dissolution of any Person referred to
              in paragraph (g) or (h) above and such proceedings shall continue
              undismissed or unstayed for a period of 90 or more days (or such
              shorter period of time which such Person has pursuant to
              Government Rule to cause the dismissal of such proceeding or stay
              the effectiveness of any such order, judgment or decree).

       (l)    A judgment or judgments for the payment of money is rendered by
              one or more Government Authorities against the Borrower in an
              aggregate amount (less any amount that applicable insurers have
              acknowledged liability for) exceeding $500,000 in the aggregate,
              and the same shall not be discharged (or provision shall not be
              made for such discharge), or a stay of execution thereof shall not
              be procured, within 45 days from the date of entry thereof, and
              such Person shall not, within said period of 45 days, or such
              longer period during which execution of the same shall have been
              stayed, appeal therefrom and cause the execution thereof to be
              stayed during such appeal, or any action shall be taken by a
              judgment creditor to attach or levy upon any assets of such Person
              to enforce any such judgment.

       (m)    An ERISA Event shall have occurred that, in the opinion of the
              Administrative Agent, when taken together with all other ERISA
              Events that have occurred, could reasonably be expected to result
              in a Material Adverse Effect.

       (n)    (i) Any Environmental Claim arising with respect to the
              Development of any Project shall have been asserted against such
              Project, the Borrower or the Operator or, in connection with its
              involvement with the Development of a Project, any other
              Environmental Party which, if adversely determined, could
              reasonably be expected to have a Material Adverse Effect; or (ii)
              any Release or Use of any Hazardous Materials at, on, under or
              from such Project shall have occurred which could reasonably be
              expected to have a Material Adverse Effect.

       (o)    Any Indebtedness of the Borrower in excess of $500,000 is not paid
              when due (after giving effect to any grace period applicable
              thereto), becomes due and payable by reason of any default or
              event of default with respect thereto (howsoever described), or
              could under the terms of the documentation evidencing such
              Indebtedness (after giving effect to any grace period applicable
              thereto)


                                      -72-


              become due and payable by reason of any default or event of
              default with respect thereto (howsoever described).

       (p)    (i) The Borrower, the Sponsor, SCE, the Operator or Imperial
              Irrigation District shall fail to obtain, renew, maintain or
              comply with all Government Approvals as shall now or hereafter be
              necessary or desirable; or (ii) any Government Approval related to
              any Project shall be Impaired or shall cease to be in full force
              and effect; or (iii) any action, suit, proceeding or investigation
              shall be commenced by or before any Government Authority that
              could reasonably to expected to result in the Impairment of any
              such Government Approval and such action, suit, proceeding or
              investigation is not dismissed or terminated within 90 days and,
              in each such case, such failure, Impairment, cessation or
              commencement could reasonably be expected to have a Material
              Adverse Effect.

       (q)    (i) Except as expressly contemplated pursuant to paragraph (u)
              below, any material provision of any Transaction Document shall at
              any time for any reason cease to be valid and binding or in full
              force and effect; or (ii) except as expressly contemplated
              pursuant to paragraph (u) below, any Transaction Document shall be
              Impaired in whole or part; or (iii) the validity or enforceability
              of any Transaction Document shall be contested by any party
              thereto (other than either Agent or the Lenders) or any Government
              Authority; or (iv) the Borrower, the Sponsor, SCE, the Operator or
              Imperial Irrigation District shall deny that it has any or further
              liability or obligation under any Transaction Document and, in
              each such case, such cessation, Impairment, contest or denial
              could reasonably be expected to have a Material Adverse Effect.

       (r)    Any Security Document shall cease to be in full force and effect
              or to be effective to grant a perfected Lien to the Collateral
              Agent for the benefit of the Secured Parties, on any part of the
              Collateral described therein having value in excess of $100,000 in
              the aggregate with the priority purported to be created thereby
              subject to the rules and regulations of the BLM.

       (s)    Any Material Adverse Effect shall occur and be continuing.

       (t)    One or more judgments or decrees is entered against the Borrower
              in the form of an injunction or other similar relief requiring
              suspension or abandonment of the Development of any Project (or a
              material portion thereof) for a continuous period of at least 90
              days, and such judgment or decree is not vacated, discharged or
              stayed or bonded pending appeal within 90 days (or any shorter
              appeal period as is available under applicable Government Rules
              from the date of entry thereof).

       (u)    The Borrower or the Operator ceases to carry on or suspends all or
              substantially all of its activities in connection with the
              Development of a Project or otherwise abandons or permits the
              abandonment of its Project, in each case for a period of 45 days
              or more, other than where the cessation or suspension is for bona
              fide


                                      -73-


              operational reasons or due to an event of force majeure and the
              Borrower is using commercially reasonable efforts to commence or
              recommence such construction or operation.



       (v)    The Tower Repairs fail to be substantially completed on or prior
              to July 1, 2003.

9.02   RIGHTS UPON AN EVENT OF DEFAULT. Upon the occurrence and during the
       continuation of an Event of Default:

       (a)    the Administrative Agent may, and, upon request of the Majority
              Lenders, shall, by notice to the Borrower and the Collateral
              Agent, terminate the Commitments and/or declare the principal
              amount then outstanding of, and the accrued interest on, the Loans
              and all other amounts payable by the Borrower hereunder and under
              the Notes (including, without limitation, any amounts payable
              under Section 5.05 or 5.06) to be forthwith due and payable,
              whereupon such amounts shall be immediately due and payable
              without presentment, demand, protest or other formalities of any
              kind, all of which are hereby expressly waived by the Borrower;
              and

       (b)    in the case of the occurrence of an Event of Default referred to
              in paragraph (g) or (h) above with respect to the Borrower, the
              Commitments shall automatically be terminated and the principal
              amount then outstanding of, and the accrued interest on, the Loans
              and all other amounts payable by the Borrower hereunder and under
              the Notes (including any amounts payable under Section 5.05 or
              5.06) shall automatically become immediately due and payable
              without presentment, demand, protest or other formalities of any
              kind, all of which are hereby expressly waived by the Borrower.

         Notwithstanding anything else provided herein, upon the occurrence and
         during the continuance of an Event of Default, the Collateral Agent may
         exercise any and all remedies available to it under law or equity and
         any Lender may exercise any right of set-off available to it. Without
         limiting the foregoing, remedies under any Security Document may only
         be exercised by the Collateral Agent, although any Secured Party shall
         have the right (but not the obligation) to cure any default under a



         Security Document subject to the rules and regulations of the BLM.

                                   ARTICLE X

                                   THE AGENTS

10.01  APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby appoints and
       authorizes each of the Administrative Agent and the Collateral Agent to
       act as its agent hereunder and under the other Financing Documents to
       which such Agent is or becomes a party with such powers as are

       specifically delegated to such Agent by the terms of this


                                      -74-


       Agreement and of such other Financing Documents, together with such other
       powers as are reasonably incidental thereto. Each Agent (which term as
       used in this sentence and in Section 10.05 and the first sentence of
       Section 10.06 shall include reference to its Affiliates and its own and
       its Affiliates' officers, directors, employees, representatives,
       attorneys and agents):

       (a)    shall have no duties or responsibilities except those expressly
              set out in this Agreement and in the other Financing Documents to
              which such Agent is or becomes a party, and shall not by reason of
              this Agreement or any such other Financing Document be a trustee
              for any Lender or subject to any fiduciary or other implied
              duties, regardless of whether a Default has occurred and is
              continuing;

       (b)    shall not be responsible to the Lenders for any recitals,
              statements, representations or warranties contained in this
              Agreement or in any other Financing Document, or in any
              certificate or other document referred to or provided for in, or
              received by any of them under, this Agreement or any other
              Financing Document, or for the value, validity, effectiveness,
              genuineness, enforceability or sufficiency of this Agreement or
              any other Financing Document or any other document referred to or
              provided for herein or therein, or for the validity or sufficiency
              of the security afforded hereby or thereby, or for any failure by
              the Borrower or any other Person to perform any of its obligations
              hereunder or thereunder;

       (c)    shall not, except (in the case of the Collateral Agent) to the
              extent expressly instructed by the Majority Lenders with respect
              to collateral security under the Security Documents, be required
              to initiate or conduct any litigation or collection proceedings
              hereunder or with respect hereto or under, or with respect to, any
              other Financing Document;

       (d)    shall not be liable or responsible for any action taken, suffered
              or omitted to be taken by it hereunder or under, or with respect
              to, any other Financing Document or under any other document or
              instrument referred to or provided for herein or therein or in
              connection herewith or therewith, except for its own gross
              negligence or willful misconduct as finally determined by a court
              of competent jurisdiction; and

       (e)    shall not be required to take any action which is contrary to the
              Financing Documents or applicable Government Rules.

       Each Agent may employ agents, experts and attorneys-in-fact and shall not
       be responsible for the negligence or misconduct of any such agents,
       experts or attorneys-in-fact selected by it in good faith. The
       Administrative Agent may deem and treat the payee of any Note as the
       holder thereof for all purposes hereof unless and until a notice of the
       assignment or transfer thereof shall have been filed with the


       Administrative


                                      -75-


       Agent, together with the consent of the Borrower to such assignment or
       transfer (to the extent provided in Section 11.06(b)).

10.02  RELIANCE BY AGENTS. Each Agent shall be entitled to rely upon, and shall
       not incur any liability for relying upon, any certification, notice or
       other written communication (including any thereof by telex, telegram or
       cable) reasonably believed by it to be genuine and correct and to have
       been signed or sent by or on behalf of the proper Person or Persons, and
       upon advice and statements of legal counsel, independent accountants and
       other experts selected by such Agent. Each Agent may also rely upon any
       statement made to it orally or by telephone and believed by it to be made
       by the proper Person, and shall not incur any liability for relying
       thereon. As to any matters not expressly provided for by this Agreement
       or any other Financing Document to which an Agent is intended to be a
       party, such Agent shall in all cases be fully protected in acting, or in
       refraining from acting, hereunder or thereunder in accordance with
       instructions given by the Majority Lenders or all of the Lenders as is
       required in such circumstance, and such instructions of such Lenders and
       any action taken, suffered or omitted or failure to act pursuant thereto
       shall be binding on all of the Lenders.

       Without limiting the foregoing, each Agent shall be entitled to advice of
       counsel and other professionals concerning all matters of trust and its
       duty hereunder, but no Agent shall be answerable or responsible for the
       professional malpractice of any attorney-at-law or certified public
       accountant or for the acts or omissions of any other professional in
       connection with the rendering of professional advice in accordance with
       the terms of this Agreement, if such attorney-at-law, certified public
       accountant or other professional was selected by such Agent with due
       care.

10.03  DEFAULTS. Each Agent shall be deemed not to have knowledge or notice of
       the occurrence of a Default (other than, in the case of the
       Administrative Agent, the non-payment of principal of or interest on
       Loans or of commitment fees payable to the Administrative Agent and, in
       the case of each Agent, fees payable to it under Financing Documents)
       unless such Agent has received notice from a Lender or the Borrower
       specifying such Default and stating that such notice is a "Notice of
       Default". In the event that any Agent receives such a notice of the
       occurrence of a Default, such Agent shall give prompt notice thereof to
       the Lenders (and, in the case of the Administrative Agent, shall give
       each Lender prompt notice of each such non-payment) and the other Agent.
       Each Agent shall (subject to Section 10.07) take such action with respect
       to such Default as shall be directed by the Majority Lenders or, if
       provided herein, all of the Lenders, as applicable; provided that, unless
       and until such Agent shall have received such directions, such Agent may
       (but shall not be obligated to) take such action, or refrain from taking
       such action, with respect to such Default as it shall deem advisable in
       the best interest of the Lenders except to the extent that this Agreement
       expressly requires that such action be taken, or not be taken, only with
       the consent or upon the authorization of the Majority Lenders or all of
       the Lenders, as applicable.

                                      -76-


10.04  RIGHTS AS A LENDER. With respect to its Commitments and the Loans made by
       it, United (and any successor acting as Administrative Agent or
       Collateral Agent) in its capacity as a Lender hereunder shall have the
       same rights and powers hereunder as any other Lender and may exercise the
       same as though it were not acting as the Administrative Agent or the
       Collateral Agent, and the term "Lender" or "Lenders" shall, unless the
       context otherwise indicates, include United in its individual capacity.
       United (and any successor acting as Administrative Agent or Collateral
       Agent, as applicable) and its Affiliates may (without having to account
       therefor to any Lender) accept deposits from, lend money to and generally
       engage in any kind of banking, trust or other business with the Borrower
       (and any of its Affiliates) as if it were not acting as the
       Administrative Agent or the Collateral Agent, as applicable, and United
       (and any successor acting as Administrative Agent or Collateral Agent, as
       applicable) and its Affiliates may accept fees and other consideration
       from the Borrower (and any of its Affiliates) for services in connection
       with this Agreement or otherwise without having to account for the same
       to the Lenders.

10.05  INDEMNIFICATION. The Lenders agree to indemnify each Agent (to the extent
       not reimbursed under Section 11.03, but without limiting the obligations
       of the Borrower under Section 11.03) ratably in accordance with the
       aggregate principal amount of the Loans held by the Lenders (or, if no
       Loans are at the time outstanding, ratably in accordance with their
       respective Commitments), for any and all liabilities, obligations,
       losses, damages, penalties, actions, judgments, fines, claims, demands,
       settlements, suits, costs, expenses or disbursements of any kind and
       nature whatsoever which may be imposed on, incurred by or asserted
       against such Agent (including by any Lender) arising out of or by reason
       of any investigation or in any way relating to or arising out of this
       Agreement or any other Transaction Document or any other documents
       contemplated by or referred to herein or therein or the transactions
       contemplated hereby or thereby (including the costs and expenses which
       the Borrower is obligated to pay under Section 11.03, but excluding,
       unless a Default has occurred and is continuing, normal administrative
       costs and expenses incident to the performance of its agency duties
       hereunder) or the enforcement of any of the terms hereof or thereof or of
       any such other documents; provided that no Lender shall be liable for any
       of the foregoing to the extent they arise from the gross negligence or
       willful misconduct (as finally determined by a court of competent
       jurisdiction) of the party to be indemnified. The obligations of the
       Lenders under this Section 10.05 shall survive the termination of this
       Agreement, the repayment of the Loans or the earlier resignation or
       removal of either Agent.

10.06  NON-RELIANCE ON AGENTS AND OTHER LENDERS. Each Lender agrees that it has,
       independently and without reliance on either Agent or any other Lender,
       and based on such documents and information as it has deemed appropriate,
       made its own credit analysis of the Borrower and its Affiliates and its
       own decision to enter into this Agreement and that it will, independently
       and without reliance upon either Agent or any other Lender, and based on
       such documents and information as it shall deem appropriate at the time,
       continue to make its own analysis and decisions in taking or not taking

       action under this Agreement or any other Transaction Document. No Agent


       shall be required to


                                      -77-


       keep itself informed as to the performance or observance by the Borrower
       or any other Person of this Agreement or any other Transaction Document
       or any other document referred to or provided for herein or therein or to
       inspect the Properties or books of the Borrower or such other Person.
       Except for notices, reports and other documents and information expressly
       required to be furnished to the Lenders by an Agent hereunder or under
       the Financing Documents, such Agent shall not have any duty or
       responsibility to provide any Lender with any credit or other information
       concerning the affairs, financial condition or business of the Borrower
       (or any Affiliate thereof) which may come into the possession of such
       Agent or any of its Affiliates.

10.07  FAILURE TO ACT. Except for action expressly required of an Agent
       hereunder and under the other Financing Documents to which such Agent is
       or becomes a party, such Agent shall in all cases be fully justified in
       failing or refusing to act hereunder and thereunder unless it shall
       receive further assurances to its satisfaction from the Lenders of their
       indemnification obligations under Section 10.05 against any and all
       liability and expense which may be incurred by it by reason of taking or
       continuing to take any such action. No provision of this Agreement shall
       require the Collateral Agent to expend or risk its own funds or otherwise
       incur financial liability in the performance of any of its duties
       hereunder or in the exercise of any of its rights or powers if it shall
       have reasonable grounds to believe that repayment of such funds or
       adequate indemnity against such risk or liability is not reasonably
       assured to it. Each Agent shall be entitled to interest (calculated on a
       per annum basis) on all amounts advanced by it hereunder in its
       discretion at the Federal Funds Rate. Each Agent shall at any time be
       entitled to cease taking any action if it no longer deems any indemnity
       or undertaking from the Lenders to be sufficient.

10.08  RESIGNATION OR REMOVAL OF AGENTS. Subject to the appointment and
       acceptance of a successor Agent as provided below, an Agent may resign at
       any time by giving notice thereof to the Lenders and the Borrower, and an
       Agent may be removed at any time with or without cause by the Majority
       Lenders. Upon any such resignation or removal, the Majority Lenders shall
       have the right to appoint, with the consent of the Borrower (unless a
       Default or Event of Default has occurred and is continuing), such consent
       not to be unreasonably withheld or delayed, a successor Agent. If no
       successor Agent shall have been so appointed by the Majority Lenders and
       shall have accepted such appointment within 30 days after the retiring
       Agent's giving of notice of resignation or the Majority Lenders' removal
       of the retiring Agent, then the retiring Agent, at its discretion, may,
       on behalf of the Lenders, appoint a successor Agent, which shall be a
       bank which has an office in New York, New York with capital, surplus and
       undivided profits of at least $500,000,000. Upon the acceptance of any
       appointment as Agent hereunder by a successor Agent, such successor Agent
       shall thereupon succeed to and become vested with all the rights, powers,
       privileges and duties of the retiring Agent, and the retiring Agent shall
       be discharged from its duties and obligations hereunder. After any
       retiring Agent's resignation or removal hereunder as Agent, the

       provisions of this Article X and Section 11.03 shall continue in effect


       for its benefit in respect of any actions taken,


                                      -78-


       suffered or omitted to be taken by it while it was acting as such Agent.
       Each Agent agrees not to resign solely as a result of the occurrence and
       continuance of a Default or an Event of Default.

10.09  CONSENTS. Except as otherwise provided in Section 11.04, each Agent may,
       with the prior written consent of the Majority Lenders (but not
       otherwise), consent to any modification, supplement or waiver under any
       Transaction Document; provided that, without the prior written consent of
       each Lender, the Collateral Agent shall not (except as provided herein or
       in the Security Documents) release any Collateral or otherwise terminate
       any Lien under any Security Document, or agree to additional obligations
       being secured by the Collateral (unless the Lien for such additional
       obligations shall be junior to the Lien in favor of the other obligations
       secured by such Security Document and is otherwise permitted hereunder)
       or alter the relative priorities of the obligations entitled to the
       benefits of the Liens created under the Security Documents with respect
       to any of the Collateral, except that no such consent shall be required,
       and the Collateral Agent is hereby authorized, to release any Lien
       covering the Borrower's Property that is the subject of a disposition of
       Property permitted under this Agreement or under the relevant Security
       Document or to which the Lenders have consented.

10.10  COLLATERAL AGENT. The Collateral Agent shall:

       (a)    forward promptly after receipt thereof (and use its best efforts
              to forward within five Business Days of such receipt): (i) to each
              Secured Party a copy of each document furnished to such Agent for
              such Secured Party under this Agreement, and any other Financing
              Documents to which such Agent is a party; and (ii) to the
              Administrative Agent any notice delivered to the Collateral Agent
              pursuant to any Consent and Agreement;

       (b)    have the right, but not the obligation, to: (i) refuse any item
              for credit to any Account except as required by the terms of the
              Financing Documents; (ii) refuse to honor any request for transfer
              in relation to any Account that is not consistent with the
              Financing Documents; (iii) charge to any Account all applicable
              charges; and (iv) pay fees, interest and other charges owing by
              the Borrower as provided herein and in the other Transaction
              Documents;

       (c)    except as otherwise provided herein and in the Depositary
              Agreement (including by the provision of standing instructions
              therein), and subject to the provisions of Section 10.07, take all
              actions and make all determinations with respect to the Collateral
              and the Security Documents, including as to the advisability of
              taking additional steps to perfect, or cause the perfection of,
              any security interest, as directed in writing by the
              Administrative Agent; and

       (d)    have the right at any time to seek clarification and instructions

              concerning the administration of the Financing Documents from the
              Administrative Agent, legal


                                      -79-




              counsel or any court of competent jurisdiction and shall be fully
              protected in relying upon such instructions.

                                   ARTICLE XI

                                  MISCELLANEOUS

11.01  WAIVER. No failure on the part of either Agent or any Lender to exercise
       and no delay in exercising, and no course of dealing with respect to, any
       right, power or privilege under this Agreement, any Note or any other
       Financing Document shall operate as a waiver thereof, and no single or
       partial exercise of any right, power or privilege under this Agreement,
       any Note or any other Financing Document shall preclude any other or
       further exercise thereof or the exercise of any other right, power or
       privilege. The remedies provided herein are cumulative and not exclusive
       of any remedies provided by law.

11.02  NOTICES. All notices, requests and other communications provided for
       herein and under the Financing Documents (including any modifications of,
       or waivers or consents under, this Agreement) shall be given or made in
       writing (including by telecopy) delivered to the intended recipient at
       the "Address for Notices" specified below its name on the signature pages
       hereof or, as to any party, at such other address as shall be designated
       by such party in a notice to each other party. Except as otherwise
       provided in this Agreement, all such communications shall be deemed to
       have been duly given when transmitted by telecopier with confirmation of
       receipt received or personally delivered or, in the case of a mailed
       notice, upon receipt, in each case given or addressed as aforesaid;
       provided, however, that if such transmission or delivery does not occur
       by 4:00 p.m. recipient's time, then such transmission or delivery shall
       be deemed to occur on the next Business Day.

11.03  EXPENSES; ETC.

       (a)    Expenses. The Borrower shall pay or reimburse each of the Lenders
              and each Agent for paying:

              (i)    all reasonable out-of-pocket costs and expenses of the
                     Agents (including the reasonable fees and expenses of: (A)
                     Bingham McCutchen LLP, special counsel to the Lenders; (B)
                     the Independent Engineer; (C) the Insurance Advisor; (D)
                     such other counsel or experts engaged by the Administrative
                     Agent at the request of the Majority Lenders (and, except
                     during the occurrence and continuation of a Default, with
                     the consent of the Borrower, such consent not to be
                     unreasonably withheld or delayed) from time to time; and
                     (E) counsel engaged by the Collateral Agent from time to
                     time with (except during the occurrence and continuation of

                     a Default) the consent of the Borrower, such


                                      -80-


                     consent not to be unreasonably withheld or delayed), in
                     each case in connection with: (I) the negotiation,
                     preparation, execution and delivery of this Agreement and
                     the other Transaction Documents and the extension of credit
                     hereunder; or (II) any amendment, modification or waiver of
                     any of the terms of this Agreement or any other Transaction
                     Document;

              (ii)   all reasonable costs and expenses of the Lenders and each
                     Agent (including reasonable counsels' fees and expenses and
                     reasonable experts' fees and expenses) in connection with:
                     (A) any Default and any enforcement or collection
                     proceedings resulting therefrom or in connection with the
                     negotiation of any restructuring or "work-out" (whether or
                     not consummated) of the obligations of the Borrower under
                     this Agreement or the obligations of any Project Party
                     under any other Transaction Document; and (B) the
                     enforcement of this Section 11.03;

              (iii)  all transfer, stamp, documentary or other similar taxes,
                     assessments or charges levied by any Government Authority
                     in respect of this Agreement or any other Transaction
                     Document or any other document referred to herein or
                     therein and all costs, expenses, taxes, assessments and
                     other charges incurred in connection with any filing,
                     registration, recording or perfection of any Lien
                     contemplated by this Agreement or any other Financing
                     Document or any other document referred to herein or
                     therein; and

              (iv)   all costs, expenses and other charges in respect of title
                     insurance procured with respect to the Liens created
                     pursuant to the Deed of Trust.

              In relation to payments referred to under clause (iii) above,
              within 30 days after paying such amount, the Borrower shall
              deliver to the Administrative Agent, evidence reasonably
              satisfactory to the Administrative Agent of such payment.

       (b)    Indemnity. The Borrower shall indemnify each Agent, each Lender,
              their respective Affiliates and their respective shareholders,
              officers, directors, employees, representatives, attorneys and
              agents (each, an "INDEMNITEE") from, and shall hold each of them
              harmless against, any and all losses, liabilities, claims,
              damages, expenses, obligations, penalties, fines, demands,
              settlements, actions, judgments, suits, costs or disbursements of
              any kind or nature whatsoever (including the reasonable fees and
              expenses of counsel and consultants for each Indemnitee in
              connection with any investigative, administrative or judicial
              proceeding commenced or threatened, whether or not such Indemnitee
              shall be designated a party thereto, but excluding any such
              losses, liabilities, claims, damages, expenses, obligations,
              penalties, actions, judgments, suits, costs or


                                      -81-


              disbursements incurred solely by reason of the gross negligence or
              willful misconduct of such Indemnitee) that may at any time
              (including at any time following the Termination Date) be imposed
              on, asserted against or incurred by any Indemnitee as a result of,
              or arising out of, or in any way related to or by reason of:

              (i)    any of the transactions contemplated hereby or by any other
                     Transaction Document or the execution, delivery or
                     performance of this Agreement or any other Transaction
                     Document;

              (ii)   the extensions of credit hereunder or the actual or
                     proposed use by the Borrower of any of the extensions of
                     credit hereunder or the grant to the Collateral Agent for
                     the benefit of, or to any of, the Secured Parties of any
                     Lien on the Collateral or on any other Property of the
                     Borrower, the Sponsor or any ownership interest in the
                     Borrower;

              (iii)  the exercise by the Collateral Agent or the other Secured
                     Parties of their rights and remedies (including
                     foreclosure) under any agreements creating any such Lien;
                     and

              (iv)   any Environmental Law (including any Lien filed against any
                     Project by or in favor of any Government Authority) as a
                     result of the past, present or future operations of the
                     Borrower, the Sponsor (as it relates to the Projects) or
                     the Operator (or any predecessor in interest to any such
                     person), or the past, present or future condition of any
                     site or facility owned, operated or leased at any time by
                     the Borrower, the Sponsor or the Operator (or any such
                     predecessor in interest to any such person), or any Release
                     or Use or threatened Release of any Hazardous Materials at
                     any such site or facility, that is not otherwise in
                     accordance with applicable Environmental Law, including any
                     such Release or Use or threatened Release which shall occur
                     during any period when such Indemnitee shall be in
                     possession of any such site or facility following the
                     exercise by either Agent or any other Secured Party of any
                     of its rights and remedies hereunder or under any Financing
                     Document or any other Transaction Document.

       (c)    Records. Each relevant Financing Party shall maintain in
              accordance with its usual practice records evidencing the amounts
              payable by the Borrower under this Section 11.03; provided that
              the failure of any Financing Party to maintain such records shall
              not in any manner affect the obligation of the Borrower to make


              such payments.

                                      -82-


11.04  AMENDMENTS; ETC. Except as otherwise expressly provided in this
       Agreement, any provision of this Agreement may be amended or modified
       only by an instrument in writing signed by each of the Borrower, the
       Administrative Agent, the Collateral Agent and the Majority Lenders, or
       by each of the Borrower and the Collateral Agent and the Administrative
       Agent acting with the consent of the Majority Lenders, and any provision
       of this Agreement may be waived by the Majority Lenders or by the
       Administrative Agent acting with the consent of the Majority Lenders;
       provided that:

       (a)    no amendment, modification or waiver shall, unless by an
              instrument signed by all of the Lenders or by the Administrative
              Agent acting with the consent of all of the Lenders: (i) increase
              or extend the term, or extend the time or waive any requirement
              for the reduction or termination, of the Commitments; (ii) extend
              the date fixed for the payment of principal of or interest on any
              Loan or any fee hereunder; (iii) reduce the amount of any such
              payment of principal; (iv) reduce the rate at which interest is
              payable thereon or any fee is payable hereunder; (v) alter the
              rights or obligations of the Borrower to prepay Loans; (vi) alter
              the manner in which payments or prepayments of principal, interest
              or other amounts hereunder shall be applied among the Lenders or
              Types or Classes of Loans; (vii) alter the terms of this Section
              11.04; (viii) amend the definition of the term "Majority Lenders"
              or modify in any other manner the number or percentage of the
              Lenders required to make any determinations or waive any rights
              hereunder or to modify any provision hereof; (ix) waive any of the
              conditions precedent set out in Section 6.01; or (x) release all
              or any material portion of the Collateral; and

       (b)    any amendment, modification, waiver or supplement of the rights or
              duties of either Agent hereunder shall require the consent of such
              Agent.

       Anything in this Agreement to the contrary notwithstanding, if at any
       time when the conditions precedent set out in Article VI to any extension
       of credit hereunder are, in the opinion of the Majority Lenders,
       satisfied, any Lender shall fail to fulfill its obligations to make such
       extension of credit, then, for so long as such failure shall continue,
       such Lender shall (unless the Majority Lenders, determined as if such
       Lender were not a "Lender" hereunder, shall otherwise consent in writing)
       be deemed for all purposes relating to amendments, modifications, waivers
       or consents under this Agreement or any other Financing Document
       (including under this Section 11.04 and under Section 10.09) to have no
       Loans or Commitments, shall not be treated as a "Lender" hereunder when
       performing the computation of Majority Lenders, and shall have no rights
       under the preceding paragraph of this Section 11.04.

       Anything in this Agreement to the contrary notwithstanding, no waiver or
       modification of any provision of this Agreement that has the effect
       (either immediately or at some later time) of enabling the Borrower to
       satisfy a condition precedent to the making of a Loan of any Class shall
       be effective against the Lenders making Loans of such Class for purposes
       of the Commitments of such Class unless the Majority Lenders making Loans

       of such Class shall have concurred with such waiver or modification, and


       no waiver or


                                      -83-


       modification of any provision of this Agreement or any other Financing
       Document that could reasonably be expected to adversely affect the
       Lenders making Loans of any Class in a manner that does not affect all
       Classes equally shall be effective against the Lenders making Loans of
       such Class unless the Majority Lenders making Loans of such Class shall
       have concurred with such waiver or modification.

11.05  SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to
       the benefit of the parties hereto and their respective successors and
       permitted assigns.

11.06  ASSIGNMENTS AND PARTICIPATIONS.

       (a)    Borrower. The Borrower may not assign its rights or obligations
              hereunder or under the Notes without the prior consent of all of
              the Lenders and the Administrative Agent.

       (b)    Lenders. Subject to the terms of clause (g) below, each Lender may
              assign any of its Loans, its Notes and its Commitments (but only
              with the consent of, in the case of an outstanding Commitment, the
              Administrative Agent, not to be unreasonably withheld) to an
              Eligible Assignee; provided that: (i) no such consent by the
              Administrative Agent shall be required in the case of any
              assignment to another Lender or an Affiliate (or Approved Fund) of
              a Lender; (ii) except in the case of an assignment to a Lender or
              an Affiliate (or Approved Fund) of a Lender or an assignment of
              the entire remaining amount of the assigning Lender's Commitments,
              any such partial assignment shall be in an amount at least equal
              to $5,000,000; and (iii) each assignment by a Lender of its
              Commitment, Loans or Note of a particular Class shall be made in
              such a manner so that the same portion of its Commitment, Loans
              and Note of such Class is assigned to the respective assignee.

              Upon execution and delivery by the assignee to the Borrower and
              the Administrative Agent of an instrument in writing pursuant to
              which such assignee agrees to become a "Lender" hereunder (if not
              already a Lender) having the Commitments and Loans specified in
              such instrument, and upon consent thereto by the Administrative
              Agent, to the extent required above, the assignee shall have, to
              the extent of such assignment (unless otherwise provided in such
              assignment with the consent of the Administrative Agent, to the
              extent required above), the obligations, rights and benefits of a
              Lender hereunder holding the Commitments and Loans (or portions
              thereof) assigned to it (in addition to the Commitments and Loans,
              if any, theretofore held by such assignee) and the assigning
              Lender shall, to the extent of such assignment, be released from
              the Commitments (or portion thereof) so assigned. Upon each such
              assignment (other than such an assignment by United), the

              assigning Lender shall pay the Administrative Agent an assignment
              fee of $3,000.


                                      -84-


              In furtherance of the foregoing, on the date of any such
              assignment pursuant to this Section 11.06(b), the Borrower shall
              deliver to the assigning Lender and the assignee Lender, in
              exchange for the Notes theretofore delivered by the Borrower to
              the assigning Lender, appropriately completed Notes, dated the
              effective date of such assignment, payable to such assigning
              Lender and to such assignee, in an aggregate amount equal to their
              respective Commitments after giving effect to such assignment, and
              otherwise duly completed.

              [Intentionally omitted.]

       (c)    Participants. A Lender may sell or agree to sell to one or more
              other Persons a participation in all or any part of any Loan held
              by it, or in its Commitments (provided that partial participations
              shall be in an amount at least equal to $5,000,000 or the entire
              remaining amount of the assigning Lender's Loans and Commitments,
              whichever is the lesser). Each purchaser of a participation (a
              "PARTICIPANT") shall be entitled to the rights and benefits of the
              provisions of Section 8.01(m) with respect to its participation in
              such Loans and Commitments as if (and the Borrower shall be
              directly obligated to such Participant under such provision as if)
              such Participant were a "Lender" for purposes of said Section,
              but, except as otherwise provided in Section 4.07(c), shall not
              have any other rights or benefits under this Agreement or any Note
              or any other Financing Document (the Participant's rights against
              such Lender in respect of such participation to be those set out
              in the agreements executed by such Lender in favor of the
              Participant). All amounts payable by the Borrower to any Lender
              under Article V in respect of Loans and its Commitments, shall be
              determined as if such Lender had not sold or agreed to sell any
              participations in such Loans and Commitments, and as if such
              Lender were funding each of such Loans and Commitments in the same
              way that it is funding the portion of such Loans and Commitments
              in which no participations have been sold. In no event shall a
              Lender that sells a participation agree with the Participant to
              take or refrain from taking any action hereunder or under any
              other Financing Document, except that such Lender may agree with
              the Participant that it will not, without the consent of the
              Participant, agree to: (i) increase or extend the term, or extend
              the time or waive any requirement for the reduction or
              termination, of such Lender's Commitment; (ii) extend the date
              fixed for the payment of principal of or interest on the related
              Loans or any portion of any fee hereunder payable to the
              Participant; (iii) reduce the amount of any such payment of
              principal; (iv) reduce the rate at which interest is payable
              thereon, or any fee hereunder payable to the Participant, to a
              level below the rate at which the Participant is entitled to
              receive such interest or fee; (v) alter the rights or obligations
              of the Borrower to prepay the related Loans; or (vi) consent to
              any modification or waiver hereof or of any Financing Document to
              the extent that the same, under Section 10.09 or 11.04, requires
              the consent of each Lender.



                                      -85-


              Notwithstanding anything else provided herein, no Person
              purchasing a participation in accordance with the terms hereof
              shall be considered a "Lender" for any purposes of the Financing
              Documents by reason of the purchase of such participation.

       (d)    Assignment to Federal Reserve Bank. Anything in this Section 11.06
              to the contrary notwithstanding, any Lender may (without notice to
              the Borrower, either Agent or any other Lender, and without
              payment of any fee) assign and pledge all or any portion of its
              Loans and its Notes to any Federal Reserve Bank as collateral
              security pursuant to Regulation A of the Board of Governors of the
              Federal Reserve System and any Operating Circular issued by such
              Federal Reserve Bank. No such assignment shall release the
              assigning Lender from its obligations hereunder.

       (e)    Information. A Lender may furnish any information concerning the
              Borrower in the possession of such Lender from time to time to
              assignees and participants (including prospective assignees and
              participants), subject, however, to the provisions of Section
              11.08.

       (f)    Assignment to Borrower. Anything in this Section 11.06 to the
              contrary notwithstanding, no Lender may assign or participate any
              interest in any Loan held by it hereunder to the Borrower or any
              of its Affiliates without the prior consent of each Lender.



       (g)    United. Notwithstanding anything to the contrary in this Section
              11.06, United shall not assign any interest in any Commitment or
              Loan such that at any time it shall cease to own less than 50.1%
              of the aggregate principal amount of the Loans from time to time
              outstanding.

11.07  MARSHALLING; RECAPTURE. None of the Administrative Agent, the Collateral
       Agent, or any Lender shall be under any obligation to marshal any assets
       in favor of the Borrower or any other party or against or in payment of
       any or all of the Secured Obligations. To the extent either Agent or any
       Lender receives any payment by or on behalf of the Borrower, which
       payment or any part thereof is subsequently invalidated, declared to be
       fraudulent or preferential, set aside or required to be repaid to the
       Borrower or its estate, trustee, receiver, custodian or any other party
       under any bankruptcy or insolvency law, state or Federal law, common law
       or equitable cause, then to the extent of such payment or repayment, the
       obligation or part thereof that has been paid, reduced or satisfied by
       the amount so repaid shall be reinstated by the amount so repaid and
       shall be included within the liabilities of the Borrower to such Agent or
       such Lender as of the date such initial payment, reduction or
       satisfaction occurred.

11.08  CONFIDENTIALITY. Each Lender and each Agent agrees (on behalf of itself
       and each of its Affiliates, directors, officers, employees and
       representatives) to keep confidential, any non-public information



       supplied to it by the Borrower pursuant to this Agreement that is



                                      -86-


       identified by the Borrower as being confidential at the time the same is
       delivered to such Lender or such Agent; provided that nothing herein
       shall limit the disclosure of any such information: (i) to the extent
       required by any Government Rule or judicial process; provided that,
       unless prohibited by applicable Government Rules or not reasonably
       practicable: (A) notice shall be given to the Borrower of such request;
       and (B) such Lender or such Agent, as applicable, shall reasonably
       cooperate with the Borrower to the extent the Borrower may seek to
       challenge such requirement, so long as the Borrower pays all costs of
       such challenge and the disclosing party determines that such challenge
       would not adversely affect it; (ii) to counsel for any of the Lenders or
       either Agent; (iii) to banking, securities exchange or other regulatory
       or supervisory authorities, auditors or accountants; (iv) to either Agent
       or any other Lender; (v) in connection with the exercise of any remedies
       hereunder or under any of the Financing Documents or any suit, action or
       proceeding relating to this Agreement or any other Financing Document or
       the enforcement of rights hereunder or thereunder; (vi) to the
       Independent Engineer, the Insurance Advisor or to other experts engaged
       by either Agent or any Lender in connection with this Agreement and the
       transactions contemplated hereby; (vii) to the extent that such
       information is required to be disclosed to a Government Authority in
       connection with a tax audit or dispute; (viii) in connection with any
       Default and any enforcement or collection proceedings resulting therefrom
       or in connection with the negotiation of any restructuring or "work-out"
       (whether or not consummated) of the obligations of the Borrower under
       this Agreement or the obligations of the Borrower, the Sponsor, the
       Operator or other Project Party under any other Transaction Document; or
       (ix) to any assignee or participant (or prospective assignee or
       participant) so long as such assignee or participant (or prospective
       assignee or participant) first executes and delivers to the respective
       Lender and the Borrower a confidentiality agreement pursuant to which it
       agrees to comply with the requirements of this Section 11.08.
       Notwithstanding the foregoing provisions of this Section 11.08(b), the
       foregoing obligation of confidentiality shall not apply to any such
       information that: (A) was known to any Lender or either Agent prior to
       the time it received such confidential information from the Borrower or
       its Affiliates pursuant to the Transaction Documents; or (B) becomes part
       of the public domain independently of any act of any Lender or either
       Agent not permitted hereunder (through publication or otherwise); or (C)
       is received by any Lender or either Agent, as applicable, without
       restriction as to its disclosure or use, from a Person other than the
       Borrower or its Affiliates; provided that such Lender or such Agent, as
       applicable has no actual knowledge that such source is disclosing such
       information to such Lender or such Agent, as applicable, in violation of
       a confidentiality agreement with respect to such information.

11.09  NON-RECOURSE. No recourse shall be had for the payment of any obligations
       under any Loan or upon any other obligation, covenant or agreement under
       this Agreement or any other Financing Document, against the Sponsor or
       any Affiliate thereof, any incorporator, direct or indirect stockholder,
       member, partner, officer, director, as such, whether past, present or
       future of the Sponsor or the Borrower or any Affiliate thereof or of any

       successor corporation thereto (either directly or through the Sponsor or
       the Borrower or a


                                      -87-


       successor corporation) (each hereinafter, a "NON-RECOURSE PERSON"),
       whether by virtue of any constitutional provision, statute or rule of
       law, or by the enforcement of any assessment or penalty or otherwise. It
       is expressly agreed and understood that:

       (a)    this Agreement and each other Financing Document are solely
              limited liability company obligations of the Borrower, and that no
              personal liability whatsoever shall attach to, or be incurred by,
              any Non-Recourse Person, either directly or indirectly through the
              Borrower or any successor Person, because of the indebtedness
              thereby authorized or under or by reason of any of the
              obligations, covenants or agreements contained in this Agreement
              or any of the Financing Documents or to be implied herefrom or
              therefrom; and



       (b)    any claim of or relating to such personal liability is hereby
              expressly waived and released as a condition of, and as part of
              the consideration for, the execution of this Agreement and each
              other Financing Document.

       Notwithstanding the foregoing, nothing in this Section 11.09 shall impair
       or in any way limit any liabilities or obligations of: (i) the Sponsor
       under or pursuant to its obligations as set forth in the Borrower Equity
       Interest Pledge; or (ii) any Non-Recourse Party for fraud or willful
       misconduct.

11.10  SURVIVAL. The obligations of the Borrower under Sections 5.01, 5.05, 5.06
       and 11.03, the obligations of the Lenders under Section 10.05 and the
       obligations of the Borrower and the Lenders under the penultimate
       sentence of Section 10.08 and under Section 11.08 shall survive after the
       Termination Date. In addition, each representation and warranty made, or
       deemed to be made by a notice of any Disbursement, herein or pursuant
       hereto shall survive the making of such representation and warranty, and
       no Lender shall be deemed to have waived, by reason of making any
       Disbursement hereunder, any Default that may arise by reason of such
       representation or warranty proving to have been false or misleading,
       notwithstanding that such Lender or either Agent may have had notice or
       knowledge or reason to believe that such representation or warranty was
       false or misleading at the time such Disbursement was made.

11.11  COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may be executed
       in any number of counterparts, all of which taken together shall
       constitute one and the same instrument and any party hereto may execute
       this Agreement by signing any such counterpart. This Agreement and the
       other Financing Documents constitute the entire agreement and
       understanding among the parties hereto with respect to matters covered by
       this Agreement and the other Financing Documents and supersede any and
       all prior agreements and understandings, written or oral, relating to the
       subject matter hereof. This Agreement shall become effective at such time
       as the Administrative Agent shall have received counterparts hereof
       signed by all of the intended parties hereto.


11.12  NO THIRD PARTY BENEFICIARIES IN RELATION TO DISBURSEMENTS. THE AGREEMENT


       OF THE LENDERS TO MAKE THE LOANS TO THE


                                      -88-


       BORROWER, ON THE TERMS AND CONDITIONS SET OUT IN THIS AGREEMENT, ARE
       SOLELY FOR THE BENEFIT OF THE BORROWER, AND NO OTHER PERSON (INCLUDING
       ANY AFFILIATE OF THE BORROWER, OR ANY PROJECT PARTY, CONTRACTOR,
       SUBCONTRACTOR, SUPPLIER, WORKMAN, CARRIER, WAREHOUSEMAN OR MATERIALMAN
       FURNISHING LABOR, SUPPLIES, GOODS OR SERVICES TO OR FOR THE BENEFIT OF
       ANY PROJECT) SHALL HAVE ANY RIGHTS HEREUNDER OR UNDER ANY OTHER FINANCING
       DOCUMENT AS AGAINST EITHER AGENT OR ANY LENDER OR WITH RESPECT TO ANY
       EXTENSION OF CREDIT CONTEMPLATED HEREBY.

11.13  GOVERNING LAW; SUBMISSION TO JURISDICTION, ETC. THIS AGREEMENT AND THE
       NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
       THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE
       NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
       SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN
       NEW YORK COUNTY (INCLUDING ANY APPELLATE DIVISION THEREOF), AND OF ANY
       OTHER APPELLATE COURT IN THE STATE OF NEW YORK, FOR THE PURPOSES OF ALL
       LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
       TRANSACTIONS CONTEMPLATED HEREBY (OTHER THAN ENFORCEMENT OF THE DEED OF
       TRUST). EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
       PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
       HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A
       COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
       BEEN BROUGHT IN AN INCONVENIENT FORUM.

11.14  WAIVER OF JURY TRIAL. EACH OF THE BORROWER, EACH AGENT AND EACH OF THE
       LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
       APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
       PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
       TRANSACTIONS CONTEMPLATED HEREBY.

11.15  SPECIAL EXCULPATION. NO CLAIM MAY BE MADE BY THE BORROWER, ANY OF ITS
       AFFILIATES, ANY PARTY TO THIS AGREEMENT OR THE AFFILIATES, SHAREHOLDERS,
       DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF ANY OF THEM
       AGAINST EITHER AGENT OR ANY LENDER OR THE AFFILIATES, SHAREHOLDERS,
       DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF ANY OF THEM FOR
       ANY SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE LOSS OR
       DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER
       THEORY OF LIABILITY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY

       OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR


       THEREBY, OR ANY ACT,


                                      -89-


       OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND THE BORROWER
       HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH
       DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO
       EXIST IN ITS FAVOR.

11.16  SERVICE OF PROCESS. Each party hereto hereby irrevocably consents to the
       service of process in any suit, action or proceeding in such courts by
       the mailing thereof by any of the other parties hereto by registered or
       certified mail, postage prepaid, to the "Address for Notices" specified
       below its name on the signature pages hereof.

11.17  SERVICE OF PROCESS. Nothing herein shall in any way be deemed to limit
       the ability of any party hereto to serve any writs, process or summonses
       in any other manner permitted by applicable law or to obtain jurisdiction
       over any other party hereto in such jurisdiction, and in such manner, as
       may be permitted by applicable law.

11.18  SEVERABILITY. Any provision of this Agreement or the other Financing
       Documents that is prohibited or unenforceable in any particular
       jurisdiction shall, as to that jurisdiction, be ineffective to the extent
       of that prohibition or unenforceability without invalidating the
       remaining provisions of this Agreement or the other Financing Documents,
       and any such prohibition or unenforceability in any particular
       jurisdiction shall not invalidate or render unenforceable that provision

       in any other jurisdiction.

                            [SIGNATURE PAGES FOLLOW]





IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

                                  BORROWER
                                  --------

                                  ORMESA LLC


                                  By: ORMAT FUNDING CORP.,
                                      its Sole Member and Controlling Manager

                                  By: /s/ Connie Stechman
                                     ------------------------------------------
                                     Name: Connie Stechman
                                     Title: Director, Chief Financial Officer
                                            and Assistant Secretary

                                  Address for Notices:

                                  Ormesa LLC
                                  980 Greg Street
                                  Sparks, Nevada 89431
                                  Telephone No.: (775) 356-9029
                                  Facsimile No.: (775) 356-9039
                                  Attention: President








                                  Schedule I to the Credit Agreement


                                      I-2


                                  LENDERS
                                  -------

                                  UNITED CAPITAL,
                                    a division of Hudson United Bank



                                  By: /s/ Jerome P. Peters, Jr.
                                      -----------------------------------------
                                     Name: Jerome P. Peters, Jr.
                                     Title: Senior Vice President

                                  Address for Notices:

                                  United Capital, a division
                                  of  Hudson United Bank
                                  87 Post Road East
                                  Westport, Connecticut 06880

                                  Telephone No.: (203) 291-6600
                                  Facsimile No.: (203) 291-6652
                                  Attention: Mr. Jerome P. Peters, Jr.






                                  Schedule I to the Credit Agreement


                                      I-3

                                  ADMINISTRATIVE AGENT
                                  --------------------

                                  UNITED CAPITAL,
                                     a division of Hudson United Bank,
                                     not in its individual capacity but solely
                                     as Administrative Agent




                                  By: /s/ Jerome P. Peters, Jr.
                                      -----------------------------------------
                                     Name: Jerome P. Peters, Jr.
                                     Title: Senior Vice President

                                  Address for Notices:

                                  United Capital, a division
                                  of  Hudson United Bank
                                  87 Post Road East
                                  Westport, Connecticut 06880

                                  Telephone No.: (203) 291-6600
                                  Facsimile No.: (203) 291-6632
                                  Attention: Mr. Jerome P. Peters, Jr.





                                  Schedule I to the Credit Agreement



                                      I-4

                                  COLLATERAL AGENT
                                  ----------------

                                  UNITED CAPITAL,
                                     a division of Hudson United Bank,
                                     not in its individual capacity but solely
                                     as Collateral Agent



                                  By: /s/ Jerome P. Peters, Jr.
                                      -----------------------------------------
                                     Name: Jerome P. Peters, Jr.
                                     Title: Senior Vice President

                                  Address for Notices:

                                  United Capital, a division
                                  of  Hudson United Bank
                                  87 Post Road East
                                  Westport, Connecticut 06880
                                  Telephone No.: (203) 291-6600
                                  Facsimile No.: (203) 291-6632
                                  Attention: Mr. Jerome P. Peters, Jr.




                                  Schedule I to the Credit Agreement



                                                                  Exhibit 10.1.5



         This CREDIT AGREEMENT, dated as of December 18, 2003 (this
"Agreement"), is entered into among ORCAL GEOTHERMAL INC., a corporation
organized under the laws of the State of Delaware, as borrower ("Borrower"), THE
FINANCIAL INSTITUTIONS LISTED ON EXHIBIT H OR WHO LATER BECOME A PARTY HERETO,
as banks (the financial institutions party to this Agreement being collectively
referred to as the "Banks") and BEAL BANK, S.S.B., as administrative agent for
the Banks (in such capacity, "Administrative Agent").

                                    RECITALS

         A. Borrower intends to acquire directly or indirectly certain Persons
which directly or indirectly own, lease, use and operate the Projects referred
to herein, consisting of (a) an approximately 52 MW geothermal electric power
project located in Heber, California and owned by HGC, (b) a geothermal fluid
facility located in Heber, California and owned by HFC, (c) an approximately 40
MW geothermal electric power project (comprised of three geothermal plants)
located near Mammoth Lakes, California and owned by Mammoth Lakes and (d) an
approximately 48 MW geothermal electric power project located in Heber,
California and leased by SIGC pursuant to the GE Lease, and, in connection
therewith, Borrower has requested that the Banks provide a portion of the
financing for the Acquisition; and

         B. The Banks are willing to provide such financing upon the terms and
subject to the conditions set forth herein and in the other Credit Documents.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the agreements herein and in the
other Credit Documents and in reliance upon the representations and warranties
set forth herein and therein, the parties hereto agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

     1.1 DEFINITIONS. Except as otherwise expressly provided, capitalized terms
used in this Agreement (including its exhibits and schedules) shall have the
meanings given to such terms in Exhibit A.

     1.2 RULES OF INTERPRETATION. Except as otherwise expressly provided, the
rules of interpretation set forth in Exhibit A shall apply to this Agreement and
the other Credit Documents.




                                    ARTICLE 2
                              THE CREDIT FACILITIES

     2.1 LOAN FACILITIES.

         2.1.1 Senior Credit Facility.

         (a) Availability. Subject to the terms and conditions set forth in this
Agreement and in reliance upon the representations and warranties of Borrower
set forth herein, each Bank severally agrees to advance to Borrower on the
Closing Date such loans as Borrower may request pursuant to this Section 2.1.1
(individually, a "Loan" and, collectively, the "Loans"), in an aggregate
principal amount which does not exceed such Bank's Senior Loan Commitment.
Nothing in this clause (a) shall in any respect impair Beal Bank, S.S.B.'s
obligations under Section 9.12.

         (b) Notice of Borrowing. Borrower shall request Loans by delivering to
Administrative Agent a written notice in the form of Exhibit C-1, appropriately
completed (a "Notice of Borrowing"), which contains or specifies, among other
things:

              (i) the portion of the requested Loan which shall bear interest as
provided in (A) Section 2.1.1(c)(i) (individually, a "Base Rate Loan" and,
collectively, the "Base Rate Loans") or (B) Section 2.1.1(c)(ii) (individually,
a "LIBOR Loan" and, collectively, the "LIBOR Loans");

              (ii) the aggregate principal amount of the requested Loan, which
shall be in the minimum amount of $1,000,000 or an integral multiple of $100,000
in excess thereof;

              (iii) the proposed date of the requested Loan (which shall be a
Banking Day and the Closing Date);

              (iv) in the case of any requested Loan to be made as a LIBOR Loan,
the initial Interest Period requested therefor (which shall, subject to Section
2.1.2(a), be twelve months); and

              (v) a certification by Borrower that, as of the date such
requested Loan is proposed to be made, the Loan proposed to be made on such date
does not exceed $154,500,000.

         Borrower shall give the Notice of Borrowing to Administrative Agent so
as to provide not less than the Minimum Notice Period applicable to Loans of the
Type requested. Any Notice of Borrowing may be modified or revoked by Borrower
through the Banking Day immediately prior to the Closing Date, and shall
thereafter be irrevocable.

         Each Notice of Borrowing shall be delivered in any manner permitted by
Section 10.1 to Administrative Agent at the office, to the facsimile number or
to the electronic mail address and during the hours specified in Section 10.1.


                                       2


         (c) Interest. Subject to Section 2.4.3, Borrower shall pay interest on
the unpaid principal amount of each Loan from the date of Borrowing of such Loan
until the maturity or prepayment thereof at the following rates per annum:

              (i) With respect to the principal portion of such Loan which is,
and during such periods as such Loan is, a Base Rate Loan, at a rate per annum
equal to the Base Rate (such rate to change from time to time as the Base Rate
shall change) plus 4.375%; provided that such 4.375% interest rate margin shall
be increased by 0.50% on the eighth anniversary of the Closing Date.

              (ii) With respect to the principal portion of such Loan which is,
and during such periods as such Loan is, a LIBOR Loan, at a rate per annum, at
all times during each Interest Period for such LIBOR Loan, equal to the greater
of (A) the Adjusted LIBO Rate for such Interest Period and (B) 2.00%, in each
case plus 5.125%; provided that such 5.125% interest rate margin shall be
increased by 0.50% on the eighth anniversary of the Closing Date.

         (d) Principal Payments. Borrower shall repay to Administrative Agent,
for the account of each Bank, the aggregate unpaid principal amount of the Loan
made by such Bank in installments payable on each Principal Repayment Date in
accordance with the repayment schedule set forth on Exhibit I, with any
remaining unpaid principal, interest, fees and costs due and payable on the
Maturity Date. Borrower may not re-borrow the principal amount of any Loan so
repaid.

         2.1.2 Interest Provisions Relating to All Loans.

         (a) Applicable Interest Rate. Subject to Section 2.4.3, the applicable
basis for determining the rate of interest with respect to any Loan shall be
selected by Borrower initially at the time a Notice of Borrowing is given
pursuant to Section 2.1.1. The basis for determining the interest rate with
respect to any Loan may be changed from time to time as specified in a Notice of
Conversion of Loan Type delivered pursuant to Section 2.1.5. If on any day a
Loan is outstanding with respect to which notice has not been delivered to
Administrative Agent in accordance with the terms of this Agreement specifying
the applicable basis for determining the rate of interest, then for that day
such Loan shall bear interest determined by reference to the Base Rate. Upon the
occurrence and during the continuation of any Event of Default, the Banks shall
not be obligated to make any LIBOR Loans with an Interest Period greater than
one month.

         (b) Interest Payment Dates. Borrower shall pay accrued interest on the
unpaid principal amount of each Loan (i) in the case of each Base Rate Loan, on
the last Banking Day of each calendar quarter, (ii) in the case of each LIBOR
Loan, on the last Banking Day of the calendar month in which the three-month
anniversary of the first day of the applicable Interest Period in which such
LIBOR Loan is outstanding occurs, and (iii) in all cases, upon repayment or
prepayment (to the extent thereof and including any optional prepayments or
Mandatory Prepayments), upon conversion from one Type of Loan to another Type of
Loan and at maturity (whether by acceleration or otherwise); provided, however,
that Borrower's first scheduled interest payment hereunder shall occur on March
31, 2004.


                                       3


         (c) LIBOR Loan Interest Periods.
             ---------------------------

              (i) Subject to Section 2.1.2(a), each Interest Period for LIBOR
Loans shall be twelve months. Notwithstanding anything to the contrary in the
preceding sentence, (A) any Interest Period which would otherwise end on a day
which is not a Banking Day shall be extended to the next succeeding Banking Day
unless such next Banking Day falls in another calendar month, in which case such
Interest Period shall end on the immediately preceding Banking Day; (B) any
Interest Period which begins on the last Banking Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Banking Day of a
calendar month; and (C) any Interest Period which would otherwise end after the
Maturity Date shall end on the Maturity Date.

              (ii) Borrower may contact Administrative Agent at any time prior
to the end of an Interest Period for a quotation of Interest Rates in effect at
such time for given Interest Periods and Administrative Agent shall promptly
provide such quotation. Borrower may select an Interest Period telephonically or
by electronic mail within the time periods specified in Section 2.1.5, which
selection shall be irrevocable on and after commencement of the applicable
Minimum Notice Period. Borrower shall confirm such telephonic or electronic mail
notice to Administrative Agent by facsimile on the day such notice is given by
delivery to Administrative Agent of a written notice in substantially the form
of Exhibit C-2, appropriately completed (a "Confirmation of Interest Period
Selection"). If Borrower fails to notify Administrative Agent of the next
Interest Period for any LIBOR Loans in accordance with this Section 2.1.2(c)(ii)
then, subject to Section 2.1.2(a), such Loans shall automatically be renewed as
LIBOR Loans with an Interest Period of twelve months on the last day of the
current Interest Period therefor. Administrative Agent shall as soon as
practicable (and, in any case, within two Banking Days after delivery of the
Confirmation of Interest Period Selection) notify Borrower of each determination
of the Interest Rate applicable to each Loan.

         (d) Interest Computations. All computations of interest on Base Rate
Loans shall be based upon a year of 365 days or, in the case of a leap year, 366
days, shall be payable for the actual days elapsed (including the first day but
excluding the last day), and shall be adjusted in accordance with any changes in
the Base Rate to take effect on the beginning of the day of such change in the
Base Rate. All computations of interest on LIBOR Loans shall be based upon a
year of 360 days and shall be payable for the actual days elapsed (including the
first day but excluding the last day). Borrower agrees that all computations by
Administrative Agent of interest shall be conclusive and binding in the absence
of manifest error.

         2.1.3 Promissory Notes. The obligation of Borrower to repay the Loans
made by a Bank and to pay interest thereon at the rates provided herein shall,
upon the written request of such Bank, be evidenced by promissory notes in the
form of Exhibit B-1 (individually, a "Note" and, collectively, the "Notes")
payable to the order of such requesting Bank and in the principal amount of such
Bank's Senior Loan Commitment or outstanding Loan balance, as the case may be.
Borrower authorizes each such requesting Bank to record on the schedule annexed
to such Bank's Note or Notes, the date and amount of each Loan made by such
requesting Bank, and each payment or prepayment of principal thereunder and
agrees that all such notations shall


                                       4


constitute prima facie evidence of the matters noted; provided that in the event
of any inconsistency between the records or books of Administrative Agent and
any Bank's records or Notes, the records of Administrative Agent shall be
conclusive and binding in the absence of manifest error. Borrower further
authorizes each such requesting Bank to attach to and make a part of such
requesting Bank's Note or Notes continuations of the schedule attached thereto
as necessary. No failure to make any such notations, nor any errors in making
any such notations, shall affect the validity of Borrower's obligations to repay
the full unpaid principal amount of the Loans or the duties of Borrower
hereunder or thereunder. Upon the payment in full in cash of the aggregate
principal amount of, and all accrued and unpaid interest on, the Loans, and upon
the request of Borrower, the Banks holding such Notes shall promptly mark the
applicable Notes cancelled and return such cancelled Notes to Borrower.

         2.1.4 Loan Funding.

         (a) Notice. Each Notice of Borrowing and Notice of Conversion of Loan
Type shall be delivered to Administrative Agent in accordance with Sections
2.1.1(b) and 2.1.5, respectively. Administrative Agent shall promptly notify
each Bank of the contents of each Notice of Borrowing and Notice of Conversion
of Loan Type.

         (b) Pro Rata Loans. All Loans shall be made on a pro rata basis by the
Banks in accordance with their respective Proportionate Shares of such Loans,
with each Borrowing to consist of a Loan by each Bank equal to such Bank's
Proportionate Share of such Loans.

         (c) Bank Funding. Each Bank shall, before noon (12:00 p.m.) on the date
of each Borrowing, make available to Administrative Agent by wire transfer of
immediately available funds in Dollars to the account of Administrative Agent
most recently designated by it for such purpose, such Bank's Proportionate Share
of the Loan to be made on such date. The failure of any Bank to make the Loan to
be made by it as part of any Borrowing shall not relieve any other Bank of its
obligation hereunder to make its Loan on the date of such Loan. Except as
provided in Section 9.12, no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on the date of any
Borrowing.

         (d) Failure of Bank to Fund. Without limiting the obligations of Beal
Bank, S.S.B. under Section 9.12, unless Administrative Agent shall have been
notified by any Bank prior to the applicable date of a Borrowing that such Bank
does not intend to make available to Administrative Agent the amount of such
Bank's Proportionate Share of the Loan requested on such date, Administrative
Agent may assume that such Bank has made such amount available to Administrative
Agent on such date in accordance with the prior paragraph and Administrative
Agent may, in its sole discretion and in reliance upon such assumption, make
available to Borrower a corresponding amount on such date. If such amount is not
in fact made available to Administrative Agent by such Bank, Administrative
Agent shall be entitled to recover such amount on demand (and, in any event,
within two Banking Days from the applicable date of such Borrowing) from such
Bank together with interest thereon, for each day from the applicable date of
such Borrowing until the date such amount is paid to Administrative Agent, at
the Federal Funds Rate for the first two Banking Days after such date. If such
Bank pays such amount to Administrative Agent, then such amount shall constitute
such Bank's Proportionate Share of


                                       5


such Loan included in such Loan. Nothing in this Section 2.1.4(d) shall be
deemed to relieve any Bank from its obligation to fulfill its obligations
hereunder or to prejudice any rights that Borrower may have against any Bank as
a result of any default by such Bank hereunder.

         (e) Funding Account. No later than noon (12:00 p.m.) on the date
specified in the Notice of Borrowing, if the applicable conditions precedent
listed in Section 3.1 have been satisfied or waived in accordance with the terms
thereof and, subject to Section 2.1.4(d), to the extent Administrative Agent
shall have received the appropriate funds from the Banks, Administrative Agent
shall make available to Borrower the Loans requested in such Notice of Borrowing
in Dollars and in immediately available funds, at Administrative Agent's New
York Branch, and shall deposit or cause to be deposited the proceeds of such
Loans into the Funding Account.

         2.1.5 Conversion of Loans. Borrower may convert Loans (or portions
thereof) from one Type of Loans to another Type of Loans; provided, however,
that (i) any conversion of LIBOR Loans into Base Rate Loans shall be made on,
and only on, the first day after the last day of an Interest Period for such
LIBOR Loans and (ii) Loans shall be converted only in amounts of $1,000,000 and
increments of $500,000 in excess thereof. Borrower shall request such a
conversion by delivering to Administrative Agent a written notice in the form of
Exhibit C-3, appropriately completed (a "Notice of Conversion of Loan Type"),
which contains or specifies, among other things:

         (a) the Loans, or portions thereof, which are to be converted;

         (b) the Type of Loans into which such Loans, or portions thereof, are
to be converted;

         (c) if such Loans are to be converted into LIBOR Loans, the initial
Interest Period selected by Borrower for such Loans (which Interest Period,
subject to Section 2.1.2(a), shall be twelve months as provided in Section
2.1.2(c));

         (d) the proposed date of the requested conversion (which shall be a
Banking Day and otherwise in accordance with this Section 2.1.5); and

         (e) a certification by Borrower that no Event of Default has occurred
and is continuing.

Borrower shall so deliver each Notice of Conversion of Loan Type so as to
provide at least the applicable Minimum Notice Period. Any Notice of Conversion
of Loan Type may be modified or revoked by Borrower through the Banking Day
immediately prior to the Minimum Notice Period, and shall thereafter be
irrevocable. Each Notice of Conversion of Loan Type shall be delivered in any
manner permitted by Section 10.1 to Administrative Agent at the office, to the
facsimile number or to the electronic mail address and as otherwise specified in
Section 10.1. Administrative Agent shall promptly notify each Bank of the
contents of each Notice of Conversion of Loan Type.


                                       6


         2.1.6 Prepayments.

         (a) Terms of All Prepayments.
             ------------------------

              (i) Upon the prepayment of any Loan (whether such prepayment is an
optional prepayment under Section 2.1.6(b) or a Mandatory Prepayment), Borrower
shall pay to Administrative Agent for the account of the Bank which made such
Loan, (A) all accrued interest to the date of such prepayment on the amount of
such Loan prepaid, (B) all accrued fees to the date of such prepayment relating
to the amount of such Loan being prepaid, (C) any applicable Make-Whole
Premiums, and (D) if such prepayment is the prepayment of a LIBOR Loan on a day
other than the last day of an Interest Period for such LIBOR Loan, all
Liquidation Costs incurred by such Bank as a result of such prepayment (pursuant
to the terms of Section 2.6).

              (ii) Notwithstanding the foregoing, but only in respect of any
Mandatory Prepayment, Borrower shall have the right, by giving five Banking
Days' notice to Administrative Agent, in lieu of prepaying a LIBOR Loan on a day
other than the last day of an Interest Period for such LIBOR Loan, to deposit or
cause Administrative Agent to deposit into an account to be held by Depositary
Agent (which account shall be subjected to the Lien of the Collateral Documents
in a manner reasonably satisfactory to Administrative Agent) an amount equal to
the LIBOR Loans to be prepaid. Such funds shall be held in such account until
the expiration of the Interest Period applicable to the LIBOR Loan to be prepaid
at which time the amount deposited in such account shall be used to prepay such
LIBOR Loan and any interest accrued on such amount shall be deposited into the
Revenue Account. The deposit of amounts into such account shall not constitute a
prepayment of Loans and all Loans to be prepaid using the proceeds from such
account shall continue to accrue interest at the then applicable interest rate
for such Loans until actually prepaid. All amounts in such account shall only be
invested in Permitted Investments as directed by and at the expense and risk of
Borrower.

              (iii) Except as otherwise specifically set forth herein, all
prepayments of Loans shall be applied to reduce the remaining payments required
under Section 2.1.1(d) in inverse order of maturity. Borrower may not re-borrow
the principal amount of any Loan which is prepaid.

         (b) Optional Prepayments.
             --------------------

              (i) On or before the third anniversary of the Closing Date,
Borrower may not prepay all or any part of the outstanding Loans.

              (ii) After the third anniversary of the Closing Date, Borrower may
prepay all or any part of the outstanding Loans, at any time, on giving at least
30-Banking Days' notice to Administrative Agent, provided that, (A) each such
prepayment equals or exceeds $1,000,000 or integral multiples of $100,000 in
excess thereof and, (B) each such prepayment shall be made at a prepayment
premium (the "Make-Whole Premium") equal to (I) after the third anniversary of
the Closing Date and on or prior to the fourth anniversary of the Closing Date,
103% of the amount of such outstanding Loans, (II) after the fourth anniversary
of the Closing


                                       7


Date and on or prior to the fifth anniversary of the Closing Date, 102.5% of the
amount of such outstanding Loans, (III) after the fifth anniversary of the
Closing Date and on or prior to the sixth anniversary of the Closing Date, 102%
of the amount of such outstanding Loans, (IV) after the sixth anniversary of the
Closing Date and on or prior to the seventh anniversary of the Closing Date,
101.5% of the amount of such outstanding Loans, (V) after the seventh
anniversary of the Closing Date and on or prior to the eighth anniversary of the
Closing Date, 101% of the amount of such outstanding Loans, (VI) after the
eighth anniversary of the Closing Date and on or prior to the ninth anniversary
of the Closing Date, 100.5% of the amount of such outstanding Loans, and (VII)
thereafter, 100% of the amount of such outstanding Loans.

              (iii) Notwithstanding the foregoing Sections 2.1.6(b)(i) and (ii),
if the Banks do not provide the Lease Financing for reasons other than that
Borrower is not in full compliance with the provisions of Section 5 of the Fee
Letter, then Borrower may prepay, without premium or penalty, all (but not part)
of the outstanding Loans, at any time, on giving at least 30-Banking Days'
notice to Administrative Agent (provided that if Borrower shall have delivered
the Release Notice pursuant to Section 3.3, the Borrower shall not have any such
right to prepay such Loans under this clause (iii)).

         (c) Mandatory Prepayments. Borrower shall prepay (or cause to be
prepaid) Loans (i) to the extent required by Sections 3.7.4(b) and (c) of the
Depositary Agreement, Section 7.2 of this Agreement or any other provision of
this Agreement or any other Credit Document which requires such prepayment or
(ii) to the extent of (A) 100% of the cash proceeds of the issuance of any new
equity securities of Borrower or any of its Subsidiaries (other than any equity
securities issued by Borrower pursuant to Section 2.2 of the Sponsor Guaranty),
(B) 100% of any debt (other than Permitted Debt) issued by Borrower or any of
its Subsidiaries and (C) 100% of proceeds of asset sales of Borrower or any of
its Subsidiaries (other than sales permitted by Section 6.3 and exclusive of
sales of electrical energy and renewable energy credits in accordance with the
terms of the Credit Documents) (any such prepayment pursuant to this Section
2.1.6(c), a "Mandatory Prepayment"). If the Loans are accelerated (whether
voluntarily, involuntarily or by operation of law) upon the occurrence or during
the continuation of any Event of Default occurring under Section 7.1.1, 7.1.2,
7.1.9 or 7.1.11 or otherwise as a result of a willful breach by Borrower of any
of its obligations under Section 5.2, 5.17, 5.18, 6.1, 6.3 or 6.8 that results
in an Event of Default, Borrower shall repay all of the outstanding Loans at a
price equal to (I) on or before the third anniversary of the Closing Date, 105%
of the amount of such outstanding Loans and (II) after the third anniversary of
the Closing Date, the applicable Make-Whole Premium.

         2.1.7 Register. Administrative Agent shall maintain, at its address
referred to in Section 10.1, a register for the recordation of the names and
addresses of the Banks and the Commitments and Loans of each Bank from time to
time (the "Register"). The Register shall be available for inspection by
Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice. Administrative Agent shall record in the Register (i)
the Commitments and the Loans from time to time of each Bank, (ii) the interest
rates applicable to all Loans and the effective dates of all changes thereto,
(iii) the Interest Period for each LIBOR Loan, (iv) the date and amount of any
principal or interest due and payable or to become due and


                                       8


payable from Borrower to each Bank hereunder, (v) each repayment or prepayment
in respect of the principal amount of the Loans of each Bank, (vi) the amount of
any sum received by Administrative Agent hereunder for the account of the Banks
and each Bank's share thereof, and (vii) such other information as
Administrative Agent may determine is necessary or appropriate for the
administering of the Loans and this Agreement. Any such recording shall be
conclusive and binding in the absence of manifest error; provided that neither
the failure to make any such recordation, nor any error in such recordation,
shall affect any Bank's Commitment or Borrower's Obligations in respect of any
applicable Loans or otherwise; and provided further that in the event of any
inconsistency between the Register and any Bank's records, the Register shall
govern absent manifest error.

     2.2 TOTAL SENIOR LOAN COMMITMENTS. Notwithstanding anything that may be
construed to the contrary in this Agreement, the aggregate principal amount of
all Loans made by the Banks shall not exceed $154,500,000 (such amount, the
"Total Senior Loan Commitment").

     2.3 FEES. Borrower shall pay to Administrative Agent solely for
Administrative Agent's account the fees and other amounts described in the Fee
Letter.

     2.4 OTHER PAYMENT TERMS.

         2.4.1 Place and Manner. Except as otherwise expressly provided in the
Fee Letter or any other provision contained in any of the Credit Documents,
Borrower shall make all payments due to any Bank or Administrative Agent
hereunder to Administrative Agent, for the account of such Bank or
Administrative Agent (as the case may be), to the account in the name of OrCal
Geothermal Inc., Account No. 01-20016024, at Federal Home Loan Bank of Dallas,
ABA No. 111040195, or such other account as Administrative Agent shall notify
Borrower in writing from time to time, in Dollars and in immediately available
funds not later than 12:00 noon on the date on which such payment is due. Any
payment made after such time on any day shall be deemed received on the Banking
Day immediately after the date such payment is received. Administrative Agent
shall disburse to each Bank each such payment received by Administrative Agent
for such Bank, such disbursement to occur on the day such payment is received if
received by 12:00 noon or if otherwise reasonably possible, or otherwise on the
next Banking Day.

         2.4.2 Date. Whenever any payment due hereunder shall fall due on a day
other than a Banking Day, such payment shall be made on the next succeeding
Banking Day, and such extension of time shall be included in the computation of
interest or fees, as the case may be, without duplication of any interest or
fees so paid in the next subsequent calculation of interest or fees payable.

         2.4.3 Default Interest. Notwithstanding anything to the contrary
herein, upon the occurrence and during the continuation of any Event of Default
under Section 7.1.1, the outstanding principal amount of all Loans and, to the
extent permitted by applicable Legal Requirements, any accrued but unpaid
interest payments thereon and any accrued but unpaid fees and other amounts
hereunder, shall thereafter bear interest (including post-petition interest in
any proceeding under applicable Bankruptcy Laws) payable upon demand at a rate
that is (a) 2% per annum in excess of the interest rate then otherwise payable
under this Agreement with respect to the applicable Loans or (b) in the case of
any such fees and other amounts, at a rate that is 2% per


                                       9


annum in excess of the interest rate then otherwise payable under this Agreement
for Base Rate Loans (the "Default Rate"); provided that, in the case of LIBOR
Loans, upon the expiration of the Interest Period in effect at the time any such
increase in interest rate is effective, such LIBOR Loans shall thereupon become
Base Rate Loans and shall thereafter bear interest payable upon demand at a rate
that is 2% per annum in excess of the interest rate then otherwise payable under
this Agreement for Base Rate Loans.

         2.4.4 Net of Taxes, Etc.

         (a) Taxes. Subject to each Bank's compliance with Section 2.4.6, any
and all payments to or for the benefit of Administrative Agent or any Bank by
Borrower hereunder or under any other Credit Document shall be made free and
clear of and without deduction, setoff or counterclaim of any kind whatsoever
and in such amounts as may be necessary in order that all such payments, after
deduction for or on account of any present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto
(excluding income and franchise taxes, which include taxes imposed on or
measured by the net income, net profits or capital of Administrative Agent or
such Bank by any jurisdiction or any political subdivision or taxing authority
thereof or therein as a result of a connection between such Bank and such
jurisdiction or political subdivision, unless such connection results solely
from such Bank's executing, delivering or performing its obligations or
receiving a payment under, or enforcing, this Agreement or any Note) (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"), shall be equal to the
amounts otherwise specified to be paid under this Agreement and the other Credit
Documents. If Borrower shall be required by applicable Legal Requirements to
withhold or deduct any Taxes from or in respect of any sum payable hereunder or
under any other Credit Document to Administrative Agent or any Bank, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.4.4), Administrative Agent or such Bank receives an amount equal
to the sum it would have received had no such deductions been made, (ii)
Borrower shall make such deductions and (iii) Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable Legal Requirements. In addition, Borrower agrees to pay any
present or future stamp, recording or documentary taxes and any other excise or
property taxes, charges or similar levies (not including income or franchise
taxes) that arise under the laws of the United States of America, the State of
New York or the State of California from any payment made hereunder or under any
other Credit Document or from the execution or delivery or otherwise with
respect to this Agreement or any other Credit Document (hereinafter referred to
as "Other Taxes").

         (b) Tax Indemnity. Borrower shall indemnify each Bank for and hold it
harmless against the full amount of Taxes and Other Taxes (including any Taxes
or Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.4.4) paid by any Bank, or any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted; provided that


                                       10


Borrower shall not be obligated to indemnify any Bank for any penalties,
interest or expenses relating to Taxes or Other Taxes arising from such Bank's
gross negligence or willful misconduct. Each Bank agrees to give written notice
to Borrower of the assertion of any claim against such Bank relating to such
Taxes or Other Taxes as promptly as is practicable after being notified of such
assertion, and in no event later than 90 days after the principal officer of
such Bank responsible for administering this Agreement obtains knowledge
thereof; provided that any Bank's failure to notify Borrower of such assertion
within such 90 day period shall not relieve Borrower of its obligation under
this Section 2.4.4 with respect to Taxes or Other Taxes, penalties, interest or
expenses arising prior to the end of such period, but shall relieve Borrower of
its obligations under this Section 2.4.4 with respect to Taxes or Other Taxes,
penalties, interest or expenses between the end of such period and such time as
Borrower receives notice from such Bank as provided herein. Payments by Borrower
pursuant to this indemnification shall be made within 30 days from the date such
Bank makes written demand therefor (submitted through Administrative Agent),
which demand shall be accompanied by a certificate describing in reasonable
detail the basis thereof.

         (c) Notice. Within 30 days after the date of any payment of Taxes by
Borrower, Borrower shall furnish to Administrative Agent, at its address
referred to in Section 10.1, the original or a certified copy of a receipt
evidencing payment thereof or, if such receipt is not obtainable, other evidence
of such payment by Borrower reasonably satisfactory to Administrative Agent.
Borrower shall compensate each Bank for all reasonable losses and expenses
sustained by such Bank as a result of any failure by Borrower to so furnish such
copy of such receipt.

         (d) Conduit Financing. Notwithstanding anything to the contrary
contained in this Section 2.4.4, if a Bank is a conduit entity participating in
a conduit financing arrangement (as defined in Section 7701(l) of the Code and
the Treasury Regulations issued thereunder) with respect to any payments made by
Borrower under this Agreement and under any Credit Document, Borrower shall not
be obligated to pay additional amounts to such Bank pursuant to this Section
2.4.4 to the extent that the amount of taxes in the United States exceeds the
amount that would have otherwise been payable were such Bank not a conduit
entity participating in a conduit financing arrangement.

         (e) Reimbursement by Banks. If any Bank receives an indemnification
payment pursuant to Section 2.4.4(b) and if such Bank is able, in its sole
opinion, to apply or otherwise take advantage of any refund or tax credit
arising out of or in conjunction with any Taxes or Other Taxes which give rise
to such indemnification, such Bank shall, to the extent that in its sole opinion
it can do so without prejudice to the retention of the amount of such refund or
credit and without any other adverse tax consequences for such Bank, reimburse
to Borrower at such time as such tax refund or credit shall have actually been
received or utilized by such Bank such amount as the Bank shall, in its sole
opinion, have determined to be attributable to the relevant Taxes or Other Taxes
and as will leave such Bank in no better or worse position than it would have
been in if the payment of such Taxes or Other Taxes had not been required.
Nothing in this Section 2.4.4(e) shall oblige any Bank to disclose to Borrower
or any other person any information regarding its tax affairs or tax
computations, or shall interfere with Bank's absolute


                                       11


discretion to arrange its tax affairs in whatever manner it thinks fit. In
particular, no Bank shall be under any obligation to claim relief from its
corporate profits or similar tax liability in credits or deductions available to
it and, if it does claim, the extent, order and manner in which it does so shall
be at its absolute discretion.

         (f) Survival of Obligations. The obligations of Borrower under this
Section 2.4.4 shall survive the termination of this Agreement and the repayment
of the Obligations.

         2.4.5 Application of Payments. Except as otherwise expressly provided
herein or in the other Credit Documents, payments made under this Agreement or
the other Credit Documents and other amounts received by Administrative Agent,
Depositary Agent or the Banks under this Agreement or the other Credit Documents
shall first be applied to any fees, costs, charges or expenses payable to
Administrative Agent, Depositary Agent or the Banks, next to any accrued but
unpaid interest then due and owing, and then to outstanding principal then due
and owing or otherwise to be prepaid, in each case hereunder or under the other
Credit Documents (in each case, such application to be made on a pro rata basis
among such applicable Persons).

         2.4.6 Withholding Exemption Certificates. Each Bank upon becoming a
Bank and each Person to which any Bank grants a participation (or otherwise
transfers its interest in this Agreement) upon the granting of such
participation (or the occurrence of such other transfer) will deliver to
Administrative Agent and Borrower either (a) if such Bank or Person is a
corporation established under the laws of the United States or any political
subdivision thereof, an executed copy of a United States Internal Revenue
Service Form W-9, or (b) if such Bank or Person is not a corporation established
under the laws of the United States or any political subdivision thereof, a duly
completed and executed non-bank certificate in the form of Exhibit J hereto, if
applicable, and two duly completed copies of United States Internal Revenue
Service Form W-8BEN or W-8ECI or successor applicable form, as the case may be
(certifying therein an entitlement to a reduction in, or an exemption from,
United States withholding taxes). Each Bank or Person which delivers to Borrower
and Administrative Agent a Form W-8BEN or W-8ECI pursuant to the preceding
sentence shall deliver to Borrower and Administrative Agent two copies of each
Form W-8BEN or W-8ECI, or successor applicable forms, or other manner of
certification or procedure, as the case may be, on or before the date that any
such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent forms previously delivered by it to
Borrower, and such extensions or renewals thereof as may reasonably be requested
by Borrower, certifying in the case of a Form W-8BEN or W-8ECI that such Bank is
entitled to receive payments under this Agreement without deduction or
withholding (or at a reduced rate of withholding under any applicable tax
treaty) of any United States federal income taxes, unless in any such cases an
event (including any change in treaty, law or regulation) has occurred prior to
the date on which any such delivery would otherwise be required which renders
all such forms inapplicable or which would prevent a Bank from duly completing
and delivering any such form with respect to it and such Bank advises Borrower
that it is not capable of receiving payments without any deduction or
withholding (or at a reduced rate of withholding) of United States federal
income tax, and in the case of Form W-8BEN or W-


                                       12


8ECI, establishing an exemption from United States backup withholding tax.
Borrower shall not be obligated, however, to pay any additional amounts in
respect of United States federal income tax pursuant to Section 2.4.4 (or make
an indemnification payment pursuant to Section 2.4.4) to any Bank (including any
entity to which any Bank sells, assigns, grants a participation in, or otherwise
transfers its rights under this Agreement, any Note or any other Credit
Document) if the obligation to pay such additional amounts (or such
indemnification) would not have arisen but for a failure of such Bank to comply
with its obligations under this Section 2.4.6.

         2.5 PRO RATA TREATMENT.

         2.5.1 Borrowings, Etc. Except as otherwise provided herein, (a) each
Borrowing consisting of Loans shall be made or allocated among the Banks pro
rata according to their respective Proportionate Shares of such Loans and (b)
each payment of principal of and interest on Loans shall be made or shared among
the Banks holding such Loans pro rata according to the respective unpaid
principal amounts of such Loans held by such Banks.

         2.5.2 Sharing of Payments, Etc. If any Bank shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of setoff, or
otherwise) on account of Loans owed to it, in excess of its Proportionate Share
of payments on account of such Loans obtained by all Banks entitled to such
payments, such Bank shall forthwith purchase from the other Banks such
participation in the Loans, as the case may be, as shall be necessary to cause
such purchasing Bank to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Bank, such purchase from such Bank
shall be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price to the extent of such recovery together with an amount equal to
such other Bank's Proportionate Share (according to the proportion of (a) the
amount of such other Bank's required repayment to (b) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered.
Borrower agrees that any Bank so purchasing a participation from another Bank
pursuant to this Section 2.5.2 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of setoff) with respect
to such participation as fully as if such Bank were the direct creditor of
Borrower in the amount of such participation.

    2.6 CHANGE OF CIRCUMSTANCES.

         2.6.1 Inability to Determine Rates. If, on or before the first day of
any Interest Period for any LIBOR Loans, (a) Administrative Agent determines
that the Adjusted LIBO Rate for such Interest Period cannot be adequately and
reasonably determined due to the unavailability of funds in or other
circumstances affecting the London interbank market, or (b) Banks holding
aggregate Proportionate Shares of 33-1/3% or more of the Loans shall advise
Administrative Agent that (i) the rates of interest for such LIBOR Loans do not
adequately and fairly reflect the cost to such Banks of making or maintaining
such Loans or (ii) deposits in Dollars in the London interbank market are not
available to such Banks (as conclusively certified by each such Bank in good
faith in writing to Administrative Agent and to Borrower) in the ordinary course
of business in sufficient amounts to make and/or maintain their LIBOR Loans,
then Administrative Agent shall immediately give notice of such condition to
Borrower. After


                                       13


the giving of any such notice and until Administrative Agent shall otherwise
notify Borrower that the circumstances giving rise to such condition no longer
exist (which Administrative Agent shall deliver to Borrower promptly, and in any
event within 2 Banking Days, after the cessation of such circumstances),
Borrower's right to request from the applicable affected Banks the making of or
conversion to, and the applicable affected Banks' obligations to make or convert
to, LIBOR Loans shall be suspended; provided, however, that Borrower shall have
the right in such event to request the making of or conversion to, and the
applicable affected Banks shall be obligated to make or convert to, LIBOR Loans
with an Interest Period that is 1, 3, 6 or 9 months (as selected by such Banks)
if the circumstances giving rise to the conditions described in this Section
2.6.1 are not applicable to LIBOR Loans with such shorter Interest Period. Any
LIBOR Loans outstanding at the commencement of any such suspension shall be
converted at the end of the then current Interest Period for such Loans into
Base Rate Loans unless such suspension has then ended.

         2.6.2 Illegality. If, after the date of this Agreement, the adoption of
any Governmental Rule, any change in any Governmental Rule or the application or
requirements thereof (whether such change occurs in accordance with the terms of
such Governmental Rule as enacted, as a result of amendment, or otherwise), any
change in the interpretation or administration of any Governmental Rule by any
Governmental Instrumentality, or compliance by any Bank or Borrower with any
request or directive (whether or not having the force of law, but if not having
the force of law, being of a type with which a Bank customarily complies) of any
Governmental Instrumentality (a "Change of Law") shall make it unlawful or
impossible for any Bank to make or maintain any LIBOR Loan, then such Bank shall
immediately notify Administrative Agent and Borrower of such Change of Law. Upon
receipt of such notice, (a) Borrower's right to request the making of or
conversion to, and such Bank's obligations to make or convert to, LIBOR Loans
shall be suspended for so long as such condition shall exist, and (b) Borrower
shall, at the request of such Bank, at Borrower's option either (i) pursuant to
Section 2.1.5, convert any then outstanding LIBOR Loans into Base Rate Loans at
the end of the current Interest Periods for such Loans, or (ii) immediately
repay pursuant to Section 2.1.6 or convert LIBOR Loans of the affected Type into
Base Rate Loans if such Bank shall notify Borrower that such Bank may not
lawfully continue to fund and maintain such Loans. Any conversion or prepayment
of LIBOR Loans made pursuant to the preceding sentence prior to the last day of
an Interest Period for such Loans shall be deemed a prepayment thereof for
purposes of Section 2.7 (but not for purposes of Section 2.1.6(b)).

         2.6.3 Increased Costs. If, after the date of this Agreement, any Change
of Law:

         (a) shall subject any Bank to any tax, duty or other charge with
respect to any LIBOR Loan or Commitment in respect thereof, or shall change the
basis of taxation of payments by Borrower to any Bank on such a Loan or with
respect to any such Commitment (except for Taxes, Other Taxes or changes in the
rate of taxation on the overall net income of any Bank); or

         (b) shall impose, modify or hold applicable any reserve, special
deposit or similar requirement (without duplication of any reserve requirement
included within the applicable Interest Rate through the definition of "Reserve
Requirement") against assets held by,


                                       14


deposits or other liabilities in or for the account of, advances or loans by, or
any other acquisition of funds by any Bank for any LIBOR Loan; or

         (c) shall impose on any Bank any other condition directly related to
any LIBOR Loan or Commitment in respect thereof;

and the effect of any of the foregoing is to increase the cost to such Bank of
making, issuing, creating, renewing, participating in (subject to the
limitations in Section 9.13) or maintaining any such LIBOR Loan or Commitment in
respect thereof or to reduce any amount receivable by such Bank hereunder, then
Borrower shall from time to time, within thirty days after demand by such Bank,
pay to such Bank additional amounts sufficient to reimburse such Bank for such
increased costs or to compensate such Bank for such reduced amounts. A
certificate setting forth in reasonable detail the amount of such increased
costs or reduced amounts and the basis for determination of such amount,
submitted by such Bank to Borrower, shall, in the absence of manifest error, be
conclusive and binding on Borrower for purposes of this Agreement.

         2.6.4 Capital Requirements. If any Bank determines that (a) any Change
of Law after the date of this Agreement increases the amount of capital required
or expected to be maintained by such Bank, or the Lending Office of such Bank or
any Person controlling such Bank (a "Capital Adequacy Requirement"), and (b) the
amount of capital maintained by such Bank or such Person which is attributable
to or based upon the Loans, the Commitments or this Agreement must be increased
as a result of such Capital Adequacy Requirement (taking into account such
Bank's or such Person's policies with respect to capital adequacy), then
Borrower shall pay to such Bank or such Person, within thirty days after
delivery of demand by such Bank or such Person, such amounts as such Bank or
such Person shall reasonably determine are necessary to compensate such Bank or
such Person for the increased costs to such Bank or such Person of such
increased capital. A certificate of such Bank or such Person, setting forth in
reasonable detail the computation of any such increased costs, delivered to
Borrower by such Bank or such Person shall, in the absence of manifest error, be
conclusive and binding on Borrower for purposes of this Agreement.

         2.6.5 Notice; Participating Banks' Rights. Each Bank shall notify
Borrower of any event occurring after the date of this Agreement that will
entitle such Bank to compensation pursuant to this Section 2.6, as promptly as
practicable, and in no event later than 90 days after the principal officer of
such Bank responsible for administering this Agreement obtains knowledge
thereof; provided that any Bank's failure to notify Borrower within such 90 day
period shall not relieve Borrower of its obligation under this Section 2.6 with
respect to claims arising prior to the end of such period, but shall relieve
Borrower of its obligations under this Section 2.6 with respect to the time
between the end of such period and such time as Borrower receives notice from
the indemnitee as provided herein. No Person purchasing from a Bank a
participation in any Loan (as opposed to an assignment) shall be entitled to any
payment from or on behalf of Borrower pursuant to Section 2.4.4, Section 2.6.3
or Section 2.6.4 which would be in excess of the applicable proportionate amount
(based on the portion of the Loan in which such Person is participating) which
would then be payable to such Bank if such Bank had not sold a participation in
that portion of the Loan.


                                       15



         2.7 FUNDING LOSSES. If Borrower shall (a) repay or prepay any LIBOR
Loans on any day other than the last day of an Interest Period for such Loans
(whether an optional prepayment or a Mandatory Prepayment), (b) fail to borrow
any LIBOR Loans in accordance with a Notice of Borrowing delivered to
Administrative Agent (whether as a result of the failure to satisfy any
applicable conditions or otherwise) after such Notice of Loan Borrowing has
become irrevocable, (c) fail to convert any Loans into LIBOR Loans in accordance
with a Notice of Conversion of Loan Type delivered to Administrative Agent
(whether as a result of the failure to satisfy any applicable conditions or
otherwise) after such Notice of Conversion of Loan Type has become irrevocable,
(d) fail to continue a LIBOR Loan in accordance with a Confirmation of Interest
Period Selection delivered to Administrative Agent, or (e) fail to make any
prepayment in accordance with any notice of prepayment delivered to
Administrative Agent, then Borrower shall, within ten Banking Days after demand
by any Bank, reimburse such Bank for all reasonable costs and losses incurred by
such Bank as a result of such repayment, prepayment or failure ("Liquidation
Costs"). Borrower understands that such costs and losses may include losses
incurred by a Bank as a result of funding and other contracts entered into by
such Bank to fund LIBOR Loans (other than non-receipt of the margin applicable
to such LIBOR Loans). Each Bank demanding payment under this Section 2.7 shall
deliver to Borrower a certificate setting forth in reasonable detail the basis
for and the amount of costs and losses for which demand is made. Such a
certificate so delivered to Borrower shall, in the absence of manifest error, be
conclusive and binding as to the amount of such loss for purposes of this
Agreement.

    2.8 ALTERNATE OFFICE.

         2.8.1 To the extent reasonably possible, each Bank shall designate an
alternative Lending Office with respect to its LIBOR Loans and otherwise take
any reasonable actions to reduce any liability of Borrower to any Bank under
Section 2.4.4, 2.6.3, 2.6.4 or 2.7, or to avoid the unavailability of any Type
of Loans under Section 2.6.1 or 2.6.2 so long as (in the case of the designation
of an alternative Lending Office) such Bank, in its sole discretion, determines
that (a) such designation is not disadvantageous to such Bank and (b) such
actions would eliminate or reduce liability to such Bank. Borrower hereby agrees
to pay all reasonable costs and expenses incurred by any Bank in connection with
any such designation or actions within ten Banking Days of demand thereof to
Borrower.

         2.8.2 Upon written notice to Administrative Agent, any Bank may
designate a Lending Office other than the Lending Office most recently
designated to Administrative Agent and may assign all of its interests under the
Credit Documents and its Notes (if any) to such Lending Office; provided that
such designation and assignment do not at the time of such designation and
assignment increase the reasonably foreseeable liability of Borrower under
Section 2.4.4, 2.6.3 or 2.6.4 or make an Interest Rate option unavailable
pursuant to Section 2.6.1 or 2.6.2.

    2.9 REPLACEMENT OF BANK IN RESPECT OF INCREASED COSTS.

         2.9.1 Within fifteen days after receipt by Borrower of (a) written
notice and demand from any Bank (an "Affected Bank") for payment of additional
amounts or increased costs as provided in Section 2.4.4, 2.6.3 or 2.6.4, (b)
notice that such Bank is suspending its


                                       16


obligation to make or convert to LIBOR Loans with an Interest Period of twelve
months as provided in Section 2.6.1, or (c) notice that it is unlawful for such
Bank to make LIBOR Loans as provided in Section 2.6.2, Borrower may, at its
option, notify Administrative Agent and such Affected Bank of its intention to
replace the Affected Bank. So long as no Event of Default shall have occurred
and be continuing, Borrower may obtain, at Borrower's expense, one or more
replacement Banks (each, a "Replacement Bank") for the Affected Bank, which
Replacement Banks shall be reasonably satisfactory to Administrative Agent. If
Borrower obtains a Replacement Bank within 90 days following notice of its
intention to do so, the Affected Bank must sell and assign its Loans to such
Replacement Banks for an aggregate amount equal to the principal balance of all
Loans held by the Affected Bank and all accrued interest and fees with respect
thereto through the date of such sale; provided, however, that Borrower shall
have reimbursed such Affected Bank for the additional amounts, increased costs,
and any other amounts that it is entitled to receive under this Agreement
through the date of such sale and assignment.

         2.9.2 Notwithstanding the foregoing, Borrower shall not have the right
to obtain a Replacement Bank if the Affected Bank rescinds its demand for
increased costs or additional amounts within fifteen days following its receipt
of Borrower's notice of intention to replace such Affected Bank. If Borrower
gives a notice of intention to replace and does not so replace such Affected
Bank within 90 days thereafter, Borrower's rights relating to any previously
incurred increased costs or additional amounts under this Section 2.9 shall
terminate and Borrower shall promptly pay all increased costs or additional
amounts previously demanded by such Affected Bank pursuant to Sections 2.4.4,
2.6.1, 2.6.3 or 2.6.4.

                                    ARTICLE 3
                              CONDITIONS PRECEDENT

     3.1 CONDITIONS PRECEDENT TO THE CLOSING DATE. The obligation of each Bank
to make the Loans under this Agreement is subject to the prior satisfaction of
each of the following conditions (unless waived in writing by Administrative
Agent with the consent of the Banks) on or before December 31, 2003 (the date
such conditions precedent are so satisfied or waived being referred to as the
"Closing Date"):

         3.1.1 Resolutions. Delivery to Administrative Agent of a copy of one or
more resolutions or other authorizations, in form and substance reasonably
satisfactory to Administrative Agent, of Ormat Technologies, Sponsor, Borrower,
OrHeber 1, ORNI and OrMammoth certified by a Responsible Officer of each such
Loan Party as being in full force and effect on the Closing Date, authorizing,
as applicable and among other things, the Loans, the granting of the Liens under
the Collateral Documents, the contribution (in the case of Sponsor) of Equity
Funds and/or Subordinated Loans to Borrower, and the execution, delivery and
performance (in the case of OrHeber 1 and OrMammoth) of the Acquisition
Agreement and (in the case of all such Loan Parties) the relevant Credit
Documents to which each such Loan Party is a party.

         3.1.2 Incumbency. Delivery to Administrative Agent of a certificate
from Sponsor, Borrower, OrHeber 1, ORNI and OrMammoth signed by the appropriate
authorized


                                       17


officer of such Loan Party and dated as of the Closing Date, as to the
incumbency of the natural Persons authorized to execute and deliver the Credit
Documents to which such Loan Party is a party.

         3.1.3 Formation Documents. Delivery to Administrative Agent of (a)
copies of the certificate of incorporation of Sponsor, Borrower, OrHeber 1,
OrHeber 2, OrHeber 3, ORNI and OrMammoth, certified by the Secretary of State of
Delaware, and (b) copies of the bylaws of each such Loan Party, certified by an
officer of such Loan Party as being true, correct and complete on the Closing
Date.

         3.1.4 Good Standing Certificates. Delivery to Administrative Agent of
certificates issued by (a) the Secretary of State of Delaware, for each of Ormat
Technologies, Sponsor, Borrower, OrHeber 1, OrHeber 2, OrHeber 3, ORNI and
OrMammoth, and (b) the Secretary of the State of California, for Borrower, in
each case (i) dated no more than ten days prior to the Closing Date and (ii)
certifying that the applicable party is in good standing and is qualified to do
business in, and has paid all franchise taxes or similar taxes due to, such
states.

         3.1.5 Third Party and Bankruptcy Court Approvals. Administrative Agent
shall have received copies of any approval or consents required from (a) any
Person under Section 7 of the Acquisition Agreement and (b) GECC in connection
with the acquisition by Borrower, OrHeber 1, ORNI, OrHeber 2 and OrHeber 3 of
their respective ownership interests in SIGC, HGC and HFC as such ownership
interests are set forth in Section 4.2.2, rather than as set forth in the
Acquisition Agreement, the Confirmation Plan or the Seller Plan of
Reorganization. The Bankruptcy Court shall have entered the Confirmation Order,
the Confirmation Order shall not have been amended, modified, vacated or stayed
in any manner and shall have become final and non-appealable. All of the
conditions precedent to the occurrence of the effective date under the Seller
Plan of Reorganization shall have occurred (provided that no condition to the
occurrence of such effective date shall have been waived without the consent of
the Banks), other than any condition related to the consummation of the
Acquisition.

         3.1.6 Credit Documents. Delivery to Administrative Agent of executed
originals of this Agreement, the Notes, the Depositary Agreement, the Security
Agreements referred to in clauses (a), (d) and (e) of the definition thereof,
the Pledge Agreements referred to in clauses (a), (b) (c) and (e) of the
definition thereof, the Escrow Agreement, the Fee Letter, the Subordination
Agreements, the Sponsor Guaranty, the Subsidiary Guaranties referred to in
clauses (c) and (d) of the definition thereof and the Ormat Industries Letter,
all of which shall have been duly authorized, executed and delivered by the
parties thereto.

         3.1.7 Certificates of Sponsor and Borrower. Delivery to Administrative
Agent of (a) a certificate, dated as of the Closing Date, duly executed by a
Responsible Officer of Borrower, in substantially the form of Exhibit F-1, which
certificate shall state that (i) all conditions precedent to the occurrence of
the Closing Date shall have been satisfied, (ii) all conditions (other than the
payment of the purchase price) to the consummation of the Acquisition in
accordance with the terms and provisions of the Acquisition Agreement have been
satisfied without waiver or amendment (unless agreed to by the Banks), (iii)
Borrower has complied with all of the terms and provisions of, and
representations and warranties contained in, the


                                       19


Commitment Letter, (iv) immediately prior to and after the Closing Date and the
consummation of the Acquisition, Borrower, OrHeber 1 and OrMammoth is and will
be Solvent, and (v) the Projections, the Initial Operating Budget and the
Initial Capital Expenditures Budget were prepared in good faith based on
reasonable assumptions and (b) a certificate, dated as of the Closing Date, duly
executed by a Responsible Officer of Sponsor, in substantially the form of
Exhibit F-2, which certificate shall state that all of the representations and
warranties set forth in the Sponsor Guaranty are true and correct.

         3.1.8 Legal Opinions. Delivery to Administrative Agent of opinions of
counsel to Ormat Technologies, Sponsor, Borrower, OrHeber 1, ORNI and OrMammoth,
in each case in form and substance reasonably satisfactory to the Banks.

         3.1.9 Insurance. Insurance complying with terms and conditions set
forth in Exhibit K shall be in full force and effect and Administrative Agent
shall have received (a) a certificate from Borrower's insurance broker(s), dated
as of a date which is no earlier than three days prior to the Closing Date, (i)
identifying underwriters, type of insurance, insurance limits and policy terms,
in each case substantially in the manner typically described in certificates of
this nature, (ii) describing the insurance obtained and (iii) stating that such
insurance is in full force and effect and that all premiums then due thereon
have been paid and that, in the opinion of such broker(s), such insurance
complies with the terms and conditions set forth in the Credit Documents, and
(b) certified copies of all policies evidencing such insurance (or a binder,
commitment or certificates signed by the insurer or a broker authorized to bind
the insurer), each in form and substance reasonably satisfactory to
Administrative Agent.

         3.1.10 Conditions under Acquisition Agreement. The transactions
described in the Acquisition Agreement (other than the payment of the purchase
price) which are to occur on or prior to the Closing Date shall have been
consummated without amendment or waiver (that have not been agreed to by the
Banks) in accordance with the terms and provisions of the Acquisition Agreement.

         3.1.11 Funding of Equity; Funds Flow. Sponsor shall have contributed
$27,425,603.92 in Equity Funds and/or Subordinated Loans to Borrower, and
Sponsor and Borrower shall have caused such contributions to be deposited in the
Funding Account. Administrative Agent, Sponsor and Borrower shall have entered
into the Funds Flow Memorandum, which shall provide, among other things, that
Administrative Agent will disburse all amounts on deposit in the Funding Account
(including such Equity Funds and/or Subordinated Loans and the Loan proceeds),
other than agreed-upon amounts reserved for the payment of certain fees and
expenses and working capital purposes, to the Sellers under the Acquisition
Agreement upon (a) the satisfaction of each of the conditions precedent set
forth in this Article 3 and (b) the consent of the Banks and Borrower.

         3.1.12 Permits. Each of the material discretionary Permits necessary
for the performance of Borrower's, OrHeber 1's, OrHeber 2's, OrHeber 3's, ORNI's
and OrMammoth's obligations under the Acquisition Agreement and the Credit
Documents as of the Closing Date (a) shall have been duly obtained, except for
such renewals, transfers, reissuance, or modifications of existing permits that
can reasonably be obtained in the normal course, (b) shall


                                       19


be in full force and effect, (c) shall not be subject to any current legal
proceeding, and (d) shall not be subject to any Unsatisfied Condition that could
reasonably be expected to result in material modification or revocation of such
Permit, and all applicable appeal periods with respect to such Permit shall have
expired. Each such Permit shall not be subject to any restriction, condition,
limitation or other provision which could reasonably be expected to have a
Material Adverse Effect or result in any of the Projects being operated in a
manner substantially inconsistent with the assumptions underlying the
Projections.

         3.1.13 Absence of Litigation. No action, suit, proceeding or
investigation shall have been instituted or threatened in writing against any
Loan Party (other than those described in Schedule 4.18 to the Acquisition
Agreement and actions, suits, proceedings or investigations against Ormat
Technologies) that (a) contests the Acquisition or any of the transactions under
the Credit Documents or (b) could reasonably be expected to have a Material
Adverse Effect. No action, suit, proceeding or investigation shall have been
instituted or threatened in writing against any other Major Project Participant
that could reasonably be expected to have a Material Adverse Effect.

         3.1.14 Payment of Fees. All taxes, fees and other costs payable in
connection with the execution, delivery, recordation and filing of the Credit
Documents shall have been paid in full or, as approved by Administrative Agent,
provided for. Administrative Agent shall have deducted out of the proceeds of
the Loans all outstanding amounts due, as of the Closing Date, and owing to (a)
the Banks or Administrative Agent under any fee letter or other agreement or
pursuant to Section 2.3, (b) the Banks' attorneys and consultants and the Title
Insurer for all services rendered and billed prior to the Closing Date and (c)
the Depositary Agent under the Depositary Agreement.

         3.1.15 UCC Reports. Delivery to Administrative Agent of a UCC report of
a date no less recent than five Banking Days before the Closing Date for each of
the jurisdictions in which the UCC-1 financing statements and the fixture
filings are intended to be filed in respect of the Collateral, showing that upon
due filing or recordation (assuming such filing or recordation occurred on the
date of such respective reports), as the case may be, and after giving effect to
the Acquisition, the Liens created under the Collateral Documents will be prior
to all other Liens on the Collateral (except for the GECC Liens, the mechanics'
liens referred to in item No. 7 to Schedule 4.10 of the Acquisition Agreement
and any Liens on the Uninsured Real Property Interests or the real property that
is subject thereto) which are perfected by filing or recording.

         3.1.16 No Material Adverse Change. Since November 14, 2003, no Material
Adverse Effect (under and as defined in the Acquisition Agreement) has occurred
and is continuing.

         3.1.17 Perfection of Liens. All actions necessary or desirable to
perfect the Liens of the Collateral Documents to which Sponsor, Borrower,
OrHeber 1, ORNI and OrMammoth are a party as of the Closing Date shall have been
taken (including (a) the delivery of certificated securities of Borrower,
OrHeber 1 and OrMammoth, together with executed,


                                       20


undated transfer documents and (b) the filing of UCC-1 financing statements
naming the applicable Loan Party as the debtor and Administrative Agent as the
secured party).

         3.1.18 Establishment of Accounts. The Operating Accounts and the
Accounts required to be established as of the Closing Date under the Depositary
Agreement shall have been established to the satisfaction of the Banks.

         3.1.19 Representations and Warranties. Each representation and warranty
of Sponsor, Borrower, OrHeber 1, ORNI and OrMammoth under the Credit Documents
shall be true and correct as of the Closing Date.

         3.1.20 No Default. No Event of Default or Potential Event of Default
shall have occurred and be continuing as of the Closing Date, or will result
from the Acquisition and the consummation of the transactions contemplated by
Section 3.2.

         3.1.21 BLM Notice. Delivery to Administrative Agent of a copy of one or
more notices from Borrower to the United States Bureau of Land Management and
any other applicable Persons with respect to the change in ownership of the
Project Companies and Borrower's intention to replace certain bonds described in
Schedule 4.10 to the Acquisition Agreement.

         3.1.22 Notice of Borrowing. Delivery to Administrative Agent of a
properly completed Notice of Borrowing.

         3.1.23 Process Agents. Delivery to Administrative Agent of evidence
that each of Sponsor, Borrower, OrHeber 1, ORNI and OrMammoth has appointed CT
Corporation System as its respective agent for service of process in the State
of New York.

         3.1.24 Escrow. Execution and delivery to Administrative Agent of an
Escrow Agreement (the "Escrow Agreement"), in substantially the form of Exhibit
C-4, among Sponsor, Borrower, Administrative Agent and Chicago Title Company.

    3.2 TRANSACTIONS TO OCCUR AT CLOSING. No later than 5:00 p.m. (New York
City time) on the Closing Date, Borrower shall cause each of the following to
occur (the satisfaction of each of the following being referred to as the "Close
of Escrow"):

         3.2.1 Acquisition. Consummation of the Acquisition in accordance with
the terms of (and without any waivers or amendments unless agreed to by the
Banks to) the Acquisition Agreement.

         3.2.2 Resolutions. Delivery to Administrative Agent of a copy of one or
more resolutions or other authorizations of each Loan Party (other than Ormat
Technologies, Sponsor, Borrower, OrHeber 1, OrHeber 2, OrHeber 3, ORNI,
OrMammoth, Mammoth Lakes and SIGC) certified by an officer of each such Loan
Party as being in full force and effect on the Closing Date, authorizing, as
applicable and among other things, the granting of the Liens under the


                                       21


Collateral Documents and the execution, delivery and performance of the Credit
Documents to which such Loan Party is a party.

         3.2.3 Incumbency. Delivery to Administrative Agent of a certificate
from each Loan Party (other than Ormat Technologies, Sponsor, Borrower, OrHeber
1, OrHeber 2, OrHeber 3, ORNI, OrMammoth, Mammoth Lakes and SIGC) signed by the
appropriate authorized officer of each such Loan Party and dated as of the
Closing Date, as to the incumbency of the natural Persons authorized to execute
and deliver the Credit Documents to which such Loan Party is a party.

         3.2.4 Formation Documents. Delivery to Administrative Agent of the
Governing Documents of each Loan Party (other than Ormat Technologies, Sponsor,
Borrower, OrHeber 1, OrHeber 2, OrHeber 3, ORNI and OrMammoth), certified by an
officer of such Loan Party as being true, correct and complete on the Closing
Date.

         3.2.5 Good Standing Certificates. Delivery to Administrative Agent of
certificates issued by the secretary of state of the state in which each Loan
Party (other than Ormat Technologies, Sponsor, Borrower, OrHeber 1, OrHeber 2,
OrHeber 3, ORNI and OrMammoth) is formed or incorporated, as applicable, (a)
dated no more than ten days prior to the Closing Date and (b) certifying that
such Loan Party is in good standing and is qualified to do business in, and has
paid all franchise taxes or similar taxes due to, such states.

         3.2.6 Credit Documents and Major Project Documents. Delivery to
Administrative Agent of (a) executed originals of each Credit Document to be
executed by any Loan Party on the Closing Date, other than (i) those Credit
Documents delivered under Section 3.1.6 above and (ii) Consents, and (b) a
certified list of, and true, correct and complete copies of, each Major Project
Document in effect as of the Closing Date, and, in each case, all of which shall
have been duly authorized, executed and delivered by the parties thereto.

         3.2.7 Certificate of Officer. Delivery to Administrative Agent of a
certificate, dated as of the Closing Date and in substantially the form of
Exhibit F-3, duly executed by a Responsible Officer of each Loan Party (other
than Ormat Technologies, Sponsor, Mammoth Lakes, OrHeber 2, OrHeber 3, ORNI and
SIGC) which certificate shall, among other things, state that (a) neither such
Loan Party nor, to such Loan Party's knowledge, any other party to any Major
Project Document is or, but for the passage of time or giving of notice or both
will be, in breach of any material obligation thereunder, (b) all conditions
precedent to the performance of such Loan Party, and, to such Loan Party's
knowledge, all conditions precedent to the performance of the other parties
under the Major Project Documents then required to have been performed shall
have been satisfied, (c) immediately prior to and at the Close of Escrow, each
of the Guarantors is Solvent and (d) all conditions precedent set forth in this
Section shall have been satisfied.

         3.2.8 Legal Opinions. Delivery to Administrative Agent of opinions of
counsel to the Loan Parties and Affiliates thereof (if any) (other than Ormat
Technologies, Sponsor and Borrower) which are parties to any Major Project
Document, in each case in form and substance reasonably satisfactory to the
Banks.


                                       22


         3.2.9 Utilities. All potable water, sewer, telephone, electric and all
other utility services necessary for the leasing, ownership and operation of the
Projects shall have been contracted for.

         3.2.10 Permits. Each of the material discretionary Permits necessary
for the performance of the applicable Loan Party's (other than Ormat
Technologies') or the applicable Major Project Participant's obligations under
the Credit Documents or the Major Project Documents as of the Closing Date (a)
shall have been duly obtained, except for such renewals, transfers, reissuance,
or modifications of existing permits that can reasonably be obtained in the
normal course, (b) shall be in full force and effect, (c) shall not be subject
to any current legal proceeding, and (d) shall not be subject to any Unsatisfied
Condition that could reasonably be expected to result in material modification
or revocation of such Permit, and all applicable appeal periods with respect to
such Permit shall have expired. Each such Permit shall not be subject to any
restriction, condition, limitation or other provision which could reasonably be
expected to have a Material Adverse Effect or result in any of the Projects
being operated in a manner substantially inconsistent with the assumptions
underlying the Projections.

         3.2.11 Perfection of Liens. All actions necessary or desirable to
perfect the Liens of the Collateral Documents to which OrHeber 1, OrMammoth, HFC
and HGC are a party as of the Closing Date shall have been taken (including the
filing of UCC-1 financing statements naming HFC and HGC (as the case may be) as
the debtor and Administrative Agent as the secured party).

         3.2.12 ALTA Title Policy.

         (a) Subject to clause (c) of this Section 3.2.12, delivery to
Administrative Agent of a lender's ALTA extended coverage policy of title
insurance, together with such endorsements thereto as are reasonably required by
the Banks (which shall include, but not be limited to, a tie-in endorsement for
all such policies), or the commitment of Title Insurer to issue such a policy,
dated as of the Closing Date, in the amount of $125,000,000, issued by Title
Insurer in form and substance substantially similar to the owner's ALTA policy
of title insurance provided to Borrower under the Acquisition Agreement,
insuring (or agreeing to insure) that:

              (i) each of HFC and HGC has a good, marketable and insurable
leasehold, easement and/or fee interest in the material real property interests
comprising the applicable Project, in each case free and clear of Liens,
encumbrances or other exceptions to title, other than the Title Exceptions; and

              (ii) each Deed of Trust creates (or will create when recorded) a
valid first-priority Lien on HFC's or HGC's (as the case may be) interest in the
applicable Mortgaged Property, free and clear of all Liens, encumbrances and
exceptions to title whatsoever, other than the Title Exceptions.

         (b) The Banks shall have determined that each title policy or title
commitment referred to in clause (a) above shall be in all material respects the
same as the title policies referred to in Schedule 7.9 to the Acquisition
Agreement; provided, however, that any additional


                                       23


exceptions to title contained in such Bank's policy or commitment shall be
permitted only if they do not violate the Real Property Standard.

         (c) The ALTA policy of title insurance set forth in Section 3.2.12(a)
shall (i) not provide coverage to Administrative Agent for any real property
interests located in Mono County, California, (ii) not contain an exception for
mechanics' or materialmen's liens, except for (A) the mechanic's liens described
in item No. 7 to Schedule 4.10 of the Acquisition Agreement, (B) any other
mechanics' and materialmen's liens that do not violate the Real Property
Standard and (C) the mechanics' and materialmen's lien exceptions and exclusions
set forth in the policy jacket and (iii) be permitted to contain one or more
exceptions for matters that would be shown by an ALTA survey.

         3.2.13 Real Estate Rights. Each Project Company shall have obtained and
shall hold all leasehold or other possessory rights in real estate, together
with necessary real property Permits and access rights necessary for (a)
performance in full of each such Project Company's obligations under the Credit
Documents and Major Project Documents to which such Project Company is a party,
and (b) the leasing, ownership and operation of the Projects in accordance with
the Projections; in each case except to the extent that any such missing leases,
possessory rights, real property Permits or access rights do not violate the
Real Property Standard.

         3.2.14 Request for Notice. Requests for Notice shall have been recorded
in favor of Administrative Agent with respect to any Major Project Documents
that are subject to recorded underlying Liens.

         3.2.15 Regulatory Status. (a) Each Project is, and has been since it
commenced commercial operation, (i) a QF, and (ii) exempt from all provisions of
the FPA except Sections 1-18, 202(c), 210-214, 305(c) and such provisions of
Part III of the FPA as may be necessary for FERC actions to enforce the
foregoing; and (b) each Project's FERC Form 556 most recently filed with FERC
contains current and accurate ownership and operating characteristics of the
Project.

         3.2.16 Representations and Warranties. Each representation and warranty
of each Loan Party under the Credit Documents shall be true and correct.

         3.2.17 No Default. No Event of Default or Potential Event of Default
shall have occurred and be continuing, or will result from the Acquisition and
the consummation of the transactions contemplated by this Section 3.2.

         3.2.18 Process Agents. Delivery to Administrative Agent of evidence
that each Loan Party (other than Ormat Technologies, Sponsor, Borrower, OrHeber
1, OrHeber 2, OrHeber 3, ORNI, OrMammoth, SIGC and Mammoth Lakes) has appointed
CT Corporation System as its respective agent for service of process in the
State of New York in respect of each Credit Document to which such Person is a
party which is governed by the laws of the State of New York.


                                       24


         3.2.19 Close of Escrow. Concurrently with the payment of the purchase
price with respect to the condition precedent set forth in Section 3.2.1, the
termination of the escrow under the Escrow Agreement shall occur and all
documents and closing deliverables contained in such escrow shall be released
from such escrow.

    3.3 MAMMOTH COLLATERAL RELEASE

         3.3.1 Upon the written request of Borrower, Administrative Agent, on
the behalf of Secured Parties, (a) shall return to Borrower all Pledged Equity
Interests (as defined in the Pledge Agreements described in clause (c) of the
definition thereof) of OrMammoth free and clear of the Liens imposed by the
applicable Pledge Agreements, (b) shall execute and deliver to Borrower and
OrMammoth such documents and instruments (including UCC-3 termination
statements), in each case as may be reasonably necessary to release the Liens
granted to Administrative Agent, for the benefit of Secured Parties, in respect
of the Collateral directly relating to OrMammoth and the Mammoth Project, and
(c) shall execute and deliver to Borrower and OrMammoth such documents and
instruments as may be reasonably necessary to release OrMammoth from its
obligations under the applicable Subsidiary Guaranty, the Depositary Agreement
and the other Credit Documents to which such Loan Party is a party, provided
that either the Mammoth Prepayment Conditions or the GE Buyout Conditions are
satisfied (the satisfaction of either the Mammoth Prepayment Conditions or the
GE Buyout Conditions and the related release of Collateral described in this
Section 3.3.1 being referred to as the "Mammoth Collateral Release").

         3.3.2 Upon the satisfaction of the Mammoth Prepayment Conditions, then
(a) Administrative Agent shall undertake each of the actions specified in
Section 3.3.1, and (b) the amounts on deposit in the Funding Account shall be
held in the Funding Account until the earlier to occur of (i) the satisfaction
of the GE Buyout Conditions and (ii) the date Borrower delivers a notice (the
"Release Notice") to Administrative Agent requesting that the funds on deposit
in the Funding Account be applied to the prepayment of the Loans pursuant to
this Section and Section 2.1.6(a)(i) (other than clauses (C) and (D) thereof)
(it being acknowledged and agreed that, from and after the date of the delivery
of the Release Notice (the "Release Date"), Beal Bank, S.S.B. shall be released
from all of its obligations under the Credit Documents (including the Fee
Letter) to provide any financing relating to the Lease Buyout or any other Lease
Solution). Subject to Section 3.3.3, if the satisfaction of the GE Buyout
Conditions occurs on or before the Release Date, then the amounts on deposit in
the Funding Account shall be transferred to Sponsor free and clear of the Liens
imposed by the Collateral Documents. Subject to Section 3.3.3, if the
satisfaction of the GE Buyout Conditions does not occur on or before the Release
Date, then the amounts on deposit in the Funding Account shall be transferred to
Administrative Agent and applied to the prepayment of the Loans pursuant to
Section 2.1.6(a)(i) (other than clauses (C) and (D) thereof).

         3.3.3 Each of the parties hereto acknowledges and agrees that (a) the
deposit of amounts into the Funding Account pursuant to Section 3.3.2 and
otherwise in connection with the Mammoth Collateral Release shall not constitute
a prepayment of Loans until such time (if ever) such amounts are transferred to
Administrative Agent and applied to the prepayment of the Loans pursuant to
Section 2.1.6(a)(i) (other than clauses (C) and (D) thereof), and (b) all Loans


                                       25


to be prepaid or transferred to Sponsor using amounts from the Funding Account
shall continue to accrue interest at the then-applicable interest rate for such
Loans until actually prepaid. Without limiting the foregoing, if such amounts
are transferred to Sponsor, then (i) the corresponding amount of Loans (i.e.,
$28,900,000) shall at all times (including during such times as such amounts are
on deposit in the Funding Account) be deemed to be outstanding under the Credit
Agreement and (ii) interest on such amounts shall be due and payable in
accordance with the provisions of Section 2.1.2.

         3.3.4 Each of the parties hereto acknowledges and agrees that, upon the
release of OrMammoth from its obligations under the applicable Subsidiary
Guaranty, the Depositary Agreement and the other Credit Documents to which such
Loan Party is a party and the release of the Collateral directly relating to
OrMammoth and the Mammoth Project pursuant to this Section 3.3 and
notwithstanding anything to the contrary contained in any of the Credit
Documents, (a) OrMammoth shall be deemed not to be a "Loan Party",
"Non-Guarantor" or "Guarantor", (b) the Mammoth Project shall be deemed not to
be a "Project", (c) each of OrMammoth and Mammoth Lakes shall be deemed to be a
"Nonrecourse Person", (d) Mammoth Lakes shall be deemed not to be a "Project
Company", (e) "Project Revenues" shall be deemed not to include any income,
cash, receipts or proceeds generated by OrMammoth, Mammoth Lakes or the Mammoth
Project, (f) each Project Document solely related to the Mammoth Project shall
be deemed not to be a "Project Document" or "Major Project Document", (g) each
of the Loan Parties shall be released from all of their respective obligations
under the Credit Documents with respect to OrMammoth, Mammoth Lakes and the
Mammoth Project (including any covenants or defaults directly related to
OrMammoth, Mammoth Lakes, the Mammoth Project or the Collateral being released
as part of the Mammoth Collateral Release), other than the Loan Parties'
(excluding OrMammoth) obligations under Sections 5.24, 7.1.5, 7.1.13 and 10.4 of
the Credit Agreement, and (h) on or before the second Banking Day following the
Mammoth Collateral Release, Borrower shall take all actions necessary to cause
OrMammoth and Mammoth Lakes not to be direct or indirect subsidiaries of
Borrower, any Guarantor or any Non-Guarantor.

         3.3.5 Concurrent with and as a condition to the Mammoth Collateral
Release, OrMammoth shall execute and deliver to Administrative Agent a release
(in form and substance reasonably satisfactory to Administrative Agent),
pursuant to which OrMammoth shall release each Secured Party from any and all
claims which OrMammoth may have against any of the Secured Parties arising from
the Operative Documents and the transactions contemplated thereby.

                                    ARTICLE 4
                         REPRESENTATIONS AND WARRANTIES

                  Borrower makes the following representations and warranties to
and in favor of Administrative Agent and the Banks (a) to the extent they relate
to any Loan Party (other than Ormat Technologies, the Non-Guarantors (other than
ORNI) and the Project Companies), as of the Closing Date (unless such
representation and warranty expressly relates solely to another time) both prior
to and immediately after the consummation of the Acquisition and (b) to the
extent they relate to any of each Non-Guarantor (other than ORNI) and each
Project Company,


                                       26



as of the Closing Date (unless such representation and warranty expressly
relates solely to another time) but immediately after giving effect to the
consummation of the Acquisition, all of which shall survive the Closing Date,
the Close of Escrow and the making of the Loans:

    4.1 EXISTENCE. Borrower, each Guarantor and each Non-Guarantor are
organized or formed and validly existing under the laws of the jurisdiction of
its incorporation or formation (as applicable) and are qualified to do business
in such jurisdiction and in each other jurisdiction in which the conduct of
their business requires such qualification (including, with respect to Borrower,
the State of California).

    4.2 OWNERSHIP OF THE LOAN PARTIES.

         4.2.1 The equity interests in Borrower, each Guarantor and each
Non-Guarantor are duly authorized, validly issued and fully paid and
nonassessable and, as of the Closing Date, none of such equity interests
consists of margin stock.

         4.2.2 The capital structure of the Loan Parties (other than Ormat
Technologies) is accurately set forth on Exhibit L, and each of the following is
true and correct:

         (a) Sponsor directly owns all of the equity interests in Borrower.

         (b) Borrower directly owns all of the equity interests in OrHeber 1,
all of the equity interests in OrMammoth, a 50% general partnership interest in
HFC and a 50% general partnership interest in HGC.

         (c) OrHeber 1 directly owns a 50% general partnership interest in HFC,
a 50% general partnership interest in HGC and all of the membership interests in
ORNI.

         (d) ORNI directly owns all of the equity interests in OrHeber 2 and all
of the equity interests in OrHeber 3.

         (e) OrHeber 2 directly owns a 99.998% general partnership interest in
SIGC.

         (f) OrHeber 3 directly owns a 0.002% limited partnership interest in
SIGC.

         (g) OrMammoth directly owns a 1% limited partnership interest in
Mammoth Lakes and a 49% general partnership interest in Mammoth Lakes.

         (h) There no options, warrants, convertible securities or other rights
to acquire any equity interests in Borrower, any Guarantor or any Non-Guarantor.

         (i) Borrower does not have any direct or indirect Subsidiaries, other
than the Guarantors and Non-Guarantors.

    4.3 POWER AND AUTHORIZATION. Each of Borrower, each Guarantor and each
Non-Guarantor has full power and authority to conduct its business as
contemplated by the Operative Documents. The Credit Documents and the Project
Documents to which Borrower, each


                                       27


Guarantor and each Non-Guarantor is a party have been duly authorized, executed
and delivered by each such Loan Party.

    4.4 NO CONFLICT. The execution, delivery and performance by each of
Borrower, each Guarantor and each Non-Guarantor of the Credit Documents and
Major Project Documents to which it is a party and the consummation of the
transactions contemplated by the Credit Documents and the Major Project
Documents do not and will not (a) violate any provision of (i) any Legal
Requirement applicable to Borrower, any of the Guarantors or any of the
Non-Guarantors, as the case may be, (ii) the Governing Documents of Borrower,
any of the Guarantors or any of the Non-Guarantors, as the case may be, or (iii)
any order, judgment or decree of any court or agency or Governmental
Instrumentality binding on Borrower, any of the Guarantors or any of the
Non-Guarantors, (b) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of Borrower, any of the Guarantors or any of the Non-Guarantors, (c)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Borrower, any of the Guarantors or any of the
Non-Guarantors (other than any Liens created under any of the Credit Documents
in favor of Administrative Agent on behalf of the Secured Parties), or (d)
require any approval of any Person, except for such approvals or consents which
will be obtained on or before the Closing Date and disclosed in writing to the
Banks.

    4.5 ENFORCEABLE OBLIGATIONS. Each Credit Document and Major Project Document
to which Borrower, any of the Guarantors or any of the Non-Guarantors is a party
constitutes a legal, valid and binding obligation of such Loan Party, as the
case may be, enforceable against such Loan Party in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors' rights or by the effect of general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

    4.6 COMPLIANCE WITH LAW. None of Borrower, any of the Guarantors or any of
the Non-Guarantors (a) is in violation of any applicable Legal Requirements in
any material respect or (b) is subject to or in default in any material respect
with respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign.

    4.7 CONDUCT OF BUSINESS. The only business conducted by Borrower, OrHeber 1,
OrHeber 2, OrHeber 3, ORNI and OrMammoth is the ownership of those Loan Parties
which they directly own, as described in Section 4.2.2. To the knowledge of
Borrower, the only business conducted by any of the Guarantors or Non-Guarantors
is the business of directly or indirectly owning, operating, leasing,
maintaining and using the Projects. Neither Borrower nor any Project Company is
a party to or bound by any material contract other than the Credit Documents and
the Major Project Documents to which it is a party. The Guarantors and
Non-Guarantors (other than the Project Companies) are parties only to those
agreements set forth on Exhibit G-5.


                                       28


    4.8 INVESTMENT COMPANY ACT. None of Borrower, any of the Guarantors or any
of the Non-Guarantors is an "investment company" or a "company controlled by an
investment company", within the meaning of the Investment Company Act of 1940,
as amended.

    4.9 ERISA. There are no ERISA Plans for any Loan Party (other than Ormat
Technologies) or any ERISA Affiliate.

    4.10 HAZARDOUS SUBSTANCES.

         4.10.1 Except as set forth in Exhibit G-4: (a) with respect to each
Site, none of Borrower, any of the Guarantors or any of the Non-Guarantors is
or, to Borrower's, each Guarantor's and each Non-Guarantor's knowledge, has in
the past been in violation of any Hazardous Substance Law which violation could
reasonably be expected to result in a material liability to such Loan Party or
its properties and assets or in an inability of such Loan Party to perform its
obligations under the Operative Documents; (b) none of Borrower, any of the
Guarantors, or any of the Non-Guarantors nor, to Borrower's, each Guarantor's
and each Non-Guarantor's knowledge, any other Person has used, Released,
generated, manufactured, produced or stored in, on, under, or about any Site, or
Released or arranged for the disposal at any other location of any Hazardous
Substances in any form, circumstance or condition that could reasonably be
expected to subject any Secured Party to liability, or Borrower, any of the
Guarantors, or any of the Non-Guarantors to material liability, under any
Hazardous Substance Law; (c) to Borrower's, each Guarantor's and each
Non-Guarantor's knowledge, there are no underground tanks, whether operative or
temporarily or permanently closed, located on any Site that could reasonably be
expected to subject any Secured Party to liability, or Borrower, any of the
Guarantors, or any of the Non-Guarantors to material liability, under any
Hazardous Substance Law; (d) there are no Hazardous Substances used, stored or
present at or on any Site except in material compliance with Hazardous Substance
Laws and other Legal Requirements or as disclosed in the Environmental Reports;
(e) to Borrower's, each Guarantor's and each Non-Guarantor's knowledge, there
are no Hazardous Substances that could reasonably be expected to migrate onto
any Site that could reasonably be expected to impose on Borrower, any of the
Guarantors, or any of the Non-Guarantors a material liability, except as
disclosed in the Environmental Reports; and (f) to Borrower's, each Guarantor's
and each Non-Guarantor's knowledge there neither is nor has been any condition,
circumstance, action, activity or event that could reasonably be expected to be,
or result in, a material violation by Borrower of any Hazardous Substance Law,
or to result in liability of any Secured Party or material liability of
Borrower, any of the Guarantors, or any of the Non-Guarantors under any
Hazardous Substance Law.

         4.10.2 Except as set forth on Exhibit G-4, (a) as of the Closing Date,
there is no pending or, to Borrower's, each Guarantor's and each Non-Guarantor's
knowledge, threatened in writing, judicial or administrative action or
proceeding seeking to impose material liability against Borrower or any
Guarantor or Non-Guarantor by any Governmental Instrumentality (including the
California Public Utilities Commission, U.S. Army Corps of Engineers and U.S.
Environmental Protection Agency) or any other Person which is not a Governmental
Instrumentality with respect to the presence or Release of Hazardous Substances
in, on, from or to any Site and, (b) thereafter, there is no pending or, to
Borrower's, each Guarantor's and each


                                       29


Non-Guarantor's knowledge, threatened in writing, judicial or administrative
action or proceeding by any Governmental Instrumentality (including the
California Public Utilities Commission, U.S. Army Corps of Engineers and U.S.
Environmental Protection Agency) or any non-governmental third party with
respect to the presence or Release of Hazardous Substances in, on, from or to
any Site which could reasonably be expected to have a Material Adverse Effect.

         4.10.3 Except as set forth on Exhibit G-4 or in the Environmental
Reports, to Borrower's, each Guarantor's and each Non-Guarantor's knowledge,
there are no past violations that have not been finally resolved or existing
violations of any Hazardous Substances Laws with respect to any Site, which
violations could reasonably be expected to result in a material liability of
Borrower, any of the Guarantors, or any of the Non-Guarantors.

    4.11 LITIGATION.

         4.11.1 No action, suit, proceeding or investigation has been instituted
or, to Borrower's, each Guarantor's and each Non-Guarantor's knowledge,
threatened in writing against any Loan Party (other than Ormat Technologies),
other than (i) those described in Schedule 4.18 to the Acquisition Agreement or
(ii) those that could not reasonably be expected to have a Material Adverse
Effect.

         4.11.2 None of Borrower, any Guarantor or any Non-Guarantor has any
knowledge of (a) any action, suit, proceeding or investigation that has been
instituted or threatened in writing against any Major Project Participant, or by
which any of them or their properties are bound, which could reasonably be
expected to have a Material Adverse Effect, (b) any proceeding or investigation
that has been instituted by the FERC which could reasonably be expected to
result in the revocation of any Project's QF status or any other determination
that one or more of the Projects has failed to comply with FERC's regulations
relating to QFs, or (c) any order, judgment or decree has been issued or
proposed to be issued by any Governmental Instrumentality that, as a result of
the leasing, ownership or operation of any of the Projects, the sale of
electricity therefrom or the entering into of any Credit Document or Project
Document or any transaction contemplated thereby, could reasonably be expected
to cause or deem the Banks, Administrative Agent, Borrower or any Affiliate of
any of them to be subject to, or not exempted from, regulation under PUHCA or
the FPA, or subject to laws or regulations of the State of California respecting
the rates or the financial or organizational regulation of electric utilities.

         4.11.3 No action, suit or proceeding before or by any court, arbitrator
or other Governmental Instrumentality is pending to which any Loan Party is a
party or to which its business, assets or property is subject and, to
Borrower's, each Guarantor's and each Non-Guarantor's knowledge, no such action,
suit or proceeding is threatened to which any such Loan Party or its business,
assets or property would be subject that, in either case, questions the validity
of any of the Credit Documents.

         4.12 LABOR DISPUTES AND ACTS OF GOD. Neither the business nor the
properties of any of the Project Companies or, to Borrower's, each Guarantor's
and each Non-Guarantor's knowledge, any Major Project Participant are currently
affected by any fire, explosion, accident,


                                       30


strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy, or other casualty (whether or not
covered by insurance), which could reasonably be expected to have a Material
Adverse Effect.

         4.13 DISCLOSURE. No information or documentation furnished by any of
the Loan Parties to Administrative Agent or the Banks or to any consultant
submitting a report to Administrative Agent or the Banks contained (at the time
of delivery thereof) any untrue statement of a material fact or omitted (at the
time of delivery thereof) to state a material fact necessary in order to make
the statements contained herein or therein not misleading under the
circumstances in which they were made at the time such statements were made
(other than (a) the Projections, (b) the Operating Budget, (c) the Capital
Expenditures Budget, (d) any information that was corrected or updated in
writing by Borrower to the Banks prior to the Closing Date, and (e) any
information which was provided by Borrower to any of the Banks' consultants
prior to the Closing Date and which contains "forward looking statements"). To
the knowledge of Borrower, no information which was provided by Borrower to any
of the Banks' consultants prior to the Closing Date and which contains "forward
looking statements" contained (at the time of delivery thereof) any untrue
statement of a material fact or omitted (at the time of delivery thereof) to
state a material fact necessary in order to make the statements contained herein
or therein not misleading under the circumstances in which they were made at the
time such statements were made. There is no fact known to Borrower, any
Guarantor or any Non-Guarantor which has had or could reasonably be expected to
have a Material Adverse Effect which has not been disclosed in writing to
Administrative Agent and the Banks by or on behalf of Borrower on or prior to
the Closing Date in connection with the transactions contemplated hereby.

    4.14 TAXES.

         4.14.1 Each of Borrower, each Guarantor and each Non-Guarantor has
timely filed all federal, state and local tax returns and reports that it is
required to file, and has paid all taxes, material assessments, utility charges,
fees and other governmental charges it is required to pay to the extent due
(other than those taxes that it is contesting in good faith and by appropriate
proceedings). None of Borrower, any Guarantor's or any Non-Guarantor has
received any written notice proposing tax assessment against any such Loan Party
which could reasonably be expected to have a Material Adverse Effect. To the
extent any taxes, assessments, charges and fees are being contested, the
applicable Loan Party (other than Ormat Technologies) has established reserves
that are adequate for the payment thereof in conformity with GAAP.

         4.14.2 To Borrower's, each Guarantor's and each Non-Guarantor's
knowledge, (a) at all times since its formation, each Project Company has been
an entity that is disregarded as separate from its owner for federal income tax
purposes and (b) no IRS Form 8832 has ever been filed with respect to any
Project Company to treat such Project Company as other than a disregarded
entity.

         4.14.3 None of Borrower, any Guarantor and any Non-Guarantor has any
liability for the taxes of any Person (other than itself) (i) under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local or
foreign law), (ii) as a transferee or


                                       31


successor, (iii) by contract, or (iv) otherwise, other than those liabilities
which are being assumed by (through indemnification of OrHeber 1, OrHeber 2,
OrHeber 3 and OrMammoth or otherwise) Covanta under the Acquisition Agreement.

         4.14.4 Borrower does not intend to treat the Loans (including the
incurrence thereof) as being a "reportable transaction" (within the meaning of
Treasury Regulation Section 1.6011-4).

    4.15 OWNERSHIP OF PROPERTY; LIENS; MATERIAL REAL PROPERTY INTERESTS.
Borrower, each Guarantor and each Non-Guarantor have, as applicable, (a) good,
marketable and insurable easement, fee and/or leasehold interest in each of the
Material Real Property Interests, free and clear of all Liens (other than the
Title Exceptions) and (b) good, marketable and valid title to all other
Collateral, free and clear of all Liens (other than Permitted Liens). With
respect to each Project, the Title Exceptions do not, in the aggregate,
materially and adversely affect the value, operations or use of such Project.
Exhibit G-6 contains an accurate and complete list of all of the Project
Companies' material real property interests (including fee, leasehold and
easement interests).

    4.16 GOVERNMENTAL REGULATION. None of the Loan Parties, Administrative
Agent, or any Bank, nor any Affiliate of any of them will (solely as a result of
the ownership, leasing or operation of the Projects, the sale of electricity,
capacity or ancillary services therefrom or the entering into any Credit
Document or Project Document or any transaction contemplated thereby) be subject
to, or not exempt from, regulation under the FPA or PUHCA or under state laws
and regulations respecting the rates or the financial or organizational
regulation of electric utilities, except that each Project Company will be
subject to Sections 1-18, 21-30, 202(c), 210-214 and 305(c) of the FPA and such
provisions of Part III of the FPA as may be necessary for FERC actions to
enforce the foregoing. Except to the extent provided in the preceding clause,
none of Borrower, any Guarantor or any Non-Guarantor will be deemed by any
Governmental Instrumentality to be subject to financial, organizational or rate
regulation as an "electric utility", "electric corporation", "electrical
company", "public utility", or "public utility holding company" or any similar
Person under any applicable Governmental Rule.

    4.17 MARGIN STOCK. None of Borrower, any Guarantor or any Non-Guarantor is
engaged principally, or as one of its principal activities, in the business of
extending credit for the purpose of "buying", "carrying" or "purchasing" margin
stock (each as defined in Regulations T, U or X of the Federal Reserve Board),
and no part of the proceeds of the Loans will be used by any Loan Party for the
purpose of "buying", "carrying" or "purchasing" any such margin stock or for any
other purpose which violates the provisions of the regulations of the Federal
Reserve Board.

    4.18 BUDGETS; PROJECTIONS. Borrower has prepared the Capital Expenditures
Budget, the Operating Budget and the Projections and is responsible for
developing the assumptions on which such Capital Expenditures Budget, Operating
Budget and the Projections are based; and such Capital Expenditures Budget,
Operating Budget and the Projections (a) are based on reasonable assumptions
(including as to all legal and factual matters material to the estimates set
forth therein) and (b) are consistent in all material respects with the
provisions of


                                       32


the Major Project Documents in effect as of the Closing Date.

    4.19 FINANCIAL STATEMENTS. In the case of each financial statement of (a)
Ormat Technologies for the calendar year ending on December 31, 2002, (b)
Sponsor for the quarterly period ending on March 31, 2003 and (c) Sponsor for
the quarterly period ending on September 30, 2003, each such financial statement
and information has been prepared in conformity with GAAP and fairly presents,
in all material respects, the financial position (on a consolidated and, where
applicable, consolidating basis) of such Loan Party, described in such financial
statements as at the respective dates thereof and the results of operations and
cash flows (on a consolidated and, where applicable, consolidating basis) of
such Loan Party, described therein for each of the periods then ended, subject,
in the case of any such unaudited financial statements, to changes resulting
from audit and normal year-end adjustments and the absence of footnote
disclosure.

    4.20 NO DEFAULT. None of Borrower, any Guarantor or any Non-Guarantor is in
default under any Major Project Document as of the Closing Date, except with
respect to defaults that may be claimed by any landowner set forth on Exhibit N
who (a) has submitted claims to the Bankruptcy Court relating to the SIGC
Project, the HFC Project or the HGC Project, and (b) has not entered into a
settlement agreement with respect to such claims (each such landowner, an
"Outstanding Non-Royalty Claimant"). No Potential Event of Default or Event of
Default has occurred and is continuing.

    4.21 ORGANIZATION ID NUMBER. The organizational identification numbers of
the Loan Parties (other than Ormat Technologies) set forth on Exhibit M are true
and correct.

    4.22 INTELLECTUAL PROPERTY. Borrower, each Guarantor and each Non-Guarantor
own or possess all Permits, patents, copyrights, service marks, trademarks and
trade names, or rights thereto, that are necessary for the operation of its
business, without known conflict with the rights of others.

    4.23 CERTAIN FEES. No broker's or finder's fee or commission will be payable
with respect to the transactions contemplated by the Credit Documents, other
than (a) fees payable to Administrative Agent, the Banks or any of their
respective Affiliates and (b) fees payable by Sponsor to Marathon Capital, LLC.

    4.24 COLLATERAL. The Liens granted to Administrative Agent (for the benefit
of the Secured Parties) pursuant to the Collateral Documents (a) constitute as
to personal property included in the Collateral a valid lien, subject, with
respect to any proceeds, to the limitations set forth in Section 9-315 of the
UCC and (b) constitute as to the Mortgaged Property included in the Collateral a
valid Lien on the Mortgaged Property; provided, however, that the Non-Material
Real Property Interests shall be subject to the Real Property Standard for
purposes of this Section 4.24(b). The security interest granted to
Administrative Agent (for the benefit of the Secured Parties) pursuant to the
Collateral Documents in the Collateral consisting of personal property (other
than the Operating Accounts and all amounts deposited therein or credited
thereto) will be perfected (i) with respect to any property that can be
perfected solely by filing, to the extent Article 9 of the UCC applies thereto,
upon the filing of financing statements in the filing offices identified in
Exhibit D-6, (ii) with respect to any property that can be perfected by


                                       33


control (subject to Section 6.14), upon execution of the Depositary Agreement,
and (iii) with respect to any property (if any) that can be perfected by
possession, upon Administrative Agent receiving possession thereof, and in each
case such security interest will be, as to Collateral perfected under the UCC or
otherwise as aforesaid, superior and prior to the rights of all third Persons
now existing or hereafter arising whether by way of mortgage, Lien, security
interests, encumbrance, assignment or otherwise, except (A) with respect to the
Collateral described in clause (i) of this Section 4.24, the Permitted Liens
described in clauses (a) and (e) of the definition of "Permitted Liens" and, to
the extent required by Governmental Rule, those matters described in clauses
(b), (c) and (g) of the definition of "Permitted Liens" and (B) with respect to
the Collateral described in clauses (ii) and (iii) of this Section 4.24, the
Permitted Liens described in clause (a) of the definition of "Permitted Liens"
and, to the extent required by Governmental Rule, those matters described in
clause (b) of the definition of "Permitted Liens". Except to the extent
possession of portions of the Collateral is required for perfection, all such
action as is necessary has been taken to establish and perfect Administrative
Agent's rights in and to the Collateral in existence on the Closing Date to the
extent Administrative Agent's security interest can be perfected by filing,
including any recording, filing, registration, giving of notice or other similar
action; provided, however, that the Non-Material Real Property Interests shall
be subject to the Real Property Standard for purposes of this sentence. Subject
to the requirements contained in the UCC with respect to the filing of
continuation statements, no filing, recordation, re-filing or re-recording other
than those listed on Exhibit D-6 hereto is necessary to perfect and maintain the
perfection of the interest, title or Liens of the Collateral Documents, and on
the Closing Date all such filings or recordings will have been made to the
extent Administrative Agent's security interest can be perfected by filing.
Borrower has properly delivered or caused to be delivered, or provided control,
to Administrative Agent or Depositary Agent all Collateral that permits
perfection of the Lien and security interest described above by possession or
control.

    4.25 SUFFICIENCY OF PROJECT DOCUMENTS. Other than those that can be
reasonably expected to be commercially available when and as required, the
services to be performed, the materials to be supplied and the real property
interests, the easements and other rights granted, or to be granted, pursuant to
the Major Project Documents in effect as of the Closing Date comprise all of the
material services, materials and property interests required to lease, own and
operate the Projects in accordance with the terms of the Credit Documents and
the Major Project Documents.

    4.26 UTILITY SERVICES. All utility services necessary for operation of each
Project for its intended purposes are available at such Project.

    4.27 REAL PROPERTY RIGHTS. Each Project Company possesses all necessary
easements, rights of way, licenses, agreements and other rights for (a) the
contiguous interconnection and utilization of all interconnection facilities
(including geothermal resource production and injection pipelines) and (b) the
operation of the Projects in accordance with the Projections.

    4.28 PROPER SUBDIVISION. Each Material Real Property Interest has been
subdivided or entitled to exception therefrom, and for all purposes each
Material Real Property Interest may


                                       34



be mortgaged, conveyed and otherwise dealt with as separate legal lots or
parcels.

    4.29 FLOOD ZONE DISCLOSURE. No material portion of the Collateral includes
improvements that are located in an area that has been identified by the Federal
Emergency Management Agency as an area having special flood or mudslide hazards
and in which flood insurance has been made available under the National Flood
Insurance Act of 1968, as amended.

    4.30 QF STATUS. Each Project is, and has been since it commenced commercial
operation, (a) a QF, and (b) exempt from all provisions of the FPA. Each
Project's FERC Form 556 most recently filed with FERC contains current and
accurate ownership and operating characteristics of such Project, except for
updated information that is to be included in the filings contemplated by
Section 5.19.1.

    4.31 ACQUISITION AGREEMENT. The representations and warranties of each
applicable Loan Party contained in the Acquisition Agreement are true and
correct in all material respects.

    4.32 SOLVENCY.(a) Borrower, each Guarantor and each Non-Guarantor is
Solvent.

    4.33 GEOTHERMAL RESOURCES. To the knowledge of Borrower, the geothermal
resources available to the Project Companies under the applicable Project
Documents are sufficient to operate each Project in accordance with the terms of
the Power Purchase Agreements and the Credit Documents and in a manner
consistent with the Projections.

    4.34 OPERATOR EXPERIENCE. Sponsor has substantial experience in the
operation and maintenance of comparable geothermal electric generating
facilities and geothermal fields (including associated equipment) and is fully
qualified to operate and maintain the Projects in accordance with the terms of
the Power Purchase Agreements and the Credit Documents and in a manner
consistent with the Projections.

                                    ARTICLE 5
                              AFFIRMATIVE COVENANTS

                  Borrower covenants and agrees that until the repayment in full
in cash of all Obligations (other than those contingent Obligations that are
intended to survive the termination of this Agreement or the other applicable
Credit Documents), Borrower shall, and shall cause each of the Guarantors and
the Non-Guarantors, as applicable, to:

    5.1 USE OF PROCEEDS. Use the proceeds of the Loans only (a) to fund the
Acquisition and (b) to pay related fees and expenses of Borrower, in each case
as provided in the Funds Flow Memorandum.

    5.2 PAYMENT OF OBLIGATIONS. Pay all of Borrower's, each Guarantor's and each
Non-Guarantor's respective obligations due under the Project Documents as and
when due and payable, except (a) such as may be contested in good faith or as to
which a bona fide dispute may exist (provided that adequate reserves have been
established in conformity with GAAP), and


                                       35


(b) Borrower's and the Project Companies' trade payables which shall be paid in
the ordinary course of business.

    5.3 WARRANTY OF TITLE. Maintain (a) good, marketable and insurable fee,
easement and/or leasehold interests in each Material Real Property Interest, as
applicable, and (b) good, legal and valid title to all of its other respective
material properties and assets (other than properties and assets disposed of in
the ordinary course of business or otherwise disposed of in accordance with
Section 6.3), in each case free and clear of all Liens (other than Permitted
Liens). Borrower, the Guarantors and the Non-Guarantors shall warrant and
defend, as applicable, title to and right of possession and use of each Project,
and the validity and priority of the Liens of the Secured Parties on the
Collateral.

    5.4 NOTICES; REPORTS. Promptly, upon acquiring notice or giving notice
(except as otherwise specified below), as the case may be, or obtaining
knowledge thereof, give written notice (with copies of any underlying notices,
papers, files or related documentation) to Administrative Agent of:

         5.4.1 any litigation pending or, to Borrower's, each Guarantor's and
each Non-Guarantor's knowledge, threatened in writing against Borrower, any
Guarantor or any Non-Guarantor involving claims against such Loan Party or a
Project in excess of $500,000 individually or $1,000,000 in the aggregate per
calendar year or involving any injunctive, declaratory or other equitable
relief, such notice to include, if requested in writing by Administrative Agent,
copies of all papers filed in such litigation and to be given monthly if any
such papers have been filed since the last notice given;

         5.4.2 any dispute or disputes for which written notice has been
received by Borrower, any Guarantor or any Non-Guarantor which may exist between
such Loan Party and any Governmental Instrumentality and which involve (a)
claims against Borrower, any Guarantor or any Non-Guarantor which exceed
$500,000 individually or $1,000,000 in the aggregate per calendar year, (b)
injunctive or declaratory relief, or (c) revocation, modification, failure to
renew or the like of any material discretionary Permits necessary for the
performance of any Loan Party's (other than Ormat Technologies') or Major
Project Participant's obligations under the Credit Documents or the Major
Project Documents;

         5.4.3 any Event of Default or Potential Event of Default;

         5.4.4 any casualty, damage or loss, whether or not insured, through
fire, theft, other hazard or casualty, or any act or omission of (a) Borrower,
any Guarantor, any Non-Guarantor, or any of their employees, agents,
contractors, consultants or representatives in excess of $500,000 for any one
casualty or loss or $1,000,000 in the aggregate in any calendar year, or (b) to
Borrower's, each Guarantor's and each Non-Guarantor's knowledge, any other
Person if such casualty, damage or loss could reasonably be expected to have a
Material Adverse Effect;

         5.4.5 any cancellation, suspension or material change in the terms,
coverage or amounts of any insurance described in Exhibit K;


                                       36


         5.4.6 any contractual obligations incurred by Borrower, any Guarantor
or any Non-Guarantor exceeding $500,000 per year in the aggregate for a Project,
not including any obligations incurred pursuant to the Operative Documents or
any obligation contemplated in the then-current Capital Expenditures Budget or
the then-current Operating Budget;

         5.4.7 any intentional withholding of compensation to, or any right to
withhold compensation claimed by, any Major Project Participant, other than
retention provided by the express terms of any such contracts;

         5.4.8 any (a) termination (other than expiration in accordance with its
terms and any applicable Consent) or material default of which Borrower, any
Guarantor or any Non-Guarantor has knowledge or written notice thereof under any
Major Project Document and (b) material Project Document Modification (with
copies of all such Project Document Modifications whether or not requiring
approval of Administrative Agent or the Required Banks pursuant to Section
6.12);

         5.4.9 any written claim of events of force majeure (including claims
therefor regardless of whether Borrower believes such claim has merit) and, to
the extent requested in writing by Administrative Agent, copies of invoices or
statements which are reasonably available to Borrower, any Guarantor or any
Non-Guarantor under any Major Project Document, certified by an authorized
representative of Borrower, together with a copy of any supporting
documentation, schedule, data or affidavit delivered under such Major Project
Document;

         5.4.10 any (a) material noncompliance with any Hazardous Substance Law
or any material Release of Hazardous Substances on or from each Site that has
resulted or could reasonably be expected to result in personal injury or
material property damage or to have a Material Adverse Effect, (b) pending or,
to Borrower's, each Guarantor's and each Non-Guarantor's knowledge, threatened
in writing, Environmental Claim against Borrower or, to Borrower's, each
Guarantor's and each Non-Guarantor's knowledge, any of its Affiliates,
contractors, lessees or any other Persons, arising in connection with their
occupying or conducting operations on or at any Project or any Site which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect, or (c) underground tank, whether operative or temporarily or permanently
closed, located on any Site;

         5.4.11 promptly, but in no event later than 10 Banking Days prior to
any Lease Solution, notice thereof, which notice shall describe, in reasonable
detail, the nature of such Lease Solution;

         5.4.12 promptly, but in no event later than 10 Banking Days prior to
any change in or transfer of ownership interests in Borrower, any Guarantor, any
Non-Guarantor or any Project (including a Mammoth Ownership Event), notice
thereof, which notice shall identify any transferee of such ownership interest
and the nature of such transferee's interest or shall describe, in reasonable
detail, such other change or transfer; provided that Borrower shall not be
obligated to notify Administrative Agent of any change in the Constellation
Entities' interest in Mammoth Lakes or a transfer by the Constellation Entities
of any of their ownership interest in Mammoth


                                       37


Lakes if such changes or transfer was to an Affiliate of the Constellation
Entities, in each case until 30 days after it has knowledge of the occurrence of
such change or transfer.

         5.4.13 initiation of any condemnation proceedings involving any
Project, any Site or any material portion thereof;

         5.4.14 promptly, but in no event later than fifteen Banking Days after
Borrower has knowledge of the execution and delivery thereof, a copy of each
Additional Project Document;

         5.4.15 promptly, but in no event later than 30 days after the receipt
thereof by Borrower, copies of (a) any material discretionary Permits necessary
for the performance of the any Loan Party's (other than Ormat Technologies')
obligations under the Credit Documents or the Major Project Documents obtained
by such Loan Party after the Closing Date, (b) any amendment, supplement or
other modification to any material discretionary Permits necessary for the
performance of the any Loan Party's (other than Ormat Technologies') or Major
Project Participant's obligations under the Credit Documents or the Major
Project Documents after the Closing Date and (c) all material notices relating
to any Project received by Borrower, any Guarantor or any Non-Guarantor from, or
delivered by any such Loan Party to, any Governmental Instrumentality;

         5.4.16 promptly, but in no event later than five days after occurrence
thereof, notice of (a) the scheduling of any outage with an anticipated duration
in excess of ten days, (b) any outage (scheduled or otherwise) with a duration
in excess of ten days, and (c) any de-rating or change in the rating of any
Project; and

         5.4.17 (a) within ten days after the occurrence of a Reportable Event
with respect to any ERISA Plan; (b) promptly, but in no event later than fifteen
days, after the withdrawal of any Loan Party (other than Ormat Technologies) or
any ERISA Affiliate from a Multiemployer Plan; (c) promptly, but in no event
later than five days, after the PBGC institutes any proceedings to terminate any
ERISA Plan or takes action to appoint a trustee of any ERISA Plan under Section
4042 of ERISA; (d) promptly, but in no event later than ten days, after the
occurrence of any event which could give rise to a Lien in favor of the IRS or
the PBGC under any ERISA Plan; (e) promptly, but in no event later than 30 days,
after any Loan Party (other than Ormat Technologist) or any ERISA Affiliate has
knowledge that any ERISA Plan that is a Multiemployer Plan is in reorganization,
is insolvent or intends to terminate under Section 4041A of ERISA and (f)
promptly, but in no event later than ten days after, the date any Loan Party
(other than Ormat Technologies) or any ERISA Affiliate shall apply for a minimum
funding waiver under Section 412 of the Code with respect to an ERISA Plan, a
description thereof and copies of documents and materials related thereto.

    5.5 FINANCIAL STATEMENTS.

         5.5.1 Deliver or cause to be delivered to Administrative Agent, in form
and detail reasonably satisfactory to Administrative Agent (except where GAAP is
specifically required):


                                       38


         (a) as soon as practicable and in any event within 60 days after the
end of (i) each quarterly accounting period of each Guarantor's and each
Non-Guarantor's fiscal year and (ii) each of the first three quarterly
accounting periods of Borrower's fiscal year (in each case commencing with the
fiscal quarter ending March 31, 2004), unaudited quarterly financial statements
of Borrower, the Guarantors and the Non-Guarantors as of the last day of such
quarterly period and the related statements of income, cash flow, and
shareholders' or members' equity (as applicable) for such quarterly period and
(in the case of second and third quarterly periods) for the portion of the
fiscal year ending with the last day of such quarterly period, setting forth in
each case (but only with respect to periods occurring during or after the 2005
fiscal year) in comparative form corresponding unaudited figures from the
preceding fiscal year (it being acknowledged that such requirement may be
satisfied by the delivery of the appropriate report or Form 10-Q filed with the
United States Securities Exchange Commission), all prepared in accordance with
GAAP (subject to changes resulting from audit and normal year-end adjustments
and the absence of footnote disclosure); and

         (b) as soon as practicable and in any event within 120 days after the
close of each applicable fiscal year, audited consolidated financial statements
of Borrower (it being acknowledged that such requirement may be satisfied by the
delivery of the appropriate report or Form 10-K filed with the United States
Securities Exchange Commission). Such financial statements shall include a
balance sheet as of the close of such year, an income and expense statement,
reconciliation of capital accounts (where applicable) and a statement of cash
flow (it being acknowledged that such requirement may be satisfied by the
delivery of the appropriate report or Form 10-K filed with the United States
Securities Exchange Commission), all prepared in accordance with GAAP and
certified by an independent certified public accountant selected by the Person
whose financial statements are being prepared. Such certificate shall not be
qualified or limited because of restricted or limited examination by such
accountant of any material portion of the records of Borrower.

         5.5.2 Cause to be delivered, along with such financial statements of
Borrower, the Guarantors and the Non-Guarantors that are required to be provided
pursuant to Section 5.5.1, a certificate signed by a Responsible Officer of such
Loan Party certifying that (a) such Responsible Officer has made or caused to be
made a review of the transactions and financial condition of such Loan Party
during the relevant fiscal period and that such review has not, to such
Responsible Officer's knowledge, disclosed the existence of any event or
condition which constitutes an Event of Default or Potential Event of Default,
or if any such event or condition existed or exists, the nature thereof and the
corrective actions that such Loan Party has taken or proposes to take with
respect thereto, (b) such Loan Party is in compliance with all applicable
material provisions of each Credit Document to which such Loan Party is a party
or, if such is not the case, stating the nature of such non-compliance and the
corrective actions which such Loan Party has taken or proposes to take with
respect thereto, and (c) such financial statements are true and correct in all
material respects and that no material adverse change in the consolidated
assets, liabilities, operations, or financial condition of such Loan Party has
occurred since the date of the immediately preceding financial statements
provided to Administrative Agent or, if a material adverse change has occurred,
the nature of such change.


                                       39


    5.6 BOOKS, RECORDS, ACCESS.

         5.6.1 Maintain, or cause to be maintained, adequate books, accounts and
records with respect to Borrower and the Projects.

         5.6.2 Subject to requirements of Governmental Rules, safety
requirements and existing confidentiality restrictions imposed upon any Loan
Party (other than Ormat Technologies) by any other Person, permit employees or
agents of Administrative Agent and Independent Engineer at any reasonable times
and upon reasonable prior notice to inspect all of their respective properties,
to examine or audit all of their respective books, accounts and records and make
copies and memoranda thereof, and to communicate with their auditors outside
their presence (it being acknowledged that Administrative Agent shall endeavor
to notify Borrower of any such communications with auditors prior to such
communications).

    5.7 COMPLIANCE WITH LAW. Promptly comply, or cause compliance, in all
material respects with all Legal Requirements (including Legal Requirements and
applicable Permits relating to pollution control, environmental protection,
equal employment opportunity or employee benefit plans, ERISA Plans and employee
safety, with respect to any Project Company or any Project), and make such
alterations to the Projects and the Sites as may be required for such
compliance; provided, however, that nothing in this Section 5.7 shall prohibit
Borrower from challenging or defending any claim or proceeding asserting that
such noncompliance may exist.

    5.8 EXISTENCE; CONDUCT OF BUSINESS. Except as otherwise expressly permitted
under this Agreement, (a) maintain and preserve its existence and all material
rights, privileges and franchises necessary in the normal conduct of its
business, (b) subject to Section 5.2, perform (to the extent not excused by
force majeure events or the nonperformance of the other party and not subject to
a good faith dispute) all of its material contractual obligations under the
Major Project Documents to which it is party or by which it is bound, (c)
maintain all of its Permits and use reasonable efforts to cause all Major
Project Participants to maintain all of their respective Permits related to the
Projects, except to the extent that any such failure to maintain could not
reasonably be expected to have a Material Adverse Effect, and (d) obtain all
Permits necessary for the operation of the Projects in accordance with the Power
Purchase Agreements and the Credit Documents and in a manner consistent with the
Projections.

    5.9 EXEMPTION FROM REGULATION. Take or cause to be taken all necessary or
appropriate actions so that (a) each Project will be a QF and (b) each Loan
Party (other than Ormat Technologies) and each Project shall not be subject to,
or shall be exempt from, financial or organizational regulation as a "public
utility company" or "public utility holding company" under PUHCA, the FPA or
financial, organizational or rate regulation as a public utility under the laws
of the State of California.

    5.10 OPERATION OF THE PROJECTS.


                                       40


    5.10.1 Cause the Project Companies to keep each Project in good operating
condition consistent with the standard of care set forth in the Major Project
Documents and all applicable Permits, and make all repairs necessary to keep
each such Project in such condition.

    5.10.2 Cause the Project Companies to operate each Project in a manner
consistent with Prudent Utility Practices and in compliance with the terms of
the Power Purchase Agreements.

    5.10.3 At any time after June 30, 2004, if the Lease Buyout shall not have
occurred, at the request of Administrative Agent, (a) cause Sponsor to assign
the SIGC O&M Agreement to a wholly-owned Subsidiary of Borrower and an Affiliate
of OrHeber 1, (b) transfer or cause to be transferred all of the employees of
Sponsor who operate, administer and maintain the SIGC Project to such newly
formed wholly-owned Subsidiary of Borrower, (c) grant or cause to be granted to
Administrative Agent (for the benefit of the Secured Parties) a first-priority
perfected Lien on the ownership interests and assets of such newly formed
wholly-owned Subsidiary of Borrower, and (d) provide or cause to be provided to
Administrative Agent with respect to such transactions and such newly formed
wholly-owned Subsidiary of Borrower, to the satisfaction of Administrative
Agent, (i) assignment and transfer documents, (ii) Consents as described in
Section 5.13.2, (iii) each of the documents described in Sections 3.1.1, 3.1.3
and 3.1.4 and (iv) opinions of counsel as described in Section 3.1.8.

    5.11 BUDGETS.

         5.11.1 On or before 90 days prior to the beginning of each calendar
year (other than 2004), adopt an operating plan and a budget, detailed by month,
of anticipated Project Revenues, such budget to include scheduled debt service,
proposed dividend distributions, proposed Major Maintenance, proposed reserves
and all anticipated O&M Costs (including reasonable allowance for contingencies)
applicable to each Project for the ensuing calendar year (each such annual
operating plan and budget, including the Initial Operating Budget, an "Operating
Budget"). There shall be one Operating Budget for the Mammoth Project and, at
the election of Borrower, there shall be one or more Operating Budgets for the
SIGC Project, the HGC Project and the HFC Project. Each Operating Budget shall
be subject to the approval of Administrative Agent only if (a) the aggregate
amount of anticipated O&M Costs exceeds by 15% or is less by 20% of the amount
proposed to be expended by the applicable Loan Parties (other than Ormat
Technologies) for all such items during the applicable calendar year (as set
forth in the Projections), or (b) the aggregate amount of actual O&M Costs (i)
for the prior three-years (or, if applicable, partial years) exceeds by 10% or
(ii) for the prior three-years (or, if applicable, partial years) is less than
85%, in each case of the amount proposed (as set forth in the Projections) to be
expended by the applicable Loan Parties (other than Ormat Technologies) for all
such items during such prior years. Each Project Company shall operate and
maintain each Project within amounts for (A) any line-item set forth in the
Operating Budget not to exceed 120% (on a year-to-date basis) and (B) all
line-items set forth in the Operating Budget not to exceed (I) during the first
six months of the applicable calendar year, 115% (on a year-to-date basis) and
(II) during the last six months of the applicable calendar year, 110% (on a
year-to-date basis).


                                       41


         5.11.2 On or before 90 days prior to the beginning of each calendar
year (other than 2004), adopt a capital expenditures plan and a budget, detailed
by quarter, of anticipated capital expenditures (including reasonable allowance
for contingencies) applicable to each Project for the ensuing calendar year
(each such annual capital expenditures, including the Initial Capital
Expenditures Budget, a "Capital Expenditures Budget"). There shall be one
Capital Expenditures Budget for the Mammoth Project and, at the election of
Borrower, there shall be one or more Capital Expenditures Budgets for the SIGC
Project, the HGC Project and the HFC Project. Each Capital Expenditures Budget
shall be subject to the approval of Administrative Agent only if (a) the
aggregate amount of anticipated capital expenditures exceeds by 15% or is less
by 20% of the amount proposed to be expended by the applicable Loan Parties
(other than Ormat Technologies) for all such items during the applicable
calendar year (as set forth in the Projections), or (b) the aggregate amount of
actual capital expenditures (i) for the prior three-years (or, if applicable,
partial years) exceeds by 10% or (ii) for the prior three-years (or, if
applicable, partial years) is less than 85%, in each case of the amount proposed
(as set forth in the Projections) to be expended by the applicable Loan Parties
(other than Ormat Technologies) for all such items during such prior years. Each
Project Company shall perform capital expenditures for each Project within
amounts for (A) any line-item set forth in the Capital Expenditures Budget not
to exceed 120% (on a year-to-date basis) and (B) all line-items set forth in the
Capital Expenditures Budget not to exceed (I) during the first six months of the
applicable calendar year, 115% (on a year-to-date basis) and (II) during the
last six months of the applicable calendar year, 110% (on a year-to-date basis).

    5.12 PRESERVATION OF RIGHTS; FURTHER ASSURANCES.

         5.12.1 Maintain in full force and effect, perform (subject to Section
5.2) the obligations of Borrower, each Guarantor and each Non-Guarantor under,
preserve, protect and defend the material rights of Borrower, each Guarantor and
each Non-Guarantor under and take all reasonable action necessary to prevent
termination (except by expiration in accordance with its terms) of each and
every Major Project Document, including (where Borrower, a Guarantor or a
Non-Guarantor, as applicable, in the exercise of its business judgment deems it
proper) prosecution of suits to enforce any material right of such Loan Party
thereunder and enforcement of any material claims with respect thereto;
provided, however, that upon the occurrence and during the continuance of an
Event of Default if Administrative Agent requests that certain actions be taken
and the applicable Loan Party (other than Ormat Technologies) fails to take the
requested actions within five Banking Days, Administrative Agent may enforce in
its own name or in such Loan Party's name, such rights of such Loan Party in the
manner and to the extent provided in the Security Agreements and the other
Credit Documents.

         5.12.2 From time to time, execute, acknowledge, record, register,
deliver and/or file all such notices, statements, instruments and other
documents (including any memorandum of lease or other agreement, financing
statement, continuation statement, certificate of title or estoppel
certificate), relating to the Loans stating the interest and charges then due
and any known Events of Default or Potential Events of Default, and take such
other steps as may be necessary or advisable to render fully valid and
enforceable under all applicable laws the rights, liens and priorities of the
Secured Parties with respect to all Collateral and other security from


                                       42


time to time furnished under this Agreement and the other Credit Documents or
intended to be so furnished, in each case in such form and at such times as
shall be reasonably requested by Administrative Agent, and pay all reasonable
fees and expenses (including reasonable attorneys' fees) incident to compliance
with this Section 5.12.2.

         5.12.3 If Borrower, any Guarantor or any Non-Guarantor that previously
has executed and delivered a Deed of Trust shall at any time acquire any real
property or leasehold or other interest in real property not covered by any such
Deed of Trust, then promptly upon such acquisition, execute, deliver and record
a supplement to the applicable Deed of Trust, reasonably satisfactory in form
and substance to Administrative Agent, subjecting the real property or leasehold
or other interests to the Lien created by such Deed of Trust. If reasonably
requested by Administrative Agent, Borrower shall obtain an appropriate title
insurance policy endorsement or supplement, as applicable, insuring the Lien of
the Secured Parties in such additional property, subject only to Permitted Liens
and other exceptions to title approved by Administrative Agent.

         5.12.4 Upon the request of Administrative Agent, execute and deliver
all documents as shall be necessary or that Administrative Agent shall
reasonably request in connection with the rights and remedies of Administrative
Agent and the Banks under the Operative Documents, and perform, such other
reasonable acts as may be necessary to carry out the intent of this Agreement
and the other Credit Documents.

         5.12.5 Take such action, including the execution and filing of all such
documents and instruments, as may be necessary to effect and continue the
appointment of CT Corporation System as its agent for service of process in full
force and effect, or if necessary by reason of any fact or condition relating to
such agent, to replace such agent (but only after having given notice and
evidence thereof to Administrative Agent).

    5.13 POST-CLOSING CONSENTS.

         5.13.1 On or before the date which is 60 days after the Closing Date
or, in respect of Major Project Documents related to the SIGC Project, on or
before March 31, 2004, cause each applicable Project Company and each applicable
Major Project Participant in respect of the Major Project Documents described in
Exhibit E-2, respectively, to enter into (a) a Consent in substantially the form
of Exhibit E-1 or (b) in the case of the Major Project Documents to which Edison
or IID is a counterparty, a Consent substantially in the form customarily
provided by such Persons in substantially similar circumstances.

         5.13.2 With respect to any Additional Project Document entered into by
HGC, HFC, Mammoth Lakes (at any time after a Mammoth Ownership Event) or SIGC
(at any time after a Lease Buyout), cause the applicable counterparty to execute
and deliver to Administrative Agent (a) a Consent in substantially the form of
Exhibit E-1 or (b) in the case of any Additional Project Document to which
Edison or IID is a counterparty, a Consent substantially in the form customarily
provided by such Persons in substantially similar circumstances.

    5.14 INSURANCE. Maintain in effect at all times the types of insurance set
forth on Exhibit K, in the amounts and on the terms and conditions specified
therein, with insurance companies


                                       43


rated "A-" or better, with a minimum size rating of "IX", by Best's Insurance
Guide and Key Ratings (or an equivalent rating by another nationally recognized
insurance rating agency of similar standing if Best's Insurance Guide and Key
Ratings shall no longer be published).

    5.15 TAXES. Timely file all federal, state and local tax returns and reports
that it is required to file, and pay all taxes, material assessments, utility
charges, fees and other governmental charges it is required to pay to the extent
due. The applicable Loan Party may contest in good faith any such taxes,
assessments and other charges and, in such event, may permit the taxes,
assessments or other charges so contested to remain unpaid during any period,
including appeals, when such Loan Party is in good faith contesting the same, so
long as (a) reserves to the extent required by GAAP have been established in an
amount sufficient to pay any such taxes, assessments or other charges, accrued
interest thereon and potential penalties or other costs relating thereto, or
other adequate provision for the payment thereof shall have been made and
maintained at all times during such contest, (b) enforcement of the contested
tax, assessment or other charge is effectively stayed for the entire duration of
such contest, and (c) any tax, assessment or other charge determined to be due,
together with any interest or penalties thereon, is promptly paid after
resolution of such contest.

    5.16 EMINENT DOMAIN. If an event of eminent domain shall occur, (a)
diligently pursue all its rights to compensation against the relevant
Governmental Instrumentality, (b) not, without the written consent of the
Required Banks, compromise or settle any claim against such Governmental
Instrumentality, and (c) pay or apply all eminent domain proceeds in accordance
with the Depositary Agreement. Borrower, the Guarantors and the Non-Guarantors
consent to, and agree not to object to or otherwise impede or impair, the
participation of Administrative Agent in any eminent domain proceedings, and
such Loan Party shall from time to time deliver to Administrative Agent all
documents and instruments requested by it to permit such participation.

    5.17 GE LEASE SOLUTION. Use its best efforts to (a) extend the term of the
GE Lease until a date no earlier than the Maturity Date on terms and conditions
satisfactory to the Required Banks, in their respective reasonable business
judgment (it being acknowledged and agreed that the Required Banks may not
approve any such extension or terms if the annual rent or lease payment under
the GE Lease is an amount in excess of (i) 0.50 multiplied by (ii) the
difference between (A) the projected Project Revenues generated by SIGC and (B)
the projected amount of SIGC's O&M Costs (excluding any such rent or lease
payments); or (b) purchase the SIGC Project from GECC (a "Lease Buyout") on
terms and conditions reasonably acceptable to the Required Banks (it being
acknowledged and agreed that the Required Banks may not approve any such
purchase if the purchase price is to be paid by Borrower, any Guarantor or any
Non-Guarantor, unless the funds used to pay such purchase price are Equity Funds
and/or Subordinated Loans and are supplied to Borrower, the applicable Guarantor
or the applicable Non-Guarantor by Sponsor or are raised by the Loan Parties in
a financing contemplated by Section 5 of the Fee Letter). Upon any such Lease
Buyout, the Loan Parties (other than Ormat Technologies and Sponsor) shall
concurrently take all actions necessary to (i) grant Administrative Agent, for
the benefit of the Secured Parties, a first-priority perfected Lien on the


                                       44


assets of SIGC, ORNI, OrHeber 2 and OrHeber 3 (subject to any Permitted Liens),
pursuant to (A) a Deed of Trust, in substantially the form of Exhibit D-1 (with
respect to SIGC only) and (B) a Security Agreement, in substantially the form of
Exhibit D-2; (ii) pledge all of the ownership interests in SIGC, OrHeber 2 and
OrHeber 3 to Administrative Agent, for the benefit of the Secured Parties,
pursuant to a Pledge Agreement in substantially the form of Exhibit D-3, (iii)
provide a guaranty by SIGC, ORNI, OrHeber 2 and OrHeber 3 of the Obligations of
the other Loan Parties (other than Ormat Technologies and Sponsor) under the
Credit Documents, in substantially the form of Exhibit D-5, and (iv) provide to
Administrative Agent the following documents related to such Lease Buyout: (A)
executed copies of the purchase documents, (B) Consents as described in Section
5.13.2, (C) each of the documents described in Section 3.1.1 relevant to the
Lease Buyout, (D) opinions of counsel as described in Section 3.1.8 and (E)
title insurance policies (with a survey exception) and surveys (which surveys
shall be completed within the Applicable Post-Closing Period) substantially
similar to those described in Section 5.20. The successful consummation of a
transaction described in clause (a) or (b) above shall be referred to herein as
the "Lease Solution". If the Lease Solution is not implemented, then SIGC shall
properly exercise its initial three-year renewal option under the GE Lease on or
before September 30, 2004. No Loan Party shall exercise any other renewal option
or purchase option under the GE Lease. Administrative Agent, the Banks and
Borrower hereby acknowledge that the purchase of the SIGC Project from Owner
Participant pursuant to the terms of the Purchase Agreement, dated as of
November 14, 2003, by and between Ormat Technologies and Owner Participant
(without giving effect to any amendments or waivers thereto which have not been
approved in writing by Administrative Agent) shall be deemed to be, upon the
successful consummation of the acquisition contemplated thereby, a Lease Buyout
and a Lease Solution.

    5.18 MAMMOTH LAKES SECURITY. Upon any Mammoth Ownership Event, concurrently
take all actions necessary to (a) grant Administrative Agent, for the benefit of
the Secured Parties, a first-priority perfected Lien on the assets of Mammoth
Lakes (subject to any Permitted Liens), pursuant to (i) a Deed of Trust, in
substantially the form of Exhibit D-1 and (ii) a Security Agreement, in
substantially the form of Exhibit D-2, (b) pledge all of the ownership interests
in Mammoth Lakes to Administrative Agent, for the benefit of the Secured
Parties, pursuant to a Pledge Agreement in substantially the form of Exhibit
D-3, (c) provide a guaranty by Mammoth Lakes of the obligations of the other
Loan Parties (other than Ormat Technologies and Sponsor) under the Credit
Documents, in substantially the form of Exhibit D-5 and (d) provide to
Administrative Agent the following documents related to such Mammoth Ownership
Event: (A) executed copies of the purchase or transfer documents, (B) Consents
as described in Section 5.13.2, (C) each of the documents described in Sections
3.1.1 and 3.1.3 (including the partnership agreement of Mammoth Lakes), (D)
opinions of counsel as described in Section 3.1.8 and (E) title insurance
policies (with a survey exception) and surveys (which surveys shall be completed
within the Applicable Post-Closing Period) substantially similar to those
described in Section 5.20.

    5.19 FERC MATTERS.

         5.19.1 Cause each applicable Project Company to prepare and file with
FERC, within 20 Banking Days of the Closing Date, a self-certification using
FERC Form 556 updating


                                       45


the Project's prior certification or self-certification, as applicable, to
include any changes that have occurred as a result of the Acquisition. Each such
self-certification shall comply with all applicable FERC rules and regulations.

         5.19.2 Cause each applicable Project Company to receive all necessary
approvals under the law (including applicable FERC rules and regulations) before
selling any electrical energy to any Person other than Edison.

    5.20 POST-CLOSING REAL ESTATE MATTERS. Within the Applicable Post-Closing
Period, provide to Administrative Agent updated ALTA surveys and updated ALTA
lender's title insurance policies (reflecting such updated surveys) that cover
all of the real property interests held by the Project Companies (based on each
Project as it exists as of the Closing Date) (such provision by Borrower, the
"Post-Closing Title Work"); provided, that (a) no such surveys or title
insurance policies shall be provided with respect to those interests (and the
real property associated therewith) that Administrative Agent determines do not
require surveying and (b) no lender's title insurance policies shall be provided
for any real property interests located in Mono County, California. Such updated
surveys and title insurance policies shall demonstrate that the Project
Companies have all material real property interests necessary to operate the
Projects in accordance with the Projections, and shall not show any material
title exceptions or Liens that could reasonably be expected to have a Material
Adverse Effect (other than the Title Exceptions and the Liens created under the
Collateral Documents) which were not disclosed on the surveys delivered prior to
November 14, 2003 or the title policies or commitments delivered as of the
Closing Date.

    5.21 MINIMUM MWH. If any of the Projects fails to generate in any year 97%
or more of the anticipated megawatt-hours (determined by reference to the
Projections), at Borrower's cost, promptly deliver to Administrative Agent an
updated GeothermEx Report.

    5.22 CAPITAL EXPENDITURES. With respect to the capital expenditures
anticipated to be made during the 2004 and 2005 calendar years (as set forth in
the GeothermEx Report, the Independent Engineer's Report and the Projections),
cause each applicable Project Company to make all such capital expenditures and
in all material respects complete such capital expenditure projects in the
manner and in the time provided for in the GeothermEx Report, the Independent
Engineer's Report and the Projections; provided, however, that with respect to
the Mammoth Project, Mammoth Lakes shall not be obligated to undertake such
capital expenditures unless and to the extent that the Constellation Entities
shall have approved such capital expenditures as and to the extent required
under the Governing Documents of Mammoth Lakes. Borrower, OrMammoth and Mammoth
Lakes shall use their respective commercially reasonable efforts to cause the
Constellation Entities to grant all approvals necessary under the Governing
Documents of Mammoth Lakes to undertake and complete such capital expenditures.

    5.23 CALCULATIONS. In no event later than fifteen Banking Days after each
Principal Repayment Date, calculate and deliver to Administrative Agent (a) the
Average Debt Service Coverage Ratio for the twelve-month period immediately
preceding such Principal Repayment Date and, for each Principal Repayment Date
on or before December 31, 2004, the Blended Debt Service Coverage Ratio for such
Principal Repayment Date, (b) Borrower's then-current forecast


                                       46


of cash flow and (c) each Project's actual megawatt-hours for the applicable
prior quarter or year. The calculations hereunder shall be used in determining
(i) the application and distribution of funds pursuant to Section 6.19 of this
Agreement and Sections 3.1.2(b) and 3.6.2 of the Depositary Agreement and (ii)
compliance with Sections 5.21 and 7.1.17 of this Agreement.

    5.24 INDEMNIFICATION.

         5.24.1 Indemnify, defend and hold harmless Administrative Agent and
each Bank, and in their capacities as such, their respective officers,
directors, shareholders, controlling Persons, employees and agents
(collectively, the "Indemnitees") from and against and reimburse the Indemnitees
for:

         (a) any and all claims, obligations, liabilities, losses, damages,
injuries (to Person, property, or natural resources), penalties, actions, suits,
judgments, costs and expenses (including reasonable attorney's fees) of whatever
kind or nature, whether or not well founded, meritorious or unmeritorious,
demanded, asserted or claimed against any such Indemnitee (collectively,
"Subject Claims") in any way relating to, or arising out of or in connection
with this Agreement or the other Operative Documents to which it is a party,
except for claims by a Loan Party against an Indemnitee that are in whole or in
part successful;

         (b) any and all Subject Claims arising in connection with the Release
or presence of any Hazardous Substances at any Project, whether foreseeable or
unforeseeable, including all costs of removal, investigation, remediation and
disposal of such Hazardous Substances, all reasonable costs required to be
incurred in (i) determining whether any Project is in compliance and (ii)
causing any Project to be in compliance, with all applicable Legal Requirements,
all reasonable costs associated with claims for damages to Persons or property,
and reasonable attorneys' and consultants' fees and court costs; and

         (c) any and all Subject Claims in any way relating to, or arising out
of or in connection with any claims, suits or liabilities against any Loan Party
to the extent related to any of the Projects or the transactions contemplated by
the Operative Documents.

         5.24.2 The foregoing indemnities shall not apply with respect to an
Indemnitee to the extent arising as a result of the gross negligence or willful
misconduct of such Indemnitee, but shall continue to apply to other Indemnitees.

         5.24.3 The provisions of this Section 5.24 shall survive foreclosure of
the Collateral Documents and satisfaction or discharge of the Obligations, and
shall be in addition to any other rights and remedies of Administrative Agent
and any Bank.

         5.24.4 In case any action, suit or proceeding shall be brought against
any Indemnitee, such Indemnitee shall notify Borrower of the commencement
thereof, and Borrower shall be entitled, at Sponsor's expense, acting through
counsel reasonably acceptable to such Indemnitee, to participate in the defense
thereof.

                                       47


         5.24.5 Any Indemnitee shall be entitled to compromise or settle such
Subject Claim.

         5.24.6 Upon payment of any Subject Claim by Borrower pursuant to this
Section 5.24 or other similar indemnity provisions contained herein to or on
behalf of an Indemnitee, Borrower, without any further action, shall be
subrogated to any and all claims that such Indemnitee may have relating thereto,
and such Indemnitee shall cooperate with Borrower and Borrower's insurance
carrier and give such further assurances as are necessary or advisable to enable
Borrower vigorously to pursue such claims.

         5.24.7 Any amounts payable by Borrower pursuant to this Section 5.24
shall be regularly payable within 10 Banking Days after Borrower receives an
invoice for such amounts from any applicable Indemnitee, and if not paid within
such 10 Banking Day period shall bear interest at the lesser of (a) the Default
Rate and (b) the maximum rate payable under applicable Legal Requirements. The
obligations of Borrower under this Section 5.24 shall be deemed to be part of
the Obligations.

         5.24.8 Notwithstanding anything to the contrary set forth herein,
Borrower shall not, in connection with any one legal proceeding or claim, or
separate but related proceedings or claims arising out of the same general
allegations or circumstances, in which the interests of the Indemnitees do not
materially differ, be liable to the Indemnitees (or any of them) under any of
the provisions set forth in this Section 5.24 for the fees and expenses of more
than one separate firm of attorneys (which firm shall be selected by the
affected Indemnitees, or upon failure to so select, by Administrative Agent).

         5.24.9 If, for any reason whatsoever, the indemnification provided
under this Section 5.24 is unavailable to any Indemnitee or is insufficient to
hold it harmless to the extent provided in this Section 5.24, then provided such
payment is not prohibited by or contrary to any applicable Legal Requirement or
public policy, Borrower shall contribute to the amount paid or payable by such
Indemnitee as a result of the Subject Claim in such proportion as is appropriate
to reflect the relative economic interests of Borrower and its Affiliates on the
one hand, and such Indemnitee on the other hand, in the matters contemplated by
this Agreement as well as the relative fault of Borrower (and its Affiliates)
and such Indemnitee with respect to such Subject Claim, and any other relevant
equitable considerations.

         5.24.10 Nothing in this Section 5.24 shall constitute a release by
Borrower of any claims that it has as a result of a breach or a default by any
of the Secured Parties of their respective obligations under this Agreement or
any other Credit Document.

                                    ARTICLE 6
                               NEGATIVE COVENANTS

                  Borrower covenants and agrees that until the repayment in full
in cash of all Obligations (other than those contingent Obligations that are
intended to survive the termination of this Agreement and the other applicable
Credit Documents) Borrower shall not, and shall cause each Guarantor and
Non-Guarantor, as applicable, not to:


                                       48


    6.1 INDEBTEDNESS. Create, incur or suffer to exist any Debt of Borrower, the
Guarantors and the Non-Guarantors, other than Permitted Debt in an aggregate
amount (other than the Loans) not to exceed at any time 8% of the aggregate of
(a) the amount of the Total Senior Loan Commitment and (b) if applicable, the
Lease Financing.

    6.2 LIENS. Create, assume or suffer to exist any Lien, securing a charge or
obligation on any Project or on any of the Collateral or of any Loan Party
(other than Sponsor and Ormat Technologies), real or personal, whether now owned
or hereafter acquired, except Permitted Liens.

    6.3 SALE OR LEASE OF ASSETS. Sell, lease, assign, transfer or otherwise
dispose of assets, whether now owned or hereafter acquired, except (a) in the
ordinary course of its business and as contemplated by the Project Documents,
(b) to the extent that such asset is unnecessary, worn out or no longer useful
or usable in connection with the operation or maintenance of the applicable
Project, (c) any asset with a fair market value not in excess of $100,000, or,
in any one calendar year, assets with an aggregate fair market value not in
excess of $500,000, and, in each case, at fair market value; provided that, in
the case of clause (a), (b) or (c), no such sale, lease, assignment, transfer or
other disposition shall be permitted if such sale, lease, assignment, transfer
or other disposition could reasonably be expected to have a Material Adverse
Effect. Upon any such sale, lease, assignment, transfer or other disposition of
any such assets, all Liens in favor of any Secured Party, including the Liens
created pursuant to the Collateral Documents, relating to such asset shall be
released.

    6.4 CHANGE IN BUSINESS. Change the nature of its business or expand its
business beyond the business contemplated by the Operative Documents and the
Lease Financing. Borrower shall conduct no business, hold no assets and have no
liabilities, other than (a) its ownership interests in OrHeber 1, OrHeber 2,
OrHeber 3, ORNI, OrMammoth, SIGC, HGC and HFC and (b) its rights, liabilities
and obligations under its Governing Documents, the Lease Financing and the
Credit Documents to which it is a party. Each of OrHeber 1 OrHeber 2, OrHeber 3,
ORNI and OrMammoth shall conduct no business, hold no assets and have no
liabilities, other than (i) its ownership interests in the applicable Guarantor
or Non-Guarantor and (ii) its liabilities under its Governing Documents, the
Acquisition Agreement, the agreements set forth on Exhibit G-5, and the Credit
Documents to which it is a party. Each Project Company shall conduct no
business, hold no assets and have no liabilities, other than in connection with
the business of operating and using its applicable Project.

    6.5 CHANGE OF NAME. Change its name, principal place of business,
organizational identification number or jurisdiction of incorporation or
formation, as applicable, without giving Administrative Agent at least 45 days'
prior written notice.

    6.6 INVESTMENTS. Make any investments (whether by purchase of stocks, bonds,
notes or other securities, loan, extension of credit, advance or otherwise)
other than (a) Permitted Investments, (b) the Lease Buyout and (c) the Mammoth
Ownership Event; provided that, for purposes of this Section 6.6, capital
expenditures provided for in the then-current Capital Expenditures Budget shall
not constitute investments.


                                       49


    6.7 FORMATION OF SUBSIDIARIES. Create any new Subsidiary or become a joint
venturer in any joint venture.

    6.8 FUNDAMENTAL CHANGES. Enter into any merger, consolidation or
amalgamation, or liquidate, dissolve or wind up or terminate itself (other than
a Permitted Reorganization).

    6.9 TRANSACTIONS WITH AFFILIATES.

         6.9.1 Enter into any transaction or series of transactions relating to
any Project with or for the benefit of an Affiliate without the prior written
approval of the Required Banks, other than (a) the Project Documents in effect
on the Closing Date, and the transactions permitted thereby, (b) any employment,
noncompetition or confidentiality agreement entered into by such Loan Party with
any of its employees, officers or directors in the ordinary course of business,
(c) the Project Documents entered into by any Project Company and any such
Affiliate for the purpose of providing the applicable Project with electrical
energy to service its internal power requirements (provided that (i) the IID is
obligated to provide such power requirements in the event that such Affiliate
cannot serve such power requirements and (ii) such Project Document is
materially more favorable to such Project Company than any Project Document
which would be obtainable for a comparable transaction with the IID), (d)
transactions with a fair market value not in excess of $500,000 in any one
calendar year which are no less favorable to such Project Company than would be
obtainable for a comparable transaction in arms-length dealings with an
unrelated third party, and (e) as otherwise expressly permitted or contemplated
by the Credit Documents. Notwithstanding anything to the contrary contained in
this Section 6.9.1, the applicable Project Company may enter into any Project
Document with respect to the capital expenditures to be performed during the
2004 or 2005 calendar year in the manner described in the GeothermEx Report or
the Independent Engineer's Report without the consent of Administrative Agent or
any of the other Banks.

         6.9.2 Enter into any operation and maintenance agreements (including
any O&M Agreement) or engineering, procurement or construction contracts
relating to any Project pursuant to which such Project Company is obligated to
pay such Affiliate (including any Operator) any profits or bonuses.

    6.10 CERTAIN RESTRICTIONS ON CHANGES TO GOVERNING DOCUMENTS. Amend,
supplement, give any consent under or otherwise modify its Governing Documents
in a manner which is inconsistent with or violates the terms of, or could
reasonably be expected to prevent compliance with any of the terms of, any
Credit Document or any Major Project Document or could reasonably be expected to
result in a Material Adverse Effect.

    6.11 REGULATIONS. Directly or indirectly apply any part of the proceeds of
any Loan, any Equity Funds, and any Subordinated Loans received by Borrower or
other funds or revenues received by any Subsidiary thereof to the "buying",
"carrying" or "purchasing" of any margin stock within the meaning of Regulations
T, U or X of the Federal Reserve Board, or any regulations, interpretations or
rulings thereunder.


                                       50


    6.12 AMENDMENT OF PROJECT DOCUMENTS.

         6.12.1 Terminate (other than in accordance with its terms), amend,
supplement or otherwise modify (except for any amendments to the Material Real
Property Documents, to the extent that such amendments are in the form attached
as Exhibit B to that certain Settlement Agreement dated October 6, 2003, among
HGC, HFC, SIGC, Covanta and each of the other parties thereto), or grant any
waivers or consents under, or agree to any contract variation or discretionary
or other change that requires the consent or agreement of such Loan Party (each,
a "Project Document Modification") under any Major Project Documents, including
the GE Lease and the Power Purchase Agreements.

         6.12.2 Agree to any Project Document Modification under any Project
Document other than a Major Project Document unless such Project Document
Modification (a) could not reasonably be expected to have a Material Adverse
Effect, (b) is not reasonably likely to materially impair or reduce the maximum
capacity, value, efficiency, utility, output, performance, reliability,
durability or availability of the applicable Project, or materially increase O&M
Costs, or materially decrease Project Revenues, and (c) is not otherwise
prohibited under the Credit Documents.

    6.13 ASSIGNMENT.

         6.13.1 Assign its rights under any of the Credit Documents or under any
Major Project Document to any Person (other than in connection with a Permitted
Reorganization).

         6.13.2 Consent to the assignment of any obligations under any Major
Project Document by any counterparty thereto (other than any assignment made (a)
by GECC to SIGC in connection with the Lease Buyout, (b) by Sponsor of the SIGC
O&M Agreement pursuant to Section 5.10.3 or (c) by any counterparty to a
Material Real Property Document).

    6.14 ACCOUNTS. Maintain, establish or use any account other than the
Accounts; provided that (a) SIGC may maintain each account which it is required
to maintain under the GE Lease (provided, further, that, upon the termination of
the GE Lease, all amounts on deposit in the accounts maintained under the GE
Lease and which are released to SIGC shall be transferred to the Revenue
Account), (b) Mammoth Lakes may maintain each account which it is required to
maintain under its Governing Documents or that is existing on the Closing Date
(provided, further, that, upon any Mammoth Ownership Event, all amounts on
deposit in such accounts shall be transferred to the Revenue Account), and (c)
each of OrHeber, OrMammoth and Borrower may maintain a checking account (an
"Operating Account") with a maximum aggregate balance not to exceed $60,000.

    6.15 HAZARDOUS MATERIALS. Release into the environment any Hazardous
Substances in violation of any Hazardous Substance Laws, Legal Requirements or
the Project's Permits, except for (a) temporary unplanned exceedences not
allowed under any Project's Permits, which temporary unplanned exceedences could
not reasonably be expected to have a Material Adverse Effect and which a Loan
Party is diligently and in good faith attempting to correct and (b)
unintentional violations with respect to which (i) the Release is not continuing
or


                                       51


reasonably likely to re-occur and is not reasonably susceptible to prevention
or cure, (ii) there are no unsatisfied reporting and/or remediation requirements
under applicable Hazardous Substance Laws, Legal Requirements or applicable
Permits, (iii) no non-monetary penalties or sanctions have been imposed or are
reasonably likely to be imposed (except for the remediation of such violation)
under applicable Hazardous Substance Laws, Legal Requirements or applicable
Permits, and (iv) the Release could not reasonably be expected to materially
impair the value of any Site or any other Collateral, and could not otherwise
reasonably be expected to have a Material Adverse Effect.

    6.16 ADDITIONAL PROJECT DOCUMENTS. Enter into, or become a party to, any
Additional Project Document without the consent of Administrative Agent, which
consent shall not unreasonably be withheld, conditioned or delayed.
Notwithstanding anything to the contrary contained in this Section 6.16, the
applicable Project Company may enter into any Project Document with respect to
the capital expenditures to be performed during the 2004 or 2005 calendar year
in the manner described in the GeothermEx Report or the Independent Engineer's
Report without the consent of Administrative Agent or any of the other Banks.

    6.17 REAL PROPERTY ACQUISITIONS. Acquire or lease any real property or other
interest in real property (excluding the acquisition (but not the exercise) of
any options to acquire any such interests in real property) other than the real
property interests acquired prior to the Closing Date, unless Borrower shall
have delivered to Administrative Agent a "Phase I" environmental report with
respect to such real property and, if a "Phase II" environmental review is
warranted (as reasonably determined by Administrative Agent upon its review of
such "Phase I" environmental report), a "Phase II" environmental report, in each
case, along with a corresponding reliance letter from the consultant issuing
such report(s), confirming, in form and substance reasonably satisfactory to
Administrative Agent, either that no Hazardous Substances were found in, on or
under such real property of a nature or in concentrations that could reasonably
be expected to impose on the Loan Parties a material environmental liability
(other than Ormat Technologies or Sponsor).

    6.18 ERISA. Maintain, contribute to, or become obligated to contribute to,
or become subject to any liability under or relating to any ERISA Plan.

    6.19 DIVIDENDS. Declare or make any distribution or dividend, unless the
following conditions have been satisfied (the "Restricted Payments Conditions"):

         (a) such dividend or distribution is on a date occurring within 45 days
after the immediately preceding Principal Repayment Date;

         (b) no Event of Default or Potential Event of Default has occurred and
is continuing as of the date of such applicable dividend or distribution, and
such dividend or distribution would not cause an Event of Default or Potential
Event of Default;

         (c) with respect to each such dividend or distribution which is on a
date occurring prior to December 31, 2004, (i) the Blended Debt Service Coverage
Ratio is greater than or equal to 1.25 to 1, and (ii) the Average Debt Service
Coverage Ratio for each quarterly


                                       52


period immediately preceding or ending on the applicable Principal Repayment
Date (but after the Closing Date) is greater than or equal to the projected
Average Debt Service Coverage Ratio for each such quarterly period (as set forth
in the Projections);

         (d) with respect to each such dividend or distribution which is on a
date occurring on or after December 31, 2004, the Average Debt Service Coverage
Ratio for the four-quarter period immediately preceding the applicable Principal
Repayment Date is greater than or equal to 1.25 to 1; and

         (e) Borrower's forecast of cash flow, delivered to Administrative Agent
pursuant to Section 5.23 and approved by Administrative Agent in its sole
discretion, does not indicate an inability to amortize the Loans (due to
technical reasons and/or contractual issues).

         Notwithstanding the foregoing, nothing in this Section 6.19 shall
prohibit (i) distributions or dividends by the Guarantors or Non-Guarantors to
Borrower or (ii) distributions or dividends by Borrower to Sponsor pursuant to
Section 2.2 of the Sponsor Guaranty.

    6.20 POWER SALES.

         6.20.1 With respect to Borrower, any Guarantor or any Non-Guarantor
(other than the Project Companies), sell any electrical energy, capacity or
ancillary services to any Person other than sales of renewable energy credits.

         6.20.2 With respect to any Project Company, sell any electrical energy,
capacity or ancillary services to any Person, other than to Edison under the
Power Purchase Agreements and sales of renewable energy credits.

    6.21 CAPITAL EXPENDITURES; GEOTHERMAL RESOURCE DEVELOPMENT. Without the
prior written consent of the Required Banks (which consent may be withheld in
their respective sole discretion), cause any Loan Party to take any action
(including the making of capital expenditures) for the purpose of (a) expanding
any of the geothermal fields which currently service any of the Projects, (b)
developing new geothermal resources at or contiguous to any of the Sites
(including the Mammoth Lakes and HFC geothermal fields) or (c) drilling new
wells of any type at any of the Sites (including the Mammoth Lakes and HFC
geothermal fields); provided that no such consent shall be required for any such
actions related to the Projects which are to be performed during the 2004 or
2005 calendar year in the manner described in the GeothermEx Report and the
Independent Engineer's Report. The parties hereby acknowledge that no such
consent shall be required for geothermal field maintenance (including pumps,
well-workovers, replacement wells and make-up wells) unless such maintenance
could reasonably be expected to have a Material Adverse Effect.

    6.22 INTEREST RATE AGREEMENTS. Secure any of its obligations under any
Interest Rate Agreement with any portion of the Collateral.

                                    ARTICLE 7
                           EVENTS OF DEFAULT; REMEDIES


                                       53


    7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an event of default (each, an "Event of Default") hereunder:

         7.1.1 Failure to Make Payments. Any Loan Party shall fail to perform in
accordance with the terms of this Agreement or any other Credit Document its
obligation (if any) to pay (a) any principal on any Loan on the date that such
sum is due, (b) any interest on any Loan within three days after the date such
sum is due, (c) any scheduled fee, cost, charge, Make-Whole Premium, or sum due
hereunder or under any other Credit Documents within three days of the date that
such sum is due, or (d) any other fee, cost, charge or other sum due under this
Agreement or the other Credit Documents within five days after written notice
that such sum is due.

         7.1.2 Bankruptcy; Insolvency. Any Loan Party (other than Ormat
Technologies) or any other Major Project Participant (so long as such Major
Project Participant shall have outstanding or unperformed obligations (other
than warranty obligations) under the Operative Document to which it is a party)
shall become subject to a Bankruptcy Event; provided that, solely with respect
to a Bankruptcy Event with respect to a Major Project Participant other than any
Loan Party (other than Ormat Technologies), no Event of Default shall occur as a
result of such Bankruptcy Event if Borrower is attempting to obtain a
Replacement Obligor for the affected party and does so within 30 days thereof.

         7.1.3 Defaults Under Other Indebtedness. Borrower, any Guarantor, any
Non-Guarantor or, prior to the termination of the Sponsor Guaranty pursuant to
the terms hereof and thereof, Sponsor shall default for a period beyond any
applicable grace period (a) in the payment of any principal, interest or other
amount due under any agreement involving Debt and the outstanding principal
amount or amounts payable under any such agreement equals or exceeds (i) in the
case of Borrower or any Project Company, $1,000,000 in the aggregate, (ii) in
the case of any Guarantor or Non-Guarantor that is not a Project Company,
$100,000 in the aggregate and (iii) in the case of Sponsor, $5,000,000 in the
aggregate, or (b) in the performance of any obligation due under any agreement
involving Debt if in the case of this clause (b), pursuant to such default, the
holder of the obligation concerned has the right to accelerate the maturity of
any Debt evidenced thereby which equals or exceeds (i) in the case of Borrower
or any Project Company, $1,000,000 in the aggregate, (ii) in the case of any
Guarantor or Non-Guarantor that is not a Project Company, $100,000 in the
aggregate and (iii) in the case of Sponsor, $5,000,000 in the aggregate.

         7.1.4 Judgments.

         (a) A final judgment or judgments shall be entered against (i) Sponsor,
at any time prior to the termination of the Sponsor Guaranty pursuant to the
terms hereof and thereof, in the amount of $5,000,000 or more individually or
(ii) Borrower, any Guarantor or any Non-Guarantor in the amount of $1,000,000 or
more individually or in the aggregate or involving injunctive relief requiring
suspension or abandonment of the operation of a Project (other than, in each
case, (A) a judgment which is fully covered by insurance, discharged, bonded
pending appeal or satisfied within 60 days after its entry, or (B) a judgment,
the execution of which is


                                       54


effectively stayed within 60 days after its entry but only for 60 days after the
date on which such stay is terminated or expires).

         (b) Any order, judgment or decree shall be entered against any Loan
Party (other than Ormat Technologies) decreeing the dissolution or split up of
such Person and such order shall remain undischarged or unstayed for a period in
excess of 30 days.

         7.1.5 ERISA. If any Loan Party (other than Ormat Technologies) or any
ERISA Affiliate should establish, maintain, contribute to or become obligated to
contribute to any ERISA Plan and (a) a Reportable Event shall have occurred with
respect to any ERISA Plan and, within 30 days after the reporting of such
Reportable Event to Administrative Agent by Borrower (or Administrative Agent
otherwise obtaining knowledge of such event) and the furnishing of such
information as Administrative Agent may reasonably request with respect thereto,
Administrative Agent shall have notified Borrower in writing that (i)
Administrative Agent or Majority Banks has made a determination that, on the
basis of such Reportable Event, there are reasonable grounds for the termination
of such ERISA Plan by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such ERISA Plan and (ii) as a
result thereof, an Event of Default exists hereunder; or (b) a trustee shall be
appointed by a United States District Court to administer any ERISA Plan; or (c)
the PBGC shall institute proceedings to terminate any ERISA Plan; or (d) a
complete or partial withdrawal by any Loan Party (other than Ormat Technologies)
or any ERISA Affiliate from any Multiemployer Plan shall have occurred and,
within 30 days after the reporting of any such occurrence to Administrative
Agent by Borrower (or Administrative Agent otherwise obtaining knowledge of such
event) and the furnishing of such information as Administrative Agent or
Majority Banks may reasonably request with respect thereto, Administrative Agent
shall have notified Borrower in writing that Administrative Agent has made a
determination that, on the basis of such occurrence, an Event of Default exists
hereunder; provided that before any event shall constitute an Event of Default
under this Section 7.1.5, the events described in this Section 7.1.5 must,
individually or together, result in total liability to Borrower, any applicable
Loan Party (other than Ormat Technologies) and all ERISA Affiliates in excess of
$5,000,000.

         7.1.6 Breach of Terms of Agreement.

         (a) Defaults Without Cure Periods. (i) Any Loan Party shall fail to
perform or observe any of the covenants set forth in Section 5.1, 5.8(a),
5.12.2, 5.14, 5.17 or 5.18 or Article 6 of this Agreement; or (ii) Sponsor shall
fail to perform or observe any of the covenants set forth in Article 2 or
Section 4.1 or 4.6 of the Sponsor Guaranty.

         (b) Defaults With Fifteen Day Cure Periods. Borrower shall fail to
perform or observe any of the covenants set forth in Section 5.6.2 of this
Agreement or Sponsor shall fail to perform or observe any of the covenants set
forth in Section 4.7 or 4.8 of the Sponsor Guaranty, and such failure shall
continue unremedied for a period of fifteen days after such Loan Party becomes
aware thereof or receives written notice thereof from Administrative Agent.

         (c) Other Defaults. Any Loan Party shall fail to perform or observe any
of the covenants set forth hereunder or any other Credit Document not otherwise
specifically provided


                                       55


for in Section 7.1.6(a), Section 7.1.6(b) or elsewhere in this Article 7, and
such failure shall otherwise continue unremedied for a period of 30 days after
such Loan Party becomes aware thereof or receives written notice thereof from
Administrative Agent; provided, however, that, if (i) such failure cannot be
cured within such 30 day period, (ii) such failure is capable of being cured,
(iii) such Loan Party is proceeding with diligence and in good faith to cure
such failure, (iv) the existence of such failure has not had and could not,
after considering the nature of the cure, be reasonably expected to have a
Material Adverse Effect, and (v) Administrative Agent shall have received an
officer's certificate signed by a Responsible Officer to the effect of clauses
(i), (ii), (iii) and (iv) above and stating what action such Loan Party is
taking to cure such failure, then such 30 day cure period shall be extended to
such date, not to exceed a total of 90 days, as shall be necessary for such Loan
Party diligently to cure such failure.

         7.1.7 Loss of Collateral. Any substantial portion of the Collateral is
damaged, seized or appropriated without appropriate insurance proceeds (subject
to the underlying deductible) or without fair value being paid therefor so as to
allow replacement of such Collateral and/or prepayment of Loans and to allow the
Loan Parties (other than Ormat Technologies) to continue satisfying their
respective obligations hereunder and under the other Operative Documents.

         7.1.8 Regulatory Status.

         (a) Any Loan Party (other than Ormat Technologies) shall suffer an
Adverse PUHCA Event or shall otherwise become subject to, or not exempt from
financial, organizational or rate regulation as a "holding company" or a
"subsidiary company" of a "holding company" under PUHCA, as a "public utility"
or "electric utility" under the FPA, or as a public utility under the laws of
the State of California.

         (b) Any of the Projects shall cease to be a QF.

         7.1.9 Abandonment. Any Project shall be abandoned or operation thereof
shall be suspended for a period of more than 30 consecutive days for any reason
(other than force majeure); provided that a forced outage or scheduled outage of
a Project shall not constitute abandonment or suspension of the Project, so long
as the applicable Project Company is diligently attempting to end such outage
and such outage does not result in a default under any Major Project Document.

         7.1.10 Unenforceability of Credit Documents.

         (a) Any material provision of any Credit Document shall cease to be in
full force and effect (other than by reason of a release of Collateral
thereunder in accordance with the terms of the Credit Documents, the
satisfaction in full of the obligations of the Loan Parties under the Credit
Documents or any other termination of a Credit Document in accordance with the
terms thereof) or any Credit Document shall be declared null and void by a
Governmental Instrumentality.


                                       56


         (b) Subject to Section 3.3, Administrative Agent shall not have a valid
and perfected Lien in the Collateral. Subject to Section 3.3, Administrative
Agent shall not have a valid and perfected first priority Lien in the Collateral
(subject to (i) with respect to the Collateral described in Section 4.24(i), the
Permitted Liens described in clauses (a) and (e) of the definition of "Permitted
Liens" and, to the extent required by Governmental Rule, those matters described
in clauses (b), (c) and (g) of the definition of "Permitted Liens", (ii) with
respect to the Collateral described in Sections 4.24(ii) and 4.24(iii), the
Permitted Liens described in clause (a) of the definition of "Permitted Liens"
and, to the extent required by Governmental Rule, those matters described in
clause (b) of the definition of "Permitted Liens" and (iii) with respect to the
Uninsured Real Property Interests, those matters described in clause (j) of the
definition of "Permitted Liens").

         (c) Any Loan Party shall contest the validity or enforceability of any
Credit Document in writing or deny in writing that it has any further liability
prior to the payment in full of all obligations of the Loan Parties under the
Credit Documents.

         7.1.11 Change of Control.

         (a) Any of the following shall occur: (i) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all
or substantially all of the assets of Borrower, any Guarantor or any
Non-Guarantor to any Person or group of related Persons, together with any
Affiliates thereof; (ii) the holders of the ownership interests of any Loan
Party (other than Ormat Technologies) shall approve any plan or proposal for the
liquidation or dissolution of any Loan Party (other than Ormat Technologies);
(iii) Sponsor shall cease to directly own 100% of the voting and economic
interests in Borrower; (iv) Borrower shall cease to directly own 100% of the
voting and economic interests in OrHeber 1, 100% of the voting and economic
interests in OrMammoth, 50% of the voting and economic interests in HFC and 50%
of the voting and economic interests in HGC; (v) OrHeber 1 shall cease to
directly own 50% of the voting and economic interests in HFC, 50% of the voting
and economic interests in HGC and 100% of the voting and economic interests in
ORNI; (vi) ORNI shall cease to directly own 100% of the voting and economic
interests in OrHeber 2 and 100% of the voting and economic interests in OrHeber
3; (vii) OrHeber 2 shall cease to directly own 99.998% of the voting and
economic interests in ORNI; (viii) OrHeber 3 shall cease to directly own 0.002%
of the voting and economic interests in SIGC; or (ix) OrMammoth shall cease to
directly own 100% of the voting and economic interests in Mammoth Lakes.

         (b) Notwithstanding the provisions of Section 7.1.11(a), (i) the Loan
Parties shall be permitted to undertake a Permitted Reorganization on or before
December 31, 2004, and (ii) Sponsor shall be permitted to undertake a Permitted
Sponsor Sale.

         7.1.12 Loss of or Failure to Obtain Necessary Permits.

         (a) Borrower, any Guarantor or any Non-Guarantor shall fail to obtain
any Permit necessary for the ownership, leasing, maintenance or operation of any
Project and such failure could reasonably be expected to have a Material Adverse
Effect.


                                       57


         (b) Any Permit necessary for ownership, leasing, maintenance or
operation of any Project shall be materially modified, revoked, canceled or not
renewed by a Governmental Instrumentality (or otherwise ceases to be in full
force and effect) and such modification, revocation, cancellation or non-renewal
could reasonably be expected to have a Material Adverse Effect.

         7.1.13 Misstatements; Omissions. Any representation or warranty made or
deemed made by any Loan Party in any Credit Document to which such Loan Party is
a party, shall be untrue or misleading in any material respect as of the time
made; provided that, in respect of unintentional misrepresentations which are
capable of being remedied and are made or deemed made after the Closing Date,
any such unintentional misrepresentation shall not be deemed to be an Event of
Default if such misrepresentation is corrected within 30 days of the occurrence
thereof.

         7.1.14 Project Document Defaults.

         (a) Any Project Document shall cease to be valid and binding and in
full force and effect; provided that any such event will not constitute an Event
of Default if the applicable Project Company is attempting to replace such
Project Document with the consent of the Required Banks and does so within 60
days of such event; provided, further, that an Event of Default shall occur
under this paragraph only if the failure of such Project Document to remain
valid and binding and in full force and effect could reasonably be expected to
have a Material Adverse Effect.

         (b) Any Project Document shall terminate or be terminated or canceled
prior to its stated expiration date or any Project Company shall be in default
(after the giving of any applicable notice and the expiration of any applicable
grace period) under any of the Project Documents; provided that a default under
or termination or cancellation of any Project Document shall constitute an Event
of Default only if (a) such default or termination could reasonably be expected
to have a Material Adverse Effect or (b) such default could result in a Major
Project Document being terminated by the applicable counterparty within five
Banking Days.

         (c) Any Major Project Participant shall be in default (after the giving
of any applicable notice and the expiration of any applicable grace period)
under any of the Major Project Documents; provided that a default under any
Project Document shall constitute an Event of Default only if such default or
termination could reasonably be expected to have a Material Adverse Effect.

         7.1.15 Failure to Close Escrow. The Close of Escrow shall not have
occurred on or before 5:00 p.m. (New York City time) on the Closing Date.

         7.1.16 Failure to Meet Minimum Debt Service Coverage Ratio. The Average
Debt Service Coverage Ratio for the twelve-month period immediately preceding
the applicable Principal Repayment Date is less than 1.00 to 1, and any funds on
deposit in the Debt Service


                                       58



Reserve Account shall have been applied to the payment of fees, interest or
principal on the Loans.

         7.1.17 Failure to Meet Projections.

         (a) (i) The Projects (taken as a whole) shall generate in any year less
than 90% of the anticipated megawatt-hours (as set forth in the Projections) for
such year, and (ii) the Projects (taken as a whole) shall have generated in the
preceding three years (on average) less than 95% of the anticipated
megawatt-hours (as set forth in the Projections) for such years.

         (b) The Projects (taken as a whole) shall generate in any year less
than 90% of the anticipated megawatt-hours (as set forth in the Projections) for
such year; provided that such failure shall not be an Event of Default if (i)
the Projects (taken as a whole) shall have generated in the preceding three
years (on average) at least 95% of the anticipated megawatt-hours (as set forth
in the Projections) for such years and (ii) within fifteen days of the end of
such year, Borrower shall have provided Administrative Agent with a report
describing (A) the actions Borrower and the applicable Project Companies are
taking and have taken to correct and remedy such operating performance
shortfalls, (B) the date by which such corrective actions will be completed
(which date shall be on or before June 30 of the year after the year in which
such failure arose), and (C) the causes of such operating performance shortfalls
(it being acknowledged and agreed that (I) Administrative Agent may consult with
consultants of its choosing, at the expense of Borrower, in respect of its
evaluation of such report and (II) Administrative Agent shall have no approval
rights with respect to such report); provided further that, if the Projects
(taken as a whole) shall fail to generate 95% or more of the anticipated
megawatt-hours (as set forth in the Projections) in each of the next two
quarters following the end of the earlier of (x) June 30 of the relevant year
and (y) the quarter during which such corrective actions have been fully
implemented, then an Event of Default shall be deemed to have occurred.

         7.1.18 Post-Closing Title Work. At the expiration of the Applicable
Post-Closing Period, (a) the Non-Material Real Property Interests shall not be
part of the Mortgaged Property or (b) the Liens granted to Administrative Agent
(for the benefit of the Secured Parties) pursuant to the Collateral Documents
shall not constitute as to the Non-Material Real Property Interests a valid and
perfected Lien on such Non-Material Real Property Interests.

    7.2 REMEDIES. Upon the occurrence and during the continuation of any Event
of Default, Administrative Agent and the Banks may, at the election of the
Majority Banks, without further notice of default, presentment or demand for
payment, protest or notice of non-payment or dishonor, or other notices or
demands of any kind, all such notices and demands (other than notices required
by the Credit Documents) being waived, exercise any or all of the following
rights and remedies, in any combination or order that the Majority Banks may
elect, in addition to such other rights or remedies as the Secured Parties may
have hereunder, under the Collateral Documents or at law or in equity:

         7.2.1 No Further Loans. Refuse, and Administrative Agent, and the Banks
shall not be obligated, to continue any Loans, make any additional Loans, or
make any payments, or


                                       59


permit the making of payments, from any Account or other funds held by
Administrative Agent under the Credit Documents or on behalf of any Loan Party
(other than Ormat Technologies).

         7.2.2 Cure by Agents. Without any obligation to do so, make
disbursements or Loans to or on behalf of any Loan Party (other than Ormat
Technologies) or disburse amounts from the Revenue Account to cure (a) any Event
of Default hereunder and (b) any default and render any performance under any
Project Document as the Majority Banks in their sole discretion may consider
necessary or appropriate, whether to preserve and protect the Collateral or the
Secured Parties' interests therein or for any other reason. All sums so
expended, together with interest on such total amount at the Default Rate (but
in no event shall the rate exceed the maximum lawful rate), shall be repaid by
Borrower to Administrative Agent, as the case may be, on demand and shall be
secured by the Credit Documents, notwithstanding that such expenditures may,
together with amounts advanced under this Agreement, exceed the aggregate amount
of the Total Senior Loan Commitment.

         7.2.3 Acceleration. Declare and make all or a portion of the sums of
accrued and outstanding principal and accrued but unpaid interest remaining
under this Agreement, together with all unpaid fees, costs (including
Liquidation Costs) and charges due hereunder or under any other Credit Document,
immediately due and payable and require Borrower immediately, without
presentment, demand, protest or other notice of any kind (other than notices
required by the Credit Documents or by applicable Legal Requirements), all of
which Borrower hereby expressly waives, to pay Administrative Agent or the
Secured Parties an amount in immediately available funds equal to the aggregate
amount of any outstanding Obligations; provided that, in the event of an Event
of Default occurring under Section 7.1.2 with respect to any Loan Party, all
such amounts shall become immediately due and payable without further act of
Administrative Agent or the Secured Parties.

         7.2.4 Cash Collateral. Apply or execute upon any amounts on deposit in
any Account or any moneys of any Loan Party (other than Ormat Technologies) on
deposit with Administrative Agent or any Secured Party in the manner provided in
the UCC and other relevant statutes and decisions and interpretations thereunder
with respect to cash collateral. Without limiting the foregoing, Administrative
Agent shall have all rights and powers with respect to the Accounts and the
contents of the Accounts as it has with respect to any other Collateral and may
apply, or cause the application of, such amounts to the payment of interest,
principal, fees, costs, charges or other amounts due or payable to
Administrative Agent, Depositary Agent or the Secured Parties with respect to
the Loans in such order as the Required Banks may elect in their sole
discretion. Until such time as the Majority Banks so elect to exercise such
rights and powers, amounts in the Revenue Account shall be applied as provided
in Section 2.2(b) of the Depositary Agreement. Borrower shall not have any
rights or powers with respect to such amounts except as expressly provided in
this Section 7.2.4.

    7.2.5 Possession of Projects. Enter into possession of any Project and
perform any and all work and labor necessary to operate and maintain any such
Projects, and all sums expended by Administrative Agent in so doing, together
with interest on such total amount at the Default Rate, shall be repaid by
Borrower to Administrative Agent upon demand and shall be secured by the Credit
Documents, notwithstanding that such expenditures may, together with


                                       60


amounts advanced under this Agreement, exceed the aggregate amount of the Total
Senior Loan Commitment.

         7.2.6 Remedies Under Credit Documents. Exercise, and direct
Administrative Agent to exercise, any and all rights and remedies available to
it under any of the Credit Documents, including judicial or non-judicial
foreclosure or public or private sale of any of the Collateral pursuant to the
Collateral Documents.

                                    ARTICLE 8
                               SCOPE OF LIABILITY

         Except as expressly set forth in this Article 8, notwithstanding
anything in this Agreement or the other Credit Documents to the contrary, the
Banks shall have no claims with respect to the transactions contemplated by the
Operative Documents against Sponsor or any of its Affiliates (other than
Borrower, the Guarantors and the Non-Guarantors), or any of Sponsor's or
Sponsor's Affiliates' shareholders (other than Borrower, the Guarantors and the
Non-Guarantors), partners (other than Borrower, the Guarantors and the
Non-Guarantors), members (other than Borrower, the Guarantors and the
Non-Guarantors), officers, agents, managers, directors or employees
(collectively, the "Nonrecourse Persons"). The Banks' recourse against the
Nonrecourse Persons shall be limited to the Collateral (including the Projects,
all Project Revenues, all Loan proceeds, Insurance Proceeds, Eminent Domain
Proceeds, and all income or revenues of the foregoing) as and to the extent
provided herein and in the Collateral Documents; provided that the foregoing
provision of this Article 8 shall not (a) constitute a waiver, release or
discharge of any of the indebtedness, or of any of the terms, covenants,
conditions, or provisions of this Agreement or any other Credit Document and the
same shall continue (but without personal liability to the Nonrecourse Persons)
until fully paid, discharged, observed, or performed; (b) limit or restrict the
right of Administrative Agent or any Secured Party (or any assignee, beneficiary
or successor to any of them) to name Borrower or any other Person as a defendant
in any action or suit for a judicial foreclosure or for the exercise of any
other remedy under or with respect to this Agreement or any other Collateral
Document or Credit Document, or for injunction or specific performance, so long
as no judgment in the nature of a deficiency judgment shall be enforced against
any Nonrecourse Person, except as set forth in this Article 8; (c) in any way
limit or restrict any right or remedy of Administrative Agent or any Secured
Party (or any assignee or beneficiary thereof or successor thereto) with respect
to, and each of the Nonrecourse Persons shall remain fully liable to the extent
that it would otherwise be liable for its own actions with respect to, any
fraud, willful breaches of covenants, willful misrepresentation, common law
waste or misappropriation of Project Revenues, Loan proceeds, Insurance
Proceeds, Eminent Domain Proceeds or any other earnings, revenues, rents,
issues, profits or proceeds from or of the Collateral, that should or would have
been paid as provided herein or paid or delivered to Administrative Agent or any
Secured Party (or any assignee or beneficiary thereof or successor thereto)
towards any payment required under this Agreement or any other Credit Document;
(d) affect or diminish or constitute a waiver, release or discharge of any
specific written obligation, covenant, or agreement in respect of the
transactions contemplated by the Operative Documents made by any of the
Nonrecourse Persons or any security granted by the Nonrecourse Persons in
support of the obligations of such Persons under


                                       61


any Collateral Document (or as security for the obligations of Borrower), any
Subsidiary Guaranty or the Sponsor Guaranty; and (e) limit the liability of any
Person who is a party to any Project Document or has issued any certificate or
other statement in connection therewith with respect to such liability as may
arise by reason of the terms and conditions of such Project Document,
certificate or statement (but subject to any limitation of liability in such
Project Document) under relating solely to such liability of such Person as may
arise under such referenced agreement, certificate or statement. The Banks shall
have full recourse against Borrower, the Guarantors and the Non-Guarantors for
all of their respective obligations under the Credit Documents. Notwithstanding
anything to the contrary contained in any of the Credit Documents, no employee,
officer, authorized representative, or director of any Loan Party (including
Ormat Technologies, Sponsor, Borrower, the Guarantors and the Non-Guarantors)
shall have any personal liability (as distinct from any corporate, partnership
or limited liability company liability that any Loan Party may have under any of
the Credit Documents as and to the extent that such liability is a result of
such Loan Party being a "Loan Party") arising under or in connection with this
Agreement, any other Credit Document or any transaction contemplated hereby or
thereby. The limitations on recourse set forth in this Article 8 shall survive
the termination of this Agreement and the indefeasible payment in full in cash
and performance in full of the Obligations hereunder and under the other
Operative Documents.

                                    ARTICLE 9
                              AGENTS; SUBSTITUTION

    9.1 APPOINTMENT, POWERS AND IMMUNITIES.

         9.1.1 Each Bank hereby appoints and authorizes Administrative Agent to
act as its agent and collateral agent hereunder and under the other Credit
Documents, in each case with such powers as are expressly delegated to
Administrative Agent by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
Administrative Agent shall not have any duties or responsibilities except those
expressly set forth in this Agreement or in any other Credit Document, or be a
trustee or a fiduciary for any Secured Party. Notwithstanding anything to the
contrary contained herein, Administrative Agent shall not be required to take
any action which is contrary to this Agreement or any other Credit Documents or
any Legal Requirement or exposes Administrative Agent to any liability. Each of
Administrative Agent, the Banks and any of their respective Affiliates shall not
be responsible to any other Secured Party for (i) any recitals, statements,
representations or warranties made by Borrower or its Affiliates contained in
this Agreement, the other Credit Documents or in any certificate or other
document referred to or provided for in, or received by Administrative Agent or
any Secured Party under this Agreement or any other Credit Document, (ii) the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement, the other Credit Documents, any Notes or any other document
referred to or provided for herein, or (iii) any failure by Borrower or its
Affiliates to perform their respective obligations hereunder or thereunder.
Administrative Agent may employ agents and attorneys-in-fact, and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.


                                       62


         9.1.2 Administrative Agent and its directors, officers, employees or
agents shall not be responsible for any action taken or omitted to be taken by
it or them hereunder or under any other Credit Document or in connection
herewith or therewith, except for its own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, (a) Administrative
Agent may treat the payee of any Note as the holder thereof until Administrative
Agent receives written notice of the permitted assignment or transfer thereof in
accordance with the requirements of the Credit Documents, including Section 9.14
of this Agreement, signed by such payee and in form satisfactory to
Administrative Agent; (b) Administrative Agent may consult with legal counsel,
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c)
Administrative Agent does not make any warranty or representation to any Secured
Party for any statements, warranties or representations made in or in connection
with any Operative Document; (d) Administrative Agent shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of any Operative Document on the part of any party
thereto, to inspect the property (including the books and records) of Borrower
or any other Person or to ascertain or determine whether a Material Adverse
Effect exists or is continuing; and (e) Administrative Agent shall not be
responsible to any Secured Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Operative Document or
any other instrument or document furnished pursuant hereto. Except as otherwise
provided under this Agreement and the other Credit Documents, Administrative
Agent shall take such action with respect to the Credit Documents as shall be
directed by the Required Banks or Majority Banks, as applicable in accordance
with the terms of the Credit Documents.

    9.2 RELIANCE. Administrative Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, facsimile,
electronic mail or telex) believed by it to be genuine and correct and to have
been signed or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by it. As to any other matters not expressly provided for by
this Agreement, Administrative Agent shall not be required to take any action or
exercise any discretion, but shall be required to act or to refrain from acting
upon instructions of the Required Banks or, where expressly provided, the
Majority Banks or all Banks (except that Administrative Agent shall not be
required to take any action which exposes Administrative Agent to personal
liability or which is contrary to this Agreement, any other Credit Document or
any Legal Requirement). Administrative Agent shall in all cases (including when
any action by Administrative Agent alone is authorized hereunder, if
Administrative Agent elects in its sole discretion to obtain instructions from
the Required Banks) be fully protected in acting, or in refraining from acting,
hereunder or under any other Credit Document in accordance with the instructions
of the Required Banks (or, where so expressly stated, the Majority Banks or all
Banks), and such instructions of the Required Banks (or Majority Banks or all
Banks, where applicable) and any action taken or failure to act pursuant thereto
shall be binding on all of the Secured Parties.


                                       63


    9.3 NON-RELIANCE. Each Bank represents that it has, independently and
without reliance on Administrative Agent, or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of the financial condition and affairs of the Loan Parties and its own decision
to enter into this Agreement and agrees that it will, independently and without
reliance upon Administrative Agent, or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own appraisals and decisions in taking or not taking action under this
Agreement. Each of Administrative Agent and any Bank shall not be required to
keep informed as to the performance or observance by any Loan Party or its
Affiliates under this Agreement or any other document referred to or provided
for herein or to make inquiry of, or to inspect the properties or books of any
Loan Party or its Affiliates.

    9.4 DEFAULTS; MATERIAL ADVERSE EFFECT. Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Potential Event of
Default, Event of Default or Material Adverse Effect, unless such Person has
received a notice from a Bank or Borrower, referring to this Agreement,
describing such Potential Event of Default, Event of Default or Material Adverse
Effect and indicating that such notice is a notice of the occurrence of such
Potential Event of Default, Event of Default or Material Adverse Effect (as the
case may be). If Administrative Agent receives such a notice of the occurrence
of a Potential Event of Default, Event of Default or Material Adverse Effect,
Administrative Agent shall give notice thereof to the Banks. Administrative
Agent shall take such action with respect to such Potential Event of Default,
Event of Default or Material Adverse Effect as is provided in Article 3, Article
7 or the terms of the Credit Documents, or if not provided for in Article 3,
Article 7 or such Credit Documents, as Administrative Agent shall be reasonably
directed by the Majority Banks; provided, however, that unless and until
Administrative Agent shall have received such directions, Administrative Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Potential Event of Default, Event of Default
or Material Adverse Effect as it shall deem advisable in the best interest of
the Banks.

    9.5 INDEMNIFICATION. Without limiting the Obligations of Borrower hereunder,
each Bank agrees to indemnify Administrative Agent and its officers, directors,
shareholders, controlling Persons, employees, agents and servants, ratably in
accordance with their Proportionate Shares for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may at any time
be imposed on, incurred by or asserted against Administrative Agent or such
Person in any way relating to or arising out of this Agreement or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or the enforcement of any of the terms hereof or
thereof or of any such other documents (to the extent Borrower has not paid any
such amounts pursuant to Section 5.24); provided, however, that no Bank shall be
liable for any of the foregoing to the extent they arise from Administrative
Agent's, or any such Person's gross negligence or willful misconduct.
Administrative Agent or any such Person shall be fully justified in refusing to
take or to continue to take any action hereunder or under any other Credit
Document unless it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Without limitation of the
foregoing,


                                       64


each Bank agrees to reimburse Administrative Agent or any such Person promptly
upon demand for its Proportionate Share of any out-of-pocket expenses (including
counsel fees) incurred by Administrative Agent or any such Person in connection
with the preparation, execution, administration or enforcement of, or legal
advice in respect of rights or responsibilities under, the Operative Documents,
to the extent that Administrative Agent or any such Person is not reimbursed for
such expenses by Borrower.

    9.6 SUCCESSOR AGENT. Administrative Agent may resign at any time by giving
fifteen days' written notice thereof to the Secured Parties and Borrower, such
resignation to become effective in the manner and at the time set forth below.
Administrative Agent may be removed involuntarily at the request of Borrower or
the Banks only for a material breach of its duties and obligations hereunder and
under the other Credit Documents or for gross negligence or willful misconduct
in connection with the performance of its duties hereunder or under the other
Credit Documents and then only upon the affirmative vote of the Required Banks
(excluding Administrative Agent from such vote and Administrative Agent's
Proportionate Share (if any) of the Commitments from the amounts used to
determine the portion of the Commitments necessary to constitute the required
Proportionate Share of the remaining Banks). Upon any such resignation or
removal of Administrative Agent, the Required Banks shall have the right, with
the consent of Borrower (such consent not to be unreasonably withheld or
delayed) to appoint a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Required Banks and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Banks' removal of
the retiring Administrative Agent, the retiring Administrative Agent may, on
behalf of the Secured Parties, with the consent of Borrower (such consent not to
be unreasonably withheld or delayed), appoint a successor Administrative Agent
hereunder, which shall be a Bank, if any Bank shall be willing to serve, and
otherwise shall be a commercial bank having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent under the Operative Documents by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations as Administrative Agent only under the Credit Documents. After
any retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under the Operative Documents.

    9.7 AUTHORIZATION. Each Secured Party hereby constitutes and appoints
Administrative Agent, acting for and on behalf of itself and each of the Secured
Parties and each successor or assign of Administrative Agent and the Secured
Parties, the true and lawful attorney-in-fact of such Secured Party, with full
power and authority in the place and stead of such Secured Party and in the name
of such Secured Party, Administrative Agent or otherwise to (a) to execute,
deliver and perform each of the Credit Documents to which Administrative Agent
is or is intended to be a party, and each Bank agrees to be bound by all of the
agreements of Administrative Agent contained in the Credit Documents, and (b) to
release Liens on property that Borrower is permitted to sell or transfer
pursuant to the terms of this Agreement or the other


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Credit Documents and to enter into agreements supplemental hereto for the
purpose of curing any formal defect, inconsistency, omission or ambiguity in
this Agreement or any Credit Document to which it is a party.

    9.8 OTHER ROLES. With respect to its Commitment, the Loans made by it and
any Note issued to it, Administrative Agent in its individual capacity shall
have the same rights and powers under the Operative Documents as any other Bank
and may exercise the same as though it were not Administrative Agent. The term
"Bank" or "Banks" shall, unless otherwise expressly indicated, include
Administrative Agent in its individual capacity for so long as Administrative
Agent has Loans or Commitments outstanding. Administrative Agent and its
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with Borrower or any
other Person, without any duty to account therefor to the Banks. For the
avoidance of doubt Administrative Agent may act as Depositary Agent
notwithstanding any potential or actual conflict of interest presented by the
foregoing and Borrower. Each of the Banks hereby waives any claim against
Administrative Agent and any of its Affiliates based upon any conflict of
interest that such Person may have with regard to acting as an agent, arranger
or issuing bank hereunder and acting in such other roles.

    9.9 AMENDMENTS; WAIVERS. Subject to the provisions of this Section 9.9,
unless otherwise specified in this Agreement or another Credit Document, the
Required Banks (or Administrative Agent pursuant to Section 9.7, or otherwise
with the consent in writing of the Majority Banks or Required Banks, as the case
may be) and Borrower, Guarantors, Non-Guarantors or Sponsor may enter into
agreements, waivers or supplements hereto for the purpose of adding, modifying
or waiving any provisions to the Credit Documents or changing in any manner the
rights of the Banks, Borrower, Guarantors, Non-Guarantors or Sponsor hereunder
or thereunder or waiving any Potential Event of Default or Event of Default;
provided, however, that no such supplemental agreement shall, without the
consent of each Bank directly affected thereby:

         (a) modify, in any respect adverse to the Banks, Section 2.1.1(d), 2.5,
2.6, 2.7, 6.12 (with respect to the assignment of Borrower's or any Guarantors'
rights under any of the Credit Documents), 9.13, 9.14 or 10.21 hereof, Section
3.1.2(b) of the Depositary Agreement or Article 2 of the Sponsor Guaranty; or

         (b) reduce the percentage specified in the definition of "Majority
Banks" or "Required Banks"; or

         (c) amend this Section 9.9; or

         (d) release any Collateral (other than immaterial portions thereof)
from the Lien of any of the Collateral Documents or allow release of any funds
from any Account, in each case other than in accordance with Section 3.3 and any
other applicable terms of the Credit Documents (provided, however, that with the
consent of Administrative Agent, HFC may terminate or quitclaim any of the
Non-Material Real Property Interests); or


                                       66


         (e) extend the Maturity Date or reduce the principal amount of any
outstanding Loans or Notes or reduce the rate or change the time of payment of
interest due on any Loan; or

         (f) reduce the amount or extend the payment date for any amount due
under Article 2, whether principal, interest, fees or other amounts; or

         (g) reduce or change the time of payment of any fee due or payable
hereunder; or

         (h) release any Loan Party from any of its material obligations under
the Sponsor Guaranty or any Subsidiary Guaranty; or

         (i) increase the maximum duration of Interest Periods permitted
hereunder; or

         (j) subordinate the Loans to any other Debt.

         No amendment, modification, termination or waiver of any provision of
this Agreement affecting the rights or obligations of Administrative Agent or
any Loan Party shall be effective without the written consent of Administrative
Agent or such Loan Party, respectively. No amendment, modification, termination
or waiver of any provision of any Note (other than by way of amending a document
referred to therein) shall be effective without the written concurrence of the
Bank which is the holder of such Note. NO CREDIT DOCUMENT TO WHICH BEAL BANK,
S.S.B. IS A PARTY SHALL BE EFFECTIVE UNLESS TWO OFFICERS OF BEAL BANK, S.S.B.
SHALL HAVE EXECUTED SUCH CREDIT DOCUMENT.

    9.10 WITHHOLDING TAX. If the forms or other documentation required by
Section 2.4.6 are not delivered to Administrative Agent, then Administrative
Agent may withhold from any interest payment to any Bank not providing such
forms or other documentation, an amount equivalent to the applicable withholding
tax.

         9.10.1 If the Internal Revenue Service or any authority of the United
States or other jurisdiction asserts a claim that Administrative Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered, was not properly executed, or
because such Bank failed to notify Administrative Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason), then such Bank shall indemnify
Administrative Agent fully for all amounts paid, directly or indirectly, by
Administrative Agent as tax or otherwise, including penalties and interest,
together with all expenses incurred, including legal expenses, allocated staff
costs, and any out of pocket expenses. Borrower shall not be responsible for any
amounts paid or required to be paid by a Bank under this Section 9.10.1.

         9.10.2 If any Bank sells, assigns, grants participation in, or
otherwise transfers its rights under this Agreement, the purchaser, assignee,
participant or transferee, as applicable, shall comply and be bound by the terms
of Section 2.4.6 and this Section 9.10 as though it were such Bank.


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    9.11 GENERAL PROVISIONS AS TO PAYMENTS. Administrative Agent shall promptly
distribute to each Bank, subject to the terms of any separate agreement between
Administrative Agent and such Bank, its pro rata share of each payment of
principal and interest payable to the Banks on the Loans and of fees hereunder
received by Administrative Agent for the account of the Banks and of any other
amounts owing under the Loans. The payments made for the account of each Bank
shall be made, and distributed to it, for the account of (a) its domestic
lending office in the case of payments of principal of, and interest on, its
Base Rate Loans, (b) its domestic or foreign lending office, as each Bank may
designate in writing to Administrative Agent, in the case of LIBOR Loans, and
(c) its domestic lending office, or such other lending office as it may
designate for the purpose from time to time, in the case of payments of fees and
other amounts payable hereunder. Subject to the requirement of Section 2.8.2,
Banks shall have the right to alter designated lending offices upon five Banking
Days prior written notice to Administrative Agent and Borrower. Administrative
Agent and each Bank acknowledge and agree that each payment made by or on behalf
of any Loan Party to Administrative Agent under any Credit Document for the
benefit of any Bank shall discharge the obligation of such Loan Party under such
Credit Document to make such payment to Administrative Agent or such Bank
irrespective of any designation made by such Bank, or any agreement or
arrangement between Administrative Agent and such Bank, contemplated by this
Section 9.11.

    9.12 SUBSTITUTION OF BANK. Notwithstanding anything in any Credit Document
to the contrary, should any Bank fail to make a Loan in violation of its
obligations under this Agreement (a "Non-Advancing Bank"), Beal Bank, S.S.B.
shall fund such Loan on the Closing Date and shall be deemed to have assumed
each of the Non-Advancing Bank's obligations under this Agreement (including the
obligation to make the Loan which the Non-Advancing Bank failed to make) and
such Person automatically shall be substituted for the Non-Advancing Bank
hereunder, and all interest and fees which would otherwise have been payable to
the Non-Advancing Bank shall thereafter be payable to such Person. Nothing in
(and no action taken pursuant to) this Section 9.12 shall relieve the
Non-Advancing Bank from any liability it might have to Borrower or to the other
Banks as a result of its failure to make any Loan.

    9.13 PARTICIPATION. Nothing herein provided shall prevent any Bank from
selling a participation in one or more of its Loans made hereunder; provided
that (a) no such sale of a participation shall alter such Bank's or Borrower's
obligations hereunder and (b) any agreement pursuant to which any Bank may grant
a participation in its rights with respect to its Loans made hereunder shall
provide that, with respect to such Loans, subject to the following proviso, such
Bank shall retain the sole right and responsibility to exercise the rights of
such Bank, including any rights it has to enforce the obligations of Borrower
relating to such Loans, to approve any amendment, modification or waiver of any
provision of this Agreement or any other Credit Document, and to take action to
have the Obligations (or any portion thereof) declared due and payable pursuant
to Article 7; provided, however, that such agreement may provide that the
participant may exercise any rights that such Bank may have to approve or
disapprove decreases in interest rates, lengthening of maturity of any Loans,
extend the payment date for any principal or interest payments, release of any
material portion of the Collateral (other than in accordance with the terms of
the Credit Documents) or release any Loan Party (other than in accordance with
the terms of the Credit Documents) from its obligations under the Sponsor
Guaranty or any


                                       68


Subsidiary Guaranty. Recipients of a participation in any Loans of any Bank
shall have rights under this Agreement with respect to increased costs or
reserve requirements under Section 2.4 or 2.6, if such recipient complies with
the requirements of Section 2.4.6, to the same extent as if they were Banks
(except that any such participant shall be entitled to claim any such amount
only to the extent that the Bank from which such participant acquired its
participation is entitled to, and such Bank makes such claim on its own behalf
because it would have otherwise incurred the same costs). For the avoidance of
doubt, Borrower shall not be responsible for increased costs arising out of any
sale of a participation of any Loans or Notes.

    9.14 TRANSFER OF COMMITMENT. Notwithstanding anything else herein to the
contrary, any Bank, after receiving Administrative Agent's prior written consent
(such consent not to be unreasonably withheld), may from time to time, without
the consent of Borrower or any other Person, at its option, sell, assign,
transfer, negotiate or otherwise dispose of a portion of one or more of its
Loans made hereunder (including the Bank's interest in this Agreement and the
other Credit Documents) to its Affiliate, any Bank or to one or more banks or
other Persons that constitute a "Bank"; provided, however, that no Bank
(including any assignee of any Bank) may assign any portion of its Loans in an
amount less than $1,000,000 (unless such lesser amount constitutes the assigning
Bank's entire share of the Loans); and provided, further, that at all times Beal
Bank, S.S.B. and its Affiliates shall collectively hold no less than 51% of the
aggregate amount of the Loans and the Commitments; and provided, further, that
Borrower shall not be responsible for increased costs arising out of any
assignment of any Loans or Notes. In the event of any such assignment, (a) the
assigning Bank's Proportionate Share shall be reduced and its obligations
hereunder released by the amount of the Proportionate Share assigned to the new
Bank, (b) the parties to such assignment shall execute and deliver an
appropriate agreement evidencing such sale, assignment, transfer or other
disposition, in form and substance reasonably satisfactory to Administrative
Agent and Borrower, (c) the parties to the sale, assignment, transfer or other
disposition, excluding Borrower, shall collectively pay to Administrative Agent
an administrative fee of $3,500, (d) at the assigning Bank's option, Borrower
shall execute and deliver to such assigning Bank a new Note in the form attached
hereto as Exhibit B-1, as requested, in a principal amount equal to such new
Bank's Commitment, but only if it shall also be executing and exchanging with
the assigning Bank a replacement note for any Note in an amount equal to the
Commitment retained by the assigning Bank, if any; provided that Borrower shall
have received for cancellation the existing Note held by such assigning Bank,
and (v) Administrative Agent shall amend Exhibit H attached hereto to reflect
the Proportionate Shares of the Banks following such assignment. Thereafter,
such new Bank shall be deemed to be a Bank and shall have all of the rights and
duties of a Bank (except as otherwise provided in this Article 9), in accordance
with its Proportionate Share, under each of the Credit Documents.

    9.15 LAWS. Notwithstanding the foregoing provisions of this Article 9, no
sale, assignment, transfer, negotiation or other disposition of the interests of
any Bank hereunder or under the other Credit Documents shall be allowed if it
would require registration under the federal Securities Act of 1933, as then
amended, any other federal securities laws or regulations or the securities laws
or regulations of any applicable jurisdiction. Borrower shall, from time to time
at the request and expense of Administrative Agent, execute and deliver to
Administrative Agent, or to such party or parties as Administrative Agent may
designate, any and all further


                                       69


instruments as may in the opinion of Administrative Agent be reasonably
necessary or advisable to give full force and effect to such sale, assignment,
transfer, negotiation or disposition which would not require any such
registration.

    9.16 ASSIGNABILITY AS COLLATERAL. Notwithstanding any other provision
contained in this Agreement or any other Credit Document to the contrary, any
Bank may assign all or any portion of the Loans or Note held by it to the
Federal Reserve Bank and the United States Treasury as collateral security;
provided that any payment in respect of such assigned Loans or Note made by
Borrower to or for the account of the assigning or pledging Bank in accordance
with the terms of this Agreement shall satisfy Borrower's obligations hereunder
in respect of such assigned Loans or Note to the extent of such payment. No such
assignment shall release the assigning Bank from its obligations hereunder.

                                   ARTICLE 10
                                  MISCELLANEOUS

    10.1 ADDRESSES. Any communications between the parties hereto or notices
provided herein to be given may be given to the following addresses:

         If to Administrative Agent:         Beal Bank, S.S.B.
                                             6000 Legacy Dr., 4E
                                             Plano, Texas  75024
                                             Attn:  William T. Saurenmann
                                             Tel: (469) 467-5510
                                             Fax: (469) 241-9568
                                             E-mail:  bsaurenmann@bealbank.com

         with a copy to:                     CSG Investments, Inc.
                                             6000 Legacy Dr., 4W
                                             Plano, Texas 75024
                                             Attn:  Steve Harvey
                                             Tel: (469) 467-5652
                                             Fax: (469) 241-9567
                                             E-mail:  sharvey@csginvestments.com

         If to Borrower:                     OrCal Geothermal Inc.
                                             980 Greg Street
                                             Sparks, NV 89431
                                             Attn:  President
                                             Tel:  (775) 356-9029
                                             Fax:  (775) 356-9039
                                             E-mail:  dbronicki@ormat.com

         All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be considered as properly given (a) if
delivered in person, (b) if sent


                                       70


by overnight delivery service (including Federal Express, UPS and other similar
overnight delivery services), (c) if mailed by first class United States Mail,
postage prepaid, registered or certified with return receipt requested, (d) if
sent by facsimile or (e) if sent via other electronic means (including
electronic mail). Notice so given shall be effective upon receipt by the
addressee, except that communication or notice so transmitted by facsimile or
other direct written electronic means shall be deemed to have been validly and
effectively given on the day (if a Banking Day and, if not, on the next
following Banking Day) on which it is transmitted if transmitted before 4:00
p.m., recipient's time, and if transmitted after that time, on the next
following Banking Day; provided, however, that (i) if any notice is tendered to
an addressee and the delivery thereof is refused by such addressee, such notice
shall be effective upon such tender, and (ii) with respect to any notice given
via facsimile or other electronic means, the sender of such message shall
promptly provide the addressee with an original copy of such notice by any of
the means specified in clause (a), (b) or (c) above. Any party shall have the
right to change its address for notice hereunder to any other location within
the continental United States by giving of 5 Banking Days' notice to the other
parties in the manner set forth above.

    10.2 ADDITIONAL SECURITY; RIGHT TO SET-OFF. Subject to Section 2.5.2,
regardless of the adequacy of any other Collateral, any Secured Party with the
prior written consent of Administrative Agent may execute or realize on its or
Administrative Agent's security interest in any such deposits or other sums
credited by or due from Banks to Borrower, and may apply any such deposits or
other sums to or set them off against Borrower's obligations to Banks under any
Notes and this Agreement at any time after the occurrence and during the
continuance of any Event of Default.

    10.3 DELAY AND WAIVER. No delay or omission to exercise any right, power or
remedy accruing to the Secured Parties upon the occurrence of any Event of
Default, Potential Event of Default, Material Adverse Effect or any breach or
default of Borrower or any other Loan Party or unsatisfied condition precedent
under this Agreement or any other Credit Document shall impair any such right,
power or remedy of the Secured Parties, nor shall it be construed to be a waiver
of any such breach or default or unsatisfied condition precedent, or an
acquiescence therein, or of or in any similar breach or default or unsatisfied
condition precedent thereafter occurring, nor shall any waiver of any single
Event of Default, Potential Event of Default, Material Adverse Effect or other
breach or default or unsatisfied condition precedent be deemed a waiver of any
other Event of Default, Potential Event of Default, Material Adverse Effect or
other breach or default or unsatisfied condition precedent theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of Administrative Agent or the Secured Parties of any
Event of Default, Potential Event of Default, Material Adverse Effect or other
breach or default or unsatisfied condition precedent under this Agreement or any
other Credit Document, or any waiver on the part of Administrative Agent or the
Secured Parties of any provision or condition of this Agreement or any other
Credit Document, must be in writing and shall be effective only to the extent in
such writing specifically set forth. All remedies, either under this Agreement
or any other Credit Document or by law or otherwise afforded to Administrative
Agent and the Secured Parties, shall be cumulative and not alternative. If any
Event of Default has been waived by the Secured Parties in accordance with
Section 9.9 and this Section 10.3, then after such waiver becomes effective


                                       71


the applicable Event of Default shall for all purposes under the Credit
Documents be deemed to be no longer continuing.

    10.4 COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower will pay to
Administrative Agent all of its reasonable costs and expenses in connection with
the preparation, negotiation, closing and administering of this Agreement and
the Credit Documents (including the Post-Closing Title Work), including the
reasonable fees, expenses and disbursements of Jenkens & Gilchrist, a
Professional Corporation, and Latham & Watkins LLP; provided, however, that
Borrower shall not be required to pay the fees of the other Banks' attorneys;
provided, further, that (a) except as set forth in Sections 5.21 and 7.1.17, no
Loan Party shall be responsible for the payment of any fees and expenses related
to the Independent Consultants and (b) Borrower shall not be responsible for the
internal costs and internal expenses incurred in connection with the
administering of any of the Credit Documents. Borrower will reimburse (i)
Administrative Agent for all reasonable costs and expenses, including reasonable
attorneys' fees (it being acknowledged and agreed that (A) Borrower shall only
be responsible for the payment of one general counsel and one special counsel to
Administrative Agent and (B) Borrower shall not be responsible for any
attorneys' fees for any of the Banks, except as provided in the preceding clause
(A)), expended or incurred by Administrative Agent and the Banks for their
reasonable internal out-of-pocket expenses, in enforcing this Agreement or the
other Credit Documents in connection with an Event of Default or Potential Event
of Default, in actions for declaratory relief in any way related to this
Agreement or in collecting any sum which becomes due on the Notes or under the
Credit Documents and (ii) Administrative Agent and the Banks for their
reasonable out-of-pocket expenses, including reasonable attorney fees (it being
acknowledged and agreed that (A) Borrower shall only be responsible for the
payment of one general counsel and one special counsel to Administrative Agent
and (B) Borrower shall not be responsible for any attorneys' fees for any of the
Banks, except as provided in the preceding clause (A)) and reasonable expert,
consultant and advisor fees and expenses, in the case of a restructuring of the
Loans or otherwise relating to the occurrence of any Potential Event of Default
or Event of Default. Borrower shall not be responsible for any counsel fees of
Administrative Agent or the Banks other than as set forth above, in Section 5.24
or as otherwise set forth in a separate agreement.

    10.5 ENTIRE AGREEMENT. This Agreement and each of the Credit Documents
integrate all the terms and conditions mentioned herein or incidental hereto and
supersede all oral negotiations and prior writings in respect to the subject
matter hereof.

    10.6 GOVERNING LAW. THIS AGREEMENT AND ANY OTHER CREDIT DOCUMENT (UNLESS
OTHERWISE EXPRESSLY PROVIDED FOR THEREIN), SHALL BE GOVERNED BY, AND CONSTRUED
UNDER, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO CONFLICTS OF LAWS
(OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW).

    10.7 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.


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    10.8 HEADINGS. Article, Section and Paragraph headings have been inserted in
this Agreement as a matter of convenience for reference only and it is agreed
that such headings are not a part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement.

    10.9 ACCOUNTING TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP and practices consistent with those
applied in the preparation of the financial statements submitted by Borrower to
Administrative Agent, and all financial data submitted pursuant to this
Agreement shall be prepared in accordance with such principles and practices.

    10.10 ADDITIONAL FINANCING. The parties hereto acknowledge that as of the
Closing Date the Banks have made no agreement or commitment to provide any
financing except as set forth herein.

    10.11 NO PARTNERSHIP, ETC. The Banks and Borrower intend that the
relationship between them shall be solely that of creditor and debtor. Nothing
contained in this Agreement, the Notes or in any of the other Credit Documents
shall be deemed or construed to create a partnership, tenancy-in-common, joint
tenancy, joint venture or co-ownership by or between the Banks and Borrower or
any other Person. None of Administrative Agent or the Banks shall be in any way
responsible or liable for the debts, losses, obligations or duties of Borrower
or any other Person with respect to the Projects or otherwise. All obligations
to pay real property or other taxes, assessments, insurance premiums, and all
other fees and charges arising from the ownership, operation or occupancy of the
Projects (if any) and to perform all obligations and other agreements and
contracts relating to the Projects shall be the sole responsibility of Borrower.

    10.12 DEED OF TRUST/COLLATERAL DOCUMENTS. The Loans are secured in part by
the Deeds of Trust encumbering certain properties in the State of California.
Reference is hereby made to the Deeds of Trust and the other Collateral
Documents for the provisions, among others, relating to the nature and extent of
the security provided thereunder, the rights, duties and obligations of Borrower
and the rights of Administrative Agent and the other Secured Parties with
respect to such security.

    10.13 LIMITATION ON LIABILITY. No claim shall be made by Borrower against
Administrative Agent, the Banks or any of their respective Affiliates,
directors, employees, attorneys or agents for any loss of profits, business or
anticipated savings, special or punitive damages or any indirect or
consequential loss whatsoever in respect of any breach or wrongful conduct
(whether or not the claim therefor is based on contract, tort or duty imposed by
law), in connection with, arising out of or in any way related to the
transactions contemplated by this Agreement or the other Operative Documents or
any act or omission or event occurring in connection therewith, and Borrower
hereby waives, releases and agrees not to sue upon any such claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.

    10.14 WAIVER OF JURY TRIAL. ADMINISTRATIVE AGENT, THE BANKS AND


                                       73


BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN), OR ACTIONS OF ADMINISTRATIVE AGENT, THE BANKS OR BORROWER.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR BORROWER, ADMINISTRATIVE AGENT AND
THE BANKS TO ENTER INTO THIS AGREEMENT.

    10.15 CONSENT TO JURISDICTION. Administrative Agent, the Banks and Borrower
agree that any legal action or proceeding by or against Borrower or with respect
to or arising out of this Agreement, the Notes, or any other Credit Document may
be brought in or removed to the courts of the State of New York, in and for the
Borough of Manhattan, or of the United States of America for the Southern
District of New York, as Administrative Agent may elect. By execution and
delivery of this Agreement, the Banks, Administrative Agent and Borrower accept,
for themselves and in respect of their property, generally and unconditionally,
the jurisdiction of the aforesaid courts. Administrative Agent, the Banks and
Borrower irrevocably consent to the service of process out of any of the
aforementioned courts in any manner permitted by law. Administrative Agent, the
Banks and Borrower further agree that the aforesaid courts of the State of New
York and of the United States of America shall have exclusive jurisdiction with
respect to any claim or counterclaim of Borrower based upon the assertion that
the rate of interest charged by the Banks on or under this Agreement, the Loans
or the other Credit Documents is usurious. Administrative Agent, the Banks and
Borrower hereby waive any right to stay or dismiss any action or proceeding
under or in connection with any or all of the Projects, this Agreement or any
other Credit Document brought before the foregoing courts on the basis of forum
non-conveniens. Nothing herein shall affect the right of Administrative Agent to
bring legal action or proceedings in any other competent jurisdiction, including
judicial or non-judicial foreclosure of the Deeds of Trust.

    10.16 KNOWLEDGE AND ATTRIBUTION. References in this Agreement and the other
Credit Documents to the "knowledge," "best knowledge" or facts and circumstances
"known to" Borrower or any other Loan Party, and all like references, mean facts
or circumstances of which a Responsible Officer of the applicable Loan Party has
actual knowledge (after due inquiry).

    10.17 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Borrower may not assign or otherwise transfer
any of its rights under this Agreement except as provided in Section 6.13, and
the Banks may not assign or otherwise transfer any of their rights under this
Agreement except as provided in Article 9.

    10.18 COUNTERPARTS. This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in one or more
duplicate counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are


                                       74


physically attached to the same document.

    10.19 USURY. Nothing contained in this Agreement or the Notes shall be
deemed to require the payment of interest or other charges by Borrower or any
other Person in excess of the amount which the holders of the Notes may lawfully
charge under applicable usury laws. In the event that the Banks shall collect
moneys which are deemed to constitute interest which would increase the
effective interest rate to a rate in excess of that permitted to be charged by
applicable Legal Requirements, all such sums deemed to constitute interest in
excess of the legal rate shall, upon such determination, at the option of the
Banks, be returned to Borrower or credited against the principal balance then
outstanding.

    10.20 SURVIVAL. All representations, warranties, covenants and agreements
made herein and in the certificates or other instruments delivered in connection
with or pursuant to this Agreement and the other Credit Documents shall be
considered to have been relied upon by the parties hereto and shall survive the
execution and delivery of this Agreement, the other Credit Documents and the
making of the Loans (it being acknowledged and agreed that, subject to the
following sentence and except as expressly provided in any such Credit Document,
all of the representations, warranties, covenants and agreements made in any
Credit Document by any Loan Party shall terminate upon the payment in full in
cash and the performance in full of the Obligations). Notwithstanding anything
in this Agreement or implied by law to the contrary, the agreements of Borrower
set forth in Sections 2.1.1(d), 2.1.6, 2.3, 2.4.4, 2.6.3, 2.6.4, 2.7, 5.24, 9.8
and 10.4 and the agreements of the Banks set forth in Sections 9.1, 9.5 and
9.10.1 shall survive the payment and performance of the Loans and the other
Obligations and the reimbursement of any amounts drawn hereunder, and the
termination of this Agreement.

    10.21 REFINANCING. Upon the written request of Administrative Agent at any
time prior to December 31, 2004, the Banks shall have the right to convert
(including by way of a refinancing) up to $100,000,000 of the Loans to senior
secured notes issued by Borrower pursuant to Section 4(2) of the Securities Act
of 1933. Borrower shall (and shall cause each other Loan Party (other than Ormat
Technologies) to, as applicable) execute, acknowledge, and/or deliver all
agreements, notices, statements, instruments and other documents (including a
note purchase agreement, notes, an intercreditor agreement and amendments to any
Credit Documents) necessary or advisable (as determined by Administrative Agent
in its sole discretion) to effectuate such conversion and the issuance of such
senior secured notes. Such note purchase agreement shall contain (a) identical
terms and conditions set forth in Articles 2 and 4 through 10 of this Agreement,
other than any changes necessarily resulting from such conversion, (b) customary
representations and warranties by Borrower, as issuer of such senior secured
notes, relating to securities law matters, (c) representations and warranties by
Borrower of the type described in Sections 4.1, 4.3, 4.4 and 4.5, (d) customary
representations and warranties by the purchasers of such senior secured notes,
relating to securities law matters and (e) provisions otherwise conforming in
substance to Model Form No. 2 of Note Purchase Agreement, including any changes
to Articles 2, 9 and 10 of this Agreement necessarily resulting from such
conversion. Without limiting the foregoing, Borrower shall (and shall cause each
other Loan Party (other than Ormat Technologies) to, as applicable) (i) provide
any information necessary or advisable in connection with the issuance of such
senior secured notes, (ii) deliver,


                                       75


to the satisfaction of Administrative Agent, each of the documents described in
Sections 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.7 and 3.1.8 (including, if requested by
S&P or Moody's, an opinion of counsel regarding non-consolidation of the Loan
Parties) with respect to any Loan Party, (iii) take any other action reasonably
requested by Administrative Agent in connection with such conversion, including
any steps as may be necessary or advisable to render fully valid and enforceable
under all applicable laws the rights of the initial purchasers and any other
holders of such senior secured notes, and (iv) pay all reasonable fees and
expenses (including reasonable attorneys' fees) of Administrative Agent and Beal
Bank, S.S.B. incident to such conversion; provided that Borrower shall not be
obligated to pay (A) any such attorneys' fees in excess of $25,000 or (B) any
fees, expenses or other amounts charged by S&P or Moody's in connection with
such conversion (whether on account of an initial rating or subsequent
surveillance ratings). For the avoidance of doubt, the terms of such senior
secured notes shall not provide for the payment of a "make-whole premium," as
that term customarily is utilized in connection with Model Form No. 2 of Note
Purchase Agreement, and shall not provide for interest rates (including default
interest rates), interest periods, interest calculations, interest payment
dates, principal amortization and repayment dates, optional and mandatory
principal prepayment rights and obligations, or fees that deviate in any respect
from such terms as set forth in this Agreement. In the event of any conversion
pursuant to and in accordance with this Section 10.21, Borrower shall not be
obligated to make any Make-Whole Premium or other prepayment premium that would
otherwise be required under Section 2.1.6 of this Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]







                                       76

                IN WITNESS WHEREOF, the parties hereto, by their officers duly
authorized, intending to be legally bound, have caused this Credit Agreement to
be duly executed and delivered as of the day and year first above written.

                               ORCAL GEOTHERMAL INC.,
                               a Delaware corporation


                               By:   /s/ Indecipherable
                                     -------------------------------------------
                                     Name:
                                     Title:


                              BEAL BANK, S.S.B.,
                              as Administrative Agent and a Bank


                               By:   /s/ Molly Curl
                                     -------------------------------------------
                                     Name:    Molly Curl
                                     Title:   Sr. Vice President


                               By:   /s/ William T. Saurenmann
                                     -------------------------------------------
                                     Name:    William T. Saurenmann
                                     Title:   Sr. Vice President


                                       77





                                                                  Exhibit 10.1.6


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

                            EXIMBANK CREDIT AGREEMENT



                                 by and between



                              ORMAT LEYTE CO. LTD.
                                   as Borrower



                                       and



                     EXPORT-IMPORT BANK OF THE UNITED STATES







                   Eximbank Credit No. AP069721 - Philippines




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







                                                                  Exhibit 10.1.6



                                TABLE OF CONTENTS




SECTION 1.  DEFINITIONS AND PRINCIPLES OF CONSTRUCTION............................................................1

         Section 1.01.  General Definitions.......................................................................1
         Section 1.02.  Principles of Construction ...............................................................4

SECTION 2.  THE EXIMBANK CREDIT...................................................................................4

         Section 2.01.  Amount of the Eximbank Credit.............................................................4
         Section 2.02.  Cash Payment..............................................................................5
         Section 2.03.  Credit Availability Date..................................................................5

SECTION 3.  TERMS OF THE EXIMBANK CREDIT..........................................................................5

         Section 3.01.  Principal Repayment.......................................................................5
         Section 3.02.  Interest Payment..........................................................................6
         Section 3.03.  Commitment Fee............................................................................6
         Section 3.04.  Credit Exposure Fee ......................................................................6
         Section 3.05.  Voluntary Prepayment......................................................................6
         Section 3.06.  Mandatory Prepayment......................................................................7
         Section 3.07.  Eximbank Note.............................................................................7
         Section 3.08.  Method of Payment.........................................................................8
         Section 3.09.  Application of Payments...................................................................8

SECTION 4.  CANCELLATION..........................................................................................9

         Section 4.01.  Mandatory Cancellation....................................................................9
         Section 4.02.  Cancellation by the Borrower..............................................................9
         Section 4.03.  Suspension by Eximbank....................................................................9

SECTION 5.  CONDITIONS PRECEDENT.................................................................................10

         Section 5.01.  Conditions Precedent to Lender Disbursement..............................................10
         Section 5.02.  Conditions Precedent to Eximbank Disbursement............................................16
         Section 5.03.  Request for Eximbank Disbursement........................................................19




SECTION 6.  REPRESENTATIONS AND WARRANTIES.......................................................................19

         Section 6.01.  Representations and Warranties with Respect to Guarantee
                              Operative Date.....................................................................19
         Section 6.02.  Representations and Warranties with Respect to the Disbursement
                              Date...............................................................................30
         Section 6.03.  Acknowledgment...........................................................................30


                                       i




SECTION 7.  AFFIRMATIVE COVENANTS................................................................................30

         Section 7.01.  Information Covenants....................................................................30
         Section 7.02.  Books, Records and Inspections; Accounting and Audit Matters.............................37
         Section 7.03.  Maintenance of Property, Insurance.......................................................38
         Section 7.04.  Maintenance of Existence; Privileges; Etc................................................40
         Section 7.05.  Compliance with Statutes.................................................................40
         Section 7.06.  Consultations Regarding Independent Engineer's Report....................................40
         Section 7.07.  Project Implementation; Use of Proceeds..................................................41
         Section 7.08.  Auditors.................................................................................42
         Section 7.09.  Taxes, Duties, Proper Legal Form.........................................................42
         Section 7.10.  Independent Engineer; Insurance Consultant...............................................42
         Section 7.11.  Performance of Obligations...............................................................43
         Section 7.12.  Additional Documents; Filings and Recordings.............................................43
         Section 7.13.  Bank Accounts............................................................................44
         Section 7.14.  Debt Reserve Cash Collateral Account.....................................................44
         Section 7.15.  Availability and Transfer of Foreign Currency............................................44
         Section 7.16.  Privatization of NAPOCOR or PNOC-EDC.....................................................44
         Section 7.17.  Spares...................................................................................45

SECTION 8.  NEGATIVE COVENANTS...................................................................................45

         Section 8.01.  Liens ...................................................................................45
         Section 8.02.  Consolidation, Merger, Sale of Assets, Etc...............................................46
         Section 8.03.  Dividends; Restricted Payments...........................................................46
         Section 8.04.  Leases...................................................................................47
         Section 8.05.  Indebtedness.............................................................................47
         Section 8.06.  Guarantees...............................................................................49
         Section 8.07.  Subsidiaries, Advances, Investments and Loans............................................49
         Section 8.08.  Transactions.............................................................................50
         Section 8.09.  Other Transactions.......................................................................50
         Section 8.10.  Modifications to Partnership Agreement of Borrower; Additional Agreements;
                              Assignments and Modifications of Agreements, Etc...................................50
         Section 8.11.  No Other Business........................................................................52
         Section 8.12.  Abandonment..............................................................................52
         Section 8.13.  Improper Use.............................................................................53
         Section 8.14.  Budgets..................................................................................53
         Section 8.15.  Press Releases; Advertising..............................................................54
         Section 8.16.  Employees and Employee Plan..............................................................54
         Section 8.17.  Name Changes; Etc. ......................................................................54
         Section 8.18.  Equity Ratio.............................................................................54
         Section 8.19.  Payments on Subordinated Debt............................................................54

         Section 8.20.  Limitation on Sale or Re-Export of the Items.............................................55


                                       ii






SECTION 9.  EVENTS OF DEFAULT....................................................................................55

         Section 9.01.  Payments.................................................................................55
         Section 9.02.  Representations, Etc.....................................................................55
         Section 9.03.  Covenants................................................................................55
         Section 9.04.  Default Under Other Agreements...........................................................56
         Section 9.05.  Bankruptcy, Etc..........................................................................58
         Section 9.06.  Project Events ..........................................................................58
         Section 9.07.  Material Adverse Effect..................................................................59
         Section 9.08.  Project Documents; Security Documents....................................................59
         Section 9.09.  Ownership of the Borrower................................................................60
         Section 9.10.  Judgments................................................................................61
         Section 9.11.  Governmental Action......................................................................61
         Section 9.12.  Permits..................................................................................62
         Section 9.13.  Transfer of Collateral; Event of Loss; Diminution of Property
                              Rights.............................................................................62
         Section 9.14.  Regulatory Status........................................................................62
         Section 9.15.  ERISA ...................................................................................62
         Section 9.16.  Funding Agreement........................................................................63

SECTION 10.  GOVERNING LAW AND JURISDICTION......................................................................64

         Section 10.01.  Governing Law ..........................................................................64
         Section 10.02.  Submission to Jurisdiction; Service of Process..........................................64
         Section 10.03.  Waiver of Sovereign Immunity............................................................65

SECTION 11.  MISCELLANEOUS.......................................................................................65

         Section 11.01.  Transportation..........................................................................65
         Section 11.02.  Transportation Costs....................................................................65
         Section 11.03.  Insurance...............................................................................65
         Section 11.04.  Disposition of Indebtedness.............................................................66
         Section 11.05.  Taxes ..................................................................................66
         Section 11.06.  Disclaimer..............................................................................67
         Section 11.07.  Indemnities and Expenses................................................................67
         Section 11.08.  Right of Setoff.........................................................................69
         Section 11.09.  Benefit of Agreement....................................................................69
         Section 11.10.  No Waiver; Remedies Cumulative..........................................................69
         Section 11.11.  Severability........................................................................... 70
         Section 11.12.  English Language........................................................................70
         Section 11.13.  Calculations; Computations .............................................................70
         Section 11.14.  Survival................................................................................70
         Section 11.15.  Amendments..............................................................................70
         Section 11.16.  Counterparts............................................................................70
         Section 11.17.  Notices.................................................................................71

         Section 11.18.  Judgment Currency.......................................................................73



                                      iii






         Section 11.19.  Headings Descriptive....................................................................73
         Section 11.20.  Prior Agreements Superseded.............................................................73
         Section 11.21.  No Recourse.............................................................................73

Schedules:

         Schedule X:        Additional Defined Terms and Principles of Construction
         Schedule 5.01(b):  Legal Opinions
         Schedule 5.01(t):  Governmental Approvals
         Schedule 6.01(h):  Litigation
         Schedule 6.01(t):  Foreign Exchange Control Approvals
         Schedule 6.01(u):  Construction Budget
         Schedule 7.03:     Insurance
         Schedule 7.07(c):  O&M Parameters
         Schedule 8.05(c):  Subordination Terms

Annexes:

         A - Form Promissory Note

         B - Request for Eximbank Disbursement to Account of Borrower C - Form
         of Post-Completion Ormat Guaranty



                                       iv


      EXIMBANK CREDIT AGREEMENT, dated as of May 13, 1996 (this "Agreement"),
between ORMAT LEYTE CO. LTD., a limited partnership organized and existing under
the laws of the Republic of the Philippines (the "Borrower") and EXPORT-IMPORT
BANK OF THE UNITED STATES ("Eximbank"), an agency of the United States.
Capitalized terms used herein shall be defined as provided in Section 1.01.

                                   BACKGROUND

      WHEREAS, the Borrower, the Administrative Agent, the Issuing Bank and the
Lenders are entering into the Lender Credit Agreement, pursuant to which the
Lenders have agreed, subject to the terms and conditions set forth therein, to
finance, inter alia, exports from the United States to the Borrower's Country
for construction of the Project and, in connection therewith, the Guaranteed
Lenders (as defined in the Eximbank Guarantee Agreement referred to below) have
requested Eximbank to provide a limited guaranty of the Loans pursuant to a
guarantee agreement dated as of the date hereof among Eximbank, the Guaranteed
Lenders and the Administrative Agent (the "Eximbank Guarantee Agreement");

      WHEREAS, the Borrower has requested Eximbank to establish a credit (the
"Eximbank Credit") in the maximum amount of $49,763,955 (as the same may be
reduced pursuant to Section 4.01, the "Maximum Eximbank Credit Amount") in favor
of the Borrower as part of the overall debt financing for construction of the
Project and it is contemplated that the proceeds of the Eximbank Credit shall be
applied by the Borrower to repay in part the Loans made by the Guaranteed
Lenders;

      WHEREAS, Eximbank is prepared (i) issue its guarantee subject to the terms
and conditions of the Eximbank Guarantee Agreement and (ii) to establish the
Eximbank Credit and to make the Eximbank Credit available to the Borrower on or
after the Project Completion Date, subject the terms and conditions set forth in
this Agreement;

      NOW THEREFORE, the parties hereto agree as follows:

      SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION

      Section 1.01. General Definitions. Capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings assigned
thereto in Schedule X attached hereto. In addition, wherever used in this
Agreement or any Annex, Exhibit or Schedule hereto, unless the context otherwise
requires, the following terms shall have the following meanings:




      "Agreement" shall mean this Credit Agreement, including any Annex,
Exhibit, Schedule and other attachment hereto, as amended or otherwise modified
from time to time.

      "Borrower" shall have the meaning specified in the first paragraph of this
Agreement.

      "Borrower's Country" shall mean the Republic.

      "Business Day" shall mean any day on which the Federal Reserve Bank of New
York is open for business.

      "Cash Payment" shall have the meaning set forth in Section 2.02.

      "Commitment Fee" shall have the meaning specified in Section 3.03.

      "Completion Date" shall have the meaning specified in the BOT Agreement.

      "Construction Note" shall mean the promissory note executed and delivered
by the Borrower pursuant to Section 2.4 of the Lender Credit Agreement.

      "Covered Taxes" shall mean any and all present or future taxes, levies,
imposts, deductions, withholdings, duties, fees, commissions or other charges,
of whatsoever nature and all liabilities paid with respect thereto imposed by
any Governmental Authority or taxing or monetary authority thereof, other than
any tax imposed on or measured by the net income or capital of a Person pursuant
to the laws of the jurisdiction of its place of incorporation or in which the
principal office is located or the office from which such Person books any
assigned interest of the Eximbank Credit.

      "Credit Exposure Fee" shall mean an exposure fee in the amount equal to
9.57% of the amount of the Eximbank Disbursement that represents: (i) the
Financed Portion of the Items; (ii) the IDC Financed Portion of IDC; and (iii)
the aggregate amount of the Guarantee Exposure Fee.

      "Default" shall mean any event, act or condition which, with notice, lapse
of time, or both, or the fulfillment of any other requirement provided for in
Section 9, would constitute an Event of Default.

      "Disbursement Date" shall mean the date on which the Eximbank Disbursement
is made by to the Borrower.

      "Eximbank Credit" shall have the meaning specified in the second WHEREAS
clause hereof.



                                       2


      "Eximbank Disbursement" shall mean the disbursement made under the
Eximbank Credit in accordance with the terms of this Agreement and evidenced by
the Eximbank Note.

      "Eximbank Note" shall have the meaning specified in Section 3.07(a).

      "Event of Default" shall have the meaning specified in Section 9.

      "Final Disbursement Date" shall mean the earlier of (i) June 15, 1998;
provided that (x) if on or before such date, the Completion Date for the entire
Power Plant shall have actually occurred pursuant to Section 6.1 of the BOT
Agreement, or shall have been deemed to have occurred pursuant to Section 5.4(h)
of the BOT Agreement, or (y) if on June (15) 1998, Force Majeure (as defined in
any of the BCE Agreement, the Construction Contract or the Supply Contract) or
default by PNOC-EDC under the BOT Agreement shall exist, or shall have existed
prior to June 15, 1998, for an aggregate period m excess of fifteen (15) days,
the date specified in clause (i) of this definition shall extended to March 15,
1999; and (ii) the date on which the Eximbank Credit is cancelled in full in
accordance with Section 4.02.

      "Guarantee Exposure Fee" shall have the meaning set forth in the Eximbank
Guarantee Agreement.

      "Guarantee Operative Date" shall mean the date designated by Eximbank on
or after which Utilizations may be made under the Lender Credit Agreement.

      "IDC" shall have the meaning specified in the Eximbank Utilization
Procedures.

      "IDC Financed Portion" shall have the meaning specified in the Eximbank
Utilization Procedures.

      "Items" shall have the meaning specified in the Eximbank Utilization
Procedures.

      "Lender Disbursement" shall mean each of the Loans disbursed from time to
time pursuant to Section 2 or 3 of the Lender Credit Agreement.

      "Local Cost Financed Portion" shall have the meaning specified in the
Eximbank Utilization Procedures.

      "Local Cost Item" shall have the meaning Specified in the Eximbank
Utilization Procedures.



                                       3


      "Maximum Eximbank Credit Amount" shall have the meaning specified in the
second clause of this Agreement.

      "Payment Date" shall mean July 30, 1996 and, thereafter, each succeeding
October 30, January 30, April 30, and July 30.

      "Payment Default Date" shall have the meanings in Section 3.02(b).

      "Principal Amortization Commencement Date" shall mean the earlier of (i)
the Completion Date (as defined in the BOT Agreement) for the initial Plant to
be constructed and tested in accordance with the terms of the Construction
Contract, the Supply Contract and the BOT Agreement and (ii) September 25, 1997.

      "Reconciliation Certificate" shall mean a reconciliation certificate in
the form of Exhibit 1 to Annex B hereto.

      "Request for Eximbank Disbursement" shall mean a request for disbursement
in the form of Annex B hereto.

      "Taxes" shall mean any and all present and future taxes, fees, levies,
imposts, duties or charges of whatsoever nature (whether imposed by withholding
or deduction or otherwise) imposed by any Governmental Authority (including
without limitation any and all liabilities with respect thereto).

      "U.S." or "United States" shall mean the United States of America.

      Section 1.02. Principles of Construction. The principles of construction
set forth in Schedule X apply.

                         SECTION 2. THE EXIMBANK CREDIT

      Section 2.01. Amount of the Eximbank Credit. (a) Eximbank hereby
establishes the Eximbank Credit, upon the terms and conditions set forth in this
Agreement, in favor of the Borrower to enable the Borrower to (i) refinance, in
an aggregate amount not to exceed $35,457,750, the Financed Portion of the costs
incurred on or after March 1, 1995 by the Borrower for the purchase m the United
States and export to the Republic of the Items; (ii) refinance, in an aggregate
amount not to exceed $5,832,000, the Local Cost Financed Portion of the costs
incurred on or after March 1, 1995 by the Borrower for the purchase m the
Republic of the Local Cost Items; (iii) refinance in an aggregate amount not to
exceed $3,124,000, the IDC Financed Portion of IDC; (iv) refinance the Guarantee
Exposure Fee; and (v) finance the Credit Exposure Fee.



                                       4


      (b) On the terms and conditions hereof, Eximbank shall make the Eximbank
Credit available to the Borrower in a single Eximbank Disbursement, subject to
the satisfaction of the conditions precedent to such disbursement under Section
5.02 hereof, and otherwise in accordance with Section 5.03 hereof.

      (c) The Eximbank Credit shall not under any circumstances exceed in
aggregate amount the lesser of:

            (i) the sum of (a) the aggregate amount of the Financed Portion for
      all Items; (b) the aggregate amount of the Local Cost Financed Portion for
      all Local Cost Items; (c) the aggregate amount of the IDC Financed Portion
      for all IDC; (d) 100% of the Guarantee Exposure Fee paid to Eximbank under
      the Eximbank Guarantee Agreement in respect of each of the above; and (e)
      100% of the Credit Exposure Fee payable to Eximbank under this Agreement;
      and

            (ii) the Maximum Eximbank Credit Amount.

      (d) All amounts due to Eximbank under this Agreement, the Eximbank Note
and the other Financing Documents are entitled to the benefit of the Security.
Any amount of the Eximbank Credit not disbursed on the Disbursement Date shall
automatically be canceled upon and as of the close of business on the
Disbursement Date.

      Section 2.02. Cash Payment. The Borrower shall have made or caused to be
made a cash payment for the purchase of each Item in an amount equal to not less
than fifteen percent (15%) of the Contract Price of such Item (the "Cash
Payment").

      Section 2.03. Credit Availability Date. The Eximbank Credit will not be
disbursed after, and Eximbank's commitment to make available the Eximbank Credit
shall terminate upon, the close of business on the Final Disbursement Date.

                     SECTION 3. TERMS OF THE EXIMBANK CREDIT

      Section 3.01. Principal Repayment. Subject to Section 4.01, the Borrower
shall repay all principal amounts disbursed under the Eximbank Credit in
approximately equal, successive quarterly installments (of which the maximum
number shall be 38), the first such installment being due on the first Payment
Date occurring on or after the date falling two hundred ten (210) days after the
Principal Amortization Commencement Date and on each succeeding Payment Date
thereafter, and ending on the Payment Date immediately preceding the Transfer
Date (as such term is defined in the BOT Agreement as in effect on the date
hereof); provided, that on the last such Payment Date the Borrower shall repay
in full the principal amount of the Eximbank Credit then outstanding. Eximbank
has determined the initial Payment Date by adding 180 days to


                                       5


its calculation of the weighted midpoint of the projected Completion Date for
each of the four Plants.

      Section 3.02 Interest Payment. (a) The Borrower shall pay interest on each
Payment Date, and on the date that all amounts disbursed under the Eximbank
Credit are paid in full, on all amounts disbursed and outstanding from time to
time under the Eximbank Credit, beginning on the first Payment Date which is
after the Disbursement Date, calculated at an interest rate per annum of 6.54%,
computed on the basis of the actual number of days elapsed (including the first
day but including the last day), using a 365-day year.

      (b) If ay amount of principal, accrued interest, fees or other amounts
owing by the Borrower to Eximbank under this Agreement, the Eximbank Note or any
other Financing Document is not paid in full when due (whether at stated
maturity, by acceleration or otherwise), the Borrower shall pay to Eximbank on
demand interest on the unpaid amount (to the extent permitted by applicable law)
for the period from the date such amount was due (the "Payment Default Date")
until the date such amount was paid in full, at an interest rate per annum equal
to the higher of: (i) the then applicable New Borrowing Rate (such rate to
remain in effect until such amount is paid in full); and (ii) the rate specified
in Section 3.02(a) above plus one percent (1.0%) per annum. For the purposes of
this Agreement and the Eximbank Note, "New Borrowing Rate" shall mean the
specified on the Commerce Department Economic Bulletin Board, under the heading
"Interest Rate for Credit Reform Act", for the year and calendar quarter in
which the Payment Default Date occurs, and under the "Maturity Ranges" category
which covers the total period of repayment described in Section 3.01.

      Section 3.03. Commitment Fee. The Borrower shall pay or cause to be paid
to Eximbank a commitment fee of one-half of one percent (0.5%) per annum on the
uncancelled amount of the Maximum Eximbank Credit (the "Commitment Fee"),
computed on the basis of the actual number of days elapsed (including the first
day hut excluding the last day), using a 365-day year, accruing from June 8,
1996 to the earlier of (i) the Disbursement Date and (ii) the Final Disbursement
Date, and payable quarterly on each Payment Date, beginning on July 30, 1996,
and on the Disbursement Date.

      Section 3.04. Credit Exposure Fee. No later than the Disbursement Date,
the Borrower shall pay or cause to be paid to Eximbank the Credit Exposure Fee.
The Credit Exposure Fee may be financed by the Borrower by the inclusion of the
request for such financing the Borrower's Request for Eximbank Disbursement.

      Section 3.05. Voluntary Prepayment. The Borrower may from time to tine
prepay all or any part of the outstanding principal amount of the Eximbank
Credit, provided that the Borrower (i) shall have given Eximbank ten (10)
Business Days prior


                                       6


written notice of the proposed amount and date of prepayment; (ii) shall have
paid in full all interest which has accrued to the date of prepayment on the
principal amount so prepaid, together with all other amounts then due to
Eximbank under this Agreement, the Eximbank Note, the Eximbank Guarantee
Agreement or any other Financing Document as of the date of such prepayment; and
(iii) shall pay to Eximbank a prepayment premium. The prepayment premium shall
be equal to the amount by which the prepaid principal amount is less than the
sum of the present values, discounted from the scheduled payment dates, of (A)
the installments of principal being prepaid, plus (B) the amounts of interest
which otherwise would have accrued on such principal amounts to the scheduled
repayment dates. The discount rate used to calculate such present values shall
be that rate of interest specified in the weekly Federal Reserve Statistical
Release, H.15 (519) Selected Interest Rates, in the category "U.S. government
securities; Treasury bills, Secondary market" for a Maturity Period (as
hereafter defined) through one year, or in the category "U.S. government
securities; Treasury constant maturities" for a Maturity Period of greater than
one year, in the column for Business Day which is five (5) Business Days prior
to the date of prepayment. "Maturity Date" shall mean the weighted average of
the periods between the date of prepayment and the scheduled repayment dates of
the installments of principal of the Eximbank Credit that are prepaid. All
prepayments shall be applied to the installments of principal of the Eximbank
Credit in the inverse order of their maturities.

      Section 3.06. Mandatory Prepayment. On the applicable dates set forth in
Sections 3.05(a) and 3.05(d) of the Disbursement Agreement, the Borrower shall,
without demand or notice, make prepayments to Eximbank using funds then made
available for such purpose from the Contingency Account by the Collateral
Trustee pursuant to Sections 3.05(a) and 3.05(d) of the Disbursement Agreement.
In addition, on the date of receipt of funds from any Buyout, the Borrower
shall, without demand or notice, make a prepayment to Eximbank in the amount of
the then outstanding principal amount of the Eximbank Credit, together with all
interest accrued thereon and all other amounts then payable to Eximbank by the
Borrower under any of the Financing Documents. In the case of any partial
payments, such prepayments shall be applied to the installments of principal of
the Eximbank Credit in the inverse order of their maturity. No prepayment
premium is payable in connection with a mandatory prepayment pursuant to this
Section 3.06.

      Section 3.07. Eximbank Note. (a) The Borrower agrees that to evidence
further its obligation to repay all amounts disbursed under the Eximbank Credit,
with interest accrued thereon, it shall issue and deliver to Eximbank a
promissory note dated the Disbursement Date in the form of Annex A (together
with replacements and substitutions therefor, the "Eximbank Note"). The Eximbank
Note shall be valid and enforceable as to its principal amount at any time only
to the extent of the amount then


                                       7


disbursed and outstanding under the Eximbank Credit and, as to interest, only to
the extent of the interest accrued thereon.

      (b) If requested by Eximbank pursuant Section 11.05(a)(ii), the Borrower
shall issue and deliver to Eximbank a new Eximbank Note in exchange for the
Eximbank Note previously issued and delivered in accordance with this Agreement,
whereupon Eximbank shall surrender such previously issued Eximbank Note to the
Borrower for cancellation.

      (c) If the Eximbank Note is mutilated, lost, stolen or destroyed, the
Borrower shall issue and deliver a new Eximbank Note of the same date, maturity
and denomination as the Eximbank Note so mutilated, lost, stolen or destroyed;
provided that, in the case of any mutilated Eximbank, not such mutilate Eximbank
Note shall be returned to the Borrower, and, in the case of any lost, stolen or
destroyed Eximbank Note, the Borrower shall have first received such evidence of
loss, theft or destruction as shall reasonably be considered satisfactory to the
Borrower.

      Section 3.08. Method of Payment. (a) All payments to be made to Eximbank
under this Agreement, the Eximbank Note or any other Financing Document (whether
at stated maturity, by reason of acceleration or prepayment, or otherwise) shall
be made without set-off or counterclaim in Dollars in immediately available and
freely transferable funds no later than 11:00 a.m. (New York City time) on the
date on which due (each such payment made after such time shall be deemed to
have been made on the next succeeding Business Day) at the Federal Reserve Bank
of New York for credit to the following Eximbank account as identified below:

       U.S. Treasury Department
       021030004
       TREAS NYC/CTR/
       BNF = /AC-4984 OBI =
       EXPORT-IMPORT BANK
       DUE _____________ ON EIB CREDIT NO. AP069121 - PHILIPPINES
       FROM ORMAT LEYTE CO. LTD.

      (b) Whenever any payment under this Agreement or the Eximbank Note shall
be stated to be due and payable on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time
shall be included in the computation of any interest or fee due thereon.

      Section 3.09. Application of Payments. Eximbank shall apply payments
received by it under this Agreement, the Eximbank Note or any other Financing
Document (whether at stated maturity, by reason of acceleration or prepayment or



                                       8


otherwise) in the following order of priority: (i) interest due pursuant to
Section 3.02(b), (ii) Commitment Fee, Credit Exposure Fee, Guarantee Exposure
Fees and all other amounts due to Eximbank under this Agreement, the Eximbank
Note or any other Financing Document and not otherwise provided for under this
Section 3.09, (iii) interest due pursuant to Section 3.02(a) and (iv)
installments of principal due.

                       SECTION 4. CANCELLATION; SUSPENSION

      Section 4.01. Mandatory Cancellation. In the event any scheduled Payment
Date for the repayment of principal of the Eximbank Credit falls on a date that
is on or prior to the final Completion Date to occur in respect of the Plants
comprising the Power Plant, the Maximum Eximbank Credit Amount shall be reduced,
in respect of each such scheduled Payment Date occurring prior to such final
Completion Date, by an amount equal to one thirty-eighth (1/38th) of the Maximum
Eximbank Credit Amount.

      Section 4.02. Cancellation by the Borrower. The Borrower may cancel at any
time all or any part of the undisbursed and uncanceled amount of the Eximbank
Credit, provided that thirty (30) days' prior written notice is given to
Eximbank. In the event of a cancellation of all or any part of the Eximbank
Credit by the Borrower, the Borrower shall pay to Eximbank, on or before the
proposed date of cancellation, all Commitment Fees accrued and unpaid under
Section 3.03 in respect of the cancelled amount and all other amounts due and
payable to Eximbank under this Agreement, the Eximbank Note or any other
Financing Document as of the proposed date of cancellation. Cancellation in full
of the Eximbank Credit shall not terminate any provision of this agreement other
than Sections 7, 8 and 9 hereof.

      Section 4.03. Suspension by Eximbank.

      (a) In the event that:

            (i) prior to the Disbursement Date, the Borrower shall fail to pay
      when due any Commitment Fee payable by the Borrower to Eximbank hereunder
      or any other amount payable by the Borrower to Eximbank hereunder, under
      the Eximbank Guarantee Agreement or under any other Financing Document; or

            (ii) at any time, any Lender suspends the right of the Borrower to
      request disbursements in accordance with the Lender Credit Agreement; or

            (iii) at any time, Lenders with twenty-five percent (25%) or more of
      the total Commitments provided for in respect of the Lender Credit (such
      25%, the "Cancelled Commitments") cancel their respective Commitments
      (other than


                                       9


      any such cancellation pursuant to any undrawn Commitment at the Project
      Completion Date);

then Eximbank, by written notice to the Borrower and the Administrative Agent,
may:

            (x) in the case of clause (i) above, suspend disbursement of the
      Eximbank Credit until all such amounts due and owing to Eximbank shall
      have been paid in full to Eximbank (whether by or on behalf of the
      Borrower or by another Person, including any Lender or Lenders);

            (y) in the case of clause (ii) above, suspend disbursement of the
      Eximbank Credit until it is satisfied that the cause of such suspension
      has been removed; and

            (z) in the case of clause (iii) above, suspend disbursement of the
      Eximbank Credit until such time as another lender or lenders, with the
      consent of Eximbank, such consent not to be unreasonably withheld (it
      being understood that each of the Lenders is acceptable to Eximbank for
      this purpose), shall enter into a binding commitment with the Borrower to
      replace the Cancelled Commitments.

      (b) The terms of Section 4.03(a) above shall be in addition to and not in
limitation of any other rights of Eximbank under this Agreement or any other
Financing Document.

      SECTION 5. CONDITIONS PRECEDENT

      Section 5.01. Conditions Precedent to Lender Disbursement. The
applicability of the Eximbank Guarantee to any Utilization shall be subject to
the satisfaction of the following conditions on or prior to the Guarantee
Operative Date (or, if so specified, the Credit Date); provided that if any such
conditions shall have been satisfied on or prior to the Guarantee Operative
Date, then on the Credit Date the Borrower shall supply such evidence indicating
that such condition continues to be satisfied as Eximbank may reasonably
require, including, without limitation, bring-down opinions and certificates:

      (a) Project Documents. Each of the Project Documents, excluding (i) the
Governmental Approvals set forth in Part B of Schedule 5.01(t) hereto, (ii) the
BOT Operation Performance Security, (iii) the BOT Construction Performance
Security, (iv) the Post-Completion Ormat Guaranty and (v) agreements and
instruments pertaining to Permitted Indebtedness not then incurred shall have
been entered into by the respective parties thereto, shall be unconditional and
fully effective in accordance with their


                                       10


respective terms (except for this Agreement or the Eximbank Guarantee Agreement
having become unconditional and fully effective, if such is a condition of
effectiveness of any of such documents), shall be in form and substance
satisfactory to Eximbank and Eximbank and the Collateral Trustee shall each have
received a true, original copy thereof or, if a true, original copy is
unavailable, a certified true copy thereof.

      (b) Opinions of Counsel. Eximbank shall have received signed legal
opinions of counsel to each Person listed on Section A of Schedule 5.01(b)
hereto, each of which shall be in form and substance and by counsel satisfactory
to Eximbank and shall be dated the Guarantee Operative Date; provided that the
opinion of counsel to PNOC-EDC may be dated the Effectivity Date (as defined in
the BOT Agreement).

      (c) Organization Documents; Proceedings.

            (i) Eximbank shall have received a certificate, dated not earlier
      than the Guarantee Operative Date, signed by a Financial Officer of the
      General Partner, and attested to by the Secretary or any Assistant
      Secretary of the General Partner, in form and substance satisfactory to
      Eximbank, together with copies of the Partnership Agreement and other
      Organization Documents of the Borrower and such resolutions of the Board
      of Directors of the General Partner as are reasonably requested by
      Eximbank.

            (ii) Eximbank shall have received a certificate, dated not earlier
      than the Guarantee Operative Date, signed by a Financial Officer of each
      Obligor (other than the Borrower, PNOC-EDC, the BOT Construction
      Performance Security Issuer and the BOT Operation Performance Security
      Issuer) and attested to by the Secretary or any Assistant Secretary of
      such Obligor, in form and substance satisfactory to Eximbank, together
      with copies of the Articles of Incorporation and By-Laws of such Obligor
      and resolutions of such Obligor reasonably requested by Eximbank.

            (iii) Arrangements satisfactory to Eximbank shall have been made for
      the appointment of SyCip Gorres Velayo & Co. or such other firm of
      independent public accountants acceptable to Eximbank, as Auditors.

            (iv) Eximbank shall have received a certificate from each Obligor
      (other than PNOC-EDC, the BOT Construction Performance Security Issuer and
      the BOT Operation Performance Security Issuer) signed by an authorized
      officer certifying the incumbency of parties executing any Project
      Document or related document on behalf of such Obligor.



                                       11


      (d) Auditors. Eximbank shall have received copies of the authorization of
the Auditors referred to in Section 6.2(b) of the Lender Credit Agreement and
Section 7.02(b) hereof.

      (e) Pledged Certificates of Partnership Interests; Subordinated Notes. The
Partners shall have delivered to the Collateral Trustee, as pledgee, (i) the
partnership certificates representing all of their respective general and
limited partnership interests in the Borrower, together with executed and
undated partnership interest transfer powers, and (ii) the Subordinated Notes
evidencing all outstanding Required Subordinated Loans, Standby Subordinated
Loans and Post-Completion Standby Subordinated Loans.

      (f) Consent Letters. Eximbank shall have received a letter, in form and
substance satisfactory to Eximbank, from CT Corporation System, presently
located at 1633 Broadway, New York, New York 10019, indicating the consent of CT
Corporation System to its appointment by the Borrower, Ormat, Ormat
International, Orleyte Company, the Construction Contractor and the Construction
Supplier as their agent to receive service of process as specified in Section
10.02 hereof, in the case of the Borrower; as specified in the Funding
Agreement, the Keystone Agreement and the Ormat EPC Guarantee, in the case of
Ormat; as specified in the Funding Agreement, the Keystone Agreement and the
International EPC Guarantee in the case of Ormat International; as specified in
the Funding Agreement and the Mortgage, Assignment and Pledge Agreement in the
case of Orleyte Company; as specified in that Funding Agreement, the Pledge
Agreement, the Construction Contract and the Keystone Agreement in the case of
the Construction Contractor; and as specified in the Supply Contract and the
Keystone Agreement in the case of the Construction Supplier.

      (g) Environment Matters. Arrangements satisfactory to Eximbank shall have
been made for the Borrower and the Project to comply with Eximbank Environmental
Procedures and Guidelines (effective February 1, 1995) and Philippine law and
guidelines relating to occupational health and safety and to the environment.

      (h) BOT Agreement Effectiveness. Each of PNOC-EDC and the Borrower shall
have issued to Eximbank a certification confirming that the Effective Date (as
defined in the BOT Agreement) has occurred.

      (i) Certificates. Eximbank shall have received copies of each executed
Project Document, together with a certificate of a Financial Officer of the
Borrower certifying that (i) the Borrower is not in default in the performance,
observance or fulfillment of any of its obligations, covenants or conditions
contained therein and, to the best of the Borrower's and the General Partner's
knowledge, no other party to any such Project Document is in default in the
performance, observance or fulfillment of any of its material obligations,
covenants or conditions contained therein and (ii) in the case of each


                                       12


such document to which Eximbank is not a party, (x) that such document is in
full force and effect, (y) that to the best of the Borrower's and the General
Partner's knowledge no event of Force Majeure (as defined in such Project
Document) has occurred thereunder and (z) that the copy thereof delivered to
Eximbank is true, correct and complete. Eximbank shall have received evidence or
copies of all Governmental Approvals set forth in Schedule 5.01(t) hereto (other
than those set forth in Part B thereof), certified by a Financial Officer of the
Borrower as being in full force and effect and except as disclosed in such
Schedule 5.01(t), not the object of a currently pending appeal.

      (j) Construction Budget; Base Case Forecast. Eximbank shall have received
the Construction Budget and the Base Case Forecast, each of which shall be in
form and substance satisfactory to Eximbank.

      (k) Reports of Consultants. Eximbank shall have received the Independent
Engineer's Report, a report prepared by the Insurance Consultant and such other
information as shall be reasonably requested by Eximbank.

      (l) Financial Statements. Eximbank shall have received copies of the most
recent audited financial statements of Ormat and Ormat International and shall
have received copies of the most recent unaudited financial statements (if
audited financial statements are not otherwise available) of the Borrower and
each other Obligor (other than the Borrower, Ormat, Ormat international,
PNOC-EDC, the BOT Construction Performance Security Issuer and the BOT Operation
Performance Security Issuer), showing, for each such Person, no material adverse
change in the financial condition of such Person since the date of the last
financial statements provided to Eximbank prior to the date of this Agreement,
and certificates dated the Guarantee Operative Date and signed by a Financial
Officer of each such Person stating that (x) such financial statements are true,
complete and correct and (y) no material adverse change in the financial
condition, operations, properties, business or prospects of such Person has
occurred since the date of such financial statements.

      (m) Evidence of Authority. Eximbank shall have received evidence of the
authority of the Borrower to enter into this Agreement, the Eximbank Note, the
Lender Credit Agreement, the Disbursement Agreement, the Collateral Trust
Agreement and the Security Documents and the other documents required by this
Agreement and the Lender Credit Agreement as of the date hereof, and the names,
specimen signatures and evidences of authority of the person signing this
Agreement, the Eximbank Note, the Eximbank Guarantee Agreement, the Lender
Credit Agreement, the Funding Agreement, the Disbursement Agreement, the
Collateral Trust Agreement and the Security Documents, the Partnership Agreement
and the other documents required by this Agreement and the Lender Credit
Agreement as of the date hereof, or who, as of the date


                                       13


hereof, will otherwise act as representatives of the Borrower in the operation
of the Eximbank Guarantee Agreement and the Eximbank Credit.

      (n) Notice to Proceed and Construction Contractor's and Construction
Supplier's Representation. Eximbank shall have received a certified copy of the
Notice to Proceed under (and as defined in) the Construction Contract and the
Notice to Proceed under (and as defined in) the Supply Contract, each of which
shall have been issued on or prior to the Credit Date Eximbank shall have
received certificates signed by authorized representatives of each of the
Construction Contractor and the Construction Supplier to the effect that (i) the
Construction Contract and the Supply Contract, respectively, are effective and
work has commenced thereunder, (ii) as of the date hereof the Scheduled
Completion Date for each of Plant A, Plant B and Plant C is September 1, 1997
and for Plant D is January 1, 1998, or such later dates (which Eximbank has
confirmed in writing are acceptable to it) as shall correspond to any extension
of the milestone dates set forth in Section 4.1(a) of the BOT Agreement for the
achievement of the Completion Date for the relevant Plant, (iii) the Borrower is
not in default under the Construction Contract or the Supply Contract,
respectively, (iv) the Construction Contractor is not entitled to any change
orders under the Construction Contract and the Construction Supplier is not
entitled to any change orders under the Supply Contract (in each case, other
than change orders previously disclosed to Eximbank in writing) on such date and
is not then aware of any other change orders required under the Construction
Contract or the Supply Contract, respectively, and (v) to the best of the
Construction Contractor's or the Construction Supplier's (as the case may be)
respective knowledge, after reasonable inquiry, no Force Majeure event (as
defined in each of the Construction Contract and the Supply Contract) has
occurred.

      (o) Project Site. Eximbank shall have received (i) an opinion of counsel
to the Borrower to the effect that the Republic has valid legal title to the
Site free of Liens (other than Liens of or arising through the Borrower, the
Construction Contractor or the Construction Supplier) and that PNOC-EDC has the
valid legal authority to use the Site and delegate unencumbered use of the Site
to the Borrower on the terms and conditions set forth in the BOT Agreement,
which opinion shall be from counsel and in form and substance satisfactory to
Eximbank, and (ii) a certificate of the Borrower that PNOC-EDC has granted the
Borrower and its designees full access to and the ability to use the Site, so
that the Borrower and/or the Construction Contractor and their respective
designees may fully perform their respective obligations under the BOT Agreement
and their respective related obligations.



                                       14


      (p) No Default; Representative and Warranties. Immediately before and
after the initial Utilization:

            (i) no Lender Credit Default or Lender Credit Event of Default shall
      have occurred and be continuing; and

            (ii) all representations and warranties made by the Borrower and any
      Obligor which is an Affiliate of the Borrower and contained herein or in
      the Project Documents (other than the Insurance Contracts, Governmental
      Approvals or any other agreement, commitment or understanding referred to
      in subsection (xiv) of the definition of "Operating Agreements" in
      Schedule X) shall be true and correct in all material respects with the
      same effect as though such representations and warranties had been made on
      and as of the Guarantee Operative Date except where expressed to be made
      only as of an earlier date.

      (q) Security. The Security, in form and substance satisfactory to
Eximbank, shall have been duly created, perfected and, where appropriate,
registered, to create a first priority security interest and charge over the
Collateral in existence at the date hereof. Without limitation to the preceding
sentence, the Borrower shall have duly authorized, executed and delivered or, as
the case may be, provided:

            (i) acknowledgment copies of proper financing statements or other
      instruments duly filed under the Applicable Law of each jurisdiction as
      may be necessary or, in the reasonable opinion of Eximbank, desirable to
      perfect the charges and security interests purported to be created by the
      Security Documents;

            (ii) certified copies of requests, for information or copies, or
      equivalent reports, listing the financing statements and instruments
      referred to in clause (i) above and all other effective financing
      statements that name the Borrower as debtor and that are filed in the
      jurisdictions referred to in said clause (i), together with copies of such
      other financing statements and instruments (none of which shall cover the
      Collateral except to the extent evidencing Lender Credit Permitted Liens);

            (iii) evidence of the completion of all other recordings and filings
      of, or with respect to, the Security Documents as may be necessary or, in
      the reasonable opinion of Eximbank, desirable to perfect the security
      interests purported to be created by the Security Documents;



                                       15


            (iv) evidence that all other actions necessary or, in the reasonable
      opinion of Eximbank, desirable to perfect and protect the security
      interests purported to be created by the Security Documents have been
      taken;

            (v) the Borrower shall have established the Blocked Account; and

            (vi) the Required Funding Amount shall have been fully funded either
      through a cash deposit pursuant to Section 2(j)(i) of the Funding
      Agreement and/or a Required Letter of Credit pursuant to Section 2(k)(i)
      of the Funding Agreement.

      (r) Consent and Approvals. There shall have been obtained, or there shall
have been made arrangements, satisfactory to Eximbank, for obtaining during the
period prior to the Project Completion Date, in addition to the Project
Documents, the governmental, corporate, creditors', shareholders', partners' and
other licenses, approvals or consents listed in Schedule 5.01(t) hereto and all
other governmental, corporate, creditors, shareholders', partners' and other
necessary licenses, approvals or consents (other than with respect to Eximbank)
for: (i) the financing by each of the Lenders and the Issuing Bank under the
Lender Credit Agreement; (ii) the carrying on of the business of the Borrower as
it is presently carried on and is contemplated to carried on; (iii) the carrying
out of the Project; (iv) the due execution and delivery of, and performance
under, each Project Document which has been entered into at the date hereof, the
Security, and any documents in implementation of any thereof; and (v) the
remittance to Eximbank and the Collateral Trustee and by the Collateral Trustee
to the Secured Parties or the respective assignees, in Dollars, of all monies
payable pursuant to each Project Document which has been entered into on the
date hereof, and any documents in implementation of any thereof.

      (s) No Project Document Default; Governmental Approvals. Each of the
Project Documents which has been entered into or which is required to have been
entered into on the Guarantee Operative Date shall be in full force and effect
and no material breach or default shall have occurred under such Project
Document. No event of Force Majeure (as defined in any of the BOT Agreement, the
Supply Contract and the Construction Contract) shall have occurred which has
had, or in the reasonable judgment of Eximbank is reasonably likely to have, a
Material Adverse Effect. No events shall have occurred pursuant to which a claim
could be made by the Administrative Agent on behalf of the Lenders under the
Eximbank Guarantee Agreement.

      (t) Costs; Construction Progress. Eximbank and the Independent Engineer
shall have received from the Borrower a certificate in the form of Schedule
5.2(h) to the Lender Credit Agreement signed by an authorized representative of
the Borrower and expressed to be effective on the date of the relevant
Utilization that (i) the costs and


                                       16


expenses theretofore incurred by the Borrower and to be incurred by the Borrower
prior to the latest date on which the Final Disbursement Date can be expected to
occur will not exceed [$68,469,000] and (ii) the sum of (A) the aggregate
Financed Portion of the costs incurred by the Borrower after March 1, 1995 and
before the Final Disbursement Date for the purchase in the United States and
export to the Borrower's Country of the Items and (B) the aggregate Local Cost
Financed Portion of the costs incurred by the Borrower for the purchase in the
Republic of the Local Cost items and (C) the aggregate IDC Financed Portion of
IDC will not exceed the difference between (x) the Total Commitment and (y) 100%
of the Guarantee Exposure Fee.

      (u) Fees and Expenses. On or before the Credit Date, the Borrower shall
have paid or arranged for payment of fees, expenses and other charges (including
any and all Attorney Costs) then due and payable by it under this Agreement.

      (v) No Change in Contract Price. The contract price set forth in the
Supply Contract, the Construction Contract and the Keystone Agreement shall not
have been amended, changed or otherwise modified and Eximbank shall have
received a certificate from each of the Construction Supplier and the
Construction Contractor to such effect in form and substance satisfactory to
Eximbank.

      (w) Insurance. Eximbank shall have received a certificate from the
Insurance Consultant stating that the insurance policies required under the
Lender Credit Agreement to be in effect on the Credit Date are in full force and
effect.

      (x) Other Instrument, Conditions, Etc. The delivery of any other
instruments and agreements and the satisfaction of any other condition as
Eximbank may reasonably request.

      Section 5.02. Conditions Precedent to Eximbank Disbursement. As conditions
precedent to the Eximbank Disbursement, the documents described in paragraphs
(a) through (h) below shall have been received by Eximbank, each in form and
substance satisfactory to Eximbank and dated the Disbursement Date, and the
conditions described in paragraphs (i) through (n) shall have been fulfilled as
of the date on which the Eximbank Disbursement is requested by the Borrower to
be made, in a manner satisfactory to Eximbank:

      (a) Eximbank Note. The executed Eximbank Note in the principal amount of
the Eximbank Credit.

      (b) Opinions of Counsel. Signed legal opinions of counsel to each Person
listed on Section B of Schedule 5.01(c) hereto, each of which shall be in form
and



                                       17


substance and by counsel satisfactory to Eximbank and shall be dated the
Disbursement Date.

      (c) Evidence of Authority. Evidence of the authority of the Borrower to
execute, deliver and perform the terms and conditions of this Agreement, the
Eximbank Note and the other documents requested by this Agreement, and the names
and evidence of authority (including specimen signatures) of each person who, on
behalf of the Borrower, signed or will sign this Agreement, the Eximbank Note
and the other documents required by this Agreement, or will otherwise act as
representatives of the Borrower in the operation of the Eximbank Credit.

      (d) BOT Agreement. A certification signed by an authorized representative
of the Borrower and expressed to be effective as of the Disbursement Date,
stating that the Borrower is in compliance with the BOT Agreement and that such
agreement is in full force and effect.

      (e) Security. A certification signed by an authorized representative of
the Borrower and expressed to be effective as of the Disbursement Date, stating
that the Security Documents are in full force and effect and that the Security
granted therein shall have been duly created, perfected and, where appropriate,
registered, to create a first priority security interest and charge over the
Collateral in existence on the Disbursement Date in favor of the Collateral
trustee for the benefit of Eximbank.

      (f) Agent for Service of Process. Evidence that the Borrower and each
other Obligor (other than PNOC-EDC, the BOT Operation Performance Security
Issuer and the BOT Construction Performance Security Issuer) has irrevocably
appointed as its agent for service of process the Person or Persons so specified
in Section 5.01(f), and that each such agent has accepted the appointment and
has agreed to forward forthwith to the Borrower, or the relevant Obligor, as the
case may be, all legal process addressed to the Borrower or such Obligor,
received by such agent.

      (g) Insurance. A certification from the Insurance Consultant stating that
the insurance policies required pursuant to Section 7.03 to be in effect on the
Disbursement Date, as such provisions may have been modified since the date of
this Agreement and as such provisions are in effect on such date, axe in full
force and effect.

      (h) Financial Completion Test. A certification signed by an authorized
representative of the Borrower and expressed to be effective as of the
Disbursement Date, attaching relevant calculations, and reasonably acceptable to
Eximbank, stating that, after giving effect to the Eximbank Disbursement:



                                       18


            (1)   The aggregate principal amount of all Senior Debt of the
                  Borrower then outstanding shall not exceed [$51,263,955].

            (2)   The outstanding principal amount of all Required Subordinated
                  Loans shall have been converted into common equity in the
                  Borrower on terms and conditions satisfactory to Eximbank.

            (3)   The Equity Ratio shall not be less than 25:75.

            (4)   The equity contributions to the Borrower aggregate no less
                  than $16,705,045.

      (i) Project Completion. The Project Completion Date shall have occurred.

      (j) No Event of Default. Both before and after giving effect to the
Eximbank Disbursement, no Lender Credit Default, Lender Credit Event of Default,
Default or Event of Default exists or will exist that has not been cured or
waived.

      (k) Representations and Warranties. All the representations and warranties
made by the Borrower in Section 6.02 shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of such date by reference to the facts and circumstances
existing on such date, except where such representation or warranty is expressed
to be made as of a specified date.

      (l) Fees and Costs. The fees due pursuant to Section 3.03 and all costs
and expenses required to be paid pursuant to Section 11.07 shall have been paid
by the Borrower, and (i) Eximbank has been paid the Credit Exposure Fee, or (ii)
arrangements satisfactory to Eximbank shall have been entered into for providing
payment to Eximbank of the Credit Exposure Fee. For the purposes of the
foregoing sentence, "arrangements satisfactory to Eximbank" shall include,
without limitation, the direct payment of the Credit Exposure Fee by the
Borrower to Eximbank prior to the Disbursement Date or the submission to
Eximbank by the Borrower of a Request for Eximbank Disbursement that includes a
request for Eximbank financing of the Credit Exposure Fee.

      (m) Debt Reserve Cash Collateral Account. The Debt Reserve Cash Collateral
Account shall be funded in an amount not less than $4,200,000 (if the principal
of the Eximbank Credit shall be repayable in 38 installments) and an amount
equal to the Senior Debt Service due and payable during the next succeeding six
months (if the principal of the Eximbank Credit shall be repayable in fewer than
38 installments).

                                       19


      (n) No Material Adverse Effect. No Material Adverse Effect shall exist or
shall have occurred that has not been waived by Eximbank.

      (o) Payment of Buy Down Amounts. All liquidated damages accruing under
Sections 14.2 and 14.3 of the Construction Contract and Sections 12.2 and 12.3
of the Supply Contract shall have been paid in full, irrespective of any
limitation on liability therefor set forth in the Construction Contract, the
Supply Contract or the Keystone Agreement.

      (p) Post-Competition Ormat Guaranty. The Post-Completion Ormat Guaranty
shall have been entered into by the respective parties thereto, shall be
unconditional and fully effective in accordance with its terms, shall be
substantially in the form of Annex C hereto, and Eximbank and the Collateral
Trustee shall have each received a true, original copy thereof or, if a true,
original copy is unavailable, a certified true copy thereof.

      (q) Lender Financing Termination Date. After giving effect to the Eximbank
Disbursement, the Lender Financing Termination Date shall have occurred.

      Section 5.03. Request for Eximbank Disbursement. The Borrower may, no
earlier than ten (10) and no later than five (5) Business Days prior to the
proposed Disbursement Date, submit to Eximbank a completed and duly executed
Request for Eximbank Disbursement; provided, however, that no Eximbank
Disbursement shall be made in respect of such Request for Eximbank Disbursement
until the conditions set forth in Section 5.02 have been fulfilled or waived by
Eximbank. The Request for Eximbank Disbursement shall be executed by an
authorized representative of the Borrower, and shall be accompanied by (i) true,
correct and complete copies of each Eximbank Certificate; (ii) a true, correct
and complete Reconciliation Certificate; and (iii) a written undertaking from
the Administrative Agent in the form of Exhibit 1 to Annex B hereto. In no event
shall the maximum amount of the Eximbank Disbursement exceed the aggregate of
the Dollar amounts certified by Eximbank in the accompanying Eximbank
Certificates as amounts eligible for Eximbank support and 100% of the Credit
Exposure Fee. Notwithstanding anything to the contrary contained herein, the
Borrower may only submit one (1) Request for Eximbank Disbursement under this
Agreement. The Borrower shall apply the proceeds of the Eximbank Disbursement to
the payment of amounts owed to the Lenders under the Lender Credit Agreement and
the payment of the Credit Exposure Fee in accordance with the terms of Section
6.30(d) of the Lender Credit Agreement and this Agreement.



                                       20


                    SECTION 6. REPRESENTATIONS AND WARRANTIES

      Section 6.01. Representations and Warranties with Respect to Guarantee
Operative Date. In order to induce Eximbank to enter into this Agreement and
each of the other Financing Documents to which it is a party, to issue the
Eximbank Guarantee Agreement and to establish the Eximbank Credit, the Borrower
makes the following representations, warranties and agreements as of the date of
execution hereof and as of the Guarantee Operative Date, which shall survive the
execution and delivery of this Agreement and the other Financing Documents to
which Eximbank is a party and the disbursement and repayment of the Eximbank
Credit:

      (a) Limited Partnership Status. The Borrower (i) is a limited partnership
duly organized and validly existing and in good standing under the laws of the
Republic, (ii) is duly qualified to do business under the laws of each
jurisdiction in which the character of the properties owned or leased by it or
in which the transaction of its business as presently conducted or proposed to
be conducted makes such qualification necessary and (iii) has full power and
authority to own the property and assets owned by it and to lease the properties
leased by it and to transact the business in which it is engaged or proposes to
be engaged and to do all things necessary or appropriate in respect of the
Project and to consummate the transactions contemplated by the Project Documents
in effect or required to be in effect as of each date this representation is
made or deemed made. Orleyte Company is the sole general partner of the
Borrower, and Ormat Philippines and Orleyte Company are the sole limited
partners of the Borrower. Each Partner (a) is a limited life company duly
organized, validly existing and in good standing under the laws of the Cayman
islands, (b) is duly qualified to do business and is in good standing under the
laws of each jurisdiction in which the character of the properties owned or
leased by it or in which the transaction of its business as presently conducted
or as proposed to be conducted makes such qualification necessary or desirable,
and (c) has full power and authority to own the property an d assets owned by it
and to lease the properties leased by it and to transact the business in which
it is engaged or proposes to be engaged.

      (b) Power and Authority. The Borrower and each Partner has the full power
and authority to execute and deliver, and to perform the terms and provisions
of, each of the Project Documents to which it is party and has taken all
necessary partnership or corporate action, as the case may be, to authorize the
execution, delivery and performance by it of each of such Project Documents as
have been executed and delivered as of each date this representation and
warranty is made. The General Partner has the corporate power and authority to
execute and deliver in the name of the Borrower, and to perform on behalf of the
Borrower the terms and provisions of, each of the Project Documents to which the
Borrower is a party and has taken all necessary corporate action to authorize
the execution, delivery and performance by it on the Borrower's behalf of each
of such Project Documents as of each date this representation and warranty is
made.


                                       21


The Borrower and each Partner has, or in the case of the Project Documents other
than this Agreement, by the Guarantee Operative Date will have, duly executed
and delivered each of the Project Documents to which it is party, and each of
such Project Documents constitutes or, in the case of each such other Project
Document when executed and delivered, will constitute, the legal, valid and
binding obligations of the Borrower or such Partner, as the case may be, and
enforceable in accordance with its respective terms, except as the
enforceability thereof may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) general equitable principles, regardless of
whether the issue of enforceability Is considered in a proceeding in equity or
at law.

      (c) No Violation. None of the execution and delivery by the Borrower of
the Project Documents to which it is a party, nor the Borrower's compliance with
or performance of the terms and provisions thereof, nor the use of the proceeds
of the Loans or the Eximbank Credit as contemplated by the respective Financing
Documents, nor the execution, delivery and performance on behalf of the Borrower
by the General Partner of the Project Documents to which the Borrower is a party
(i) will contravene or violate any provision of any Applicable Law to which the
Borrower or the General Partner, any of their respective assets or the Project
is subject, (ii) will conflict or be inconsistent with or result in any breach
of any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation to
create or impose) any Lien (except any Permitted Liens) upon any of the property
or assets of the Borrower or the General Partner pursuant to the term of any
indenture, mortgage, deed of trust, credit agreement, loan agreement or any
other agreement, contract or instrument to which the Borrower or the General
Partner is a party or by which either of them or any of any of their respective
property or assets is bound or to which either of them may be subject, (iii)
will violate any provision of the Partnership Agreement or any other
Organization Document of the Borrower or (iv) will require any consent or
approval of any Governmental Authority or any other Person which has not been
obtained.

      (d) Organization. The general and limited partnership interests of Orleyte
Company and the limited partnership interests of Ormat Philippines in the
Borrower and the respective interests of Orleyte Company and Ormat Philippines
in the capital and the profits and distributions of the Borrower are as set
forth in the Partnership Agreement. All such partnership interests in the
Borrower have been duly and validly authorized and issued. Orleyte Company and
Ormat Philippines own the general and limited partnership interests in the
Borrower set forth in the Partnership Agreement free and clear of any Liens of
any-nature on such partnership interests except for the Liens created pursuant
to the Mortgage, Assignment and Pledge Agreement. The Borrower does not have
outstanding any certificates or securities that evidence interests in the
Borrower (except for certificates representing the respective general and
limited partnership interests of


                                       22


Orleyte Company and Ormat Philippines in the Borrower), or any securities
convertible into or exchangeable for any of its partnership interests or any
rights to subscribe for or to purchase, or any warranties or options to
purchase, or any agreements providing for the issuance (contingent or otherwise)
of, or any calls, commitments or claims of any character relating to, any such
partnership interests, except for those rights established pursuant to the
Mortgage, Assignment and Pledge Agreement, the Partnership Agreement, the Itochu
MOU, and agreements (certified copies of which shall have been delivered to
Eximbank) relating to a sale or assignment to EPDCI or an Affiliate thereof of
limited partnership interests in the Borrower representing not more than 10% of
the aggregate partnership interests in the Borrower.

      (e) Subsidiaries. The Borrower has no Subsidiaries and owns no equity
interest in any other Person.

      (f) Singe-Purpose Borrower. The Borrower has not incurred any liabilities
other than in connection with its participation in the transactions contemplated
by the Project Documents. The Borrower (i) has not engaged in any business other
than the design, development, ownership, financing, construction and operation
of the Project and (ii) has not a party to any agreement, contract or commitment
(other than (w) the agreements identified in clauses (i) through (xiv),
inclusive, (xvii) and (xviii) of the definition of the term Operating Agreements
set forth in Schedule X hereto, (x) the Financing Documents, (y) agreements,
contracts or commitments contemplated by the O&M Parameters (including those
relating to employee training, secondment of employees and vehicle rentals), the
then-current Construction Budget or the then-current Annual Budget and (z)
agreements, contracts and commitments in respect of Permitted Indebtedness)
which, individually, creates an annual financial obligation of the Borrower in
excess of $75,000 (or the equivalent in other currency) or which would cause the
aggregate annual financial obligations of the Borrower under all agreements,
contracts and commitments (other than those specified in clauses (w) through (z)
immediately above) to which the Borrower is a party to exceed $150,000 (or the
equivalent in other currency).

      (g) Financial Statements; Financial Condition; Undisclosed Liabilities;
Etc.

            (i) The statements of financial condition of the Borrower and the
      General Partner most recently furnished to Eximbank present fairly the
      financial condition of the Borrower or the General Partner, as the case
      may be, at the date of such statements of financial condition and the
      results of the operations of the Borrower or the General Partner, as the
      case may be, for such fiscal year. Such financial statements have been
      prepared in accordance with Philippine (in the case of the Borrower) and
      Cayman Islands (in the case of the General Partner) generally accepted
      accounting principles and practices consistently applied.


                                       23


      Since the date of such financial statements, no event, condition or
      circumstance (including without limitation Force Majeure as defined in
      Articles 13.1(a) and 13.1(b) of the BOT Agreement) has existed or has
      occurred which is reasonably likely to have a Material Adverse Effect.

            (ii) Except as fully reflected in the financial statements referred
      to in Section 6.01(g)(i), there are no liabilities or obligations with
      respect to the Borrower or the General Partner of any nature whatsoever
      (whether absolute, accrued, contingent or otherwise and whether or not
      due) for the period to which such financial statements relate which,
      either individually or in the aggregate, is reasonably likely to have a
      Material Adverse Effect. Neither the Borrower nor the General Partner
      knows of any reasonable basis for the assertion against the Borrower or
      the General Partner of any liability or obligation of any nature
      whatsoever for such relevant period that is not fully reflected in the
      financial statements referred to in Section 6.01(g)(i) which, either
      individually or in the aggregate, is reasonably likely to have a Material
      Adverse Effect.

      (h) Litigation; Labor Duties.

            (i) Except as disclosed in Schedule 6.01(h) hereto, there is no
      action, suit, investigation or proceeding by or before any court,
      arbitrator, administrative agency or other Governmental Authority
      (including without limitation any appeal by any Person of a Governmental
      Approval) pending or, to the best of the Borrower's knowledge, threatened
      against or affecting the Borrower or any of its properties, revenues or
      assets or the Project or the Site which has had or is reasonably likely to
      have a Material Adverse Effect. The Borrower is not in default with
      respect to any order of any court, arbitrator, administrative agency or
      other Governmental Authority. There is no injunction, writ, preliminary
      restraining order of any nature issued by an arbitrator, court or other
      Governmental Authority directing that any of the material transactions
      provided for in any of the Project Documents not be consummated as herein
      or therein provided. To the best of the Borrower's knowledge, there is no
      action, suit, investigation or proceeding by or before any court,
      arbitrator, administrative agency or other Governmental Authority
      (including without limitation any appeal by any Person of a Governmental
      Approval) pending or threatened against or affecting any party to any
      Project Document which is an Affiliate of the Borrower or any of their
      properties, revenues or assets, and the Borrower does not have knowledge
      of any such action, suit, investigation or proceeding pending or
      threatened against or affecting any other party to any Project Document or
      any of their properties, revenues or assets, in each case


                                       24


      described in this sentence which has had or is reasonably likely to have a
      Material Adverse Effect.

            (ii) There are no strikes, slowdowns or work stoppages by the
      Borrower's employees on-going or, to the knowledge of the Borrower,
      threatened which are reasonably likely to have a Material Adverse Effect.

      (i) True and Complete Disclosure. All factual information (taken as a
whole, which, for the avoidance of doubt (i) shall not include any information
by way of projections, estimates or other expressions of view as to future
circumstances provided that such projections, estimates or other expressions of
view are expressed in good faith and on the basis of reasonable assumptions and
(ii) shall be qualified by any disclaimers with respect to such factual
information provided by the Borrower to Eximbank) heretofore or
contemporaneously furnished by or on behalf of the Borrower, Ormat or any other
Affiliate of the Borrower in writing to Eximbank (including without limitation
such factual information as contained in the information Memorandum and the
Project Documents), and all other such factual information (taken as a whole)
hereafter furnished by or on behalf of the Borrower, Ormat or any other
Affiliate of Ormat in writing to Eximbank will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any fact necessary to make such
information (taken as a whole) not misleading in any material respect at such
time in light of the circumstances under which such information was provided.
There are in existence no documents or agreements which have not been disclosed
to Eximbank which are material in the context of the Project Documents or which
have the effect of varying any of the Project Documents.

      (j) Tax Returns and Payments. The Borrower has filed all tax returns
required by Applicable Law to be filed by it and has paid all income taxes
payable by it which have become due pursuant to such tax returns and all other
taxes and assessments payable by it which have become due, other than those not
yet delinquent and except for those contested in good faith and for which
adequate reserves have been established. The Borrower has paid, or has provided
adequate reserves (in the good faith judgment of the management of the Borrower)
for the payment of, all national, regional or local income taxes applicable for
all prior Fiscal Years and for the current Fiscal Year to the date hereof.

      (k) Governmental Approvals. All Governmental Approvals necessary under
Applicable Law in connection with (i) the due execution and delivery of, and
performance by the Borrower of its obligations and the exercise of its rights
under, the Project Documents in effect or required to be in effect as of each
date this representation is made or deemed made, (ii) the investment by the
Partners in the Borrower, (iii) the due execution, delivery and performance by
the General Partner on behalf of the Borrower of


                                       25


each of the Project Documents to which the Borrower is a party, (iv) the grant
by each of the Borrower, the Partners, and Ormat International of the Liens
created pursuant to the Security Documents and the Funding Agreement and the
validity, enforceability and perfection thereof and the exercise by Eximbank or
the Collateral Trustee of its rights and remedies thereunder and (v) the
construction and operation of the Project as contemplated by the Project
Documents, to be obtained by the Borrower or any Affiliate of the Borrower are,
and to be obtained by any other Person (to the best knowledge of the Borrower)
are, set forth in Schedule 5.01(t). Each of the Governmental Approvals set forth
in Part A of Schedule 5.01(t) and each other Governmental Approval obtained by
the Borrower after the date of this Agreement but on or prior to the date this
representation is made, has duly obtained or made, is validly issued, is in full
force and effect, is not the object of a currently pending appeal, is held in
the name of the Person identified in Schedule 5.01(t) and is free from any
condition or requirement compliance with which is reasonably likely to have a
Material Adverse Effect or which the Borrower does not reasonably expect to be
able to satisfy. There is no proceeding (including without limitation any appeal
by any Person) pending or, to the best knowledge of the Borrower, threatened
which is reasonably likely to result in the rescission, termination, material
modification, suspension or determination of invalidity or lack of effectiveness
of any such Governmental Approval. The information set forth in each application
and other written material submitted by the Borrower to the applicable
Governmental Authority in connection with each such Governmental Approval is
accurate and complete in all material respects. The Governmental Approvals set
forth in Part B of Schedule 5.01(t) are required solely in connection with later
stages of construction and operation of the Project. The Borrower has no reason
to believe that any Governmental Approval that has not been obtained by the
Borrower, but which will be required in the future, will not be granted to it in
due course, on or prior to the date when required and free from any condition or
requirement compliance with which is reasonably likely to have a Material
Adverse Effect or which the Borrower does not reasonably expect to be able to
satisfy. The Project, if constructed in accordance with the Construction
Contract, the Supply Contract and the other Project Documents, will conform to
and comply with all covenants, conditions, restrictions and reservations in the
Governmental Approvals and the Project Documents applicable thereto and all
Applicable Laws. The Borrower has no reason to believe that the Collateral
Trustee will not be entitled, without undue expense or delay, to the benefit of
each Governmental Approval set forth on Schedule 5.01(t) upon the exercise of
remedies under the Security Documents Eximbank has received a true and complete
copy of each Governmental Approval heretofore obtain or made by the Borrower.

      (l) Compliance with Statutes, Etc.

            (i) Each of the Borrower and, with respect to its ownership interest
      in and management of the Borrower, the General Partner is in compliance
      with all


                                       26


      Applicable Laws in respect of the conduct of its business and the
      ownership of its property (including, without limitation, Applicable Laws
      relating to environmental standards and controls and resettlements and
      Applicable Laws relating to the maintenance of debt to equity ratios).

            (ii) Without limitation to the foregoing clause (i), the Borrower's
      business and the Project are being carried out in compliance with
      applicable Republic environmental guidelines.

      (m) Environmental Matters. To the best of the Borrower's knowledge,
neither the Site nor the Power Plant (nor any other property with respect to
which the Borrower has retained or assumed liability either contractually or by
operation of the law) has been affected by any Hazardous Material in a manner
that is reasonably likely to give rise to any material liability of the Borrower
under any Environmental Law or which has had or is reasonably likely to have an
Adverse Effect.

      (n) Patents, Licenses, Franchises and Formulas. The Borrower owns or has
the right to use all the patents, trademarks, permits, service marks, trade
names, copyrights, licenses, franchises and formulas, or rights with respect
thereto, and has obtained assignments of all leases and other rights of whatever
nature, necessary for the present and proposed conduct of its business and the
carrying out of the Project in the manner contemplated by the Project Documents,
without any known conflict with the fights of others which, or the failure to
obtain which, as the case may be, is reasonably likely to result in a Material
Adverse Effect.

      (o) Submission to Law and Jurisdiction. As of the Guarantee Operative
Date, the choice of governing law for each of the respective Project Documents
in effect or required to be in effect as of the Guarantee Operative Date will be
recognized in the courts of the Republic, and those courts will recognize and
give effect to any judgment in respect of such Project Document obtained by or
against the Borrower in the courts of the jurisdictions to which the Borrower
has submitted.

      (p) Status of the Loans and the Eximbank Credit. The Lender Financing
Secured Obligations constitute, and the Eximbank Secured Obligations will
constitute, direct, unconditional, and general obligations of the Borrower and
rank senior as to priority of payment and security to all Subordinated Secured
Obligations and Affiliated Reimbursement Obligations of the Borrower and not
less than pari passu as to priority of payment to all other Indebtedness of the
Borrower. Except as permitted by Section 8.01 of this Agreement, the Borrower
has not secured or agreed to secure any such other Indebtedness by any Lien upon
any of its present or future revenues, assets or properties or upon any general
or limited partnership interests in the Borrower.



                                       27


      (q) Documents; Sufficiency of Project Documents.

            (i) Eximbank has received a complete copy of each Project Document
      in effect or required to be in effect as of each date this representation
      is made or deemed made (including all exhibits, schedules and disclosure
      letters referred to therein or delivered pursuant thereto, if any).

            (ii) To the best of the Borrower's knowledge, the services to be
      performed, the materials to be supplied and easements, licenses and other
      rights granted or to be granted to the Borrower pursuant to the terms of
      the Project Documents provide or will provide the Borrower with all rights
      and property interests required to enable the Borrower to obtain all
      services, materials or rights (including access) required for the design,
      construction, start-up, operation and maintenance of the Project,
      including the Borrower's full and prompt performance of its obligations,
      and full and timely satisfaction of all conditions precedent to the
      performance by others of their obligations, under the Project Documents,
      other than those services, materials or rights that reasonably can be
      expected to be obtainable in the ordinary course of business without
      material additional expenses or material delay.

      (r) Fees and Enforcement. Other than amounts that have been paid in full
or will have been paid in full by the Guarantee Operative Date (or, for the
purposes of Section 6.02 hereof, the Disbursement Date), no fees or taxes,
including without limitation stamp, transaction, registration or similar taxes,
are required to be paid for the legality, validity, or enforceability of this
Agreement or any of the other Project Documents in effect or required to be in
effect as of each date this representation is made or deemed made. This
Agreement and each of such Project Documents executed and delivered as of the
date this representation is made or deemed made are each in proper legal form
under the laws of the Republic, and under the respective governing laws selected
in such Project Documents, for the enforcement thereof in such jurisdiction
without any further action on the part of the Collateral Trustee or Eximbank.

      (s) Utility Availability. Arrangements reflected accurately and completely
in the Construction Budget have been made under the Construction Contract, the
Supply Contract, the BOT Agreement or otherwise on commercially reasonable terms
for the provision of all services, materials and utilities reasonably necessary
for the construction of the Project.

      (t) Availability and transfer of Foreign Currency. Except as disclosed in
Schedule 6.01(t) to this Agreement, all requisite foreign exchange control
approvals and other authorizations, if any, by the Republic or any department or
agency thereof have been duly obtained and validly issued and are in full force
and effect to assure (i) the


                                       28


ability of the Borrower to receive, and the ability of any other Person to make,
any and all payments to the Borrower contemplated by the Project Documents, (ii)
the availability of Dollars to enable the Borrower to perform all of its
obligations under the Financing Documents or any of the other Project Documents,
as the case may be, in accordance with their respective terms, and (iii) the
ability of the Borrower to convert all sums received in Peso amounts from
PNOC-EDC under the BOT Agreement and the PNOC-EDC Consent Agreement and from the
Republic under the Performance Undertaking and the Republic Consent Agreement,
including any Peso amounts representing SFRI Fees, from Pesos to Dollars,
immediately upon receipt thereof, and to use the Dollars as necessary to perform
all of its obligations under the Project Documents, in accordance with their
respective terms. None of such foreign exchange control approvals and other
authorizations are subject by its respective terms as currently in effect to
modification or revocation. Except as disclosed in Schedule 6.01(t) to this
Agreement, there are no restrictions or requirements which limit the
availability or transfer of foreign exchange, or the conversion to a foreign
exchange, for the purpose of the performance by the Borrower of its obligations
under the Financing Documents, this Agreement or under any of the other Project
Documents.

      (u) Construction Budget.

            (i) The Construction Budget as in effect on the date hereof is
      attached as Schedule 6.01(u) to this Agreement. The Construction Budget
      accurately specifies all costs and expenses incurred and, to the best of
      the Borrower's knowledge, anticipated to be incurred, prior to the latest
      date on which the Maturity Date can be expected to occur to construct and
      finance the construction of the Project in the manner contemplated by the
      Project Documents. In addition, to the best of the Borrower's knowledge,
      the amount of all costs and expenses required to be paid or incurred prior
      to the latest date on which the Maturity Date can be expected to occur to
      construct and finance the construction of the Project in the manner
      contemplated by the Project Documents does not exceed the amount reflected
      in the Construction Budget

            (ii) To the best of the Borrower's knowledge, all projections and
      budgets (including the Construction Budget and the Base Case Forecast)
      furnished or to be furnished to the Administrative Agent, the Collateral
      Trustee, the Issuing Bank, the Lenders or Eximbank by or on behalf of the
      Borrower and the summaries of significant assumptions related thereto (w)
      have been and will be prepared with due care, (x) fairly present, and will
      fairly present, the Borrower's expectations as to the matters covered
      thereby as of their date, (y) are based on, and will be based on,
      reasonable assumptions as to all factual and legal matters material to the
      estimates therein (including interest rates and costs)


                                       29


      and (z) are in all materials respects consistent with, and will be in all
      material respects consistent with, the provisions of the Project
      Documents.

      (v) Title; Liens. The Borrower has good and valid title to all of its
other properties and assets, in each case, free and clear of all Liens other
than Permitted Liens, including without limitation, on and subject to the terms
and conditions of the BOT Agreement, an unconditional and unencumbered right to
use the Site for the duration of the Cooperation Period (as defined in the BOT
Agreement). No mortgage or financing statement or other instrument or
recordation covering all or any part of the property or assets of the Borrower
is on file in any recording office, except such as relate to Liens described in
paragraphs (a) and (b) of Section 8.01 hereof.

      (w) Transactions with Affiliates. The Borrower is not a party to any
contracts or agreements with, or any other commitments to, whether or not in the
ordinary course of business, any Affiliate, which are individually valued in
excess of $50,000 or in the aggregate valued in excess of $100,000 except for
the Lender Credit Agreement, the Construction Contract, the Supply Contract, the
Funding Agreement, the Mortgage, Assignment and Pledge Agreement, the Keystone
Agreement, the Assignment and Assumption Agreement, the O&M Support Undertaking
and any other contracts, agreements or commitments that are contemplated in the
O&M Parameters (including those relating to employee training, vehicle rentals
and secondment of employees) or in the Funding Agreement.

      (x) No Additional Fees. Other than as expressly set forth in the Base Case
Forecast and the Construction Budget, the Borrower has not paid or become
obligated to pay any fee or commission to any broker, finder or intermediary for
or on account of arranging the financing of the transactions contemplated by the
Project Documents.

      (y) Regulation of Parties. None of the Borrower, its Affiliates nor any of
the Secured Parties or Eximbank is or will be, solely as a result of the
participation by such parties separately or as a group in the transactions
contemplated hereby or by any other Project Document, or as a result of the
ownership, use or operation of the Project, subject to regulation by any
Governmental Authority of the United States as a "public utility", an "electric
utility holding company", a "public utility holding company", a "holding
company", or an "electrical corporation" or a subsidiary or affiliate of any of
the foregoing under any Applicable Law of the United States (including, without
limitation, PUHCA and FPA) or by any Governmental Authority of the Republic as a
"public utility" under any Applicable Law of the Republic. So long as the owner
and operator of the Project is an "exempt wholesale generator" under Section 32
of PUHCA or a "foreign utility company" under Section 33 of PUHCA, none of the
Secured Parties will by reason of its or their ownership or operation of the
Project upon the exercise or remedies under the Security Documents be subject to
regulation by any Governmental Authority of the


                                       30


United States as a "public utility", an "electric utility", an "electric utility
holding company", a "holding company", or an "electric corporation" or a
subsidiary or affiliate of any of the foregoing under any Applicable Law of the
United States (including, without limitation, PUHCA and FPA).

      (z) Regulatory Status. The Borrower is not subject to regulation as a
"subsidiary company" of a holding company under PUHCA.

      (aa) ERISA and Employees. The Borrower does not sponsor, maintain,
administer, contribute to, participate in, or have any obligation to contribute
to or any liability under, any Plan nor since the date which is six years
immediately preceding the Guarantee Operative Date has the Borrower established,
sponsored, maintained, administered, contributed to, participated in, or had any
obligation to contribute to or liability under, any Plan. A Termination Event
has not occurred with respect to any Plan the occurrence of which has had or to
the Borrower's knowledge is reasonably likely to result in a Material Adverse
Effect. Neither the Borrower nor any ERISA Affiliate has failed to make a
required contribution or payment to a Multiemployer Plan when due, the failure
of which has had or to the Borrower's knowledge is reasonably likely to result
in a Material Adverse Effect. To the Borrower's knowledge, no accumulated
funding deficiency as defined in Section 412 of the Code has been incurred nor
has any funding waiver from the Internal Revenue Service been received or
requested with respect to any Pension Plan, nor has the Borrower or any ERISA
Affiliate failed to make any contribution or to pay any amount due and owing as
required by Section 412 of the Code, Section 302 of ERISA or the terms of any
Pension Plan, nor has there been any event requiring disclosure under Section
404l(c)(3)(C) or Section 4063 of ERISA with respect to any Pension Plan, the
event or occurrence of which has had or to the Borrower's knowledge is
reasonably likely to result in a Material Adverse Effect. To the Borrower's
knowledge, the Borrower and each ERISA Affiliate has met its minimum funding
requirements under ERISA and the Code with respect to the Plans and all benefit
liabilities under each Pension Plan are being funded in accordance with
applicable legal requirements and reasonable actuarial assumptions and methods
as set forth in ERISA and the Code. To the Borrower's knowledge, no material
proceeding, claim, lawsuit and/or investigation exists or, to the best of the
Borrower's knowledge, is threatened concerning any (i) Pension Plan, or (ii)
Multiemployer Plan, the occurrence of which has had or is reasonably likely to
result in a Material Adverse Effect. Neither the Borrower nor, to the Borrower's
knowledge, any ERISA Affiliate has incurred any liability to the PBGC other than
for insurance premiums with respect to a Pension Plan, the payment of which is
not yet due.

      (bb) Investment Company Act. Neither the Borrower nor any of its
Affiliates is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.



                                       31


      Section 6.02. Representations and Warranties with Respect to the
Disbursement Date. In order to induce Eximbank to make the Eximbank Credit
available to the Borrower on the Disbursement Date, the Borrower confirms the
representations and warranties set forth in Section 6.01 as if made as of the
Disbursement Date (except where specified to be made as of a special date).

      Section 6.03. Acknowledgment. The Borrower acknowledges that it has made
the foregoing representations and warranties with the intention of persuading
Eximbank to enter into this Agreement, the Eximbank Guarantee Agreement and the
other Financing Documents to which Eximbank is a party, and that Eximbank has
entered into this Agreement, the Eximbank Guarantee Agreement and the other
Financing Documents to which Eximbank is a party on the basis of, and in full
reliance on, each of such representations and warranties. The Borrower warrants
to Eximbank that each of such representations is true and correct in all
material respects as of the date of this Agreement and that none of them omits
any matter necessary to make such representation not misleading in any material
respect. The rights and remedies of Eximbank in relation to any
misrepresentations or breach of warranty on the part of the Borrower shall not
be prejudiced by any investigation by or on behalf of Eximbank into the affairs
of the Borrower, by the execution, delivery or performance of this Agreement or
any other Financing Document or by any other act or thing which may be done by
or on behalf of Eximbank in connection with this Agreement or any other
Financing Document and which might, apart from this Section, prejudice such
rights or remedies. The representations referred to in this Section 6 shall
survive the execution and delivery of this Agreement and the making of the
Eximbank Disbursement.

      SECTION 7. AFFIRMATIVE COVENANTS

      With respect to provisions of this Section 7 so specifying, from and after
the Disbursement Date and, with respect to all remaining provisions of this
Section 7, from and after the execution and delivery of this Agreement, in each
case until the Eximbank Credit is paid in full, except as otherwise waived
pursuant to the next two succeeding sentences, the Borrower covenants and agrees
as provided in this Section 7. Provisions of this Section 7 specifying effect
from and after the Disbursement Date and provisions requiring consultations with
or the furnishing of documents or other information to Eximbank or requiring the
consent or approval of Eximbank to the taking or omission of any action may only
be waived by Eximbank and in writing. All other provisions of this Section 7 may
be waived with effect during the period prior to the Disbursement Date by the
Required Secured Parties and in writing and, thereafter, by Eximbank and in
writing.

      Section 7.01. Information Covenants. The Borrower shall furnish to shall
furnish to Eximbank:



                                       32


      (a) Quarterly Financial Statements. As soon as available but, in any
event, within ninety (90) days (or one hundred twenty (120) days in the case of
the fourth quarterly accounting period) after the close of each quarterly
accounting period in each Fiscal Year:

            (i) two copies of complete unaudited statements of financial
      condition of the Borrower and the General Partner as at the end of such
      quarterly period with related statements of income and retained earnings
      and statements of changes in financial position for such quarterly period
      and for the elapsed portion of the Fiscal Year ended with the last day of
      such quarterly period, in each case setting forth comparative figures for
      the related periods in the prior Fiscal Year, which shall be prepared in
      accordance with generally accepted accounting principles as in effect from
      time to time (A) in the case of the Borrower, in the Republic and (B) in
      the case of the General Partner, in the United States and which, in either
      case, shall otherwise be in form satisfactory to Eximbank and certified by
      the chief financial officer of the Borrower or the General Partner, as the
      case may be, subject to normal year-end audit adjustments;

            (ii) a report on any event or condition which has had or which is
      reasonably likely to have a Material Adverse Effect; and

            (iii) a statement, in form reasonably satisfactory to Eximbank, of
      all financial transactions in such Quarter between the Borrower and any
      Affiliate of the Borrower, including a certification that such
      transactions were on ordinary commercial terms negotiated on an
      arms-length basis.

      (b) Annual Financial Statement. As soon as available but, in any event,
within one hundred twenty (120) days after the close of each Fiscal Year, two
copies of the following, all prepared in accordance with generally accepted
accounting principles as in effect in the Republic from time to time and
otherwise in form satisfactory to Eximbank: (i) statements of financial
condition of the Borrower as at the end of such Fiscal Year with the related
statements of income and retained earnings and statements of changes in
financial position for such Fiscal Year, setting forth comparative figures for
the preceding Fiscal Year and certified by the Auditors, together with (if
applicable) consolidated statements and all adjustments thereto (all such
statements being in agreement with the Borrower's books of account and prepared
in accordance with Republic generally accepted accounting principles
consistently applied), (ii) a report of the Auditors (x) stating that in the
course of its regular audit of the financial statements of the Borrower, which
audit was conducted in accordance with Republic generally accepted auditing
standards, the Auditors obtained no knowledge of any Incipient Default Event or
Default Event which has occurred and is continuing or, in the opinion of the



                                       33


Auditors such an Incipient Default Event or Default Event has occurred and is
continuing, a statement as to the nature thereof and (y) certifying that, based
on said financial statements, the Borrower was in compliance with the financial
covenant contained in Section 8.18 as of the end of the relevant Fiscal Year
and, during the last fiscal quarter of such Fiscal Year, did not receive any
distributions or make any payments of principal of or interest on any
Subordinated Secured Obligations or Affiliated Reimbursement Obligations in
violation of such covenant or of the Debt Reserve Annual Coverage Ratios set
forth in priorities SIXTH, SEVENTH, EIGHTH or NINTH, as the case may be, of
Section 3.02(d)(ii) of the Disbursement Agreement or, as the case may be,
detailing any non-compliance therewith and (iii) a certificate of the chief
financial officer of the Borrower setting forth comparative figures for such
statements of financial condition and the pro forma financial projections
submitted to Eximbank in connection with the Borrower's application for credit
approval.

      (c) Other Financial Statements.

            (i) Within one hundred twenty (120) days (or, with respect to Ormat,
      one hundred fifty (150) days) of the end of each fiscal year, copies of
      the audited (or unaudited, if audited are not available) annual financial
      statements (consisting of a balance sheet and the related statements of
      income, equity and cash flows) of Ormat, Ormat International, Orleyte
      Company and Ormat Philippines certified by the respective chief financial
      officer of each such person and within ninety (90) days after the end of
      each of the first three fiscal quarters of each fiscal year, copies of the
      unaudited quarterly financial statements (consisting of a balance sheet
      and the related statements of income, equity and cash flows) of Ormat,
      Ormat International, Orleyte Company and Ormat Philippines, certified by
      the respective chief financial officer of each such person that such
      financial statements are true and correct and have been prepared in
      accordance with United States (or, in the case of Ormat, Israeli)
      generally accepted accounting principles (subject to normal year-end
      adjustments); provided, however, that the Borrower shall have no
      obligation hereunder to provide to Eximbank the financial statements of
      either Ormat or Ormat International after such entity is no longer an
      Obligor.

            (ii) Within one hundred (115) days after the close of the second
      fiscal quarter of each Fiscal Year of the Borrower, a report of the
      Auditors certifying that, as of the end of such fiscal quarter, the
      Borrower was in compliance with the financial covenant contained in
      Section 8.18 and, during such fiscal quarter, did not receive any
      distributions or make any payments of principal of or interest on any
      Subordinated Secured Obligations or Affiliated Reimbursement Obligations
      in violation of such covenant or of the Debt Reserve Annual Coverage
      Ratios set forth in priorities SIXTH, SEVENTH, EIGHTH or NINTH,


                                       34


      as the case may be, of Section 3.02(d)(ii) of the Disbursement Agreement
      or, as the case may be, detailing any non-compliance therewith.

            (iii) Within ninety (90) days after the close of each of the first
      and third fiscal quarters of each Fiscal Year of the Borrower, a
      certificate of the chief financial officer of the Borrower, accompanied by
      calculations in reasonable detail supporting the conclusions set forth
      therein, to the effect as of the end of each such fiscal quarter, the
      Borrower was in compliance with the financial covenant contained in
      Section 8.18 and, during each such fiscal quarter, did not receive any
      distributions or make any payments of principal of or interest on any
      Subordinated Secured Obligations or Affiliated Reimbursement Obligations
      in violation of such covenant or of the Debt Reserve Annual Coverage
      Ratios set forth in priorities SIXTH, SEVENTH, EIGHTH or NINTH, as the
      case may be, of Section 3.02(d)(ii) of the Disbursement Agreement or, as
      the case may be, detailing any non-compliance therewith.

            (iv) Contemporaneously with the delivery thereof to the Collateral
      Trustee, copies of each certificate requesting a distribution or payment
      of principal of or interest on any Subordinated Secured Obligations or
      Affiliated Reimbursement Obligations in accordance with priorities SIXTH,
      SEVENTH, EIGHTH or NINTH, as the case may be, of Section 3.02(d)(ii) of
      the Disbursement Agreement.

      (d) Management Letters. Promptly after the Borrower's receipt thereof, a
copy of any "management letter" or other similar communication received by the
Borrower from the Auditors in relation to the Borrower's financial, accounting
and other systems, management and accounts.

      (e) Annual Operating Budget. As soon as available but, in any event,
within sixty (60) days prior to (i) the Cooperation Period Commencement Date in
respect of the initial Plant to be completed and, thereafter, (ii) the
commencement of each Fiscal Year, an annual operating budget (the "Annual
Budget") (including budgeted statements of income and sources and uses of cash
and balance sheets) prepared by the Borrower and accompanied by a statement of
the chief financial officer of the Borrower to the effect that, the best of his
or her knowledge, the budget is a reasonable estimate for the period covered
thereby. The first Annual Budget shall cover the period from the Cooperation
Period Commencement Date through the end of the Fiscal Year in which the
Cooperation Period Commencement Date occurs, and, if such period consists of
less than six (6) months, for the immediately succeeding Fiscal Year. Each
Annual Budget shall contain complete, fair and accurate estimates (by principal
components) of Sales Proceeds, Operating and Maintenance Costs and Debt Service
for each Month covered by such Annual Budget based on the Borrower's best
projections at such time. Unless otherwise


                                       35


consented to by Eximbank, the Annual Budget from year to year shall be based on
the same format as the Base Case Forecast, including any amounts allocated for
contingencies, and be maintained on the same basis and provide sufficient detail
to permit a meaningful comparison. For each Annual Budget that is expected to
cover any period occurring after the Disbursement Date, Eximbank (in
consultation with the Independent Engineer) shall review such Annual Budget, and
Eximbank's response shall not be unreasonably delayed. If Eximbank does not
approve an Annual Budget, Eximbank shall notify the Borrower of the items which
are disapproved and the reason for such disapproval. Until such Annual Budget is
so approved, the Annual Budget most recently in effect shall continue to apply,
except that any items of the then proposed Annual Budget that have been approved
shall also be given effect. From time to time, but not more frequently than once
per Quarter, the Borrower may propose amendments to an Annual Budget, and
Eximbank (in consultation with the Independent Engineer) may reject such
proposal within thirty (30) Business Days from the date the Borrower submits
such proposal if in Eximbank's reasonable judgment such amendment is not
reasonably necessary or advisable for operation of the Project and, if no such
rejection is made, such amendments shall become effective. Not later than three
(3) Business Days after the effective date of each Annual budget and of any
amendment thereto, the Borrower shall provide a copy of the same to the
Collateral Trustee.

      (f) Officer's Certificates. At the time of the delivery of the financial
statements provided for in Section 7.01(a) and (b), a certificate of a Financial
Officer of the Borrower to the effect that, to the best of his or her knowledge,
no Incipient Default Event or Default Event has occurred and is continuing or,
if any Incipient Default Event or Default Event has occurred and is continuing,
specifying the nature and extent thereof and what action the Borrower is taking
or proposes to take in response thereto, which certificate shall (without
duplication of the Borrower's obligations under Section 7.03(c)(iii)), from and
after the Disbursement Date, set forth the calculations required to establish
whether the Borrower was in compliance with the provisions of Section 7.14, 8.03
and 8.18 and Section 3.02(d)(ii) of the Disbursement Agreement.

      (g) Notice of Default, Litigation, etc. (i) Immediately upon the Borrower
obtaining knowledge thereof, notice, by facsimile, cable or telex, of any event
which constitutes an Incipient Default Event or Default Event, specifying the
nature of such Incipient Default Event or Default Event and any steps the
Borrower is taking to remedy the same; and (ii) promptly, and in any event
within twenty (20) Business Days (or such shorter period as may be specified
below) after an officer of the Borrower or the General Partner, as the case may
be, obtains knowledge thereof:

            (A) notice of any litigation or governmental proceeding pending (x)
      against the Borrower or the General Partner (i) involving a claim in
      excess of $125,000 (or the equivalent thereof in other currency) or (ii)
      which is


                                       36


      reasonably likely to have a Material Adverse Effect or (y) with respect to
      any Project Document;

            (B) notice of any proposal by any Governmental Authority to acquire
      compulsorily the Borrower or the General Partner, any of the Collateral or
      a substantial part of the Borrower's or the General Partner's business or
      assets;

            (C) notice of any substantial dispute between the Borrower or any
      Affiliate of the Borrower and any Governmental Authority relating to the
      Project;

            (D) notice of any change in the authorized officers or directors
      referred to in Section 5.01(m) above, giving certified specimen signatures
      of any new officer or director so appointed and, if requested by Eximbank,
      satisfactory evidence of the authority of such new officer or director;

            (E) (x) as promptly as practicable and in any event not later than
      two Business Days after becoming aware thereof notice of any actual or
      proposed termination, rescission, discharge (otherwise than by
      performance) under any material provision of any Project Document (other
      than by Eximbank) and (y) as promptly as practicable and in any event not
      later than ten Business Days after becoming aware thereof notice of any
      actual or proposed amendment, waiver or indulgence under any material
      provision of any Project Document (other than by Eximbank);

            (F) copies of any material notice or correspondence received or
      initiated by the Borrower or the General Partner relating to a
      Governmental Approval or other license or authorization necessary for the
      Performance by the Borrower or the General Partner of its respective
      obligations under the Project Documents;

            (G) notice of any Lien (other than a Permitted Lien) becoming
      enforceable over any of the Borrower's assets;

            (H) notice of any proposed material change in the nature or scope of
      the Project or the business or operations of the Borrower and any one or
      more events, conditions or circumstances (including without limitation
      Force Majeure as defined in Sections 14.1(a) and 14.1(b) of the BOT
      Agreement) that exist or have occurred which are reasonably likely to have
      a Material Adverse Effect;

            (I) until the Eximbank Guarantee Agreement has terminated in
      accordance with its terms, notice of the occurrence of any event or act
      which


                                       37


      could reasonably qualify as a Political Risk (as defined in the Eximbank
      Guarantee Agreement);

            (J) notice of or (in the case of items described in the immediately
      succeeding clause (x)) copies of: (x) each funding waiver request filed
      with respect to any Pension Plan and all communications received or sent
      by the Borrower or any ERISA Affiliate with respect to such request, and
      (y) the failure of the Borrower or any ERISA Affiliate to make a required
      installment or payment under Section 412 of the Code, Section 302 of ERISA
      or the terms of any Pension Plan by the due date (other than the quarterly
      contributions described in Section 302(e) of ERISA or Section 412(m) of
      the Code);

            (K) notice of the occurrence of any Termination Event which has had
      or is reasonably likely to result in a Material Adverse Effect in
      connection with any Pension Plan or any trust thereunder, specifying the
      nature thereof, what action the Borrower or the ERISA Affiliate has taken,
      is taking or proposes to take with respect thereto and, when known, any
      action taken or threatened by the United States Internal Revenue Service,
      the United States Department of Labor or the PBGC with thereto;

            (L) copies of: (x) all notices of the PBGC's intent to terminate any
      Pension Plan or to have a trustee appointed to administer any Pension
      Plan; and (y) all notices from a Multiemployer Plan sponsor concerning the
      imposition or amount of withdrawal liability pursuant to Section 4202 of
      ERISA; or

            (M) notice of the filing of an intent to terminate any Pension Plan
      under a distress termination within the meaning of Section 4041(c) of
      ERISA; or

            (N) a copy of each agreement, commitment or understanding (whether
      or not subject to the approval of Eximbank pursuant to any other provision
      of this Agreement) executed by or on behalf of the Borrower (excluding (x)
      the agreements set forth in clauses (i) through (xiii), inclusive, (xvi),
      (xvii) and (xviii) of the definition of the term "Operating Agreements" in
      Schedule X hereto but including replacements thereof and (y) agreements,
      commitments or understandings entered into in the ordinary course of
      business which are required to perform the O&M Parameters and which (1) do
      not, individually, create a financial obligation of the Borrower in excess
      of $75,000 and (2) would not, in the aggregate, result in the expenditure
      of funds in any Fiscal Year in excess of the amount budgeted for Operating
      and Maintenance Costs (including the Contingent O&M Amount) in the
      then-current Annual Budget for such Fiscal Year) in connection with the
      Project, which notice shall specifically refer to this Section
      7.01(g)(ii)(N) and, with respect to any such agreement,


                                       38


      commitment or understanding extending by its terms beyond the Disbursement
      Date, request that Eximbank confirm (prior to the Disbursement Date, after
      consultation with the Administrative Agent) whether or not such agreement,
      commitment or understanding shall constitute an Operating Agreement, in
      which case such agreement, commitment or understanding shall only
      constitute an Operating Agreement if Eximbank shall so designate it as an
      Operating Agreement in a writing delivered to the Borrower within 60 days
      of Eximbank's receipt thereof; or

            (O) notice of the occurrence of any event of default or default
      under Section 19.1 of the Construction Contract or under the Assignment
      and Assumption Agreement.

      (h) Implementation Reports. Prior to the Project Completion Date, within
twenty-one (21) days of the end of each Month, a report, in a form satisfactory
to Eximbank, on the implementation and progress of the Project, including (i)
any factors materially and adversely affecting or which are reasonably likely to
materially and adversely affect the carrying out of the Project and (ii) copies
of any reports received by the Borrower from any outside technical consultant
identifying any matter that is or may prove to be of material adverse
significance to the operation of the Plant.

      (i) Completion Date and Operation Date Notices. The Borrower shall provide
Eximbank with not more than ten (10) or less than two (2) Business Days' prior
notice of the scheduled occurrence of the Completion Late for each Plant. The
Borrower shall provide Eximbank with not more than ten (10) or less than two (2)
Business Days' prior notice of the scheduled occurrence of (i) each Operation
Date and (ii) the date on which the Borrower expects to satisfy the conditions
precedent to Eximbank Disbursement specified in Section 5.02 hereof (other than
those conditions that may only be satisfied on and as of the Disbursement Date).
The Borrower shall provide Eximbank with notice of the Completion Date for each
Plant and the Operation Date for each Plant not more than five (5) Business Days
after the occurrence of any thereof.

      (j) Other Information. From time to time, such other information or
documents (financial or otherwise) as Eximbank may reasonably request including,
without limitation, (1) advance notice of the commencement of all performance
tests under the Construction Contract and (2) if the Completion Date for any
Plant in the BOT Agreement shall have been deemed to have occurred pursuant to
Section 5.4(h) of the BOT Agreement, information as to the circumstances giving
rise to the same, the action(s) which the Borrower (and, to the extent known by
the Borrower, PNOC-EDC) is taking or proposes to take with respect to the same
and periodic reports of the status of such actions and the implementation
thereof.

                                       39


      Section 7.02. Books, Records and Inspections; Accounting and Audit
Matters.

      (a) The Borrower will keep proper books of record and account adequate to
reflect truly and fairly the financial condition and results of operations of
the Borrower (including the progress of the Project) in which full, true and
correct entries in conformity with Philippine generally accepted accounting
principles consistently applied and all Applicable Laws shall be made of all
dealings and transactions in relation to its business and activities. The
Borrower will permit officers and designated representatives of Eximbank to
visit and inspect, under guidance of officers of the Borrower, any of the
properties of the Borrower, and to examine and make copies of the books of
record and account of the Borrower and discuss the affairs, finances and
accounts of the Borrower with, and be advised as to the same by, its and their
officers, all at such reasonable times and intervals and to such reasonable
extent as Eximbank may request.

      (b) The Borrower shall (i) authorize the Auditors (whose fees and expenses
shall be for the account of Borrower) to communicate directly with Eximbank at
reasonable intervals, but if an Incipient Default Event or a Default Event has
occurred or is continuing, then at any time, regarding the Borrower's accounts
and operations and (ii) furnish to Eximbank a copy of such authorization, which
shall be in the form of Schedule 6.2(b) to the Lender Credit Agreement;
provided, however, that Eximbank will (i) provide the Borrower with copies of
any correspondence between Eximbank and the Auditors, and (ii) provide the
Borrower with reasonable notice of any meeting between Eximbank and the
Auditors, with a description of the matters to be discussed at such meeting, and
allow the Borrower to attend any such meeting.

      (c) The Borrower will at all times cause a complete set of the current and
(when available) as-built plans (and all supplements thereto) relating to each
Plant to be maintained at such Plants or the Construction Contractor's office
for inspection by the independent Engineer and Eximbank.

      Section 7.03. Maintenance of Property, Insurance. (a) The Borrower will
(i) keep all property useful and necessary (other than property that has become
obsolete) in its business in good working order and condition and (ii) keep its
present and future properties and business insured with financially sound and
reputable insurers satisfactory to Eximbank against loss or damage in such
manner and to the same extent as required in Section A of Schedule 7.03 hereto
until the expiration of such policies and immediately thereafter as required in
Section C of Schedule 7.03 hereto, including in each case pursuant to policies
naming the Collateral Trustee as sole loss payee thereunder, permitting the
Collateral Trustee to make claims thereunder, and containing cut-through
endorsements to reinsurers, provisions requiring that the Collateral Trustee and
Eximbank shall receive notices of extensions or renewals of insurance policies
and notice


                                       40


of any non-payment of premiums and that such policy may only be canceled for
non-payment of premiums, if cancelable, upon sixty (60) days prior notice to the
Collateral Trustee and Eximbank. On or prior to the dates required pursuant to
Section A or Section C, as the case may be, of Schedule 7.03, the Borrower will
submit to Eximbank certificates of insurance relating to the insurances required
by Section A and Section C of Schedule 7.03 (together with copies of such
insurance policies if then available) from the Borrower's insurers or insurance
brokers (including confirmation of premium payments then due), which
certificates shall indicate the properties insured, amounts and risks covered,
names of the expiration dates, names of the insurers and special features of the
insurance policies. The Borrower shall provide Eximbank with copies of insurance
policies relating to the insurances required by Section A and Section C of
Schedule 7.03 hereto on or prior to the date such policies are required to be
delivered to Eximbank in accordance with such Section A or Section C, as the
case may be Prior to the Disbursement Date, the Borrower shall provide Eximbank
with copies of the insurance policies relating to the insurances required by
Section C of Schedule 7.03 hereto, such policies to be in form and substance,
and issued by companies, satisfactory to Eximbank (in consultation with the
Insurance Consultant).

      (b) The Borrower will cause the Construction Contractor and the
Construction Supplier, as applicable, to (i) keep the insurances described in
Section B of Schedule 7.03 hereto with financially sound and reputable insurers
satisfactory to, prior to the Disbursement Date, the Administrative Agent and,
thereafter, Eximbank, in each case against loss or damage in such manner and to
the same extent as so described, in each case pursuant to policies of insurance
naming the Collateral Trustee as sole loss payee thereunder, permitting the
Collateral Trustee to make claims thereunder, and containing cut-through
endorsements to reinsurers and provisions requiring that the Collateral Trustee
and Eximbank shall receive notices of any non-payment of premiums and that such
policy may only be canceled (x) as provided in Section B of Schedule 7.03 hereto
or (y) if not therein provided, for non-payment of premiums, if cancelable, upon
thirty (30) days prior written notice to the Collateral Trustee Eximbank. On or
prior to the dates required pursuant to Section B of Schedule 7.03, the Borrower
will cause the Construction Contractor or the Construction Supplier, as
applicable, to submit to Eximbank certificates of insurance relating to the
insurances required by Section B of Schedule 7.03 (together with copies of such
insurance policies if then available) from the insurers or insurance brokers for
such insurances (including confirmation of premium payments then due), which
certificates shall indicate the type of insurance, amounts and risks covered,
names of the beneficiaries, expiration dates, names of the insurers and special
features of the insurance policies. The Borrower will cause the Construction
Contractor or the Construction Supplier, as applicable, to provide Eximbank with
copies of insurance policies relating to the insurances described in Section B
of Schedule 7.03 hereto on or prior to the date such policies are required to be
delivered to Eximbank in


                                       41


accordance with such Section B of Schedule 7.03 hereto, such policies to be in
form and substance, and issued by companies, satisfactory to Eximbank in
consultation with the Insurance Consultant. The Borrower will cause the
Construction Contractor to establish the BOT Construction Performance Security
in favor of PNOC-EDC within the time required by PNOC-EDC in connection with the
BOT Agreement and will deliver evidence reasonably satisfactory to Eximbank of
PNOC-EDC's acceptance of the BOT Construction Performance Security within
fifteen (15) calendar days after the same is so established.

      (c) In the event any insurance (including the limits or deductibles
thereof) hereby required to be maintained by the Borrower or for which the
Borrower is responsible, or required to be maintained by the Construction
Supplier or the Construction Contractor or for which the Construction Supplier
or the Construction Contractor is responsible, other than insurance required by
Applicable Law to be maintained, shall not be available on commercially
reasonable terms in the commercial insurance market, the Administrative Agent,
prior to the Lender Financing Termination Date, or, thereafter, Eximbank, shall
not unreasonably withhold its consent to waive such requirement to the extent
the maintenance thereof is not so available; provided, however, that (i) the
Borrower shall first request any such waiver in writing, which request shall be
accompanied by a written report prepared by the Borrower's insurance adviser
certifying that such insurance is not reasonably available and commercially
feasible in the commercial insurance market for electric generating plants of
similar type and capacity and, with respect to catastrophic perils, located in
Southeast Asia, and (ii) the Insurance Consultant shall confirm in writing the
conclusions contained in such report. The failure at any time to satisfy the
condition to any waiver of an insurance requirement set forth in the proviso to
the preceding sentence shall not impair or be construed as a relinquishment of
the Borrower's ability to obtain a waiver of an insurance requirement pursuant
to the preceding sentence at any other time upon satisfaction of such
conditions.

      (c) The provisions of this Section 7.03 shall be deemed to be supplemental
to, but not duplicative of, the provisions of any of the Security Documents that
require the maintenance of insurance. In the event that any insurance whatsoever
is purchased, taken or otherwise obtained by the Borrower with respect to the
Project otherwise than as required hereunder or if not properly endorsed to the
Collateral Trustee as the sole loss payee or beneficiary or otherwise made upon
the terms required in this Section 7.03, without limitation to any provision of
the Mortgage, Assignment and Pledge Agreement, such insurance shall be
considered assigned hereunder to the Collateral Trustee with the right of the
Collateral Trustee to make, settle, compromise and liquidate any and all claims
thereunder, without prejudice to the exercise of any other rights and remedies
that the Collateral Trustee may have under any of the Financing Documents, or
under any Applicable Law.



                                       42


      Section 7.04. Maintenance of Existence; Privileges; Etc. The Borrower
shall, and with respect to clauses (a)(i), (a)(iii) and (b) of this Section 7.04
shall cause the General Partner to, at all times (a) preserve and maintain in
full force and effect (i) its existence as a limited partnership or a
corporation, as the case may be, in each case duly authorized, validly existing
and in good standing under the laws of the Republic or the Cayman Islands, as
the case may be (ii) its qualification to do business in each other jurisdiction
in which the character of the properties owned or leased by it or in which the
transaction of its business as conducted or proposed to be conducted makes such
qualification necessary and (iii) all of its powers, rights, privileges and
franchise necessary for the construction, ownership, maintenance and operation
of the Project and the maintenance of its existence, (b) obtain in a timely
manner and maintain in full force and effect (or where appropriate, renew) all
Governmental Approvals (including, without limitation, those under Environmental
Laws) and all other licenses, registrations, waivers, consents and approvals
required at any time in connection with the construction, maintenance, ownership
or good and orderly operation of the Project and all licenses, consents and
approvals necessary for the conversion to Dollars of all Peso amounts
(including, without limitation, Peso amounts representing SFRI Fees) payable
under the BOT Agreement, the PNOC-EDC Consent Agreement, the Performance
Undertaking and the Republic Consent Agreement and for the remission to the
United States in Dollars of any amounts paid or payable to the Secured Parties
in connection with any Financing Document or the transactions contemplated
thereby or the partnership interests of the Borrower and (c) preserve and
maintain good and marketable title to its properties and assets (it being
understood that the Borrower's rights with respect to the Site are solely as set
forth in the BOT Agreement and the Accession Undertaking) subject to no Liens
other than Permitted Liens.

      Section 7.05. Compliance with Statutes. The Borrower will comply with all
Applicable Laws in respect of the conduct of its business and the ownership,
operation and use of its property (including, without limitation, Applicable
Laws relating to environmental standards and controls and Applicable Laws
relating to the maintenance of debt to equity ratios). The Borrower will cause
the General Partner to comply with all Applicable Laws in respect of the General
Partner owning its equity interest in, and acting in its capacity as general
partner of, the Borrower.

      Section 7.06. Consultations Regarding Independent Engineer's Report. The
Borrower agrees that (i) in addition to any other consultation required
hereunder, following the end of each Month, upon the request of the
Administrative Agent or Eximbank, the Borrower shall consult with such Person
regarding any materially adverse event or condition identified by the
Independent Engineer in the reports provided by the Independent Engineer for
such Month pursuant the Representative Agreement, and (ii) in the event the
Borrower fails to hold such consultations within 30 days of such request, such
event or condition shall be deemed to have a Material Adverse Meet.



                                       43


      Section 7.07. Project Implementation; Use of Proceeds.

      (a) The Borrower shall (i) carry out the Project and conduct its business
with due diligence and efficiency and in accordance with sound engineering,
financial, and business practices and in accordance with the Annual Budget as
specified in Section 7.01(e); and (ii) use the proceeds of the Loans and the
Eximbank Credit only for the purpose set forth in Section 2.01.

      (b) Without limiting the generality of the preceding clause (a), the
Borrower will cause the construction of the Project to be prosecuted and
completed with due diligence and continuity (except for interruptions due to
events of Force Majeure (as defined in any of the BOT Agreement, the
Construction Contract and the Supply Contract), which the Borrower will use its
best efforts to mitigate), in good and workmanlike manner and in accordance with
(i) sound generally accepted budding and engineering practices, (ii) all
Governmental Approvals and Applicable Laws applicable to the Site, the Plants or
the Borrower, (iii) the Construction Contract, (iv) the Supply Contract and (v)
the Construction Budget.

      (c) Without limiting the generality of clause (a) of this Section 7.07,
from and after the Cooperation Period Commencement Date, the Borrower will
operate and maintain the Project, and retain and maintain the staff sufficient
to operate and maintain the Project, in accordance with the O&M Parameters and
will otherwise comply with and fully satisfy all of the requirements of the O&M
Parameters.

      (d) Without limiting the generality of clauses (a) and (b) of this Section
7.07, in order to avoid a deemed abandonment under Section 15.4.1(d) of the BOT
Agreement, if the conditions precedent specified in clauses (a) and (b) of
Section 13.3 of the Construction Contract have been satisfied the Borrower
shall, within ten (10) Business Days prior to the date of potential abandonment
under the BOT Agreement, exercise the right granted to it under the last
sentence of Section 13.3 of the Construction Contract and certify to PNOC-EDC
that the Power Plant (as defined in the Construction Contract) has achieved BOT
Completion in accordance with Section 6.1(a) of the BOT Agreement.

      (e) The Borrower shall provide Eximbank with notice immediately upon
becoming aware that the conditions to enforcing any of the Ormat EPC Guaranty,
the Ormat International EPC Guaranty, the Post-Completion Ormat Guaranty or the
O&M Support Undertaking have been met.

      (f) The Borrower agrees that it shall not designate an arbitrator or
engineering firm under either the Construction Contract or the Supply Contract
with respect to any disputes thereunder without obtaining the prior written
consent of the Required Secured Parties, such consent not to be unreasonably
withheld.



                                       44


      (g) Without the prior written consent of Eximbank, which approval shall
not be unreasonably withheld, the Borrower shall not direct that Geothermal
Fluid (as defined in the Construction Contract) be run through any GU (as
defined in the Construction Contract) under circumstances which would give rise
to the commencement of any of the Warranty Periods (as defined in the
Construction Contract) pursuant to clause (a) of Section 17.10 of the
Construction Contract.

      Section 7.08. Auditors. In the event that SyCip Gorres Velayo & Co. should
cease to be the Auditors of the Borrower for any reason, the Borrower shall
appoint and maintain as the Auditors another firm of independent public
accountants approved by Eximbank.

      Section 7.09. Taxes, Duties, Proper Legal Form. The Borrower will pay and
discharge all taxes, duties, fees, assessments or other governmental charges
imposed on it, on its income or profits, on any of its property, or in
connection with any such charges imposed on it with respect to any payment made
under this Agreement or the execution, issue, delivery, registration,
notarization, assignment or transfer of any interest in or for the legality,
validity, or enforceability, of any Project Document prior to the date on which
penalties attach thereto, and all claims, levies or liabilities (including,
without limitation, claims for labor, services, materials and supplies) for sums
which have become due and payable and which have or, if unpaid, might become a
Lien upon the property of Borrower (or any part thereof). The Borrower shall
have the right, however, to contest in good faith the validity or amount of any
such tax, assessment, governmental charge or claim by proper proceedings timely
instituted, and may permit the taxes, assessments, governmental charges or
claims so contested to remain unpaid during the period of such contest if (i)
the Borrower diligently prosecutes such contest, (ii) during the period of such
contest the enforcement of any contested item is effectively stayed, (iii) the
Borrower sets aside on its books adequate reserves with respect to the contested
items and (iv) such contest does not, in the reasonable discretion of, prior to
the Disbursement Date, the Administrative Agent and thereafter, Eximbank,
involve a material risk of the sale, forfeiture or loss of any of the
Collateral. The Borrower will promptly pay or cause to be paid any valid, final
judgment enforcing any such tax, duty, fee, assessment, other governmental
charge or claim and cause the same to be satisfied of record.

      Section 7.10. Independent Engineer; Insurance Consultant. The Borrower (i)
agrees to the Independent Engineer carrying out the role described in the
Representative Agreement, (ii) confirms and agrees to the terms of its
Acknowledgment appended to the Representative Agreement, which terms are
incorporated herein by reference as if fully set forth herein and (iii) will
ensure that the Insurance Consultant will be provided with all information
reasonably requested by the Insurance Consultant and will exercise due care to
ensure that any information which it may supply the Insurance Consultant is


                                       45


materially accurate and not, by omission of information or otherwise, misleading
in any material respect.

      Section 7.11. Performance of Obligations. The Borrower will perform all of
its obligations under the terms of each mortgage, indenture, security agreement
and other debt instrument by which it is bound and will perform (i) all of its
obligations under the terms of the Financing Documents and the BOT Agreement and
(ii) such of its obligations under the terms of the Project Documents (other
than the Financing Documents and the BOT Agreement) the non-performance of which
is reasonably likely to have a Material Adverse Effect. The Borrower will
maintain in full force and effect each of the Project Documents to which it is a
party. The Borrower will preserve, protect, defend and enforce the rights
granted to it under or in connection with the Project Documents. The Borrower
shall take all action within its control required or in the reasonable opinion
of Eximbank advisable to ensure that, unless otherwise consented to in writing
by Eximbank, each of the Project Documents is in proper legal form under the
laws of the Republic or under the respective governing laws selected in such
Project Documents, for the enforcement thereof in such jurisdictions without any
further action on the part of Eximbank or the Lenders, as the case may be.

      Section 7.12. Additional Documents; Filings and Recordings. The Borrower
shall execute, and deliver, from time to time as reasonably requested by
Eximbank or the Collateral Trustee, at the Borrower's expense, such other
documents as shall be necessary or advisable or that Eximbank or the Collateral
Trustee may reasonably request in connection with the rights and remedies of the
Secured Parties granted or provided for by the Project Documents, as applicable,
and to consummate the transactions contemplated therein. The Borrower shall, at
its own expense, take all reasonable actions that have been or shall be
requested by Eximbank or the Collateral Trustee or that the Borrower knows are
necessary to establish, maintain, protect, perfect and continue the perfection
of the first priority security interests of the Secured Parties created by the
Security Documents and shall furnish timely notice of the necessity of any such
action, together with such instruments, in execution form, and such other
information as may be required to enable Eximbank and any other appropriate
Secured Party to effect any such action. Without limiting the generality of the
foregoing, the Borrower shall (a) execute or cause to be executed and shall file
or cause to be filed such financing statements, continuation statements, fixture
filings, mortgages or deeds of trust and mortgage supplements in all places
necessary or advisable (in the opinion of counsel for Eximbank or the Collateral
Trustee) to establish, maintained perfect such security interests and in all
other places that Eximbank or the Collateral Trustee shall reasonably request
and (b) do everything necessary in the reasonable judgement of Eximbank or the
Collateral Trustee to (i) create and perfect the Security with respect to future
assets covered by the Mortgage, Assignment and Pledge Agreement, (ii) maintain
the Security in full force and effect at all times and (iii) preserve and
protect the Collateral and protect and enforce its rights and


                                       46


title and the rights and title of the Secured Parties to the Collateral. In
connection with the registration of each mortgage supplement required pursuant
to Section 5 of Part B of the Mortgage, Assignment and Security Agreement, the
Borrower shall deliver to Eximbank a certified true copy of the legal opinion
required pursuant to Section 5.01(c) of Part B of the Mortgage, Assignment and
Security Agreement.

      Section 7.13. Bank Accounts. The Borrower shall maintain all its bank
accounts with the Collateral Trustee.

      Section 7.14. Debt Reserve Cash Collateral Account. On or before the
Disbursement Date, the Debt Reserve Cash Collateral Account shall be fully
funded in an amount equal to at least $4,200,000 (if the principal of the
Eximbank Credit shall be repayable in 38 installments) and an amount equal to
the Senior Debt Service due and payable during the next succeeding six months
(if the principal of the Eximbank Credit shall be repayable in fewer than 38
installments) in addition to all amounts required to be deposited at such time
in accordance with clause "FOURTH" of 3.02(d)(ii) of the Disbursement Agreement.

      Section 7.15. Availability and Transfer of Foreign Currency. The Borrower
will ensure that all requisite foreign exchange control approvals and other
authorizations, if any, by the Republic or any department or agency thereof will
be kept current and in full force and effect to assure (i) the ability of the
Borrower to receive, and the ability of any other party to make, any and all
payments to the Borrower contemplated by the Project Documents, (ii) the
availability of Dollars to enable the Borrower to perform all of its obligations
under the Financing Documents or any of the other Project Documents, as the case
may be, in accordance with their respective terms, and (iii) (on and after the
Disbursement Date) the ability of the Borrower to convert all sums received in
Peso amounts from PNOC-EDC under the BOT Agreement and the PNOC-EDC Consent
Agreement and from the Republic under the Performance Undertaking and the
Republic Consent Agreement, including any Peso amounts representing SFRI Fees,
from Pesos to Dollars, immediately upon receipt thereof, and to use the Dollars
as necessary to perform all of its Obligations under the Project Documents, in
accordance with their respective terms.

      Section 7.16. Privatization of NAPOCOR or PNOC-EDC. The Borrower shall
promptly upon becoming aware thereof notify Eximbank of the occurrence of any
event or events that give rise to any rights or benefits to the Borrower under
Article 20 of the BOT Agreement. The Borrower agrees to consult with Eximbank
prior to requesting or accepting any assurances, or making any determinations,
in accordance with such Article 20. Any such consultation shall include, without
limitation, a reasonably detailed explanation (which shall be provided to
Eximbank in writing if so requested) of the


                                       47


economic rationale for any determination or proposed course of action made or
proposed to be made under or pursuant to such Article 20.

      Section 7.17. Spares. On or before the Disbursement Date, the Borrower
shall purchase all spare parts identified on the Acquisition List (as defined in
the Eximbank Guarantee Agreement).

                         SECTION 8. NEGATIVE COVENANTS.

      With respect to provisions of this Section 8 so specifying, from and after
the Disbursement Date and, with respect to all remaining provisions of this
Section 8, from and after the execution and delivery of this Agreement, in each
case until the Eximbank Credit is paid in full, except as otherwise waived
pursuant to the next two succeeding sentences, the Borrower covenants and agrees
as provided in this Section 8. Provisions of this Section 8 specifying effect
from and after the Disbursement Date and provisions requiring consultations with
or the furnishing of documents or other information to Eximbank or requiring the
consent or approval of Eximbank to the taking or omission of any action may only
be waived by Eximbank and in writing. All other provisions of this Section 8 may
be waived with effect during the period prior to the Disbursement Date by the
Required Secured Parties and in writing and, thereafter, by Eximbank and in
writing.

      Section 8.01. Liens. The Borrower will not, and will not agree to, create,
incur, assume or suffer to exist any Lien upon or with respect to any property
or assets (real, personal or mixed, tangible or intangible) of the Borrower,
whether now owned or hereafter acquired, provided that the provisions of this
Section 8.01 shall not prevent the creation, incurrence, assumption or existence
of, prior to the Disbursement Date, Lender Credit Permitted Liens and,
thereafter, the following Liens (each, a "Post-Completion Permitted Lien"):

      (a) any tax or other statutory Lien, provided that such lien shall be
discharged within sixty (60) days after the Borrower or the General Partner
becomes aware or reasonably should have been aware of such Lien (unless
contested in good faith by the Borrower, in which case it shall be discharged
within thirty (30) days after final adjudication, and provided that during the
period of such contest the Borrower sets aside on its books adequate reserves
with respect to the contested items);

      (b) Liens created pursuant to the Security Documents;

      (c) purchase-money Liens on any property acquired after the Operation Date
provided, however, that (i) any property subject to such purchase-money Lien is
acquired by the Borrower in the ordinary course of its business and such
purchase-money Lien attaches to such property concurrently or within ninety (90)
days after the acquisition


                                       48


thereof; (ii) the Indebtedness secured by such purchase-money Lien shall not
exceed ninety percent (90%) of the lesser of the cost or the fair market value
as of the time of the acquisition of the property covered thereby by the
Borrower; (iii) each such purchase-money Lien shall attach only to the property
so acquired and fixed improvements thereon; (iv) the Indebtedness secured by all
such purchase-money Liens shall not at any time exceed $500,000 (or an
equivalent amount in other currency); and (v) the Indebtedness secured by such
purchase-money Lien is not otherwise prohibited by the provisions of Section
8.05;

      (d) Liens on property and equipment constituting leases permitted by
Section 8.04; and

      (e) mechanics', materialmen's, carrier's and similar Liens securing
obligations incurred in the ordinary course of business which (i) are not past
due or which are the subject of a Good Faith Contest by the Borrower (unless
during the pendency of such contest or as a result thereof the Liens of the
Security Documents could reasonably be expected to be materially endangered or
any material portion of the Site, any Plant, the Power Plant or the Project
could reasonably be expected to become subject to loss or forfeiture) and (ii)
which do not in the aggregate materially detract from the value of the Site, any
Plant, the Power Plant or the Project or other assets of the Borrower or
materially impair the use thereof; provided that, upon the commencement of any
proceeding to foreclose or enforce any such Post-Completion Permitted Lien,
Eximbank or the Collateral Trustee may take such action as it reasonably deems
necessary to protect its interest in the Site, any Plant, the Power Plant or the
Project including, without limitation, payment of amounts reasonably necessary
to release any such Lien, and in such event the Borrower shall reimburse
Eximbank or the Collateral Trustee, as the case may be, upon demand for the cost
thereof together with interest thereon at a rate per annum equal to (in the case
of Eximbank) the higher of (x) the New Borrowing Rate (as defined the Section
3.02(b)) that would be applicable to ____ such amounts if such amounts paid by
Eximbank were deemed to be due from the Borrower on the date paid by Eximbank
and not paid by the Borrower when due and (y) the rate specified in Section
3.02(a) plus 1.0% or (in the case of the Collateral Trustee) the Base Rate plus
3.75%.

      Section 8.02. Consolidation, Merger, Sale of Assets, Etc. The Borrower
will not, and will not permit the General Partner to, wind up, liquidate or
dissolve its affairs or enter into any transaction of merger or consolidation.
The Borrower will not (a) convey, sell, lease or otherwise dispose of (or agree
to do any of the foregoing at any future time) all or any part of its property
or assets (other than electricity and any chemical by-products produced by the
Power Plant) except in the ordinary course of business, or sales of equipment
which is uneconomic or obsolete or sales of assets that are no longer used by or
useful to the Borrower and which are promptly replaced (if applicable) by
adequate substitutes of substantially equivalent utility to the replaced assets;
or (b) purchase or


                                       49


otherwise acquire (in one or a series of related transactions) any part of the
property or assets of any Person (other than purchases or other acquisitions of
inventory or materials or capital expenditures, each in the ordinary course of
business).

      Section 8.03. Dividends; Restricted Payments. The Borrower will not
declare or pay any partnership distributions, or return any capital, to the
Partners or authorize or make any other distribution, payment or delivery of
property or cash to the Partners as such, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, for consideration, any general or
limited partnership interests now or hereafter outstanding (or any options or
warrants issued by the Borrower with respect to any partnership interests)
(collectively, "Restricted Payments") unless:

            (i) such Restricted Payment is permitted by Applicable Law;

            (ii) no Default or Event of Default is then in existence (or would
      be in existence after giving effect to such Restricted Payment);

            (iii) such Restricted Payment is made in accordance with the
      provisions of Section 3.02(d)(ii) of the Disbursement Agreement; and

            (iv) such Restricted Payment is made only after the Disbursement
      Date.

      Section 8.04. Leases. The Borrower will not enter into any agreement or
arrangement to acquire by lease the use of any property or equipment of any
kind, except leases as contemplated by the O&M Parameters, the Construction
Budget or the Annual Budget (in each case as then in effect), or except leases
of operating equipment and premises under which the aggregate rental payments
(including, without limitation, any property taxes paid as additional rent or
lease payment) do not exceed the equivalent of $400,000 in any Fiscal Year.

      Section 8.05. Indebtedness. (i) The Borrower will not contract, create,
incur, assume or suffer to exist any Indebtedness, except for, prior to the
Disbursement Date, Lender Credit Permitted Indebtedness and, thereafter, the
following types of Indebtedness ("Post-Completion Permitted Indebtedness"):

      (a) Indebtedness of the Borrower incurred under this Agreement;

      (b) Indebtedness incurred after the Operation Date which is not in a
principal amount in excess, in the aggregate of $500,000, at any time and is
accrued expenses or current trade accounts payable incurred in the ordinary
course of business or obligations under trade letters of credit incurred by the
Borrower in the ordinary course of business,


                                       50


which are to be repaid in full not more than ninety (90) days after the date on
which such Indebtedness is originally incurred to finance the purchase of goods
by the Borrower;

      (c) Unsecured Senior Working Capital Indebtedness and Subordinated Secured
Working Capital Indebtedness incurred after the Operation Date not exceeding in
the aggregate at any one time outstanding $1,500,000, provided that (i)
Unsecured Senior Working Capital Indebtedness shall not exceed $500,000 at any
one time outstanding; (ii) any and all Subordinated Secured Working Capital
Indebtedness shall be subordinated to the payment of the Eximbank Credit in
accordance with the provisions of Schedule 8.05(c); (iii) any and all
Subordinated Working Capital Lenders shall, prior to the date on which any
Subordinated Secured Working Capital Indebtedness is incurred, become party to
the Collateral Trust Agreement and deliver to the Collateral Trustee and
Eximbank an opinion of counsel to such Subordinated Working Capital Lender
reasonably satisfactory to Eximbank to the effect that the subordination terms
set forth in Schedule 8.05(c) hereto constitute the binding obligations of such
Subordinated Working Capital Lender enforceable in accordance with their
respective terms (subject to customary qualifications); and (iv) any
Subordinated Working Capital Lender consisting of Ormat or an Affiliate of Ormat
shall (if it is not a party thereto) accede to the Mortgage, Assignment and
Pledge Agreement and pledge and deliver to the Collateral Trustee the executed
original of the Subordinated Note evidencing its Subordinated Working Capital
Loans;

      (d) Third Party Subordinated indebtedness in an outstanding principal
amount not to exceed $2,500,000 at any time; provided, however, that (i) any and
all Third Party Subordinated Indebtedness shall be subordinated to the payment
of the Eximbank Credit in accordance with the provisions of Schedule 8.05(c) and
(ii) any and all Third Party Subordinated Lenders shall, prior to the date on
which such Indebtedness is incurred, become party to the Collateral Trust
Agreement and deliver to the Collateral Trustee and Eximbank an opinion of
counsel to such Third Party Subordinated Lender reasonably satisfactory to
Eximbank to the effect that the subordination terms set forth in Schedule
8.05(c) hereto constitute the binding obligations of such Third Party
Subordinated Lender enforceable in accordance with their respective terms
(subject to customary qualifications);

      (e) Indebtedness secured by purchase money Liens incurred after the
Operation Date and otherwise permitted under Section 8.01(c);

      (f) Indebtedness constituting lease obligations permitted under Section
8.04;

      (g) Optional Subordinated Loans, Standby Subordinated Loans and Post-
Completion Standby Subordinated Loans in an aggregate outstanding principal
amount not to exceed at any time the sum of $5,000,000 plus the outstanding
principal amount of


                                       51


any Optional Subordinated Loans made by Ormat pursuant to the terms of the
Development Agreement, and which bear interest at a rate not in excess of 10%
per annum; provided, that (i) any and all Optional Subordinated Loans, Standby
Subordinated Loans and Post-Completion Standby Subordinated Loans shall be
subordinated to the payment of the Eximbank Credit in accordance with the
provisions of Schedule 8.05(c) and the Collateral Trust Agreement; (ii) all
requirements of the Collateral Trust Agreement shall have been satisfied prior
to (or contemporaneous with) the incurrence thereof; and (iii) the Person making
such Optional Subordinated Loans, Standby Subordinated Loans and Post-Completion
Standby Subordinated Loans shall (if it has not previously done so) pledge
(pursuant to an instrument substantially similar in form and scope to Part D of
the Mortgage, Assignment and Pledge Agreement) and deliver to the Collateral
Trustee the executed original of the Subordinated Note or Subordinated Notes
evidencing its Optional Subordinated Loans, Standby Subordinated Loans or
Post-Completion Standby Subordinated Loans, as the case may be;

      (h) Affiliated Reimbursement Obligations; and

            (i) Contingent Obligations permitted under Section 8.06.

            (ii) The Borrower agrees that it will not obligate itself to make
      regularly scheduled payments during the period when the Eximbank Credit is
      outstanding of or on any Permitted Indebtedness that is Indebtedness for
      Borrowed Money other than quarterly and other than on a Permitted Payment
      Date or a date occurring no earlier than eight (8) days after and no later
      than fifteen (15) days after a Permitted Payment Date.

      Section 8.06. Guarantees. Without limitation to the restrictions of
Section 8.05 hereof, from and after the Disbursement Date, the Borrower will not
enter into or have outstanding any Contingent Obligations, including without
limitation any agreement or arrangement to guarantee or, in any way or under any
condition, become obligated for all or any part of any Indebtedness or other
obligation of another Person, except that, notwithstanding the restrictions of
this Section 8.06 or Section 8.05 hereof, the Borrower may enter into (a) the
Accession Undertaking, (b) Contingent Obligations set forth in the then-current
Construction Budget or Annual Budget and identified as Contingent Obligations in
any such budget so as to permit a determination of the Borrower's compliance
with this Section 8.06, (c) an obligation, not secured by any Lien, to (i)
reimburse the BOT Operation Performance Security Issuer for amounts paid to
PNOC-EDC under the BOT Operation Performance Security, provided that such
obligation is subordinated to the prior payment in full of the Eximbank Secured
Obligations on the terms set forth in Schedule 8.05(c), or (ii) reimburse Ormat
International or one or both of the Affiliated Funding Entities for Affiliated
Reimbursement Obligations, provided that such obligation is subordinated to the
prior payment in full of the Eximbank Secured


                                       52


Obligations on the terms set forth in Schedule 8.05(c) and payment is made
solely out of funds available to the Borrower for the payment of Affiliated
Reimbursement Obligations as set forth in Section 3.02(d)(ii) of the
Disbursement Agreement, and (d) other Contingent Obligations to the extent that
the amount of all such other Contingent Obligations does not exceed, in the
aggregate, $50,000 (or the equivalent in other currency).

      Section 8.07. Subsidiaries; Advances, Investments and Loans. The Borrower
will not form or have any Subsidiaries, lend money or credit or make deposits
(other than deposits in relation to the payment for goods and equipment in the
ordinary course of business) with or advances (except as specifically required
by the Construction Contract or the Supply Contract) to any Person, or purchase
or acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, any other Person, except that the Borrower may
use idle cash to acquire and hold Cash Equivalents solely to give employment to
its idle resources in accordance with the Disbursement Agreement.

      Section. 8.08. Transactions. From and after the Disbursement Date, the
Borrower will not (a) enter into or have in effect any transaction or series of
related transactions with any Person other than in the ordinary course of
business and on an arm's-length basis or (b) establish or have in effect any
sole and exclusive purchasing or sales agency, or enter into any transaction
whereby the Borrower might receive less than the full ex-works commercial price
(subject to normal trade discounts) for electricity or pay more than ex-works
commercial price for products of others, provided, however, that nothing in this
Section 8.08 shall be deemed to prohibit the execution, delivery, declaring
effective and performance by the Borrower of the BOT Agreement, the Construction
Contract, the Supply Contract, the Keystone Agreement, the O&M Support
Undertaking, the Assignment and Assumption Agreement, contracts contemplated by
the O&M Parameters (including those relating to employee training and secondment
of employees), the Funding Agreement or the Lender Credit Agreement.

      Section 8.09. Other Transactions. From and after the Disbursement Date,
the Borrower will not enter into or have in effect any partnership,
profit-sharing, or royalty agreement or other similar arrangement whereby the
Borrower's income or profits are, or might be, shared with any other Person, or
enter into or have in effect any management contract or similar arrangement
whereby its business or operations are managed by any other Person, provided,
however, that nothing in this Section 8.09 shall be deemed to prohibit the
execution, delivery, declaring effective and performance by the Borrower of the
contracts contemplated by the O&M Parameters and the Funding Agreement.

      Section 8.10. Modifications to Partnership Agreement of Borrow; Additional
Agreements; Assignments and Modifications of Agreements; Etc.



                                       53


      (a) The Borrower will not (i) amend or modify its Partnership Agreement or
other Organization Documents (ii) change its Fiscal Year or (iii) materially
change the nature of its present business.

      (b) The Borrower will not become a party to any agreement, contract or
commitment (other than (i) (w) the agreements identified in clauses (i) through
(xiv), inclusive, (xvi), (xvii) and (xviii) of the definition of the term
Operating Agreements set forth in Schedule X hereto, but not replacements
thereof, (x) the Financing Documents, (y) agreements, contacts or commitments
contemplated by the O&M Parameters (including those relating to employee
training, secondment of employees and vehicle rentals), the then-current
Construction Budget, the then-current Annual Budget or the Funding Agreement and
(z) agreements, contracts or commitments in respect of Post-Completion Permitted
Indebtedness) which, individually, creates after the Disbursement Date an annual
financial obligation of the Borrower in excess of $75,000 (or the equivalent in
other currency) or (ii) which would cause the aggregate annual financial
obligations of the Borrower after the Disbursement Date under all agreements,
contracts and commitments (other than those specified in clauses (w) through (z)
immediately above) to which the Borrower is a party to exceed $150,000 (or the
equivalent in other currency).

      (c) Except as contemplated by the Assignment and Assumption Agreement, the
Borrower shall not, directly or indirectly, terminate, cancel or suspend, or
permit or consent to any termination, cancellation or suspension of, or enter
into or consent to or permit the assignment of the rights or obligations of any
party to, any of the Project Documents; provided, however, that prior to the
Disbursement Date and without the prior written consent of the Required Secured
Parties or Eximbank the Borrower may do, permit to be done or consent to any of
the foregoing if (i) the Project Document which is the subject of the proposed
termination, cancellation, suspension or assignment is an Insurance Contract
(other than an Insurance Contract pertaining to the operation of the Power
Plant) pertaining to the construction of the Power Plant and the Administrative
Agent, after consultation with the Insurance Consultant, shall have consented
thereto or (ii) the Project Document which is the subject of the proposed
termination, cancellation, suspension or assignment is a non-material
Governmental Approval or an agreement, commitment or understanding described in
clause (xv) of the definition of the term "Operating Agreements" set forth in
Schedule X hereto and, in each case, the Administrative Agent shall have
reasonably determined that such termination, cancellation, suspension or
assignment is not reasonably likely to have a Material Adverse Effect and so
notified Eximbank. The Borrower shall not, directly or indirectly amend, modify,
supplement or waive, or permit or consent to the amendment, modification,
supplement or waiver of, or request a waiver of, any of the provisions of, or
give any consent under, any of the Project Documents (except for change orders
under the Construction Contract or the Supply Contract or Change in the Work and



                                       54


amendments, modifications, supplements or waivers that, in any such case, have
no, or could not reasonably be expected to have any, adverse effect on the
rights, benefits, obligations or duties of the Borrower existing on or arising
after the Disbursement Date, or the current or prospective operation of any of
the Plants or the value of any of the Collateral) without first obtaining the
written consent of Eximbank to such proposed or requested amendment, supplement,
waiver, or consent (provided, however, that if in any Project Document the
consent of the Borrower to an assignment by the other party thereto cannot be
unreasonably withheld, the consent of Eximbank to such an assignment shall not
be unreasonably withheld). Notwithstanding the foregoing, the Borrower shall
not, without the prior written consent of Eximbank (i) directly or indirectly,
amend, modify, supplement or waive, or permit or consent to the amendment,
modification, supplement or waiver of, (x) any provision of Article 9 of the BOT
Agreement or (y) any other provision of the BOT Agreement governing the terms
and conditions of, or the events or circumstances giving rise to the Borrower's
or PNOC-EDC's right to require, a buyout of the Power Plant (as defined in the
BOT Agreement); (ii) enter into or permit or grant any amendment or modification
of the BOT Agreement or any supplement to or waiver thereunder which is
reasonably likely to have an adverse financial impact on the Borrower
(including, without limitation, on the amounts of or timing of payments to the
Borrower under the BOT Agreement); (iii) the definitions of Guaranteed Net Plant
Steam Rate, Net Plant Steam Rate, Performance Tests, Net Deliverable Capacity
Guarantee and Reliability Guarantee, set forth in the Construction Contract; or
(iv) Exhibit E to the Construction Contract.

      (d) Other than the assignment as security of the Project Documents to the
Collateral Trustee as security for the benefit of the Secured Parties, the
Borrower will not assign (except with respect to Permitted Liens) any of its
rights or obligations under any Project Document without the prior written
consent of Eximbank.

      (e) The Borrower will not take any action under Article 9 of the BOT
Agreement to require a Buyout without the prior written consent of Eximbank.

      (f) From and after the Disbursement Date, without the prior written
consent of Eximbank, the Borrower will not refund to PNOC-EDC (but may credit to
PNOC-EDC) any amount described in the penultimate paragraph of Section 5.4 of
the BOT Agreement.

      (g) From and after the Disbursement Date, the Borrower shall not claim for
itself Force Majeure as provided in Article 14 of the BOT Agreement, Section 22
of the Construction Contract or Section 22 of the Supply Contract without the
prior written consent of Eximbank (in consultation with the Independent
Engineer).



                                       55


      (i) The Borrower shall not agree to any proposed revised testing protocols
in accordance with the final paragraph of Section 13.5 of the Construction
Contract without the prior written consent of Eximbank.

      Section 8.11. No Other Business. Without the prior written consent of
Eximbank and except as contemplated by Section 8.07 hereof, the Borrower will
not carry on any business other than in connection with the completion and
operation of the Project and will take no action whether by acquisition or
otherwise which would constitute or result in any material alteration to the
nature of that business or the nature or scope of the Project.

      Section 8.12. Abandonment. From and after the Disbursement Date, the
Borrower will not abandon or agree to abandon the Project or place it or agree
to place it on a "care and maintenance" basis for more than fourteen (14) days
in any calendar year, provided, however, that (i) nothing in this Section shall
prevent the Borrower from shut-downs necessary for repairs and maintenance at
any of the Plants or from putting any of the Plants on a "care and maintenance
basis" during any Force Majeure (as defined in the BOT Agreement) not within the
control of the Borrower which Force Majeure prevents the Borrower from
developing, constructing or operating such Plant; and (ii) nothing in this
Section 8.12 shall be deemed to waive or limit in any way the right of Eximbank
to declare an Event of Default as provided in Section 9 hereof, including
without limitation Sections 9.06 and 9.07 hereof.

      Section 8.13. Improper Use. The Borrower will not use, maintain, operate
or occupy, or allow the use, maintenance, operation or occupancy of, any portion
of the Site or any Plant for any purpose:

      (a) which may be dangerous, unless safeguarded as required by Applicable
Law (provided, however, that this clause (a) shall not be deemed to prohibit the
Borrower from carrying out the Project in accordance with the terms of the BOT
Agreement and the Construction Contract in a reasonable and prudent manner);

      (b) which violates any Applicable Law in any material respect;

      (c) which may constitute a public or private nuisance resulting in a
Material Adverse Effect;

      (d) which may make void, voidable, or cancelable, or increase the premium
of, any insurance then in force with respect to the Site or Project or any part
thereof unless, in the case of an increase in premium, the Borrower gives proof
of payment of such increase; or

                                       56


      (e) otherwise than for the intended purpose thereof in the construction,
operation and maintenance of the Plants.

      Section 8.14. Budgets. From and after the Disbursement Date the Borrower
will not make expenditures in any Fiscal Year in excess of the projected annual
Operating and Maintenance Costs (including Contingent O&M Amount) set forth in
the Annual Budget for such Fiscal Year except for:

      (a) emergency operating costs amounts funded with funds available to the
Borrower pursuant to payment of priorities SIXTH, SEVENTH, EIGHTH or NINTH of
Section 3.02(d)(ii) of the Disbursement Agreement and, to the extent that such
funds are not sufficient for such purpose: (i) proceeds of Unsecured Senior
Working Capital Indebtedness or Subordinated Secured Working Capital
Indebtedness permitted under Section 8.05; (ii) proceeds of Optional
Subordinated Loans or Third Party Subordinated Loans permitted under Section
8.05; (iii) proceeds of additional capital contributions to the Borrower; or
(iv) withdrawals from the Debt Reserve Cash Collateral Account permitted under
Section 3.03(b) of the Disbursement Agreement;

      (b) provided no Event of Default has occurred and is continuing,
expenditures not to exceed in any Fiscal Year in the aggregate $400,000 (or the
equivalent in other currency) required as a result of casualties for which the
Borrower is, in its good faith judgment, insured; provided that (A) the Borrower
promptly files a claim or claims for reimbursement under such insurance for any
such casualty, (B) the Borrower uses its best efforts to expedite payment of
such claims, and (C) the proceeds from any such insurance claims, shall be paid
into the Contingency Account; and

      (c) provided no Event of Default has occurred and is continuing,
non-budgeted payments of amounts for which the Borrower is liable to PNOC-EDC
under Article 4.11 of the BOT Agreement, not to exceed, without the consent of
the Required Secured Parties, $5,700.000.

      Section 8.15. Press Releases; Advertising. If the Borrower shall issue, or
if the Borrower shall obtain knowledge that any other Person has issued, any
press release or other announcement or advertisement that refers to the
provision of financing or other support by Eximbank for the Project, the
Borrower shall promptly notify Eximbank thereof and promptly deliver to Eximbank
a copy of such press release or other announcement or advertisement.

      Section 8.16. Employees and Employee Plan. The Borrower shall not adopt,
establish, maintain, sponsor, administer, contribute to, participate in, or
incur any liability under or obligation to contribute to, any Plan or incur any
liability to provide post-


                                       57


retirement welfare benefits, except such liability to provide post-retirement
welfare benefits as required by Applicable Law.

      Section 8.17. Name Changes; Etc. The Borrower shall not change its name
without the prior written consent of Eximbank. The Borrower shall not adopt or
change any trade name or fictitious business name without the prior written
consent of Eximbank. The Borrower shall execute and deliver to Eximbank and the
Collateral Trustee any additional documents or certificates necessary or
advisable to reflect any permitted adoption of or change in its name, trade name
or fictitious business name.

      Section 8.18. Equity Ratio. On and after the Disbursement Date, the
Borrower shall not permit the Equity Ratio at any time to be less than 25:75
(which, for the avoidance of doubt, shall be calculated in accordance with
generally accepted accounting principles as in effect in the United States from
time to time).

      Section 8.19. Payments on Subordinated Debt. Without the prior written
consent of Eximbank, the Borrower will not make any payment or delivery of
property or cash to any Person on account of any Subordinated Secured Obligation
or other subordinated debt or redeem, retire, purchase or otherwise acquire,
directly or indirectly, for consideration, any Subordinated Secured Obligations
or other subordinated debt now or hereafter outstanding, or set aside any funds
for any of the foregoing purposes collectively, "Subordinated Debt Payments")
unless:

      (i) such Subordinated Debt Payment is permitted by Applicable Law;

      (ii) no Default or Event of Default is then in existence (or would be in
existence after giving effect to such Subordinated Debt Payment);

      (iii) such Subordinated Debt Payment is made only after the Disbursement
Date; and

      (iv) such Subordinated Debt Payment is made in accordance with the
provisions of Section 3.02(d)(ii) of the Disbursement Agreement.

      Section 8.20. Limitation on Sale or Re-Export of the Items. The Borrower
shall not, without the prior written consent of Eximbank, sell the Items or use
or permit the use of the Items in any country other than the Borrower's Country.
In no event shall the Borrower sell, use or permit the use of any Item in any
Excluded Country.



                                       58


                          SECTION 9. EVENTS OF DEFAULT

      Notwithstanding anything herein or in any of the Financing Documents or
elsewhere to the contrary, upon the occurrence of any of the following events
(each of the following events, an "Event of Default"):

      Section 9.01. Payment. The Borrower shall (a) default in the payment when
due of any principal of or interest on the Eximbank Note or any other amount
owing under this Agreement or the Eximbank Note, (b) default in the payment when
due (after giving effect to any grace periods provided in the relevant Financing
Document) of any principal of or interest on, or any other amount owing under,
any other Financing Document save for any default arising by reason of a failure
of the Collateral Trustee to make any payment where funds are available and
payable pursuant to the Disbursement Agreement to meet such payment; or

      Section 9.02. Representations, Etc. Any representation or warranty
confirmed or made in any Project Document by the Borrower or any Obligor which
is an Affiliate of the Borrower, or in any writing provided by any of the them
in connection with the execution and delivery of, or in connection with any
disbursement under any of the Lender Credit Agreement or this Agreement or for a
payment of monies from any Account by the Collateral Trustee, shall be found to
have been incorrect in any material respect when made or deemed to be made and,
if remediable, shall continue to be incorrect for a period of thirty (30) days
after note thereof shall have been given to the Borrower by Eximbank; or

      Section 9.03. Covenants. (a) The Borrower shall fail to perform or observe
any covenant, term or agreement contained in Sections 2.01 (Amount of the
Eximbank Credit; Use of Proceeds), 7.03 (Maintenance of Property; Insurance),
7.14 (Debt Reserve Cash Collateral Account), 8.01 (Liens), 8.02 (Consolidation,
Merger, Sale of Assets, Etc.), 8.03 (Dividends; Restricted Payments), 8.04
(Leases), 8.05 (Indebtedness), 8.06 (Guarantees), 8.07 (Subsidiaries; Advances,
Investments and Loans), 8.10(a), (f) and (g) (Modifications to Partnership
Agreement of Borrower; Additional Agreements; Assignments and Modifications of
Agreements; Etc.), 8.11 (No Other Business); 8.18 (Equity Ratio); Section 8.19
(Payments on Subordinated Debt); or

      (b) The Borrower or any Obligor which is an Affiliate of the Borrower
shall fail to perform or observe any other covenant, term or agreement contained
in this Agreement or any other Project Document and such failure shall not be
remediable or, if remediable, shall continue unremedied for a period of thirty
(30) days after the earlier of (i) the date on which such failure shall have
first become known to the Borrower and (ii) the date on which written notice
thereof shall have been received by the Borrower from Eximbank; provided that if
(A) such failure cannot be cured within such thirty (30)


                                       59


day period, (B) such failure in the reasonable judgment of the Independent
Engineer or Eximbank is susceptible of cure, (C) the Borrower is proceeding with
diligence and in good faith to cure such failure, (D) the existence of such
failure in the reasonable judgment of Eximbank has not had and is not reasonably
likely to have a Material Adverse Effect and (E) Eximbank shall have received an
officer's certificate signed by a Financial Officer of the Borrower to the
effect of clauses (A), (B) and (C) above, certifying that the existence of such
failure has not had and is not reasonably likely to have a Material Adverse
Effect and stating what action the Borrower is taking to cure such failure,
then, such thirty (30) day cure period shall be extended by up to an additional
sixty (60) days as shall be necessary for the Borrower diligently to cure such
failure; or

      Section 9.04. Default Under Other Agreements. (a) The Borrower shall (i)
default in any payment of any Indebtedness For Borrowed Money (other than as
provided in Section 9.01) beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness For Borrowed Money was
created or (ii) default (other than in the manner referred to in clause (i)) in
the observance or performance of any agreement or condition relating to any
Indebtedness For Borrowed Money (other than as provided in Section 9.01) or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
such default or other event or condition is to (x) cause any such Indebtedness
For Borrowed Money to become due prior to its stated maturity or (y) if such
Indebtedness For Borrowed Money ranks pari passu in right of payment with the
Eximbank Secured Obligations, permit the Person to whom such Indebtedness For
Borrowed Money is owed to declare the same due and payable prior to the stated
maturity thereof; or

      (b) any Indebtedness For Borrowed Money of the Borrower shall be declared
to be due and payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity thereof; or

      (c) any Obligor (other than PNOC-EDC, Ormat and the BOT Operation
Performance Security Issuer) shall (i) default in any payment of any
Indebtedness For Borrowed Money in an aggregate principal amount exceeding the
equivalent of $2,000,000 beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness For Borrowed Money was
created or (ii) default in the observance or performance of any agreement or
condition relating to any Indebtedness For Borrowed Money in an aggregate
principal amount exceeding the equivalent of $2,000,000 or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause any such Indebtedness For Borrowed Money to become due
prior to its stated maturity; or



                                       60


      (d) Ormat shall (i) default in any payment of any Indebtedness For
Borrowed Money in an aggregate principal amount exceeding $4,000,000 beyond the
period of grace, if any, provided in the instrument or agreement under which
such Indebtedness For Borrowed Money was created or (ii) default in the
observance or performance of any agreement or condition relating to any
Indebtedness For Borrowed Money in an aggregate principal amount exceeding
$4,000,000 or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause any such Indebtedness
For Borrowed Money to become due prior to its stated maturity; provided,
however, that if one or more of the events described in this clause (d) shall
occur after the date on which Ormat shall cease to be an Obligor, the occurrence
of such event or events shall not be deemed an Event of Default unless, in the
reasonable judgment of the Required Secured Parties, the occurrence of such
event or events has had or is reasonably likely to have a material adverse
effect on the operations, business, condition (financial or otherwise) or
property of the Borrower; or

      (e) any indebtedness For Borrowed Money in an aggregate principal amount
exceeding the equivalent of $2,000,000 of any Obligor (other than PNOC-EDC,
Ormat and the BOT Operation Performance Security Issuer), or any Indebtedness
for Borrowed Money in an aggregate principal amount exceeding $4,000,000 of
Ormat, shall be declared to be due and payable, or required to be prepaid other
than by a regularly scheduled required prepayment, prior to the stated maturity
thereof, and, if such Obligor is the Construction Supplier, the existence of
such Indebtedness For Borrowed Money that has been declared due and payable
prior to the stated maturity thereof, in the reasonable judgment of Eximbank,
has had or is reasonably likely to have a Material Adverse Effect; provided,
however, that if one or more of the events described in this clause (e) with
respect to the Indebtedness For Borrowed Money of Ormat or Ormat International,
as the case may be, shall occur after the date on which Ormat or Ormat
International, as the case may be, shall cease to be an Obligor, the occurrence
of such event or events shall not be deemed an Event of Default unless, in the
reasonable judgment of Eximbank, the occurrence of such Event or events has had
or is reasonably likely to have a Material Adverse Effect; or

      (f) a default shall have occurred in the performance of any material
obligation by (i) any Obligor (other than the BOT Operation Performance Security
Issuer) or the Republic under any of the Project Documents to which such Person
is a party and such default shall continue unremedied beyond the period of
grace, if any, extended to such Person with respect to such default, as
specified in the Project Document under which such obligation was created or
(ii) any other party (other than the Persons referred to in clause (i) of this
Section 9.04(f)) under any of the Project Documents and the existence of such
default in the reasonable judgment of Eximbank has had or is reasonably likely
to have a Material Adverse Effect (and has not been cured within 60 days); or



                                       61


      Section 9.05. Bankruptcy, Etc. (a) There shall have been entered against
the Borrower or any Obligor (other than the BOT Operation Performance Security
Issuer or PNOC-EDC) a decree or order by a court adjudging the Borrower or such
Obligor bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Borrower or such Obligor under any Applicable Law; or appointing a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Borrower or such Obligor or of any substantial part of its property or other
assets, or ordering the winding up or liquidation of its affairs, or the
institution by the Borrower or such Obligor of proceedings to be adjudicated
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it; or the filing by it of a petition or answer
or consent seeking reorganization or debt relief under any Applicable Law; or
the consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Borrower or any such Obligor or of any substantial part of its
property; or the making by it of an assignment for the benefit of creditors; or
the admission by it in writing of its inability to pay its debts generally as
they become due; or any other event shall have occurred which under any
Applicable Law would have an effect analogous to any of those events listed
above in this subsection with respect to the Borrower or any such Obligor; or
any corporate action is taken by the Borrower or any such Obligor for the
purpose of effecting any of the foregoing; provided that any reorganization or
reconstruction of a company while solvent with the prior consent of Eximbank
shall not be held to constitute any event mentioned in this paragraph; and
provided, further, that in connection with any Obligor, no Event of Default
shall be declared under this Section 9.05 if (x) such Person has fully complied
and continues to fully comply with all of its obligations under all Project
Documents to which such Person is a party and (y) in the reasonable judgment of
Eximbank, such Event of Default has not had and is not reasonably likely to have
a Material Adverse Effect; or

      (b) The General Partner shall convene a meeting of creditors, or shall
convene a meeting of its board of directors (or such other applicable
controlling body or persons) to determine whether to commence voluntary
bankruptcy proceedings; or

      Section 9.06. Project Events. (a) The Borrower shall cease to have the
right to possess and use all or any portion of the Site; or

      (b) any event shall have occurred which entitles the Borrower or PNOC-EDC
to give a notice under Section 9.1 of the BOT Agreement; or

      (c) the Borrower shall (except as permitted by Section 8.02 hereof) sell
or otherwise dispose of any of its interest in the Project; or



                                       62


      (d) an event or circumstance described in subclause (a), (b), (c) or (d)
of Section 15.4.1 of the BOT Agreement shall have occurred, it being understood
that for purposes of this Section 9.06(d), the words "one-hundred twenty (120)"
or "120" contained in subclauses (b) and (c) of Section 15.4.1 of the BOT
Agreement shall be replaced with the words "sixty (60)" in each place where such
words appear and the words "one hundred fifty (150)" or "150" contained in
subclause (d) of Section 15.4.1 of the BOT Agreement shall be replaced by the
words "ninety (90)" in each place where such words appear; or

      (e) an event or circumstance described in subclause (a), (b) or (c) of
Section 15.4.2 of the BOT Agreement shall have occurred, it being understood
that for purposes of this Section 9.06(e), the words "one-hundred twenty (120)"
contained in subclauses (b) and (c) of Section 15.4.2 of the BOT Agreement shall
be replaced with the words "sixty 60" in each place where such words appear; or

      (f) the Borrower shall have received notice from PNOC-EDC under Section
15.2(c) of the BOT Agreement and shall have failed to cure the underlying BOT
Agreement default giving rise to such notice within 15 days after Borrower's
receipt thereof; provided, however, that if following the receipt of such notice
and prior to Eximbank taking action pursuant to an Event of Default under this
Section 9.06(f), (i) the Borrower and PNOC-EDC shall have agreed in writing to
one or more fixed extensions of the period provided for in Section 15.2(c) of
the BOT Agreement and (ii) the Borrower shall have provided Eximbank, in the
case of each such extension, with an opinion of Philippine counsel reasonably
satisfactory to Eximbank to the effect that such extension is legal, valid,
binding and enforceable, then an Event of Default under this Section 9.06(f)
shall have occurred only if the Borrower shall have failed to cure the
underlying BOT Agreement default giving rise to such notice from PNOC-EDC on or
prior to the date falling 15 days prior to the expiry of any such extended
period; or

      Section 9.07. Material Adverse Effect. One or more events, conditions or
circumstances (including without limitation Force Majeure as defined in Sections
14.1(a) and 14.1(b) of the BOT Agreement) shall exist or shall have occurred
which, in the reasonable judgment of Eximbank is reasonably likely to have a
Material Adverse Effect; or

      Section 9.08. Project Documents; Security Document. (a) This Agreement or
any of the other Financing Documents or any of the BOT Agreement, the Supply
Contract, the Construction Contract, the Keystone Agreement or any provision
hereof or thereof (i) is or becomes invalid, illegal or unenforceable or any
party thereto (other than Eximbank or any Lender Financing Secured Party) shall
so assert, or (ii) ceases to be in full force and effect, or shall cease to give
the Secured Parties the Liens, rights, powers


                                       63


and privileges purported to be created thereby or hereby or any party thereto
(other than Eximbank or any Lender Financing Secured Party) shall so assert; or

      (b) any of the Project Documents (other than the Financing Documents or
any of the BOT Agreement, the Supply Contract, the Construction Contract or the
Keystone Agreement) or any material provision thereof (i) is or becomes invalid,
illegal or unenforceable or any party thereto (other than Eximbank or any Lender
Financing Secured Party) shall so assert, and such default shall have continued
for a period of thirty (30) days after notice thereof shall have been given to
the Borrower by Eximbank, or (ii) ceases to be in full force and effect, or
shall cease to give the Secured Parties the Liens, rights, powers and privileges
purported to be created thereby such that the interests of the Secured Parties
are adversely affected to a material extent; or

      (c) except as permitted by Section 8.01 hereof, the Security or any
component part thereof for any reason fails to constitute a valid and perfected
first priority Lien or ceases to be in full force and effect or the Borrower or
the grantor or pledgor thereof shall so assert; or

      Section 9.09. Ownership of the Borrower. (a) Orleyte Company shall cease
to be the sole general partner of the Borrower; or

      (b) Ormat shall cease to maintain Control (as defined below) of the
Borrower or Orleyte Company or, without the prior written consent of Eximbank,
one or more sales or other transfers, directly or indirectly, of any limited
partnership interest in the Borrower, shall have occurred such that, after
giving effect thereto, either (x) Ormat would own, directly or indirectly, less
than 66 2/3% of the aggregate partnership interests in the Borrower free and
clear of all Liens (other than the Liens created by the Security Documents) or
(y) Ormat and any of its Affiliates would have received, directly or indirectly,
aggregate gross proceeds on account of the sale or other transfer of limited
partnership interests of the Borrower exceeding an amount equal to 40% of the
capitalization of the Borrower as at the Disbursement Date (for purposes of this
Section 9.09, "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, including operating and maintenance decisions, whether through ownership
of voting interests, by contract, or otherwise); or

      (c) The Borrower shall, without the prior consent of Eximbank, permit or
suffer to occur any sale, assignment or transfer of any limited partnership
interest in the Borrower, or issue or have outstanding any securities
convertible into or exchangeable for limited partnership interests in the
Borrower or issue or grant or have outstanding any rights to subscribe for or to
purchase, or any options or warrants for the purchase of, or any agreements,
arrangements or understandings providing for the issuance (contingent


                                       64


or otherwise) of, or any calls, commitments or claims of any character relating
to any limited partnership interest in the Borrower; provided, however, that, if
at all times 100% of the general and limited partnership interests in the
Borrower remain subject to a Lien in favor of the Collateral Trustee pursuant to
the terms of the Mortgage, Assignment and Pledge Agreement (or any similar
security document acceptable to Eximbank) and the Collateral Trustee remains in
possession of all of the certificates evidencing partnership interests in the
Borrower together with undated transfer powers endorsed in blank, an Event of
Default shall not be deemed to have occurred under this Section 9.09(c) if (i)
at any time after the date hereof Orleyte Company sells, assigns or transfers
limited partnership interests in the Borrower representing not more than 10% of
the aggregate partnership interests in the Borrower to each of (x) Itochu
pursuant to the terms of the Itochu MOU and (y) EPDCI (or an Affiliate thereof)
on terms no less favorable to Ormat and its Affiliates than those in the Itochu
MOU and (ii) at any time from and after the Disbursement Date (A) any sale,
assignment or transfer referred to in this Section 9.09(c), (B) full dilution of
the limited partnership interests in the Borrower by the methods noted above in
this Section 9.09(c) or (C) any combination thereof would not have the effect of
reducing below 66 2/3% the aggregate direct or indirect ownership of Ormat in
the Borrower; or

      Section 9.10. Judgments. One or more judgments or decrees shall be entered
(i) against the Borrower or any Partner involving in the aggregate a liability
not paid or fully covered by insurance) of $2,000,000 or more; or (ii) prior to
the date on which Ormat shall cease to be an Obligor, against Ormat involving in
the aggregate a liability (not paid or fully covered by insurance) of $4,000,000
or (ii) prior to the date on which Ormat International shall cease to be an
Obligor, against Ormat International involving in the aggregate a liability (not
paid or fully covered by insurance) of $2,000,000 or more; or (iv) prior to the
date on which the Construction Contractor shall cease to be an Obligor, against
the Construction Contractor involving in the aggregate a liability (not paid or
fully covered by insurance) of $2,000,000 or more, which liability, in the
reasonable judgment of the Required Secured Parties, has had or is reasonably
likely to have a Material Adverse Effect; or (v) prior to the date on which the
Construction Supplier shall cease to be an Obligor, against the Construction
Supplier involving in the aggregate a liability (not paid or fully covered by
insurance) of $2,000,000 or more, which liability, in the reasonable judgment of
the Required Secured Parties, has had or is reasonably likely to have a Material
Adverse Effect; or (vi) prior to the date on which any other Obligor ceases to
be an Obligor, against such Obligor involving in the aggregate a liability (not
paid or fully discharged by insurance) of $2,000,000 or more, which liability in
the reasonable judgment of the Required Secured Parties has had or is likely to
have a Material Adverse Effect; and in any such case all such judgments or
decrees shall not have been vacated, discharged, or stayed or bonded pending
appeal within 60 days after the entry thereof; or



                                       65


      Section 9.11. Governmental Action. Any government or Governmental
Authority shall have condemned, nationalized, seized, or otherwise expropriated
all or any substantial part of the property or other assets of the Borrower or
of its general or limited partnership interests or shall have assumed custody or
control of such property or other assets or of the business or operations of the
Borrower or of its general or limited partnership interests or shall have taken
any action for the dissolution or disestablishment of the Borrower or any action
that would prevent the Borrower or its officers from carrying on its business or
operations or a substantial part thereof; or

      Section 9.12. Permits. The Borrower or any Obligor shall fail to obtain,
renew, maintain or comply in all material respects with any Governmental
Approval set forth in Schedule 5.01(t) hereof or any license, approval or
consent referred to in Section 5.2(c) of the Lender Credit Agreement; or any
such Governmental Approval or license, approval or consent shall be rescinded,
terminated, suspended, modified or withheld or shall be determined to be invalid
or shall cease to be in full force and effect; or any proceeding shall be
commenced by or before any Governmental Authority for the purpose of rescinding,
terminating, suspending, modifying or withholding any such Governmental Approval
or license, approval or consent and such proceeding is not dismissed within 60
days; and such failure, rescission, determination of invalidity, termination,
suspension, modification, withholding, cessation or commencement is reasonably
likely to have a Material Adverse Effect; or

      Section 9.13. Transfer of Collateral; Event of Loss; Diminution of
Property Rights. (a) Title to or any right in all or any part of (i) the
Mortgage Collateral, (ii) any of the Plants or (iii) any other collateral
purported to be covered by the Security Documents (other than as permitted
pursuant to this Agreement, including Section 8.02 hereof) shall become vested
in any party other than the party named as owner and/or holder thereof in the
applicable Security Document, whether by operation of law or otherwise, or (iv)
there shall have occurred an Event of Loss; or

      (b) Except as otherwise permitted pursuant to this Agreement, the Borrower
hereafter grants any easement or dedication, files any plat, declaration or
restriction or enters into any lease or sub-lease concerning the Site or any
portion thereof, the Mortgage Collateral or any of the Plants and the effect
thereof is determined by Eximbank, in its reasonable discretion, to be material
and adverse to the Site or such portion, the Mortgage Collateral, such Plant or
Plants or the Borrower; or

      Section 9.14. Regulatory Status. The Borrower shall fail to remain
continuously exempt from all regulation under PUHCA as a result of being a
"foreign utility company" under Section 33 of PUHCA or otherwise; or



                                       66


      Section 9.15. ERISA. Any of the following events occur or exist with
respect to the Borrower or, in the case of (a) through (e) below, any ERISA
Affiliate: (a) any Termination Event with respect to any Plan; (b) any event or
circumstance that is reasonably likely to constitute grounds entitling the PBGC
to institute proceedings under Section 4042 of ERISA for the imposition of
liability in respect of any Pension Plan (other than a liability to the PBGC for
insurance premiums the payment of which is not yet due); (c) any Pension Plan
shall have an accumulated funding deficiency as defined in Section 412 of the
Code or Section 302 of ERISA; (d) any Plan intended to be qualified under
Section 401(a) or 401(k) of the Code shall be disqualified; (e) any Plan shall
be subject to an excise tax pursuant to Code Section 4980B or shall fail to
comply with Sections 601-606 (inclusive) of ERISA; (f) the Borrower provides
employee welfare benefits to retirees other than statutorily required or
pursuant to Section 601 et seq. of ERISA and Section 4980B of the Code; or (g)
the Borrower incurs liability under or relating to any Plan resulting from a
violation of ERISA, the Code and/or any other applicable law, including without
limitation the Age Discrimination in Employment Act, the Americans With
Disabilities Act and Title VII of the Civil Rights Act, each as amended; and in
each case above, such event or condition, individually or in the aggregate,
together with all other such events or conditions, if any, is reasonably likely
to subject the Borrower to any tax, penalty, or other liability to a Plan, a
Multiemployer Plan, the PBGC, or otherwise (or any combination thereof) which in
the aggregate has had or is reasonably likely to have a Material Adverse Effect;
or the Borrower or any ERISA Affiliate shall fail to pay when due an amount or
amounts which it shall have become liable to pay under Title IV or ERISA or as a
contribution to a Pension Plan and/or Multiemployer Plan which, as a result, has
had or is reasonably likely to have a Material Adverse Effect; or

      Section 9.16. Funding Agreement. Ormat International, Inc. shall fail to
cause the Affiliated Funding Entities to make any Post-Completion Standby
Subordinated Loan or Post-Completion Standby Equity Contribution or shall fail
to cause the Affiliated Funding Entities to pay any amount required to be paid
by either of them under, or otherwise to comply with any of the terms of, the
Funding Agreement required to be performed after the Eximbank Disbursement Date;
provided that no Event of Default under this Section 9.16 shall be declared as a
result of any such failure of the Affiliated Funding Entities to make a
Post-Completion Standby Subordinate Loan or a Post-Completion Standby Equity
Contribution if within 30 days after such failure Ormat shall have paid all such
defaulted amounts pursuant to the terms of the Post-Completion Ormat Guaranty;

then, (a) in the event that an Event of Default described in Section 9.01(a)
with respect to any amount owing to Eximbank shall occur and be continuing on or
prior to the Disbursement Date, Eximbank shall have the right to suspend
disbursement of the Eximbank Credit in accordance with Section 4.03(a), and (b)
in the event that any Event


                                       67


of Default (including any Event of Default described in Section 9.01(a) with
respect to any amount owing to Eximbank) shall occur, and at any time
thereafter, if such Event of Default is continuing on and/or after the
Disbursement Date, Eximbank shall have the right to (i) take any actions
necessary to cure such Event of Default and/or declare an Event of Default, (ii)
declare, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by Borrower, the entire amount of Borrower's
outstanding Eximbank Secured Obligations to be immediately due and payable,
irrespective of any other provision of any Financing Document, whereupon the
same shall be and become immediately due and payable (provided that if an Event
of Default specified in Section 9.05 shall have occurred or a Buyout shall have
occurred, the entire amount of Borrower's outstanding Eximbank Secured
Obligations shall be automatically immediately due and payable without any
declaration, presentment, demand, protest or notice or other act of any kind by
Eximbank or any of the other Secured Parties whatsoever), and (iii) proceed to
enforce or cause or instruct the Collateral Trustee to enforce any remedies
provided under any of the Financing Documents. If an event or occurrence
constitutes an Event of Default or Default under more than one of the provisions
of this Section 9, Eximbank may during the continuance of such Event of Default
take all actions and remedies provided hereunder upon expiration of the shortest
grace period, if any, applicable to such Default or Event of Default.

                   SECTION 10. GOVERNING LAW AND JURISDICTION

      Section 10.01. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF SUCH STATE WITHOUT REGARD TO THE CONFLICT OF LAWS RULES THEREOF.

      Section 10.02. Submission to Jurisdiction; Service of Process. (a) The
Borrower irrevocably agrees that any legal action or proceeding against the
Borrower with respect to this Agreement, the Eximbank Note or any Financing
Document may be brought in the courts of the State of New York in the County of
New York or of the United States for the Southern District of New York and, by
execution and delivery of this Agreement, the Borrower hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Borrower agrees
that a judgment, after exhaustion of all available appeals, in any such action
or proceeding shall be conclusive and binding upon the Borrower, and may be
enforced in any other jurisdiction, including without limitation the Republic,
by a suit upon such judgment, a certified copy of which shall be conclusive
evidence of the judgment. The Borrower hereby irrevocably designates, appoints
and empowers CT Corporation System, with offices on the date hereof at 1633
Broadway, New York, New


                                       68


York 10019, as its designee, appointee and agent to receive, accept and
acknowledge for and on its behalf, and in respect of its property, service of
any and all legal process, summons, notices and documents which may be served in
any such action or proceeding. If for any reason such designee, appointee and
agent shall cease to be available to act as such, the Borrower agrees to
designate a new designee, appointee and agent in New York City on the terms and
for the purposes of this provision satisfactory to Eximbank, advise Eximbank
thereof, and deliver to Eximbank evidence in writing of the successor agent's
acceptance of such appointment. The Borrower further irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower, at its address set forth opposite its
signature below, such service to become effective 30 days after such mailing.
The foregoing provisions constitute, among other things, a special arrangement
for service between the parties to this Agreement for the purposes of 28 U.S.C.
(section) 1608. Nothing herein shall affect the right of the Collateral Trustee
or Eximbank to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Borrower in the Republic or
in any other jurisdiction.

      (b) The Borrower hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement, the Eximbank
Note or any other Financing Document brought in the courts referred to in clause
(a) above and hereby further irrevocably waives and agrees not to plead or claim
in any such court that any such action or proceeding brought in any such court
has been brought in an inconvenient forum.

      Section 10.03. Waiver of Sovereign Immunity. The Borrower acknowledges and
agrees that the activities contemplated by the provisions of this Agreement, the
Eximbank Note and the Financing Documents are commercial in nature rather than
governmental or public, and therefore acknowledges and agrees that it is not
entitled to any right of immunity on the grounds of sovereignty or otherwise
with respect to such activities or in any legal action or proceeding arising out
of or relating to this Agreement, the Eximbank Note or the other Financing
Documents. The Borrower, in respect of itself, its process agents, and its
properties and revenues, expressly and irrevocably waives any such right of
immunity which may now or hereafter exist (including any immunity from any legal
process, from the jurisdiction of any court or from any execution or attachment
in aid of execution prior to judgment or otherwise) or claim thereto which may
now or hereafter exist, and agrees not to assert any such right or claim in any
such action or proceeding, whether in the United States or otherwise.



                                       69


                            SECTION 11. MISCELLANEOUS

      Section 11.01. Transportation. All items which are financed under the
Eximbank Credit and which are exported by ocean vessel must be transported from
the United States in vessels of U.S. Registry as required by 46 U.S.C.
(section)1241-1 (Public Resolution No. 17 of the 73rd Congress of the United
States, as amended), except to the extent that a waiver of this requirement is
obtained from the U.S. Maritime Administration ("MARAD"). If shipments are made
on non-U.S. vessels without a waiver or contrary to the provisions of the
waiver, the Items will not be eligible for financing under the Eximbank Credit
or for coverage under the Eximbank Guaranty Agreement.

      Section 11.02. Transportation Costs. The costs of ocean or air freight for
shipment of any item on a vessel or aircraft of non-U.S. registry pursuant to a
waiver from MARAD will constitute Foreign Cost associated with such Item if such
costs are included in the Contract Price of such Item. If such freight costs are
for shipment of an Item on a vessel or aircraft of U.S. registry, such costs
will constitute U.S. Content.

      Section 11.03. Insurance. The Borrower shall obtain insurance against
marine and transit hazards on all shipments of the Items in an amount not less
than the amount of the Disbursements made with respect to those shipments.
United States insurers shall be given a nondiscriminatory opportunity to bid for
such insurance business related to the Items. The cost of the premiums for such
insurance may be included in the U.S. content of the insured Item if the
insurance is placed in the United States with a United States company. In all
other cases, the cost of the premiums shall be included in the Foreign Cost
associated with the Item.

      Section 11.04. Disposition of Indebtedness. Eximbank may sell, transfer,
pledge, negotiate, grant participations in or otherwise dispose of all or any
part of the Borrower's indebtedness under this Agreement and the Eximbank Note
to any party, and any such party shall enjoy all the rights and privileges of
Eximbank under this Agreement and the Eximbank Note. The Borrower shall, at the
request of Eximbank, execute and deliver to Eximbank or to any party that
Eximbank may designate any such further instruments as may be necessary or
desirable to give full force and effect to the disposition by Eximbank.
Notwithstanding anything to the contrary contained herein, the Borrower may not
assign or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of Eximbank.

      Section 11.05. Taxes. (a) The Borrower agrees to pay all amounts owing by
it to Eximbank under this Agreement, the Eximbank Guarantee Agreement, the
Eximbank Note or any other Financing Document free and clear of and without
deduction for any Taxes. The Borrower further agrees:



                                       70


      (i) that if it is prevented by operation of law from paying any Taxes,
then the interest rate or fees required to be paid under this Agreement, the
Eximbank Guarantee Agreement, the Eximbank Note or any other Financing Document
shall increase by the amount necessary to yield to Eximbank interest, fees or
expenses in the amounts provided for in this Agreement, the Eximbank Guarantee
Agreement, the Eximbank Note or such other Financing Document after provision
for the payment of all such Taxes;

      (ii) that it shall at the request of Eximbank execute and deliver to
Eximbank such further instruments as may be necessary or desirable to effect the
increased in the interest or fees as provided for in clause (i) immediately
above, including new Eximbank Notes to be issued in exchange for any Eximbank
Note previously issued;

      (iii) that it shall hold Eximbank harmless from and against any
liabilities with respect to any such Taxes (whether or not properly or legally
asserted);

      (iv) to provide Eximbank with the original or a certified copy of evidence
of the payment of any Taxes by the Borrower as Eximbank may reasonably request,
or, if no Taxes have been paid, to provide Eximbank, at Eximbank's request, with
a certificate from the appropriate taxing authority or an opinion of counsel
acceptable to Eximbank stating that no Taxes are payable.

      (v) In the event that it is necessary for Eximbank to cooperate with the
Borrower in order for the Borrower to fulfill its obligations under this Section
11.05, Eximbank shall cooperate to the extent necessary, provided Eximbank shall
incur no expense or other liability in connection therewith.

      (b) In the event Eximbank assigns or transfers its rights, title and
interest under this Agreement to a Person which is not a Person entitled to tax
exemptions on its assets, revenues and operations substantially similar to the
tax exemptions applicable to Eximbank, then the definite n of "Taxes" applicable
to such Person for purposes of this Agreement shall be the definition of
"Covered Taxes" set forth herein.

      Section 11.06. Disclaimer. Eximbank shall not be responsible in any way
for the performance of the Purchase Contracts, and no claim against the supplier
of any Item or any other person with respect to the performance of the Purchase
Contracts will affect the obligations of the Borrower under this Agreement, the
Eximbank Note or any Financing Document.

      Section 11.07. Indemnities and Expenses. (a) The Borrower shall, whether
or not the transactions herein contemplated are consummated, pay the reasonable
fees and expenses of the Independent Enginier, the Insurance Consultant, Winston
& Strawn, special counsel to Eximbank, and Castillo Laman Tan Panteleon & San
Jose, special


                                       71


Philippine counsel to Eximbank and the law firms referred to in Sections 5.01(b)
and 5.02(b), and all reasonable costs and expenses incurred by Eximbank,
incurred in connection with (i) the preparation, printing, execution, delivery,
administration, registration (where appropriate) or enforcement of this
Agreement, the Eximbank Note, the Eximbank Guarantee Agreement and the other
Financing Documents and any other documents related thereto (including the Legal
Opinions); (ii) any amendment or modification to, preservation of rights under,
or waiver in connection with, the Financing Documents or any such other
document; and (iii) the registration (where appropriate) and the delivery of the
evidences of Indebtedness relating to the Eximbank Credit and the Disbursement
thereof.

      (b) The Borrower Shall, whether or not the transactions herein
contemplated are consummated, (i) pay and hold Eximbank harmless from and
against any and all present and future stamp and other similar taxes and
documentary or registration fees with respect to the matters referred to in the
foregoing clause (a) and save Eximbank harmless from and against any and all
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to Eximbank) to pay such taxes or fees; and (ii)
indemnify Eximbank and each of its respective officers, directors, employees,
representatives, attorneys and agents from and hold each of them harmless
against any and all liabilities incurred by any of them as a result of, or
arising out of, or in any way related to, or by reason of, any investigation,
litigation or other proceeding (whether or not Eximbank is a party thereto)
related to the entering into and/or performance of this Agreement, the Eximbank
Note, the Eximbank Guarantee Agreement or any other Project Document or the use
of the proceeds of the Eximbank Credit or the consummation of any transactions
contemplated herein or in any other Project Document, including, without
limitation, the reasonable fees and disbursements of counsel selected by such
indemnified party incurred in connection with any such investigation, litigation
or other proceeding or in connection with enforcing the provisions of this
Section 11.07(b) (but excluding any such liabilities, obligations or losses, to
the extent incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified or its officers, directors, employees,
representatives, attorneys or agents, as the case may be as determined by a
court of competent jurisdiction). Without limitation to the foregoing provisions
of this paragraph, the indemnity provided hereunder shall cover any loss,
liability or expense reasonably incurred other than by reason of gross
negligence or wilful misconduct on behalf of Eximbank arising out of or in
connection with claims by third parties (including without limitation any Lender
or the Administrative Agent) to whom a copy of the Information Memorandum has
been distributed with the knowledge of the Borrower against Eximbank relating to
any alleged inaccuracy of the factual information (taken as a whole) which, for
the avoidance of doubt shall not include any information by way of projections,
estimates or other expressions of view as to future circumstances (provided that
such projections, estimates or other expressions of view are


                                       72


expressed in good faith and on the basis of assumptions which when made were
viewed by the Borrower in good faith to be reasonable) contained in, or any
alleged omission of information which will render such aforesaid factual
information (taken as a whole) inaccurate or misleading in a material respect
from, the Information Memorandum and the Project Documents. Eximbank shall (1)
use reasonable efforts to, upon its becoming aware of any event which may result
in the Borrower being required to perform any of its indemnity obligations under
this paragraph (b), promptly notify the Borrower (provided that failure to so
notify shall not mitigate the obligations of the Borrower hereunder), (2) upon
request from the Borrower consult with the Borrower regarding any step
(including any step which may mitigate the effect of such event) it proposes to
take in respect of such event and (3) consult with the Borrower before entering
into any settlement or compromise in relation to any such claims, actions or
suits.

      (c) Without limitation to the provisions of paragraph (b) above, the
Borrower agrees to defend, protect, indemnify and hold harmless Eximbank and
each of its officers, directors, employees, representatives, attorneys and
agents from and hold each of them harmless against any and all liabilities
(including removal and remedial actions), obligation, losses, damages,
penalties, claims, actions, judgments, suits, costs, expenses and disbursements
(including reasonable attorneys' and consultants' fees and disbursements)
imposed on or asserted against any such Persons directly or indirectly based on,
or arising or resulting from, (i) the actual or alleged presence of Hazardous
Materials on, under or at any of the Plants or any portion of the Site, (ii) any
Environmental Claim relating to the Borrower or the Project or arising out of
the use of any of the Plants or any portion of the Site, or (iii) the exercise
of Eximbank's rights under any of the provisions of this Section regardless of
when any such matters arise, but excluding any matter based solely on the gross
negligence or willful misconduct of Eximbank or its officers, directors,
employees, representatives, attorneys or agents, as the case may be. Eximbank
shall (1) use reasonable efforts to, upon its becoming aware of any event which
may result in the Borrower being required to perform any of its obligations
under this paragraph (c), promptly notify the Borrower (provided that failure to
so notify shall not mitigate the obligations of the Borrower hereunder), (2)
upon request from the Borrower consult with the Borrower regarding any step
(including any step which may mitigate the effect of such event) it proposes to
take in respect of such event and (3) consult with the Borrower before entering
into any settlement or compromise in relation to any such claims, actions or
suits.

      (d) To the extent that the undertaking in the preceding paragraphs of this
Section may be unenforceable because it is violative of any law or public
policy, the Borrower will contribute the maximum portion that it is permitted to
pay and satisfy under applicable law to the payment and satisfaction of such
undertakings.



                                       73


      (e) All sums paid and costs incurred by Eximbank with respect to any
matter indemnified hereunder shall bear interest at the default rate applicable
to the Eximbank Credit from the date so paid or incurred until reimbursed by the
Borrower, and all such sums and costs shall be added to the debt and be secured
by the Security Documents and shall be immediately due and payable on demand.

      Section 11.08. Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, Eximbank is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and
apply any and all deposits (general or special) and any other Indebtedness at
any time held or owing by Eximbank to or for the credit or the account of the
Borrower against and on account of the Eximbank Secured Obligations and
liabilities of the Borrower to Eximbank under this Agreement or under any of the
other Financing Documents, and all other claims of any nature or description
arising out of or connected with this Agreement or any other Financing Document,
irrespective of whether or not Eximbank shall have made any demand with respect
thereto.

      Section 11.09. Benefit of Agreement. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, except that the Borrower may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of Eximbank.

      Section 11.10. No Waiver; Remedies Cumulative. No failure or delay on the
part of Eximbank in exercising any right, power or privilege hereunder or under
any other Financing Document and no course of dealing between the Borrower and
Eximbank shall impair any such right, power or privilege or operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Financing Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights, powers and remedies herein or in any other
Financing Document expressly provided are cumulative and not exclusive of any
rights, powers or remedies which Eximbank would otherwise have. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of Eximbank to any other or further action in any
circumstances without notice or demand.

      Section 11.11. Severability. Any provision of this Agreement, the Eximbank
Note and any other Financing Document which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability but that shall not invalidate the remaining
provisions of this


                                       74


Agreement, the Eximbank Note or any Financing Document or affect such provision
in any other jurisdiction.

      Section 11.12. English Language. All documents to be furnished or
communications to be given or made under this Agreement or any other Financing
Document shall be in the English language.

      Section 11.13. Calculations; Computations. All financial calculations to
be made under, or for the purposes of, this Agreement shall be determined in
accordance with Philippine generally accepted accounting principles, applied on
a consistent basis and, except as otherwise required to conform to the
definitions contained in Schedule X or any other provisions of this Agreement,
shall be calculated from the then most recently issued quarterly financial
statements which the Borrower is obligated to furnish to Eximbank from time to
time, as provided hereunder; provided, however, that (a) if the relevant
quarterly financial statements should be in respect of the last quarter of a
Fiscal Year then, at the option of Eximbank, such calculations may instead be
made from the audited financial statements for the relevant Fiscal Year, and (b)
if there should occur any material adverse change in the financial condition or
results of operations of the Borrower after the end of the period covered by the
relevant financial statements, then such material adverse change shall also be
taken into account in calculating the relevant figures.

      Section 11.14. Survival. All indemnities set forth herein shall survive
the execution and delivery of this Agreement and the Eximbank Note, the
execution, delivery and termination of the Eximbank Guarantee Agreement, and the
making and repayment of the Eximbank Credit.

      Section 11.15. Amendments. No term or provision of this Agreement may be
amended, changed, modified or waived except by an instrument in writing signed
by the party against whom such amendment, change, modification or waiver is
sought to be enforced.

      Section 11.16. 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 agreement.

      Section. 11.17. Notices. Except as otherwise expressly provided herein,
(a) all notices and other communications provided for hereunder shall be
provided in writing (including telegraphic, telex, facsimile or cable
communication) and shall be sent by telecopy, telex, telegraph or cable with the
original of such communication dispatched by (if inland) overnight or (if
overseas) international courier and, if such courier service is not available,
by registered airmail (or, if inland, registered first-class mail) with


                                       75


postage prepaid to the Borrower, the Collateral Trustee and Eximbank at their
respective addresses specified below, or at such other address as shall be
designated by such party in a written notice to the other parties hereto and (b)
all such notices and communications shall, when mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, be effective seven (7) days
after being deposited in the mails in the manner as aforesaid, when delivered to
the telegraph company or cable company (if inland), one (1) day or (if overseas)
three (3) days after delivery to a courier in the manner as aforesaid, as the
case may be, or when sent by telex (with the correct answer back) or telecopier:

      Addresses:

      If to the Borrower:

      ORMAT LEYTE CO. LTD.
      Solid Bank Building
      8th Floor
      777 Paseo de Roxas
      Makati City  1200
      Philippines
      Attn: President
      Tel: 011-632-812-5631
      Fax: 011-632-812-5638

      and with copies to:

      ORMAT INTERNATIONAL, INC.

      980 Greg Street
      Sparks, Nevada  89431
      Attn: President
      Tel: (702) 356-9029
      Fax: (702) 356-9039

      with a copy of any notice relating to a dispute to:

      Robert E. Giles
      Perkins Coie
      1201 Third Avenue
      40th Floor
      Seattle, WA  98101-3099
      Tel: (206) 583-8536
      Fax: (206) 583-8500

                                       76


      If to Eximbank:

      EXPORT-IMPORT BANK OF THE UNITED STATES
      811 Vermont Avenue, N.W.
      Washington, D.C.  20571
      U.S.A.
      Attn:  Vice President-
             Project Finance (AP069721-Philippines)
      Tel: (202) 565-3690
      Fax: (202) 565-3695
      Telex: RCA 248460 EXBK UR
             TRT 197681 EXIM UT
             WUI 64319 EXIBANK
             WUT 89461 EXIBANK WSH

      with a copy of each notice to:

      Winston & Strawn
      1400 L Street, N.W.
      Suite 800
      Washington, D.C.  20005
      Attn: Administrative Partner
            (U.S. Eximbank -- Leyte Field Project)
      Tel: (202) 371-5971
      Fax: (202) 371-5950

      Section 11.18. Judgment Currency. All payments of principal, interest,
fees or other amounts due to Eximbank under this Agreement, the Eximbank Note or
any other Financing Document shall be made in Dollars, regardless of any law,
rule, regulation or statute, whether now or hereafter in existence or in effect
in any jurisdiction, which affects or purports to affect such obligations. The
obligation of the Borrower in respect of any amount due under this Agreement,
the Eximbank Note or any other Financing Document, notwithstanding any payment
in any other currency (whether pursuant to a judgment or otherwise), shall be
discharged only to the extent of the amount in Dollars that the Person entitled
to receive that payment may, in accordance with normal banking procedures,
purchase with the sum paid in that other currency (after any premium and costs
of exchange) on the Business Day immediately succeeding the day on which that
Person receives that payment. If the amount in Dollars that may be so purchased
for any reason falls short of the amount originally due, the Borrower shall pay
such additional amounts, in Dollars, to compensate for the shortfall. Any
obligation of the Borrower not discharged by that payment shall continue to be
due as a separate and


                                       77


independent obligation and shall accrue interest in accordance with Section 3.02
until discharged as provided herein.

      Section 11.19. Headings Descriptive. The headings of the several sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.

      Section 11.20. Prior Agreements Superseded. This Agreement, the Eximbank
Guarantee Agreement, the Eximbank Note and the other Financing Documents to
which the Borrower is a party shall completely and fully supersede all prior
understandings or agreements, both written and oral, among the parties hereto
regarding the Eximbank Credit and the Eximbank Guarantee Agreement.

      Section 11.21. No Recourse. Except as provided in the last sentence of and
the proviso to the penultimate sentence of this Section 11.21, neither any
Partner, the Construction Supplier or the Construction Contractor nor their
respective shareholders or Affiliates (other than the Borrower), nor its or
their respective officers, directors, stockholders, controlling persons or
employees (each, a "Non-Recourse Party"), shall have any personal liability for
any amounts payable by the Borrower hereunder or under the Eximbank Note or any
other Project Document or for the performance of any covenant, agreement or
obligation of the Borrower, or for the breach of any representation, warranty or
covenant of the Borrower under this Agreement, the Eximbank Note or any other
Project Document, agreement, undertaking, certificate or other document
delivered by or on behalf of the Borrower in connection with this Agreement, and
therefore no judgment or recourse shall be sought or enforced against any
Non-Recourse Party for the payment or performance of the obligations of the
Borrower under any Project Document or any other such agreement, undertaking,
certificate or document executed by the Borrower. Except as provided in the last
sentence of this Section 11.21, it is expressly understood that all obligations
and liabilities of the Borrower under this Agreement, the Eximbank Note and the
other Project Documents to which the Borrower is a party and any other related
document, agreement or instrument executed by the Borrower are solely
obligations of the Borrower, provided, that such limitation of liability shall
not apply to a Non-Recourse Party if and to the extent that such Non-Recourse
Party commits fraud or misappropriation of earnings, revenues, profits or
proceeds from the Borrower or the Project. Notwithstanding anything herein to
the contrary, nothing herein shall limit, or be construed or deemed to limit,
the liability of any Non-Recourse Party under any Project Document to which such
Non-Recourse Party is in its individual capacity a party.

      IN WITNESS WHEREOF, the parties to this Agreement have caused this


Agreement to be duly executed and delivered in the United States as of the date
set forth below.


                                       78



ORMAT LEYTE CO. LTD.                         EXPORT-IMPORT BANK OF THE
                                                UNITED STATES

By ORLEYTE COMPANY
      its General Partner

     By /s/ Patrick Francois                     By /s/ Indecipherable
        ----------------------------                ----------------------------
              (Signature)                                    (Signature)

     Name Patrick Francois                       Name
         ---------------------------                 ---------------------------
                (Print)                                        (Print)

     Title Vice President                        Title

          --------------------------                  --------------------------
                (Print)                                        (Print)

Date of Execution:  May 13, 1996

Eximbank Credit No. AP069721 Philippines



                                                                  Exhibit 10.1.7


                              ORMAT FUNDING CORP.,
                                  AS THE Issuer


                              BRADY POWER PARTNERS
                           STEAMBOAT DEVELOPMENT CORP.
                            STEAMBOAT GEOTHERMAL LLC
                                 ORMAMMOTH INC.
                                   ORNI 1 LLC
                                   ORNI 2 LLC
                                   ORNI 7 LLC,
                                  AS GUARANTORS

                                   ORMESA LLC

                                  $190,000,000

                8 1/4% SENIOR SECURED NOTES DUE DECEMBER 30, 2020


                                    INDENTURE


                          DATED AS OF FEBRUARY 13, 2004


                         UNION BANK OF CALIFORNIA, N.A.,
                                   AS TRUSTEE






                                TABLE OF CONTENTS



                                                                                                              Page
                                                                                                              ----

ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1
         Section 1.01       Definitions..........................................................................1
         Section 1.02       Other Definitions...................................................................34
         Section 1.03       Trust Indenture Act Provisions......................................................35
         Section 1.04       Rules of Construction...............................................................35

ARTICLE II THE SENIOR SECURED NOTES.............................................................................36
         Section 2.01       Form Generally......................................................................36
         Section 2.02       Legends on Restricted Notes.........................................................38
         Section 2.03       Amount of Senior Secured Notes......................................................38
         Section 2.04       Denominations.......................................................................39
         Section 2.05       Execution, Authentication, Delivery and Dating......................................39
         Section 2.06       Temporary Senior Secured Notes......................................................41
         Section 2.07       Registration, Registration of Transfer and Exchange.................................41
         Section 2.08       Mutilated, Destroyed, Lost and Stolen Senior Secured Notes..........................48
         Section 2.09       Payments; Interest Rights Preserved.................................................49
         Section 2.10       Persons Deemed Owners...............................................................50
         Section 2.11       Cancellation........................................................................51
         Section 2.12       Computation of Interest.............................................................51
         Section 2.13       Certification Forms.................................................................51
         Section 2.14       CUSIP Numbers.......................................................................51
         Section 2.15       Issuance of Additional Notes........................................................52

ARTICLE III REDEMPTION AND PREPAYMENT...........................................................................52
         Section 3.01       Notices to Trustee..................................................................52
         Section 3.02       Selection of Senior Secured Notes to Be Redeemed....................................52
         Section 3.03       Notice of Redemption................................................................53
         Section 3.04       Effect of Notice of Redemption......................................................54
         Section 3.05       Deposit of Redemption Price.........................................................54
         Section 3.06       Senior Secured Notes Redeemed in Part...............................................54
         Section 3.07       Optional Redemption.................................................................55
         Section 3.08       Mandatory Redemption................................................................55

ARTICLE IV COVENANTS............................................................................................57
         Section 4.01       Payment of Senior Secured Notes.....................................................57
         Section 4.02       Maintenance of Office or Agency.....................................................57
         Section 4.03       Reporting Requirements..............................................................58
         Section 4.04       Delivery of Notices to Trustee......................................................59
         Section 4.05       Stay, Extension and Usury Laws......................................................59








                                                                                                              Page
                                                                                                              ----

         Section 4.06       Restrictions on Sale of Assets......................................................59
         Section 4.07       Insurance...........................................................................60
         Section 4.08       Governmental Approvals; Title.......................................................61
         Section 4.09       Limitation on Nature of Business....................................................61
         Section 4.10       Prohibition on Merger or Other Fundamental Changes..................................61
         Section 4.11       Restricted Payments.................................................................61
         Section 4.12       Revenue Account.....................................................................61
         Section 4.13       Transactions with Affiliates........................................................62
         Section 4.14       Exercise of Rights..................................................................63
         Section 4.15       Termination or Amendment to Material Project Documents..............................63
         Section 4.16       Additional Project Documents........................................................63
         Section 4.17       Performance of Project Documents....................................................64
         Section 4.18       Limitations on Indebtedness.........................................................64
         Section 4.19       Limitation on Indebtedness of Subsidiaries..........................................66
         Section 4.20       Limitations on Guarantees...........................................................66
         Section 4.21       Prohibitions on Other Obligations or Assignments....................................66
         Section 4.22       Books and Records, Inspection.......................................................67
         Section 4.23       Maintenance of Existence............................................................67
         Section 4.24       Additional Documents; Filings and Recordings........................................67
         Section 4.25       Dividend and Other Payment Restrictions Affecting Subsidiaries......................67
         Section 4.26       Budget And Expenditures.............................................................68
         Section 4.27       Limitation on Liens.................................................................68
         Section 4.28       Compliance With Laws................................................................68
         Section 4.29       Operation and Maintenance...........................................................69
         Section 4.30       Additional Subsidiaries; Bank Accounts..............................................69
         Section 4.31       Maintenance of Water Supply; Access Rights..........................................69
         Section 4.32       No Abandonment......................................................................69
         Section 4.33       Consents to Assignment of Unassigned Leases Additional Project Documents............69
         Section 4.34       Loans...............................................................................69
         Section 4.35       Amendments to Organizational Documents..............................................69
         Section 4.36       Removal of Independent Consultant...................................................70
         Section 4.37       Payments for Consent................................................................70
         Section 4.38       Limitations on Ormesa...............................................................70
         Section 4.39       Limitation on Issuance and Sale of Capital Stock of Subsidiaries....................70
         Section 4.40       Maintenance of Qualifying Facility Status...........................................71
         Section 4.41       Payment of taxes and claims.........................................................71
         Section 4.42       Repayment of Ormesa Credit Agreement................................................71
         Section 4.43       Provision of Additional Liens.......................................................71
         Section 4.44       Galena Re-powering..................................................................71
         Section 4.45       Title Policies......................................................................71
         Section 4.46       Preservation of Liens...............................................................71
         Section 4.47       Title Reports.......................................................................72

                                      -ii-








                                                                                                              Page
                                                                                                              ----

ARTICLE V DEFAULTS AND REMEDIES.................................................................................72
         Section 5.01       Events of Default...................................................................72
         Section 5.02       Enforcement of Remedies.............................................................74
         Section 5.03       Other Remedies......................................................................76
         Section 5.04       Waiver of Past Defaults.............................................................77
         Section 5.05       Control by Majority.................................................................77
         Section 5.06       Limitation on Suits.................................................................77
         Section 5.07       Rights of Holders of Senior Secured Notes to Receive Payment........................78
         Section 5.08       Collection Suit by Trustee..........................................................78
         Section 5.09       Trustee May File Proofs of Claim....................................................78
         Section 5.10       Priorities..........................................................................78
         Section 5.11       Undertaking for Costs...............................................................79

ARTICLE VI TRUSTEE..............................................................................................79
         Section 6.01       Duties of Trustee...................................................................79
         Section 6.02       Rights of Trustee...................................................................80
         Section 6.03       Individual Rights of Trustee........................................................81
         Section 6.04       Trustee's Disclaimer................................................................82
         Section 6.05       Notice of Defaults..................................................................82
         Section 6.06       Reports by Trustee to Holders of the Senior Secured Notes...........................82
         Section 6.07       Compensation and Indemnity..........................................................83
         Section 6.08       Replacement of Trustee..............................................................84
         Section 6.09       Successor Trustee by Merger, etc....................................................85
         Section 6.10       Eligibility; Disqualification.......................................................85
         Section 6.11       Preferential Collection of Claims Against the Issuer................................85
         Section 6.12       Receipt of Documents................................................................86

ARTICLE VII LEGAL DEFEASANCE AND COVENANT DEFEASANCE............................................................86
         Section 7.01       Option to Effect Legal Defeasance or Covenant Defeasance............................86
         Section 7.02       Legal Defeasance and Discharge......................................................86
         Section 7.03       Covenant Defeasance.................................................................87
         Section 7.04       Conditions to Legal or Covenant Defeasance..........................................87
         Section 7.05       Deposited Money and Government Securities to be Held in Trust;
                            Other Miscellaneous Provisions......................................................88
         Section 7.06       Repayment to Issuer.................................................................89
         Section 7.07       Reinstatement.......................................................................89

ARTICLE VIII AMENDMENT, SUPPLEMENT AND WAIVER...................................................................90
         Section 8.01       Without Consent of Holders of Senior Secured Notes..................................90
         Section 8.02       With Consent of Holders of Senior Secured Notes.....................................90
         Section 8.03       Revocation and Effect of Consents...................................................92
         Section 8.04       Notation on or Exchange of Senior Secured Notes.....................................93
         Section 8.05       Trustee to Sign Amendments, etc.....................................................93
         Section 8.06       Execution of Supplemental Indentures................................................93

                                     -iii-








                                                                                                              Page
                                                                                                              ----

         Section 8.07       Effect of Supplemental Indentures...................................................93
         Section 8.08       Conformity with Trust Indenture Act.................................................93
         Section 8.09       Reference in Senior Secured Notes to Supplemental Indentures........................93

ARTICLE IX GUARANTEE............................................................................................94
         Section 9.01       Agreement to Guarantee..............................................................94
         Section 9.02       Execution and Delivery of Guarantee.................................................95
         Section 9.03       Guarantors May Consolidate, etc. on Certain Terms...................................96
         Section 9.04       Covenants of the Guarantors and Ormesa..............................................96

ARTICLE X MISCELLANEOUS.........................................................................................96
         Section 10.01      Trust Indenture Act Controls........................................................96
         Section 10.02      Notices ............................................................................97
         Section 10.03      Communication by Holders of Senior Secured Notes with Other
                            Holders of Senior Secured Notes.....................................................98
         Section 10.04      Certificate and Opinion as to Conditions Precedent..................................98
         Section 10.05      Statements Required in Certificate or Opinion.......................................98
         Section 10.06      Rules by Trustee and Agents.........................................................99
         Section 10.07      No Personal Liability of Directors, Officers, Employees and Stockholders............99
         Section 10.08      Governing Law.......................................................................99
         Section 10.09      Submission to Jurisdiction..........................................................99
         Section 10.10      Waiver of Jury Trial................................................................99
         Section 10.11      No Adverse Interpretation of Other Agreements......................................100
         Section 10.12      Successors.........................................................................100
         Section 10.13      Severability.......................................................................100
         Section 10.14      Counterpart Originals..............................................................100


         Section 10.15      Table of Contents, Headings, etc...................................................100




EXHIBITS

Exhibit A-1:    FORM OF SENIOR SECURED NOTE
Exhibit A-2:    FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B:      FORM OF CERTIFICATE OF TRANSFER
Exhibit C:      FORM OF CERTIFICATE OF EXCHANGE
Exhibit D:      SUBORDINATION PROVISIONS

Exhibit E:      FORM OF DEED OF TRUST
Exhibit F:      FORM OF GUARANTEE
Exhibit G:      FORM OF SUPPLEMENTAL INDENTURE

                                      -iv-



                  INDENTURE dated as of February 13, 2004 among Ormat Funding
Corp., a Delaware corporation (including its successors and permitted assigns,
the "Issuer"), Brady Power Partners, a Nevada general partnership ("Brady"),
Steamboat Development Corp., a Utah corporation ("Steamboat Development"),
Steamboat Geothermal LLC, a Delaware limited liability company ("Steamboat
Geothermal"), OrMammoth Inc., a Delaware corporation ("OrMammoth"), ORNI 1 LLC,
a Delaware limited liability company ("ORNI 1"), ORNI 2 LLC, a Delaware limited
liability company ("ORNI 2"), ORNI 7 LLC, a Delaware limited liability company
("ORNI 7"), Ormesa LLC and Union Bank of California, N.A., a national banking
association, as trustee (the "Trustee").

                  The Issuer, the Guarantors (as defined) and the Trustee agree
as follows for the benefit of each other and for the equal and ratable benefit
of the Holders of the 8 1/4% Senior Secured Notes due December 30, 2020, any
Additional Notes (as defined below) and the Exchange Notes (as defined below)
issued pursuant to the Registration Rights Agreement:

                                   ARTICLE I

                   DEFINITIONS AND INCORPORATION BY REFERENCE

                  Section 1.01 Definitions.

                  "Acceptable Letter of Credit" means one or more irrevocable
standby letters of credit available for the purpose of drawing in accordance
with the Depositary Agreement, and any extensions thereof or any substitute
letter of credit therefor in the stated amount contained in such extension or
substitute, subject to the limitations set forth in, and permitting draws
thereon as contemplated by the Depositary Agreement, (i) issued to the
Depositary Agent (for the benefit of the Secured Parties entitled to the
benefits of the applicable Account) by a commercial bank having a long-term
unsecured senior debt rating of at least Investment Grade, (ii) payable in
immediately available U.S. Dollar funds on any Business Day, (iii) with a
minimum term of at least one year, (iv) providing for the amount thereof to be
available to the Depositary Agent in multiple drawings conditioned only upon
presentation of sight drafts accompanied by the applicable certificate in the
form attached to such letter of credit or if the issuing bank ceases to be an
Eligible Letter of Credit Provider, (v) transferable to any successor Depositary
Agent, the Collateral Agent or a successor Collateral Agent (or if not
transferable provides for the amount thereof to be drawn upon by the Depositary
Agent upon appointment of a successor Depositary Agent or Collateral Agent),
(vi) governed by the laws of the State of New York or California, (vii) does not
constitute Indebtedness (directly or indirectly) of the Issuer or any of its
Subsidiaries, and is not secured by a Lien on any of the properties of the
Issuer or any of its Subsidiaries, and the Issuer certifies to such in an
Officer's Certificate and (viii) which provides that it may be drawn not more
than thirty days prior to its expiration in the entire amount to be then drawn
if the issuing bank does not provide a written extension of the same to the
Depositary Agent at least 30 days prior to its then scheduled expiration date.

                  "Accounts" means the accounts established under the Depositary
Agreement.



                                                                          Page 2

                  "Additional Notes" means any Senior Secured Notes (other than
Initial Notes), if any, issued under this Indenture in accordance with Sections
2.05 and 2.15 hereof.

                  "Additional Project Document" means any contract or agreement
entered into after the Closing Date in respect of the ownership, construction,
operation, maintenance, modification or administration of a Project that is
material to the Issuer or one or more Projects (including a Qualified Project),
other than a Financing Document. The replacement of a Project Document that is
not a Material Project Document shall be deemed not to be an Additional Project
Document.

                  "Administrative Costs" means all of the Issuer's obligations,
now or hereafter existing, to pay administrative fees, costs and expenses to any
trustee or agent of the Holders of the Senior Secured Notes or any Permitted
Additional Senior Lender, including the Collateral Agent, the Depositary, and
the Trustee (including, without limitation, the reasonable fees and expenses of
counsel, agents and experts).

                  "Affiliate" means, with respect to a Person, any other Person
that, directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such first Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

                  "Agent" means any Registrar, Paying Agent or co-registrar.

                  "Agent Member" has the meaning set forth in Section
2.07(c)(v)(B) of this Indenture.

                  "Annual Period" means the twelve month period commencing on
January 1st of each year and ending on December 31st of each year.

                  "Applicable Law" means any constitution, statute, law, rule,
regulation, ordinance, judgment, order, decree or Governmental Approval, or any
published directive or requirement which has the force of law, or other
governmental restriction which has the force of law, or any determination by, or
interpretation of any of the foregoing by, any judicial authority, applicable to
and/or binding on a given Person or any Plant, as the context may require,
whether in effect as of the Closing Date or thereafter and in each case as
amended.

                  "Authentication Order" means a written order or request signed
in the name of the Issuer by the President, a Vice President, the Treasurer or
the Assistant Treasurer, and delivered to the Trustee.

                  "Authorized Officer" or "Authorized Representative" of any
Person means the individual or individuals authorized to act on behalf of such
Person by the board of directors, managing member, management committee, board
of control or any other governing body of



                                      -2-


                                                                          Page 3

such Person as designated from time to time in a certificate of such Person with
specimen signatures.

                  "Board of Directors" means:

                  (1) with respect to a corporation, the board of directors of
         the corporation or any committee thereof duly authorized to act on
         behalf of such board;

                  (2) with respect to a partnership, the board of directors of
         the general partner of the partnership or any committee duly authorized
         and empowered to take action on behalf of such partnership by the
         partnership agreement of such partnership;

                  (3) with respect to a limited liability company, the managing
         member or members or any controlling committee of managing members
         thereof; and

                  (4) with respect to any other Person, the board or committee
         of such Person serving a similar function.

                  "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.

                  "Brady" means Brady Power Partners, a Nevada general
partnership.

                  "Brady-BLM Geothermal Resources Lease N-10922" means that
certain Lease for Geothermal Resources N-10922, dated October 1, 1975, between
Brady and the United States of America through the Bureau of Land Management of
the Department of the Interior.

                  "Brady-BLM Geothermal Resources Lease N-40353" means that
certain Lease for Geothermal Resources N-40353, dated April 1, 1986, between
Brady and the United States of America through the Bureau of Land Management of
the Department of the Interior.

                  "Brady-BLM Geothermal Resources Lease N-40355" means that
certain Lease for Geothermal Resources N-40355, dated July 1, 1986, between
Brady and the United States of America through the Bureau of Land Management of
the Department of the Interior

                  "Brady-BLM Geothermal Resources Lease N-46566" means that
certain Lease for Geothermal Resources N-46566 between Brady and the United
States of America through the Bureau of Land Management of the Department of the
Interior, dated October 1, 1975.

                  "Brady/Desert Peak 1 Interconnection Agreement" means that
certain Service Connections, Meters and Customer's Facility Exhibit to the Brady
Project Power Purchase Agreement, between Brady (as successor to Nevada
Geothermal Power Partners) and Sierra Pacific Power Company.

                                      -3-


                                                                          Page 4

                  "Brady Operation and Maintenance Agreement" means that certain
Operation and Maintenance Agreement, dated January 1, 2002, between Brady,
Western States and Ormat Nevada as Western States' agent.

                  "Brady Plant" means two geothermal power generating plants
located in Churchill County, Nevada (including the Desert Peak 1 Plant) and
having a gross generating capacity of 32 MW.

                  "Brady Project Power Purchase Agreement" means that certain
Long Term Agreement for the Purchase and Sale of Electricity, dated October 5,
1990, between Brady (as successors to Nevada Geothermal Power Partners) and
Sierra Pacific Power Company, as amended by that certain Amendment to Long Term
Agreement for the Purchase and Sale of Electricity, dated July 12, 1991, as
modified by that certain Settlement Agreement, dated February 16, 2001, between
Sierra Pacific Power Company and Brady, and as further amended by that certain
Amendment No. 2 to Long Term Agreement for the Purchase and Sale of Electricity,
dated June 24, 2002.

                  "Brady Settlement Agreement" means that certain Settlement
Agreement, dated May 1, 2002, among Brady, ORNI 1 LLC, ORNI 2 LLC, Ormat Nevada,
Ormat Technologies, and ConAgra Foods, Inc.

                  "Business Day" means any day other than a Saturday or Sunday
or other day on which banks in New York, New York or Nevada are authorized or
required by law or executive order to remain closed.

                  "Capital Expenditures" means any expenses that are capitalized
on the Issuer's balance sheet in accordance with GAAP.

                  "Capital Stock" means:

                  (1) in the case of a corporation, corporate stock;

                  (2) in the case of an association or business entity, any and
         all shares, interests, participations, rights or other equivalents
         (however designated) of corporate stock;

                  (3) in the case of a partnership or limited liability company,
         partnership interests (whether general or limited) or membership
         interests; and

                  (4) any other interest or participation that confers on a
         Person the right to receive a share of the profits and losses of, or
         distributions of assets of, the issuing Person including all warrants,
         options or other rights to acquire any of the foregoing, but excluding
         from all of the foregoing any debt securities convertible into or
         exchangeable for Capital Stock, whether or not such debt securities
         include any right of participation with Capital Stock.

                                      -4-


                                                                          Page 5

                  "Cash Flow Available for Debt Service" means, for any period,
(a) all revenues (including interest, Delay Liquidated Damages, and the proceeds
of any business interruption insurance but excluding any other insurance
proceeds and any other similar non-recurring receipts) received in such period
and deposited in the Revenue Account, less (b) the sum of (x) Operating and
Maintenance Expenses for such period plus (y) Administrative Costs payable to
the Trustee, the Collateral Agent, the Depositary and any other trustee or agent
of the Secured Parties for such period, all as computed on a cash basis.

                  "Certificated Note" shall mean a certificated Senior Secured
Note registered in the name of the Holder thereof and issued in accordance with
Section 2.07 hereof, substantially in the form of Exhibit A-1/A-2 hereto except
that such Senior Secured Note shall not bear the Global Note Legend and shall
not have the "Schedule of Exchanges of Interests in the Global Note" attached
thereto.

                  "Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the Issuer's and the Issuer's
Subsidiaries' assets, taken as a whole; (ii) the adoption of a plan relating to
the Issuer's liquidation or dissolution; (iii) the consummation of any
transaction or series of related transactions (including, without limitation,
any merger or consolidation) the result of which is that any Person other than
Ormat Nevada or a Related Party, becomes the "beneficial owner" (as such term is
defined Rule 13d-3 and Rule 13d-5 under the Exchange Act) directly or
indirectly, of 50% or more of the Issuer's voting power; or (iv) the
consummation of any transactions or series of related transactions the result of
which is that Ormat Nevada and the Related Parties cease to collectively own,
directly or indirectly, more than 50% of the Issuer's economic or voting
interest; provided, however, that notwithstanding the foregoing, a Change of
Control will not be deemed to have occurred if (x) prior to giving effect to the
reduction in Ormat Nevada's and/or the Related Parties' collective voting or
economic interests in the Issuer, such reduction has been approved by holders of
at least 66% of the Senior Secured Notes or (y) prior to giving effect to any
other Person becoming the beneficial owner of 50% or more of the Issuer's voting
power pursuant to clause (iii) hereof, the transaction resulting in such change
in beneficial ownership is approved by holders of at least 66% of the Senior
Secured Notes.

                  "Clearstream" means Citibank, N.A., as operator of Clearstream
Banking, S.A.

                  "Closing Date" means February 13, 2004.

                  "Code" means the U.S. Internal Revenue Code of 1986, as
amended.

                  "Collateral" means all collateral pledged, or in respect of
which a lien is granted, pursuant to this Indenture or the Security Documents.



                                      -5-


                                                                          Page 6

                  "Collateral Agency Agreement" means that certain Collateral
Agency Agreement among the Issuer, each of the Issuer's Subsidiaries, the
Collateral Agent, the Trustee and the Depositary.

                  "Collateral Agent" means Union Bank of California, N.A., as
collateral agent for the benefit of the Secured Parties, together with its
successors and assigns.

                  "Collection Expenses" means all reasonable out-of-pocket costs
or expenses (if any) and, if applicable, reasonable transaction costs, incurred
by the Issuer in connection with the collection, enforcement, negotiation,
consummation, settlement, proceedings, administration or other activity related
to the receipt and/or collection of the relevant proceeds, as applicable.

                  "Commercial Operation" means, in connection with the Galena
Re-powering, the achievement of certain operational and capability criteria
specified for "commercial operation" in the Galena Power Purchase Agreement.

                  "Commercial Operation Date" means, in connection with the
Galena Re-powering, the date upon which Commercial Operation is achieved.

                  "ConAgra Lease" means that certain Lease, dated May 1, 2002,
between Brady and ConAgra Foods, Inc.

                  "Consolidated OG I Plant Connection Agreements" means the OG I
Plant Connection Agreement, the OG IH Plant Connection Agreement, and the OG IE
Plant Connection Agreement.

                  "Contractor" means Ormat Nevada in its capacity as contractor
if and when the Galena Re-powering Contract is executed.

                  "Contractor Guarantor" means Ormat Technologies.

                  "Control Agreements" means (i) each Control Agreement executed
and delivered by the Collateral Agent, the Issuer, certain of the Issuer's
Subsidiaries and the bank or institution where the Issuer's checking accounts
permitted to be established under this Indenture are held and (ii) each Control
Agreement executed and delivered by the Collateral Agent, the Issuer and certain
of the Issuer's Subsidiaries in connection with the Security Documents.

                  "Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 4.02 hereof or such other address as
to which the Trustee may give notice to the Issuer.

                  "Custodian" means, initially, the Trustee, and its successors
and assigns or any other custodian performing similar functions.


                                      -6-


                                                                          Page 7

                  "Debt Service Coverage Ratio" means, for any period, the ratio
of (i) the sum of all Cash Flow Available for Debt Service for such period to
(ii) the aggregate payments of scheduled or accelerated (in accordance with the
terms of the Financing Documents) principal, interest, premium, and Liquidated
Damages, if any, required to be made under this Indenture and other Financing
Documents and in connection with all other Permitted Indebtedness (other than
Subordinated Debt) for such period.

                  "Debt Service Reserve Account" means the account of such name
created under the Depositary Agreement.

                  "Debt Service Reserve Letter of Credit" means an Acceptable
Letter of Credit that may be drawn in accordance with Section 3.4 of the
Depositary Agreement.

                  "Debt Service Reserve Requirement" means, as of any date of
calculation, an amount equal to the projected principal, interest and, to the
extent that a Registration Default has occurred and is continuing, Liquidated
Damages due on the Senior Secured Notes during the succeeding six-month period.

                  "Deeds of Trust" means, collectively, (i) that certain Deed of
Trust, Assignment of Rents, Security Agreement, and Fixture Filing, dated as of
the Closing Date, executed by Steamboat Geothermal, as grantor, for the benefit
of the Collateral Agent, as beneficiary, (ii) on or after the Ormesa Support
Date, that certain Deed of Trust, Assignment of Rents, Security Agreement, and
Fixture Filing, to be executed by Ormesa, as Trustor, for the benefit of the
Collateral Agent, as beneficiary, (iii) that certain Deed of Trust, Assignment
of Rents, Security Agreement, and Fixture Filing, to be executed by Steamboat
Development, as grantor, for the benefit of the Collateral Agent, as
beneficiary, in the event the respective Resource Lease Consent is obtained,
(iv) that certain Deed of Trust, Assignment of Rents, Security Agreement, and
Fixture Filing, to be executed by Brady Power Partners as grantor, for the
benefit of the Collateral Agent, as beneficiary, to the extent any necessary
Resource Lease Consents are obtained, (v) a Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing to be executed by Mammoth-Pacific, if the
Issuer or any Guarantor acquires that portion of the Capital Stock of
Mammoth-Pacific that the Issuer and the Guarantors do not own on the Closing
Date or the Issuer and the Guarantors otherwise acquire control of 100% of the
ownership interest of the Mammoth Plant, and (vi) a Deed of Trust, Assignment of
Rents, Security Agreement and Fixture Filing, or the equivalents thereof, to be
executed by the Issuer or a Subsidiary of the Issuer that acquires a Qualified
Project.

                  "Default" means an event or condition that, with the giving of
notice or lapse of time, or any combination thereof, would become an Event of
Default.

                  "Delay Liquidated Damages" means amounts to be paid by the
Contractor pursuant to Section 11.1 of the Galena Re-powering Contract.

                                      -7-

                                                                          Page 8

                  "Depositary Agent" means Union Bank of California, N.A., as
Depositary under the Depositary Agreement, together with its successors and
assigns.

                  "Depositary Agreement" means the Deposit and Disbursement
Agreement, dated as of the Closing Date, among the Issuer, each of the Issuer's
Subsidiaries (other than Ormesa prior to the Ormesa Support Date), the
Collateral Agent, the Depositary and the Securities Intermediary.

                  "Depository" means, with respect to the Senior Secured Notes
issuable or issued in whole or in part in global form, DTC, and any and all
successors thereto appointed as depository hereunder and having become such
pursuant to the applicable provision of this Indenture.

                  "Desert Peak 1 Plant" means the geothermal generating plant
located in Churchill County, Nevada, owned by Brady and providing, as of the
Closing Date, net generating capacity of 6.1 MW.

                  "Desert Peak Sublease" means that certain sublease, dated as
of or before the Closing Date, between Brady and Western States Geothermal
Company.

                  "Distribution Account" means the account of such name created
under the Depositary Agreement.

                  "Distribution Conditions" has the meaning set forth in Section
3.8(b) of the Depositary Agreement.

                  "Distribution Date" means any Business Day on or within 60
days after a Scheduled Payment Date, on which the Issuer may make a Restricted
Payment in accordance with the terms of this Indenture.

                  "Distribution Suspense Account" means the account of such name
created under the Depositary Agreement.

                  "Dollars" and "$" means lawful money of the United States.

                  "DTC" means The Depository Trust Company.

                  "Eligible Letter of Credit Provider" means a U.S. commercial
bank(s) or financial institution(s) or a U.S. branch of a foreign commercial
bank(s) or financial institution(s) with an investment grade rating (provided
that any such rating shall not be based solely on such bank's or financial
institution's foreign currency rating at such time).

                  "Eminent Domain Proceeds" means all amounts and proceeds
(including instruments) received by the Issuer or any Guarantor in respect of
any Event of Eminent Domain.

                                      -8-


                                                                          Page 9

                  "Energy Services Agreement" means that certain Energy Services
Agreement, dated February 11, 2003, between Imperial Irrigation District and
Ormesa.

                  "Euroclear" means Euroclear Bank S.A./N.V., as operator of the
Euroclear system.

                  "ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended.

                  "Event of Abandonment" means, with respect to a Plant, the
suspension or cessation for a period of at least 120 consecutive days of all or
substantially all of the operational and maintenance activities at such Plant;
provided, however, that any such suspension or cessation that arises from an
Event of Loss, a requirement of law, an event of force majeure, curtailment or
failure to be dispatched, or other bona fide business reasons shall not
constitute an Event of Abandonment, in each case, so long as the Issuer or the
Issuer's applicable Subsidiaries are taking commercially reasonable actions to
overcome or mitigate the effects of the cause of suspension or cessation so that
maintenance and/or operations, as the case may be, can be resumed. Any period of
cessation or suspension shall end on the date that operation and maintenance
activities of a substantial nature are resumed.

                  "Event of Default" means the occurrence of any of the events
set forth under Section 5.01 hereof.

                  "Event of Eminent Domain" means any compulsory transfer or
taking or transfer under threat of compulsory transfer or taking of any material
part of the Collateral or a Project by any Governmental Authority.

                  "Event of Loss" means an event which causes all or a portion
of the Project to be damaged, destroyed or rendered unfit for normal use for any
reason whatsoever, other than an Event of Eminent Domain or a Title Event.

                  "Exchange Act" means the U.S. Securities Exchange Act of 1934,
as amended.

                  "Exchange Notes" means (i) the 8 1/4% Senior Secured Notes due
2020, registered under the Securities Act, issued pursuant to this Indenture in
connection with an Exchange Offer pursuant to the Registration Rights Agreement
and (ii) Additional Notes, if any, issued pursuant to a registration statement
filed with the SEC under the Securities Act.

                  "Exchange Offer" means the exchange and issuance by the
Issuer, pursuant to the Registration Rights Agreement, of a principal amount of
Exchange Notes (which will be registered pursuant to the Exchange Offer
Registration Statement) equal to the outstanding principal amount of Initial
Notes or Additional Notes, as the case may be, tendered by Holders thereof in
connection with such exchange and issuance.

                                      -9-

                                                                         Page 10

                  "Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.

                  "Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal fund transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York or, if such rate is not so published for
any day that is a Business Day, the average of the quotations for such day on
such transactions received by the issuing bank from three federal funds brokers
of recognized standing selected by it.

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

                  "Final Acceptance" means, in connection with the Galena
Re-powering, that the Contractor has (i) satisfied or is deemed to have
satisfied all of the requirements for Final Acceptance set forth in Section 7.1
of the Galena Re-powering Contract, and (ii) delivered to ORNI 7 the final
waivers and releases of Liens.

                  "Final Acceptance Date" means, in connection with the Galena
Re-powering Contract, the date upon which the Contractor has achieved Final
Acceptance.

                  "Final Completion" means, with respect to the Galena
Re-powering, that both (a) Final Acceptance has occurred, as certified by the
Issuer and concurred with by the Independent Engineer and (b) that Commercial
Operation has occurred, as certified by the Issuer and confirmed by the Galena
Power Purchaser.

                  "Final Completion Date" means, with respect to the Galena
Re-powering, the date upon which both (a) Final Acceptance has occurred, as
certified by the Issuer and concurred with by the Independent Engineer and (b)
Commercial Operation has occurred, as certified by the Issuer and confirmed by
the Galena Power Purchaser.

                  "Final Maturity Date" means the latest stated maturity date of
any of the Senior Secured Notes.

                  "Financing Documents" means the Senior Secured Notes, the
Guarantees (including those issued pursuant to the Exchange Offer, if and when
issued), this Indenture, the Security Documents, the Note Purchase Agreement,
the Registration Rights Agreement, the Exchange Notes, the Letters of Credit and
any other credit or security agreement executed by a Financing Entity in respect
of a Project.

                  "Financing Entity" means the Issuer, the Guarantors and Ormat
Nevada.

                                      -10-


                                                                         Page 11

                  "Fleetwood Geothermal Resources Sublease" means that certain
Geothermal Resources Sublease, dated May 31, 1991, between Steamboat
Development, as subtenant, and Fleetwood Corporation, as sublandlord, as amended
by the amendment dated June 11, 1991.

                  "Fluid Supply Agreement" means that certain Fluid Supply
Agreement, dated December 15, 2003, between Brady and Western States Geothermal
Company.

                  "FPA" means the Federal Power Act, as amended.

                  "GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect as of the relevant date of
determination.

                  "Galena Power Purchaser" means the party purchasing power from
Steamboat Geothermal under the Galena Power Purchase Agreement.

                  "Galena Power Purchase Agreement" means a power purchase
agreement between ORNI 7 and either Sierra Pacific Power Company or Nevada Power
Company, providing for a price of not less than $.052 kWh (escalating by one
percent (1%) on an annual basis) and containing terms no less favorable than
those set forth under "Description of Our Principal Contracts -- Steamboat
Complex -- Galena Re-powering Documents -- Galena Power Purchase Agreement," in
the Offering Memorandum, including without limitation, the obligation of ORNI 7
to deliver electrical energy in the amounts consistent with an expected
generation based on a nominal net capacity of 18 MW.

                  "Galena Re-powering" means the upgrading of the Steamboat
Geothermal Plant with the intent to achieve a minimum net electrical output of
18 MW through the replacement of certain equipment at the Steamboat Geothermal
Plant and the possible addition of geothermal resources from the Steamboat
Development Plant.

                  "Galena Re-powering Account" means the account of such name
created under the Depositary Agreement.

                  "Galena Re-powering Contract" means the Engineering,
Procurement and Galena Re-powering Contract dated as of the Closing Date between
the Contractor and ORNI 7.

                  "Galena Re-powering Letter of Credit" means an Acceptable
Letter of Credit having, at all times while such letter of credit is in effect,
an amount available to be drawn that, when added to that amount then on deposit
in the Galena Re-powering Account, is not less than the Galena Re-powering
Requirement at such time.

                                      -11-

                                                                         Page 12

                  "Galena Re-powering Performance Redemption" has the meaning
set forth in Section 3.08(d) of this Indenture.

                  "Galena Re-powering Requirement" means $19,400,000, or if
amounts have been previously withdrawn from the Galena Re-powering Account
pursuant to the Depositary Agreement the greater of an amount equal to (i)
$19,400,000 less the sum of the amounts that have been previously withdrawn from
the Galena Re-powering Account and (ii) the remaining amount the Independent
Engineer certifies is necessary to achieve the Final Completion Date with
respect to the Galena Re-powering; provided, however, that if additional amounts
are required to be deposited within the Galena Re-powering Account as a result
of this clause (ii), the Issuer shall be permitted to transfer amounts from the
Distribution Suspense Account into the Galena Re-powering Account in order to
satisfy such requirement.

                  "Geothermal Consultant" means Geothermex, Inc. or another
widely recognized independent geothermal engineering firm retained by the Issuer
as Geothermal Consultant.

                  "Geothermal Resources Leases" means the Sierra Pacific
Geothermal Resources Lease, the Guisti Geothermal Resources Lease, the Fleetwood
Geothermal Resources Sublease, the Magma Geothermal Resources Lease, the
Mammoth-BLM Geothermal Resources Lease CA 11667, the Mammoth-BLM Geothermal
Resources Lease CA 14408, the Ormesa-BLM Geothermal Resources Lease CA 964, the
Ormesa-BLM Geothermal Resources Lease CA 966, the Ormesa-BLM Geothermal
Resources Lease CA 1903, the Ormesa-BLM Geothermal Resources Lease CA 6217, the
Ormesa-BLM Geothermal Resources Lease CA 6218, the Ormesa-BLM Geothermal
Resources Lease CA 6219, the Ormesa-BLM Geothermal Resources Lease CA 17568, the
Railway Geothermal Resources Lease, the ConAgra Lease, the Brady-BLM Geothermal
Resources Lease N-10922, the Brady-BLM Geothermal Resources Lease N-46566, the
Brady-BLM Geothermal Resources Lease N-40353, and the Brady-BLM Geothermal
Resources Lease N-40355.

                  "G1 Power Purchase Agreement" means that certain Amended and
Restated Power Purchase and Sales Agreement, dated December 2, 1986, between
Mammoth-Pacific and Southern California Edison, as amended by that certain
Amendment No. 1 to the Amended and Restated Power Purchase and Sales Agreement,
dated May 18, 1990.

                  "G2 Interconnection Facilities Agreement" means that certain
Interconnection Facilities Agreement, attached to that certain Amendment No. 1 -
Power Purchase Contract as Appendix A, dated October 27, 1989, between
Mammoth-Pacific and Southern California Edison.

                  "G2 Power Purchase Agreement" means that certain Power
Purchase Contract, dated April 15, 1985, between Mammoth-Pacific and Southern
California Edison, as amended by that certain Amendment No. 1 - Power Purchase
Contract, dated October 27, 1989, and as amended further by that certain
Amendment No. 2 - Power Purchase Contract, dated December 20, 1989.

                                      -12-


                                                                         Page 13

                  "G3 Interconnection Facilities Agreement" means that certain
Interconnection Facilities Agreement, dated October 27, 1989, between
Mammoth-Pacific and Southern California Edison.

                  "G3 Power Purchase Agreement" means that certain Power
Purchase Contract, dated April 16, 1985, between Mammoth-Pacific (as successor
to Santa Fe Geothermal, Inc.), and Southern California Edison, as amended by
that certain Amendment No. 1 to the Power Purchase Contract, dated October 27,
1989, between Mammoth-Pacific and Southern California Edison and as amended
further by that certain Amendment No. 2 - Power Purchase Contract, dated
December 20, 1989.

                  "Global Note Legend" means the legend set forth in Exhibit
A-1/A-2 hereto.

                  "Global Notes" shall mean a Senior Secured Note that evidences
all or part of the Senior Secured Notes and bears the appropriate legend set
forth in Exhibit A-1/A-2 (or such legend as may be contemplated by Section 2.02
for such Senior Secured Notes).

                  "Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.

                  "Governmental Approvals" means all governmental approvals,
authorizations, consents, decrees, permits, waivers, privileges and filings with
or from all Governmental Authorities required to be obtained or made for the
ownership, construction, operation and maintenance of a Project.

                  "Governmental Authority" means the government of any federal,
state, municipal or other political subdivision in which the Projects are
located, and any other government or political subdivision thereof exercising
jurisdiction over the Projects or any of their assets or any party to any of the
Project Documents, including all agencies and instrumentalities of such
governments and political subdivisions.

                  "Guarantee" means each guarantee by a Guarantor of the
Issuer's obligations under the Financing Documents pursuant to Article IX or
another writing pursuant to which a Guarantor agrees to be bound by the terms
applicable to Guarantors set forth in Article IX.

                  "Guarantor" means (i) each of Brady, Steamboat Development,
Steamboat Geothermal, OrMammoth, the ORNI Entities and their respective
successors and assigns and (ii) from and after the date of such execution, any
of the Issuer's other direct or indirect Subsidiaries that execute a Guarantee
(including without limitation, in connection with the acquisition of a Qualified
Project) in accordance with the provisions of Sections 4.30 and 4.38 of this
Indenture and their respective successors and assigns.

                  "Guisti Geothermal Resources Lease" means that certain
Geothermal Resources Lease, dated June 27, 1988 among Steamboat Development,
Bernice Guisti, Judith Harvey and



                                      -13-


                                                                         Page 14

Karen Thompson, as Trustees and Beneficiaries of the Guisti Trust, as amended by
that certain Amendment to Geothermal Resources Lease dated January 1992, and
that certain Second Amendment to Geothermal Resources Lease dated June 25, 1993.

                  "Hazardous Substance" means any substance, pollutant or
contaminant now or hereafter included in such (or any similar) term under any
state, federal or local ordinance, statute, law or regulation now in effect or
hereafter enacted or amended.

                  "Holder" means a Person in whose name a Senior Secured Note is
registered in the register maintained pursuant to Section 2.07(a).

                  "IID Water Supply Agreement" means that certain Amended and
Restated Water Supply Agreement, dated March 6, 1990, between Ormesa (as
successor to Trigor Geothermal Corporation) and the Imperial Irrigation
District.

                  "Indebtedness" of any Person means, at any date, without
duplication:

                  (i)      all obligations of such Person for borrowed money;

                  (ii) all obligations of such Person evidenced by bonds,
         debentures, notes or other similar instruments (excluding "deposit
         only" endorsements on checks payable to the order of such Person);

                  (iii) all obligations of such Person to pay the deferred
         purchase price of property or services (except accounts payable and
         similar obligations arising in the ordinary course of business shall
         not be included herein);

                  (iv) all obligations of such Person as lessee under capital
         leases to the extent required to be capitalized on the books of such
         Person in accordance with GAAP;

                  (v) all obligations of such Person under conditional sale or
         other title retention agreements relating to property or assets
         purchased by such Person;

                  (vi) all Indebtedness of others secured by (or for which the
         holder of such indebtedness has an existing right, contingent or
         otherwise, to be secured by) any Lien on property owned or acquired by
         such Person, whether or not the obligations secured thereby have been
         assumed;

                  (vii) all obligations of such Person in respect of interest
         rate swaps, collars or caps and other interest rate protection
         arrangements, foreign currency exchange agreements, commodity exchange,
         commodity future, commodity forward or commodity option agreements, or
         other interest or exchange rate or commodity hedging arrangements;

                                      -14-

                                                                         Page 15

                  (viii) all obligations of such Person as an account party in
         respect of letters of credit and bankers' acceptances; and

                  (ix) all obligations of others of the type referred to in
         clauses (i) through (viii) above guaranteed by such Person, whether or
         not secured by a Lien or other security interest on any asset of such
         Person.

                  "Indenture" means this Indenture, as amended or supplemented
from time to time.

                  "Independent Consultant" means the Independent Engineer, the
Insurance Consultant and the Geothermal Consultant.

                  "Independent Engineer" means Stone & Webster Management
Consultants, Inc., or another widely recognized independent engineering firm
retained as Independent Engineer by the Issuer.

                  "Initial Galena Re-powering Withdrawal Conditions" has the
meaning set forth in Section 3.5(d) of the Depositary Agreement.

                  "Initial Notes" means $190,000,000 in aggregate principal
amount of 8 1/4% Senior Secured Notes due 2020 issued under this Indenture on
the Closing Date.

                  "Initial Purchaser" means Lehman Brothers Inc.

                  "Insurance Consultant" means Marsh USA, Inc., or its
successors; provided that such successor is another nationally recognized
independent insurance consultant.

                  "Interconnection Agreements" means the Steamboat 1/1A
Interconnection Agreement, Steamboat 2/3 Interconnection Agreement, the Mammoth
Interconnection Facilities Agreements, the Ormesa Interconnection Agreements,
and the Brady/Desert Peak 1 Interconnection Agreement.

                  "Interest Payment Date" means each June 30 and December 30
commencing June 30, 2004 and concluding on the Final Maturity Date.

                  "Investment Grade" means a rating of Baa3 or better by Moody's
and BBB- or better by S&P (or an equivalent rating by another nationally
recognized credit rating agency if one or more of such corporations are not in
the business of rating long-term obligations of commercial banks at the time of
issuance); provided, that such rating is not on review for possible downgrade or
on negative watch by any such agency.

                  "Investments" means, with respect to any Person, all direct or
indirect investments by such Person in other Persons (including Affiliates) in
the forms of loans (including guarantees or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course



                                      -15-


                                                                         Page 16

of business), purchases or other acquisitions for consideration of Indebtedness,
Capital Stock or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.

                  "Kilowatt" or "KW" means one thousand watts.

                  "Kilowatt-hours" or "kWh" means a unit of electrical energy
equal to one kilowatt of energy supplied or taken from an electric circuit
steadily for one hour.

                  "Letter of Credit" means the Debt Service Reserve Letter of
Credit, the Galena Re-powering Letter of Credit or the Ormesa Repayment Letter
of Credit, as the case may be.

                  "Letter of Transmittal" means the letter of transmittal to be
prepared by the Issuer and sent to all Holders of the Initial Notes and
Additional Notes for use by such Holders in connection with the Exchange Offer.

                  "Lien" means any mortgage, pledge, hypothecation, assignment,
mandatory deposit arrangement, encumbrance, security interest, charge, lien
(statutory or other), preference, priority or other collateral agency agreement
of any kind or nature whatsoever which has the substantial effect of
constituting a security interest, including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same effect as any of the foregoing and the filing of any
financing statement or similar instrument under the Uniform Commercial Code or
comparable law of any jurisdiction, domestic or foreign.

                  "Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.

                  "Loss Proceeds" means all proceeds from an Event of Loss
received by the Issuer or any Guarantor, including, without limitation,
insurance proceeds or other amounts actually received, except proceeds of
business interruption insurance.

                  "Magma Geothermal Resources Lease" means that certain
Geothermal Lease, dated August 31, 1983, between Mammoth-Pacific and Magma Power
Company, as amended by amendments dated April 30, 1987, January 1, 1990, and
April 12, 1991.

                  "Make-Whole Premium" means a premium equal to the excess, if
any, of (a) the present value of all scheduled principal and interest payments
on all Senior Secured Notes to be redeemed (discounted at a rate equal to the
yield to maturity of U.S. Treasury securities having an average life equal to
the Remaining Average Life of the Senior Secured Notes, plus 50 basis points)
over (b) the principal amount of the Senior Secured Notes to be redeemed.

                  "Mammoth-BLM Geothermal Resources Lease CA 11667" means that
certain Geothermal Resources Lease CA 11667, dated March 1, 1982, between
Mammoth-Pacific and the United States of America through the Bureau of Land
Management of the Department of the Interior.

                                      -16-


                                                                         Page 17

                  "Mammoth-BLM Geothermal Resources Lease CA 14408" means that
certain lease for Geothermal Resources CA 14408, dated February 1, 1985, between
Mammoth-Pacific and the United States of America through the Bureau of Land
Management of the Department of the Interior.

                  "Mammoth-BLM Site License" means that certain License for
Electric Power Plant Site CA 21918, dated July 26, 1989, between Mammoth-Pacific
and the United States of America through the Bureau of Land Management of the
Department of the Interior.

                  "Mammoth Enhancement" means the investment in additional
equipment and other enhancements at the Mammoth Project that are designed to
increase output at the Mammoth Plant by 3.6 MW.

                  "Mammoth Enhancement Redemption" has the meaning set forth in
Section 3.08(e) of this Indenture.

                  "Mammoth Interconnection Facilities Agreements" means the G2
Interconnection Facilities Agreement and the G3 Interconnection Facilities
Agreement.

                  "Mammoth Operation and Maintenance Agreement" means that
certain Plant Operating Services Agreement, dated January 1, 1995, between Ormat
Nevada (as successor to Pacific Power Plant Operations) and Mammoth-Pacific.

                  "Mammoth-Pacific" means Mammoth-Pacific, L.P. (California), a
California limited partnership.

                  "Mammoth-Pacific LP Agreement" means that certain Amended and
Restated Agreement of Limited Partnership of Mammoth-Pacific dated January 26,
1990, among CD Mammoth Lakes I, Inc., CD Mammoth Lakes II, Inc. and OrMammoth,
as amended by the amendment dated June 13, 1995.

                  "Mammoth Plant" means the three geothermal power generating
plants, denominated the G1, G2 and G3 plants located in Mammoth Lakes,
California that are owned by Mammoth-Pacific (and in which OrMammoth has a 50%
partnership interest) and having a gross generating capacity of 35 MW.

                  "Mammoth Power Purchase Agreements" means the G1 Power
Purchase Agreement, the G2 Power Purchase Agreement and the G3 Power Purchase
Agreement.

                  "Material Adverse Effect" means a material adverse effect on
(i) the Issuer's or any of the Issuer's Subsidiaries' results of operations or
financial condition (taken as a whole), (ii) the validity or priority of the
Liens on the Collateral or Guarantees, (iii) the Issuer's or any of the Issuer's
Subsidiaries' ability (taken as a whole) to observe and perform any of the
Issuer's or any of the Issuer's Subsidiaries' material obligations under the
Transaction Documents to which the Issuer or any of the Issuer's Subsidiaries is
a party or (iv) the ability of the



                                      -17-


                                                                         Page 18

Trustee or the Collateral Agent to enforce any of the payment or other material
obligations of the Issuer, any Guarantor or Ormat Nevada under the Financing
Documents to which the Issuer, the Guarantors or Ormat Nevada are parties, as
the case may be.

                  "Material Project Documents" means the Power Purchase
Agreements, the Operation and Maintenance Agreements, the Interconnection
Agreements, the Geothermal Resources Leases, the Site Licenses, the
Mammoth-Pacific LP Agreement, the IID Water Supply Agreement, the Fluid Supply
Agreement, the Desert Peak Sublease, the Brady Settlement Agreement, the Galena
Re-powering Contract and any Additional Project Document.

                  "Megawatt" or "MW" means one million watts.

                  "Megawatt-hours" or "MWh" means one thousand KWh.

                  "Meyburg Geothermal Resources Lease" means that certain
Geothermal Resources Lease, between ORNI 7, as lessee, and ORNI 6, as lessor.

                  "Moody's" means Moody's Investors Service, Inc., a corporation
organized and existing under the laws of the State of Delaware, its successors
and assigns.

                  "Net Available Amount" means, with respect to any proceeds,
such proceeds net of the related Collection Expenses.

                  "Note Purchase Agreement" means the Note Purchase Agreement
among the Issuer, the Guarantors and the Initial Purchaser for the sale and
purchase of the Senior Secured Notes.

                  "Offering" means the offering of the Senior Secured Notes
described herein.

                  "Offering Memorandum" means that certain offering memorandum
dated February 6, 2004, relating to the offer of the Senior Secured Notes for
sale.

                  "Officer's Certificate" means a certificate signed by the
Issuer's Authorized Representative.

                  "OG I Plant Connection Agreement" means that certain Plant
Connection Agreement for the Ormesa Geothermal Plant, dated October 1, 1985,
between Ormesa (as successor to Ormesa Geothermal) and the Imperial Irrigation
District.

                  "OG I Power Purchase Agreement" means that certain Power
Purchase Contract, dated July 18, 1984, between Ormesa (as successor to Republic
Geothermal, Inc.) and Southern California Edison, as amended by that certain
Amendment No. 1 to the Power Purchase Contract, dated December 23, 1988, between
Ormesa (as successor to Ormesa Geothermal) and Southern California Edison.

                                      -18-


                                                                         Page 19

                  "OG I Transmission Service Agreement" means that certain
Transmission Service Agreement for the Ormesa I, Ormesa IE and Ormesa IH
Geothermal Power Plants, dated October 3, 1989, between Ormesa (as successor to
Ormesa Geothermal) and the Imperial Irrigation District.

                  "OG IE Plant Connection Agreement" means that certain Plant
Connection Agreement for the Ormesa IE Geothermal Power Plant, dated October 21,
1988, between Ormesa (as successor to Ormesa IE) and the Imperial Irrigation
District.

                  "OG IH Plant Connection Agreement" means that certain Plant
Connection Agreement for the Ormesa IH Geothermal Power Plant, dated October 3,
1989, between Ormesa (as successor to Ormesa IH) and the Imperial Irrigation
District.

                  "OG II Plant Connection Agreement" means that certain Plant
Connection Agreement for the Ormesa Geothermal Plant No. 2, dated May 26, 1987,
between Ormesa (as successor to Ormesa Geothermal II) and the Imperial
Irrigation District.

                  "OG II Power Purchase Agreement" means that certain Power
Purchase Contract, dated June 13, 1984, between Ormesa (as successor to Ormat
Systems Inc.) and Southern California Edison.

                  "OG II Transmission Service Agreement" means that certain
Transmission Service Agreement for the Ormesa II Geothermal Power Plant, dated
August 25, 1987, between Ormesa (as successor to Ormesa Geothermal II) and the
Imperial Irrigation District.

                  "Operating and Maintenance Expenses" means, for any period,
all amounts disbursed by or on behalf of the Issuer or any Subsidiary of the
Issuer in such period for operation, maintenance, administration, repair (other
than repair done in response to a casualty event), or improvement of a Project,
including, without limitation, premiums on insurance policies, property and
other taxes, litigation expenses and costs, payments under leases, royalty and
other land use agreements, and fees, expenses, and any other payments required
under the Project Documents; provided, "Operating and Maintenance Expenses"
shall not include (i) any payment made in respect of the Financing Documents or
with respect to any Indebtedness, (ii) any payment or dividends or other
distributions to Ormat Nevada or any of the Issuer's other Affiliates other than
payments under Project Documents, (iii) any tax paid or payable by any of the
Issuer's direct or indirect equity owners with respect to the Issuer's income or
receipts or (iv) any amounts for construction related to the Galena Re-powering.

                  "Operating Budget" means the annual budget of Operating and
Maintenance Expenses for the Projects, as prepared in good faith by the Issuer
for each fiscal year, or part thereof, of the Issuer, showing such costs by
category and, where applicable, by Project.

                  "Operating Subsidiaries" means all of the Issuer's
Subsidiaries other than OrMammoth unless OrMammoth purchases the partnership
interests of Mammoth-Pacific it does not currently own.

                                      -19-


                                                                         Page 20

                  "Operation and Maintenance Agreements" means the Steamboat
Complex Operation and Maintenance Agreement, the Mammoth Operation and
Maintenance Agreement, the Ormesa Operation and Maintenance Agreement, and the
Brady Operation and Maintenance Agreement.

                  "Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
10.05 hereof. The counsel may be an employee of or counsel to the Issuer, any
Affiliate of the Issuer or the Trustee.

                  "Organizational Documents" means as to any Person, the
articles of incorporation, by laws, partnership agreement, limited liability
company agreement, operating agreement or other organizational or governing
documents of such Person.

                  "OrMammoth" means OrMammoth Inc., a Delaware corporation.

                  "Ormat Nevada" means Ormat Nevada Inc., a Delaware
corporation.

                  "Ormat Nevada Subordinated Loan" means a subordinated Credit
Agreement between the Issuer and Ormat Nevada that constitutes Subordinated
Debt.

                  "Ormat Technologies" means Ormat Technologies, Inc., a
Delaware corporation.

                  "Ormesa" means Ormesa LLC, a Delaware limited liability
company.

                  "Ormesa-BLM Geothermal Resources Lease CA 964" means the
Geothermal Resources Lease CA 964, dated September 1, 1974, between Ormesa and
the United States of America through the Bureau of Land Management of the
Department of the Interior.

                  "Ormesa-BLM Geothermal Resources Lease CA 966" means the
Geothermal Resources Lease CA 966, dated August 1, 1974, between Ormesa and the
United States of America through the Bureau of Land Management of the Department
of the Interior.

                  "Ormesa-BLM Geothermal Resources Lease CA 1903" means the
Geothermal Resources Lease CA 1903, dated September 1, 1974, between Ormesa and
the United States of America through the Bureau of Land Management of the
Department of the Interior.

                  "Ormesa-BLM Geothermal Resources Lease CA 6217" means the
Geothermal Resources Lease CA 6217, dated July 1, 1979, between Ormesa and the
United States of America through the Bureau of Land Management of the Department
of the Interior.

                  "Ormesa-BLM Geothermal Resources Lease CA 6218" means the
Geothermal Resources Lease CA 6218, dated July 1, 1979, between Ormesa and the
United States of America through the Bureau of Land Management of the Department
of the Interior.



                                      -20-



                                                                         Page 21

                  "Ormesa-BLM Geothermal Resources Lease CA 6219" means the
Geothermal Resources Lease CA 6219, dated July 1, 1979, between Ormesa and the
United States of America through the Bureau of Land Management of the Department
of the Interior.

                  "Ormesa-BLM Geothermal Resources Lease CA 17568" means the
Geothermal Resources Lease CA 17568, dated July 1, 1979, between Ormesa and the
United States of America through the Bureau of Land Management of the Department
of the Interior.

                  "Ormesa-BLM Site License CA 17129" means that certain License
for Electric Power Plant Site CA 17129, dated August 21, 1985, between Ormesa
and the United States of America through the Bureau of Land Management of the
Department of the Interior.

                  "Ormesa-BLM Site License CA 20172" means that certain License
for Electric Power Plant Site CA 20172, dated July 21, 1987, between Ormesa and
the United States of America through the Bureau of Land Management of the
Department of the Interior.

                  "Ormesa-BLM Site License CA 22079" means that certain License
for Electric Power Plant Site CA 22079, dated July 24, 1989, between Ormesa and
the United States of America through the Bureau of Land Management of the
Department of the Interior.

                  "Ormesa-BLM Site License CA 22405" means that certain License
for Electric Power Plant Site CA 22405, dated June 7, 1988, between Ormesa and
the United States of America through the Bureau of Land Management of the
Department of the Interior.

                  "Ormesa-BLM Site License CA 24678" means that certain License
for Electric Power Plant Site CA 24678, dated September 18, 1989, between Ormesa
and the United States of America through the Bureau of Land Management of the
Department of the Interior.

                  "Ormesa Credit Agreement" means the Credit Agreement dated
December 31, 2002 among Ormesa, United Capital as Administrative Agent and
Collateral Agent, and the lenders party thereto from time to time.

                  "Ormesa Interconnection Agreements" means the Consolidated OG
I Plant Connection Agreements, the OG I Transmission Service Agreement, the OG
II Plant Connection Agreement and the OG II Transmission Service Agreement.

                  "Ormesa Loan Repayment Account" means the account of such name
created under the Depositary Agreement.

                  "Ormesa Operation and Maintenance Agreement" means that
certain Operation and Maintenance Agreement, dated April 15, 2002, between
Ormesa and Ormat Nevada.

                  "Ormesa Plant" means the six geothermal power generating
plants located in East Mesa, Imperial Valley, California, owned by Ormesa and
having a gross generating capacity of 94 MW.

                                      -21-


                                                                         Page 22


                  "Ormesa Power Purchase Agreements" means the OG I Power
Purchase Agreement and the OG II Power Purchase Agreement.

                  "Ormesa Repayment Letter of Credit" means an Acceptable Letter
of Credit having, at all times such letter of credit is in effect, an amount
available to be drawn that, when added to the amount of cash then on deposit in
the Ormesa Loan Repayment Account, is in an amount not less than the Ormesa
Repayment Requirement.

                  "Ormesa Repayment Requirement" means an amount equal to
$15,500,000, which is equal to the aggregate principal amount outstanding under
the Ormesa Credit Agreement on the Closing Date less cash on deposit in the
"debt service reserve account" under the Ormesa Credit Agreement and amounts
actually repaid under the Ormesa Credit Agreement in 2004; provided, however,
that with respect to the aggregate principal amount paid on September 30, 2004,
such amount shall not be reduced to an amount less than 102% of the remaining
aggregate principal amount outstanding under the Ormesa Credit Agreement less
cash on deposit in the "debt service reserve account" under the Ormesa Credit
Agreement on such date.

                  "Ormesa Support Date" means the earliest to occur of (i)
January 31, 2005; (ii) any other date as of which the amount payable in respect
of the Ormesa Credit Agreement has been paid in full; and (iii) any other date
as of which Ormesa is no longer prohibited from granting liens pursuant to the
Ormesa Credit Agreement.

                  "ORNI 6" means ORNI 6 LLC, a Delaware limited liability
company.

                  "ORNI 7" means ORNI 7 LLC, a Delaware limited liability
company.

                  "ORNI Entities" means ORNI 1 LLC, a Delaware limited liability
company, ORNI 2 LLC, a Delaware limited liability company and ORNI 7.

                  "Outstanding" in connection with the Senior Secured Notes,
means, as of the time in question, all Senior Secured Notes authenticated and
delivered under this Indenture, except (i) Senior Secured Notes theretofore
canceled or required to be canceled under this Indenture; (ii) Senior Secured
Notes for which provision for payment shall have been made in accordance with
this Indenture; and (iii) Senior Secured Notes in substitution for which other
Senior Secured Notes have been authenticated and delivered pursuant to this
Indenture.

                  "Overdue Principal" shall mean, as of any Payment Date, all
principal of any Senior Secured Note which has become due and payable and not
been punctually paid or duly provided for when and as due and payable, whether
as a result of insufficient available funds or otherwise.

                  "Paying Agent" has the meaning set forth in Section 2.07(a) of
this Indenture.

                  "Payment Date" means any Interest Payment Date or Principal
Payment Date.

                                      -22-


                                                                         Page 23

                  "Performance Guarantee Tests" means the performance tests
conducted in accordance with the Galena Re-powering Contract to demonstrate and
verify that the Steamboat Geothermal Facility has satisfied the Performance
Guarantees and certain other performance criteria.

                  "Performance Guarantees" has the meaning given in the Galena
Re-powering Contract.

                  "Performance Liquidated Damages" means the liquidated damages
payable by the Contractor to Steamboat Geothermal pursuant to the Galena
Re-powering Contract as a consequence of the failure of the Steamboat Geothermal
Facility to meet certain of the Performance Guarantees.

                  "Permitted Additional Senior Lender" means a holder of any
Senior Secured Obligations other than the Senior Secured Notes.

                  "Permitted Indebtedness" has the meaning set forth in Section
4.18 of this Indenture.

                  "Permitted Investments" means an investment in any of the
following: (i) direct obligations of the Department of the Treasury of the
United States of America; (ii) obligations of any federal agencies which
obligations are backed by the full faith and credit of the United States of
America; (iii) commercial paper rated in any one of the two highest rating
categories by Moody's or S&P; (iv) investment agreements with banks (foreign and
domestic), broker/dealers, and other financial institutions rated at the time of
bid in any one of the three highest rating categories by Moody's and S&P; (v)
repurchase agreements with banks (foreign and domestic), broker/dealers, and
other financial institutions rated at the time of bid in any one of the three
highest rating categories by Moody's and S&P, provided, that (1) collateral is
limited to the securities specified in clauses (i) and (ii) above, (2) the
margin levels for collateral must be maintained at a minimum of 102% including
principal and interest, (3) the Collateral Agent shall have a first priority
perfected security interest in the collateral, (4) the collateral will be
delivered to a third party custodian, designated by the Issuer, acting for the
benefit of the Collateral Agent and all fees and expenses related to collateral
custody will be the responsibility of the Issuer, (5) the collateral must have
been or will be acquired at the market price and marked to market weekly and
collateral level shortfalls cured within 24 hours and (6) unlimited right of
substitution of collateral is allowed provided that substitution collateral must
be permitted collateral substituted at a current market price and substitution
fees of the custodian shall be paid by the Issuer; (vi) forward purchase
agreements delivering securities specified in clauses (i) and (iii) above with
banks (foreign and domestic), broker/dealers, and other financial institutions
maintaining a long-term rating on the day of bid no lower than investment grade
by both S&P and Moody's (such rating may be at either the parent or subsidiary
level); and (vii) money market funds rated "AAAm" or "AAAm-G" or better by S&P.

                                      -23-


                                                                         Page 24

                  "Permitted Liens" means (a) the rights and interests of the
Collateral Agent and any other Secured Party as provided in the Financing
Documents; (b) Liens for any tax, either secured by a bond or other reasonable
security or not yet due or being contested in good faith and by appropriate
proceedings, so long as (i) such proceedings shall not involve any substantial
danger of the sale, forfeiture or loss of the Projects, the sites of the Project
or any easements, as the case may be, title thereto or any interest therein and
shall not interfere in any material respect with the use of any Project, any
Project sites or any easements, (ii) a bond or other reasonable security has
been posted or provided in such manner and amount as to assure that any taxes
determined to be due will be promptly paid in full when such contest is
determined or (iii) adequate reserves have been provided therefor to the extent
required by and in accordance with GAAP; (c) materialmen's, mechanics',
workers', repairmen's, employees' or other like Liens, arising in the ordinary
course of business or in connection with the development, construction,
operation and/or maintenance of any Project, either for amounts not yet due or
for amounts being contested in good faith and by appropriate proceedings so long
as (i) the Issuer reasonably determines that such proceedings shall not involve
any substantial danger of the sale, forfeiture or loss of any Project, any
Project sites or any easements, as the case may be, title thereto or any
interest therein and shall not interfere in any material respect with the use or
disposition of any Project, any Project sites or any easements, or (ii) a bond
or adequate cash reserves have been provided therefor to the extent required by
and in accordance with GAAP; (d) Liens arising out of judgments or awards so
long as enforcement of such Lien has been stayed and an appeal or proceeding for
review is being prosecuted in good faith and for the payment of which adequate
reserves, bonds or other reasonable security have been provided or are fully
covered by insurance; (e) title exceptions as reflected in the Title Policies
other than delinquent taxes and monetary liens which are to be paid on the
Closing Date; (f) Liens, deposits or pledges to secure statutory obligations;
(g) Liens, deposits or pledges to secure performance of bids, tenders, contracts
(other than for the repayment of borrowed money) or leases, or for purposes of
like general nature in the ordinary course of its business, not to exceed $5
million in the aggregate at any time, and with any such Lien to be released as
promptly as practicable; (h) other Liens incident to the ordinary course of
business that are not incurred in connection with the obtaining of any loan,
advance or credit and that do not in the aggregate materially impair the use of
the Issuer's or the Issuer's Subsidiaries' property or assets or the value of
such property or assets for the purposes of such business; (i) involuntary Liens
as contemplated by the Financing Documents and the Project Documents (including
a lien of an attachment or execution) securing a charge or obligation on any of
the Issuer's property, either real or personal, whether now or hereafter owned,
in the aggregate sum of less than $3 million; (j) until the Ormesa Support Date,
the Liens in favor of the lenders under the Ormesa Credit Agreement; and (k)
servitudes, easements, rights-of-way, restrictions, minor defects or
irregularities in title and such other encumbrances or charges against real
property or interests therein as of a nature generally existing with respect to
properties of similar character and which do not in a material way interfere
with the value or use thereof or the Issuer's business.

                  "Person" means any individual, sole proprietorship,
corporation, partnership, joint venture, limited liability partnership, limited
liability company, trust, unincorporated association, institution, Governmental
Authority or any other entity.

                                      -24-


                                                                         Page 25

                  "Place of Payment" when used with respect to the Senior
Secured Notes, shall mean the office or agency maintained pursuant to Section
4.02.

                  "Plants" means the Brady Plant, the Ormesa Plant, the
Steamboat Geothermal Plant, the Steamboat Development Plant, the Mammoth Plant
and geothermal power generating facilities acquired after the Closing Date that
constitute Qualified Projects.

                  "Pledge and Security Agreements" means each of the Pledge and
Security Agreements, to be executed by the Issuer, each of the Guarantors and
the Collateral Agent.

                  "Power Purchase Agreements" means the Steamboat 1 Plant Power
Purchase Agreement, the Steamboat 1A Plant Power Purchase Agreement, the
Steamboat 2/3 Project Power Purchase Agreements, the Galena Power Purchase
Agreement, the Mammoth Power Purchase Agreements, the Ormesa Power Purchase
Agreements, the Brady Project Power Purchase Agreement and any power purchase
agreements relating to a Qualified Project at the time such Qualified Project is
acquired by the Issuer or a Guarantor.

                  "Predecessor Notes" with respect to any particular Senior
Secured Note, shall mean any previous Senior Secured Note evidencing all or a
portion of the same debt as that evidenced by such particular Senior Secured
Note; for the purposes of this definition, any Senior Secured Note authenticated
and delivered pursuant to Section 2.08 in lieu of a lost, destroyed or stolen
Senior Secured Note shall be deemed to evidence the same debt as the lost,
destroyed or stolen Senior Secured Note.

                  "Principal Payment Date" when used with respect to any Senior
Secured Obligations means the date on which all or a portion of the principal of
such Senior Secured Obligations become due and payable as provided in this
Indenture or any other agreement governing such Senior Secured Obligations,
whether on a scheduled date for payment of principal, on a Redemption Date, the
Final Maturity Date, a date of declaration of acceleration, or otherwise.

                  "Private Placement Legend" means the legend referenced in
Section 2.02 to be placed on all Senior Secured Notes issued under this
Indenture except where otherwise permitted by the provisions of this Indenture.

                  "Project" means each Plant together with the related Project
Documents, governmental approvals relating to the Plant or Project Documents,
and any other item relating to the Plant, including any improvements to, and the
operation of the Plant and all activities related thereto.

                  "Project Costs" means, with respect to the Galena Re-powering,
without duplication, all costs and expenses paid, incurred or to be incurred by
Steamboat Geothermal to complete the development, design, engineering,
acquisition, construction, assembly, inspection, testing, completion and
start-up of the Galena Re-powering in the manner contemplated under the Galena
Re-powering Contract, including, without limitation, (i) Operating and
Maintenance



                                      -25-



                                                                         Page 26

Expenses of the Galena Re-powering prior to Final Acceptance, (ii) amounts
payable in respect of options for, or the granting of, necessary easements,
(iii) amounts payable in respect of obtaining or maintaining Governmental
Approvals, and (iv) amounts payable in respect of acquiring initial spare parts.

                  "Project Documents" means the Material Project Documents and
any additional agreements relating to the Projects.

                  "Projections" means certain projections at the Closing Date of
the Projects' revenues and the costs associated therewith including certain
assumptions by the Issuer.

                  "Prudent Industry Practices" shall mean, at a particular time,
(i) any of the practices, methods and acts engaged in or approved by a
significant portion of the electricity generating industry operating in the
United States at such time, or (ii) with respect to any matter to which clause
(i) does not apply, any of the practices, methods and acts which, in the
exercise of reasonable judgment 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, reliability, safety and expedition. "Prudent
Industry Practice" is not intended to be limited to the optimum practice, method
or act to the exclusion of all others, but rather to be a spectrum of possible
practices, methods or acts having due regard for, among other things,
manufacturers' warranties and the requirements of any Governmental Authority of
competent jurisdiction.

                  "PUHCA" means the Public Utility Holding Company Act of 1935,
as amended.

                  "Punch List Items" means those items which must be completed
by the Contractor under the Galena Re-powering Contract after achieving the
Final Acceptance Date, performance of which will not interrupt, disrupt or
interfere to any significant extent with the operation of the Steamboat
Geothermal Facility.

                  "QIB means a "qualified institutional buyer" as defined in
Rule 144A.

                  "Qualified Project" means a (a) a fully constructed and
operational geothermal power plant located within the United States of America
(other than the Mammoth Project), (b) as to which electricity will be sold under
long-term power purchase agreements that have been approved by the applicable
public utility commission or similar governmental body with a counterparty that
has a long-term issuer rating of not less than BBB- by S&P and Baa3 by Moody's
and (c) is acquired by the Issuer or a Guarantor and the Collateral Agent is
granted a first priority pledge of all of the Capital Stock of any Guarantor
that acquires such Qualified Project or the Guarantor acquiring such Qualified
Project provides a first priority lien with respect to collateral with respect
to such Qualified Project that is consistent with that set forth under the
second paragraph of "Description of the Notes--Security" in the Offering
Memorandum.

                  "Qualifying Facility" means a facility which is a qualifying
facility within the meaning of the Public Utility Regulatory Policies Act of
1978 (and all rules and regulations



                                      -26-



                                                                         Page 27

adopted thereunder) and which meets the criteria defined in Title 18, Code of
Federal Regulations, Sections 292.201 through 292.207.

                  "Quarterly Period" means each calendar quarter; provided,
however, that the first Quarterly Period shall commence on the Closing Date and
shall end on March 31, 2004.

                  "Railway Geothermal Resources Lease" means that certain
Geothermal Resource Lease (SPL-6292), dated October 10, 1984, between Brady, as
tenant, and The Burlington Northern and Santa Fe Railway Company, as landlord,
as amended by the amendment dated December 5, 1991.

                  "Redemption Account" means the account of such name created
under the Depositary Agreement.

                  "Redemption Date" means the date on which the Issuer redeems
or shall redeem any Senior Secured Notes in accordance with this Indenture.

                  "Registrar" has the meaning specified in Section 2.07(a).

                  "Registration Default" has the meaning set forth in Section 5
of the Registration Rights Agreement.

                  "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, by and among the Issuer and the
Guarantors and the other parties named on the signature pages thereof, as such
agreement may be amended, modified or supplemented from time to time and, with
respect to any Additional Notes, one or more registration rights agreements
among the Issuer and the Guarantors and the other parties thereto, as such
agreements may be amended, modified or supplemented from time to time, relating
to rights given by the Issuer to the purchasers of Additional Notes to register
such Additional Notes under the Securities Act.

                  "Regular Record Date" for the interest or principal payable on
any Payment Date on the Senior Secured Notes means the date specified for that
purpose as contemplated by Section 2.09 (whether or not a Business Day).

                  "Regulation S" means Regulation S under the Securities Act.

                  "Regulation S Global Note" means the Temporary Regulation S
Global Note or the Regulation S Unrestricted Global Note, as applicable.

                  "Regulation S Unrestricted Global Note" has the meaning
specified in Section 2.01.

                  "Related Party" means (a) Ormat Industries, Ltd. and Ormat
Technologies, Inc., (b) any direct or indirect controlling stockholder or
controlling member or a more than 50%



                                      -27-



                                                                         Page 28

owned subsidiary of Ormat Nevada or (c) any trust, corporation, partnership,
limited liability company or other entity, of which the beneficiaries,
stockholders, partners, members or Persons holding more than a 50% controlling
interest are Ormat Nevada and/or such other Persons referred to in the
immediately preceding clause (a) or (b).

                  "Remaining Average Life" means, with respect to any Senior
Secured Note, the principal of which is to be redeemed (the "Called Principal"),
the number of years (calculated to the nearest one-twelfth year) obtained by
dividing (i) such Called Principal into (ii) the sum of the products obtained by
multiplying (a) the principal component of each Remaining Scheduled Payment (as
defined below) with respect to such Called Principal by (b) the number of years
(calculated to the nearest one-twelfth year) that will elapse between the date
on which such Called Principal is to be redeemed (the "Settlement Date") and the
scheduled due date of such Remaining Scheduled Payment. For purposes of this
definition, the term "Remaining Scheduled Payments" means, with respect to the
Called Principal of any Senior Secured Note, all payments of such Called
Principal and interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal were
made prior to its scheduled due date.

                  "Renewable Energy Credits" means all renewable energy credits,
offsets or other benefits allocated, assigned or otherwise awarded or certified
to the Issuer or any of the Issuer's Subsidiaries by any Governmental Authority
in connection with any of the Projects; provided, that the foregoing shall not
include any federal, state, and/or local production tax credits and/or
investment tax credits specific to investments in renewable energy production
and delivery facilities (if any) or any environmental credits, offsets, or other
similar benefits allocated, assigned or otherwise awarded to the Issuer or any
of the Issuer's Subsidiaries by any Governmental Authority or received in any
other manner based in whole or in part on the fact that any of the Projects
constitutes a "renewable energy system" (as defined under any Applicable Law) or
the like, including emissions credits or allowances, such as credits available
because such Project does not produce carbon dioxide or other emissions when
generating electric energy.

                  "Required Holders" means, at any time, Persons that at such
time hold not less than 51% in aggregate principal amount of the Outstanding
Senior Secured Notes.

                  "Resource Lease Consents" means (i) with respect to ORNI 1,
LLC, ORNI 2, LLC, and Brady the consents of each of David P. Frase, Timothy
Frase and Stacey Frase, and James W. Roberts, Trustee of the James W. Roberts
Revocable Trust dated August 24, 1996 under the Grant of Easement Agreement,
dated March 27, 1998; and of The Burlington Northern and Santa Fe Railway
Company under the Railway Geothermal Resources Lease, and (ii) with respect to
ORNI 7, LLC and Steamboat Development the consents of each of Fleetwood
Corporation under the Fleetwood Geothermal Resources Lease; Dorothy A. Towne and
the Trust of Dorothy A. Towne under a geothermal resources lease dated May 31,
1991; and Bernice Guisti, Judith Harvey, and Karen Thompson, Trustees and
Beneficiaries of the Guisti Trust under the Guisti Geothermal Resources Lease.

                                      -28-


                                                                         Page 29

                  "Responsible Officer" means, with respect to knowledge of any
default under this Indenture, the chief executive officer, president, chief
financial officer, general counsel, principal accounting officer, treasurer,
assistant treasurer, or any vice president of the Issuer, or other officer of
the Issuer who in the normal performance of his or her operational duties would
have knowledge of the subject matter relating to such default.

                  "Responsible Trust Officer" means, when used with respect to
the Trustee, the Depositary or the Collateral Agent, any officer within the
Corporate Trust Office of the Trustee, the Depositary or the Collateral Agent
(or any successor group of the Trustee, Depositary or Collateral Agent, as
applicable) including any Managing Director, Principal, Vice President,
Assistant Vice President, Secretary, Assistant Secretary, Treasurer, Assistant
Treasurer, Controller, General Counsel, Associate Corporate Counsel or any other
officer of the Trustee, the Depositary or the Collateral Agent customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.

                  "Restoration Sub-Account" means one or more accounts of such
name created under the Depositary Agreement in connection with an Event of Loss
or Event of Eminent Domain.

                  "Restricted Global Note" has the meaning set forth in Section
2.01 hereto.

                  "Restricted Note" has the meaning specified in Section 2.02.

                  "Restricted Payment" means, with respect to any Person, (i)
the declaration and payment of distributions, dividends or any other payment
made in cash, property, obligations or other notes, (ii) any payment of the
principal of, or interest or premium, if any, on, any Subordinated Debt, (iii)
the making of any loans or advances to any Affiliate (other than Permitted
Indebtedness), (iv) any purchase, redemption, acquisition or retirement for
value (including, without limitation in connection with any merger or
consolidation of the Issuer) of any of the Issuer's Capital Stock or (v) any
Investment in any Person other than a Guarantor; provided, however, that the
term "Restricted Payments" shall not include (v) proceeds of this offering in
the amount of $78,500,000 utilized for the acquisition of Steamboat Development,
$33,500,000 utilized for the acquisition of a 50% interest in Mammoth-Pacific
and the repayment of $14,500,000 due to Ormat Nevada, (w) cash released from any
Account as a result of the provision of an Acceptable Letter of Credit as
provided for in the Financing Documents, (x) cash released from the Ormesa Loan
Repayment Account as permitted under Section 3.7(b) of the Depositary Agreement,
(y) payments made to any Affiliate of such Person for goods and services
purchased or procured in accordance with the terms of this Indenture or (z) the
use of proceeds from Indebtedness incurred in accordance with (I) clause (b)(y)
under Section 4.18 hereof to purchase that portion of the of the Capital Stock
of Mammoth-Pacific that the Issuer does not own as of the Closing Date or (II)
clause (h) under Section 4.18 hereof to purchase a Qualified Project.

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                                                                         Page 30

                  "Restricted Period" has the meaning set forth in Section 2.01.

                  "Revenue Account" means the account of such name created under
the Depositary Agreement.

                  "Rule 144" means Rule 144 promulgated under the Securities
Act.

                  "Rule 144A" means Rule 144A promulgated under the Securities
Act.

                  "Rule 144A Global Note" means restricted, permanent global
notes in fully registered form issued to qualified institutional buyers under
Rule 144A.

                  "Rule 903" means Rule 903 promulgated under the Securities
Act.

                  "Rule 904" means Rule 904 promulgated under the Securities
Act.

                  "Scheduled Payment Date" means each June 30 and December 30,
commencing on June 30, 2004 and ending on December 30,
2020.

                  "SEC" means the United States Securities and Exchange
Commission.

                  "Secured Parties" means the Trustee, the Holders, the
Collateral Agent, the holders of additional Permitted Indebtedness (other than
Permitted Indebtedness of the type described in clause (vi) in the definition
thereof), in each case to the extent such party (or an agent on such party's
behalf) is or becomes a party to the Collateral Agency Agreement.

                  "Securities Act" means the United States Securities Act of
1933, as amended.

                  "Securities Intermediary" means Union Bank of California,
N.A., until a successor replaces it in accordance with the applicable provisions
of the Depositary Agreement and thereafter means the successor serving
thereunder in such capacity.

                  "Security Documents" means, collectively, the Depositary
Agreement, the Deeds of Trust, the Collateral Agency Agreement, the Pledge and
Security Agreements, the Control Agreements, the Third Party Consents and any
other document providing for any lien of the Secured Parties, pledge,
encumbrance, mortgage or security interest on any or all of the Issuer's assets
or the ownership interests thereof or the Issuer's Subsidiaries' assets and the
ownership interests thereof.

                  "Senior Secured Notes" means the Initial Notes and, unless the
context otherwise requires, the Additional Notes including any Exchange Notes.

                  "Senior Secured Obligations" means, collectively, without
duplication: (i) all of the Issuer's Indebtedness, financial liabilities and
obligations, of whatsoever nature and however evidenced (including, but not
limited to, principal, interest, premium, fees, reimbursement



                                      -30-



                                                                         Page 31

obligations, penalties, indemnities and legal and other expenses, whether due
after acceleration or otherwise) to the Secured Parties in their capacity as
such under the applicable Financing Document or any other agreement, document or
instrument evidencing, securing or relating to such Indebtedness, financial
liabilities or obligations, in each case, direct or indirect, primary or
secondary, fixed or contingent, now or hereafter arising out of or relating to
any such agreements; (ii) any and all sums advanced by the Collateral Agent in
order to preserve the Collateral or preserve its security interest in the
Collateral; and (iii) in the event of any proceeding for the collection or
enforcement of the obligations described in clauses (i) and (ii) above, after an
Event of Default has occurred and is continuing and unwaived, the expenses of
retaking, holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Collateral Agent of
its rights under the Security Documents, together with reasonable attorneys'
fees and court costs.

                  "Series Supplemental Indenture" means an indenture
supplemental to this Indenture entered into by the Issuer, the Trustee and the
Guarantors, if applicable, for the purpose of establishing, in accordance with
this Indenture, the title, form and terms of Senior Secured Notes of any series.

                  "Shelf Registration Statement" means the shelf registration
statement issued by the Issuer in connection with the offer and sale of Senior
Secured Notes pursuant to a Registration Rights Agreement.

                  "Sierra Pacific Geothermal Resources Lease" means that certain
Geothermal Resources Lease, dated November 18, 1983, between Steamboat
Geothermal and Sierra Pacific Power Company, as amended by the amendments dated
January 7, 1985, October 29, 1988, and October 2, 1989.

                  "Site Licenses" means the Mammoth-BLM Site License, the
Ormesa-BLM Site License CA 17129, the Ormesa-BLM Site License CA 22405, the
Ormesa-BLM Site License CA 24678, the Ormesa-BLM Site License CA 22079, and the
Ormesa-BLM Site License CA 20172.

                  "Special Record Date" for the payment of any Overdue Interest
or Overdue Principal shall mean a date fixed by the Trustee pursuant to Section
2.09.

                  "Steamboat Complex Operation and Maintenance Agreement" means
that certain Amended and Restated Operation and Maintenance Agreement, dated
December 8, 2003, among ORNI 7, LLC, Steamboat Geothermal LLC, Steamboat
Development (as of the Closing Date) and Ormat Nevada, Inc.

                  "Steamboat Development" means Steamboat Development, a Utah
corporation.

                  "Steamboat Development Plant" means the two geothermal power
generating plants located in Steamboat Hills, Nevada, having a gross generating
capacity of 32 MW and owned by Steamboat Development



                                      -31-


                                                                         Page 32

                  "Steamboat Geothermal" means Steamboat Geothermal LLC, a
Delaware limited liability company.

                  "Steamboat Geothermal Plant" means the two geothermal power
generating plants located in Steamboat Hills, Nevada, having a gross generating
capacity of 10 MW and owned by Steamboat Geothermal.

                  "Steamboat 1 Plant Power Purchase Agreement" means that
certain Agreement for the Purchase and Sale of Electricity, dated November 18,
1983, between Steamboat Geothermal LLC (as successor to Geothermal Development
Associates) and Sierra Pacific Power Company, as amended by that certain
Amendment to Agreement for the Purchase and Sale of Electricity, dated March 6,
1987.

                  "Steamboat 1A Plant Power Purchase Agreement" means that
certain Long-Term Agreement for the Purchase and Sale of Electricity, dated
October 29, 1988, between Steamboat Geothermal LLC (as successor to Far West
Capital, Inc.) and Sierra Pacific Power Company.

                  "Steamboat 2 Plant Power Purchase Agreement" means that
certain Long-Term Agreement, dated January 24, 1991, between Steamboat
Development (as successor to Far West Capital, Inc.) and Sierra Pacific Power
Company, as amended by that certain Amendment to Long-Term Agreement, dated
October 29, 1991, and as further amended by that certain Amendment to Long-Term
Agreement, dated October 29, 1992.

                  "Steamboat 1/1A Interconnection Agreement" means that certain
Special Facilities Agreement, dated October 29, 1988, between Sierra Pacific
Power Company and Steamboat Geothermal (as successor to Far West Capital, Inc.).

                  "Steamboat 2/3 Interconnection Agreement" means that certain
Special Facilities Agreement, dated April 24, 1992, between Sierra Pacific Power
Company and Steamboat Development (as successor to Far West Capital, Inc.).

                  "Steamboat 2/3 Project Power Purchase Agreements" means the
Steamboat 2 Plant Power Purchase Agreement and the Steamboat 3 Plant Power
Purchase Agreement.

                  "Steamboat 3 Plant Power Purchase Agreement" means that
certain Long-Term Agreement for the Purchase and Sale of Electricity, dated
January 18, 1991, between Steamboat Geothermal Development (as successor to Far
West Capital, Inc.) and Sierra Pacific Power Company.

                  "Subordinated Debt" means Indebtedness incurred pursuant to a
Subordinated Loan Agreement.

                  "Subordinated Debt Provider" means a Person providing loans
pursuant to a Subordinated Loan Agreement.

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                                                                         Page 33

                  "Subordinated Loan Agreement" means a binding agreement
providing nonrecourse, unsecured debt financing to the Issuer on the terms and
conditions set forth in Exhibit D to this Indenture.

                  "Subsidiary" means, with respect to any specified Person:

                  (1) any corporation, association or other business entity of
         which more than 50% of the total voting power of shares of Capital
         Stock entitled (without regard to the occurrence of any contingency and
         after giving effect to any voting agreement or stockholders' agreement
         that effectively transfers voting power) to vote in the election of
         directors, managers or trustees of the corporation, association or
         other business entity is at the time owned or controlled, directly or
         indirectly, by that Person or one or more of the other Subsidiaries of
         that Person (or a combination thereof); and

                  (2) any partnership (a) the sole general partner or the
         managing general partner of which is such Person or a Subsidiary of
         such Person or (b) the only general partners of which are that Person
         or one or more Subsidiaries of that Person (or any combination
         thereof).

                  "Third Party Consents" means each consent to assignment, among
certain counterparties to a Material Project Document, the Issuer and/or the
Issuer's applicable Subsidiary and the Collateral Agent.

                  "TIA" means the Trust Indenture Act of 1939 (15
U.S.C. (sections) 77aaa-77bbbb) as in effect on the date on which this Indenture
is qualified under the TIA.

                  "Title Event" means the existence of any defect of title or
Lien or encumbrance on a Project (other than Permitted Liens) in effect on the
Closing Date that entitles the Collateral Agent to make a claim under the policy
or policies of title insurance required pursuant to the Financing Documents.

                  "Title Event Proceeds" means all amounts and proceeds
(including instruments) in respect of any Title Event.

                  "Title Policies" means (i) each of the mortgagee title
insurance policies delivered by a title company of national standing or its
Affiliates insuring to the Lien of the Deeds of Trust or (ii) for those Projects
which do not have Deeds of Trust, the preliminary title report delivered by a
title company of national standing or its Affiliates.

                  "Transaction Documents" means the Project Documents and the
Financing Documents.

                  "Trustee" means Union Bank of California, N.A., until a
successor replaces it in accordance with the applicable provisions of this
Indenture, and thereafter means the successor serving thereunder in such
capacity.

                                      -33-


                                                                         Page 34

                  "Unassigned Leases" means (i) that certain Grant of Easement
between David P. Frase, Timothy Frase and Stacey Frase, and James W. Roberts,
Trustee of the James W. Roberts Revocable Trust, dated August 24, 1996, as
grantor, and Brady Power, as grantee, dated March 27, 1998; (ii) the Railway
Geothermal Resources Lease; (iii) the Fleetwood Geothermal Resources Sublease;
(iv) that certain Geothermal Resources Lease dated May 31, 1991 between Dorothy
A. Towne and the Trust of Dorothy A. Towne, as landlord, and Fleetwood
Corporation, as tenant; and (v) that certain Geothermal Resources Lease dated
June 27, 1988, as amended by that certain Amendment to Geothermal Resources
Lease dated January 1992, and that certain Second Amendment to Geothermal
Resources Lease dated June 25, 1993 between Bernice Guisti, Judith Harvey, and
Karen Thompson, Trustees and Beneficiaries of the Guisti Trust, as landlord, and
Steamboat Development Corp., as tenant.

                  "Unrestricted Global Note" means a permanent global Senior
Secured Note in the form of Exhibit A-1 attached hereto that bears the Global
Note Legend and that has the "Schedule of Exchanges of Interests in the Global
Note" attached thereto, and that is deposited with or on behalf of and
registered in the name of the Depositary, representing Senior Secured Notes that
do not bear the Private Placement Legend.

                  "U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.

                  "Work" means all obligations, duties and responsibilities
undertaken by the Contractor and its subcontractors in accordance with the
Galena Re-powering Contract, including the design, engineering, manufacturing,
procurement, construction, start-up and performance testing of the Galena Plant
in connection with the Galena Re-powering.

                  "Wholly Owned Subsidiary" of any specified Person means a
Subsidiary of such Person all of the outstanding Capital Stock or other


ownership interests of which (other than directors' qualifying shares) will at
the time be owned by such Person or by one or more Wholly Owned Subsidiaries of
such Person.

                  Section 1.02 Other Definitions.

                 Term                                        Defined in Section

                 "Affiliate Transaction" ...................        4.13
                 "Applicable Procedures" ...................    2.07(c)(v)(B)
                 "Beneficial Owner" ........................        4.03
                 "Checking Account".........................        4.30
                 "Combined Brady Output" ...................       4.06(c)
                 "Covenant Defeasance"......................        7.03
                 "Debtor Relief Law"........................        5.01

                 "Issuer"...................................      Preamble
                 "Legal Defeasance".........................        7.02





                                      -34-



                                                                         Page 35

                 "Overdue Interest".........................        2.09
                 "Temporary Regulation S Global Note".......        2.01
                 "Transfer" ................................       2.07(b)

                 "Trustee"..................................      Preamble
                 "Withdrawal Certificate" ..................        4.42

                  Section 1.03 Trust Indenture Act Provisions. Whenever this
Indenture refers to a provision of the TIA, the provision is incorporated by
reference in and made a part of this Indenture.

                  The following TIA terms used in this Indenture have the
following meanings:

                  "indenture securities" means the Senior Secured Notes;

                  "indenture security holder" means a Holder of a Senior Secured
Note;

                  "indenture to be qualified" means this Indenture;

                  "indenture trustee" or "institutional trustee" means the
Trustee; and

                  "obligor" on the Senior Secured Notes means the Issuer and any
successor obligor upon the Senior Secured Notes.

                  All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.

                  Section 1.04 Rules of Construction. Unless the context
otherwise requires:

                  (a) a term has the meaning assigned to it;

                  (b) an accounting term not otherwise defined has the meaning
         assigned to it in accordance with GAAP;

                  (c) "or" is not exclusive;

                  (d) words in the singular include the plural, and in the
         plural include the singular;

                  (e) references to a Person shall include such Person's
         permitted successors and assigns;

                  (f) provisions apply to successive events and transactions;

                                      -35-


                                                                         Page 36

                  (g) unless otherwise expressly specified, any agreement,
         contract or document defined or referred to herein shall mean such
         agreement, contract or document as in effect as of the date hereof, as
         the same may thereafter be amended, supplemented and/or otherwise
         modified from time to time in accordance with the terms of this
         Indenture and the other Transaction Documents and shall include any
         agreement, contract or document in substitution or replacement of any
         of the foregoing entered into in accordance with the terms of this
         Indenture and the other Transaction Documents; and

                  (h) references to sections of or rules under the Securities
         Act shall be deemed to include substitute, replacement or successor
         sections or rules adopted by the SEC from time to time.

                                   ARTICLE II

                            THE SENIOR SECURED NOTES

                  Section 2.01 Form Generally. The Senior Secured Notes of each
series shall be in substantially the form set forth in Exhibit A-1/A-2 or in
such other form as shall, subject to Section 2.05, be established by or pursuant
to an Officer's Certificate of the Issuer or in one or more Series Supplemental
Indentures relating to the Senior Secured Notes of such series, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange or
Depository therefor or as may, consistently herewith, be determined by the
officers executing such Senior Secured Notes as evidenced by their execution
thereof.

                  The Certificated Notes shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the Authorized Officers executing such Certificated Notes, as
evidenced by their execution of such Certificated Notes.

                  Restricted Notes shall bear the applicable legends as set
forth in Exhibit A-1/A-2 and as provided in Section 2.02.

                  Senior Secured Notes offered and sold in their initial
distribution in reliance on Rule 144A shall be issued in the form of one or more
Global Notes (each a "Restricted Global Note") in definitive, fully registered
form without interest coupons, substantially in the form set forth in Exhibit
A-1, or in such other form as shall, subject to Section 2.05, be established by
or pursuant to an Officer's Certificate of the Issuer or in one or more
indentures supplemental hereto, with such applicable legends as are provided for
in Exhibit A-1. Such Global Notes shall be registered in the name of the
Depository for such Global Notes or its nominee and deposited with the Trustee,
at the Corporate Trust Office of the Trustee, as custodian for such Depository,
duly executed on behalf of the Issuer and authenticated by the Trustee as herein
provided. The aggregate principal amount of any Restricted Global Note may from
time to time be increased or



                                      -36-



                                                                         Page 37

decreased by adjustments made on the records of the Trustee, as custodian for
the Depository for such Global Note, as provided in Section 2.07, which
adjustments shall be conclusive as to the aggregate principal amount of any such
Global Notes. Except as agreed by the Issuer, no Restricted Global Note shall be
issued except as provided in this paragraph to evidence Senior Secured Notes
offered and sold in their initial distribution in reliance on Rule 144A.

                  Senior Secured Notes offered and sold in their initial
distribution in reliance on Regulation S shall be issued initially in the form
of one or more temporary Global Notes (a "Temporary Regulation S Global Note")
in definitive, fully registered form without interest coupons, substantially in
the form set forth in Exhibit A-2, or in such other form as shall, subject to
Section 2.05, be established by or pursuant to an Officer's Certificate of the
Issuer or in one or more indentures supplemental hereto, with such applicable
legends as are provided for in Exhibit A-2. Such Temporary Regulation S Global
Notes shall be registered in the name of the Depository for such Global Notes or
its nominee and deposited with the Trustee, at the Corporate Trust Office of the
Trustee, as custodian for such Depository, duly executed by the Issuer and
authenticated by the Trustee as herein provided, for credit to the respective
accounts of beneficial owners of such Global Notes (or to such other accounts as
they may direct) at Euroclear or Clearstream. Beneficial interests in any
Temporary Regulation S Global Note may be held only through Euroclear or
Clearstream. Within a reasonable period of time after the expiration of the
Restricted Period (as defined below), any Temporary Regulation S Global Note
will be exchanged for a permanent Regulation S Global Note (the "Regulation S
Unrestricted Global Note," and together with the Temporary Regulation S Global
Note, the "Regulation S Global Note") substantially in the form set forth in
Exhibit A-1 with such applicable legends as are provided for in Exhibit A-1, but
without the Restricted Notes legend set forth in Exhibit A-1, upon delivery to
the Depository of certification of non-United States ownership and compliance
with Regulation S. The Regulation S Unrestricted Global Note will be deposited
with the Trustee at the Corporate Trust Office of the Trustee, as custodian for
the Depository and registered in the name of the nominee of the Depository.
Clearstream and Euroclear will hold beneficial interests in the Regulation S
Unrestricted Global Note on behalf of their participants through their
respective depositories, which in turn will hold such beneficial interests in
the Regulation S Unrestricted Global Note in participants' securities accounts
in the depositories' names on the books of the Depository. The aggregate
principal amount of any Temporary Regulation S Global Note and any Regulation S
Unrestricted Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depository
for such Global Note, as provided in Section 2.07, which adjustments shall be
conclusive as to the aggregate principal amount of any such Global Note. As used
herein, the term "Restricted Period", with respect to Global Notes offered and
sold in reliance on Regulation S, means the period of 40 consecutive days
beginning on and including the later of (i) the day on which the Senior Secured
Notes are first offered to persons other than distributors (as defined in
Regulation S) in reliance on Regulation S (according to a written notice to the
Issuer and the Trustee by the underwriter(s), if any, of the offering of such
Senior Secured Notes) and (ii) the date of the closing of the offering of such
Senior Secured Notes. Except as agreed by the Issuer, no Temporary Regulation S
Global Note or Regulation S Unrestricted Global Note shall



                                      -37-



                                                                         Page 38

be issued except as provided in this paragraph to evidence such Senior Secured
Notes offered and sold in their initial distribution in reliance on Regulation
S.

                  Section 2.02 Legends on Restricted Notes. All Senior Secured
Notes issued pursuant to this Indenture (including Senior Secured Notes issued
upon registration of transfer, in exchange for or in lieu of such Senior Secured
Notes) shall be "Restricted Notes" and shall bear the applicable legend(s)
setting forth restrictions on transfer provided in Exhibit A-1/A-2 (the "Private
Placement Legend"); provided, however, that the term "Restricted Notes" shall
not include (i) Temporary Regulation S Global Notes or Regulation S Unrestricted
Global Notes, (ii) Senior Secured Notes as to which such restrictive legend(s)
shall have been removed pursuant to Section 2.07 and (iii) Senior Secured Notes
issued upon registration of transfer of, in exchange for, or in lieu of, Senior
Secured Notes that are not Restricted Notes.

                  Section 2.03 Amount of Senior Secured Notes. The aggregate
principal amount of Senior Secured Notes which may be outstanding at any time is
unlimited, subject to compliance with Section 4.18 hereof.

                  The Senior Secured Notes may be issued in one or more series.
There shall be established in one or more Series Supplemental Indentures, prior
to the issuance of Senior Secured Notes of any series:

                  (a) the title of the Senior Secured Notes of such series
         (which shall distinguish the Senior Secured Notes of such series from
         all other Senior Secured Notes) and the form or forms of Senior Secured
         Notes of such series;

                  (b) any limit upon the aggregate principal amount of the
         Senior Secured Notes of such series that may be authenticated and
         delivered under this Indenture (except for Senior Secured Notes
         authenticated and delivered upon registration of transfer of, or in
         exchange for, or in lieu of, other Senior Secured Notes of such series
         pursuant to Sections 2.06, 2.07, 2.08, 3.06 or 8.09 and except for
         Senior Secured Notes that, pursuant to the last paragraph of Section
         2.05, are deemed never to have been authenticated and delivered
         hereunder);

                  (c) the date or dates on which the principal of the Senior
         Secured Notes of such series is payable, the amounts of principal
         payable on such date or dates and the Regular Record Date for the
         determination of Holders to whom principal is payable; and the date or
         dates on or as of which the Senior Secured Notes of such series shall
         be dated, if other than as provided in Section 2.05;

                  (d) the rate or rates at which the Senior Secured Notes of
         such series shall bear interest, or the method by which such rate or
         rates shall be determined, the date or dates from which such interest
         shall accrue, the interest payment dates on which such interest shall
         be payable and the Regular Record Date for the determination of Holders
         to



                                      -38-



                                                                         Page 39

         whom interest is payable; and the basis of computation of interest, if
         other than as provided in Section 2.12;

                  (e) if other than as provided in Section 4.02, the place or
         places where (i) the principal of, interest and Liquidated Damages, if
         any, on Senior Secured Notes of such series shall be payable, (ii)
         Senior Secured Notes of such series may be surrendered for registration
         of transfer or exchange and (iii) notices and demands to or upon the
         Issuer in respect of the Senior Secured Notes of such series and this
         Indenture may be served;

                  (f) the price or prices at which, the period or periods within
         which and the terms and conditions upon which Senior Secured Notes of
         such series may be redeemed, in whole or in part, at the option of the
         Issuer;

                  (g) the obligation, if any, of the Issuer to redeem, purchase
         or repay Senior Secured Notes of such series pursuant to any sinking
         fund or analogous provision or at the option of a Holder thereof and
         the price or prices at which and the periods or periods within which
         and the terms and conditions upon which Senior Secured Notes of such
         series shall be redeemed, purchased or repaid, in whole or in part,
         pursuant to such obligations;

                  (h) if other than minimum denominations of $1,000 and any
         integral multiple of $1,000 in excess thereof, the denominations in
         which Senior Secured Notes of such series shall be issuable;

                  (i) the restrictions or limitations, if any, on the transfer
         or exchange of the Senior Secured Notes of such series;

                  (j) the obligation, if any, of the Issuer to file a
         registration statement with respect to the Senior Secured Notes of such
         series or to exchange the Senior Secured Notes of such series for
         Senior Secured Notes registered pursuant to the Securities Act;

                  (k) any other terms of such series (which terms shall not be
         inconsistent with the provisions of this Indenture); and

                  (l) any trustees, authenticating or paying agents, warrant
         agents, transfer agents or registrars with respect to the Senior
         Secured Notes of such series.

                  Section 2.04 Denominations. The Senior Secured Notes shall be
issuable only in registered form without coupons and in denominations of $1,000
and any integral multiple of $1,000 in excess thereof. Any repayments (either
scheduled or pursuant to any redemption) of any Senior Secured Note shall be
made only in the denomination or integral multiple thereof set forth above.

                  Section 2.05 Execution, Authentication, Delivery and Dating.
The Senior Secured Notes shall be executed on behalf of the Issuer by an
Authorized Representative of the



                                      -39-



                                                                         Page 40

Issuer. The signature of any of these officers on the Senior Secured Notes may
be manual or facsimile.

                  Senior Secured Notes bearing the manual or facsimile signature
of individuals who were at the time of execution the Authorized Representative
of the Issuer shall bind the Issuer, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of such Senior Secured Notes or did not hold such offices at the date
of such Senior Secured Notes.

                  At any time and from time to time after the execution and
delivery of this Indenture, the Issuer may deliver Senior Secured Notes (with
Guarantees endorsed thereon), if applicable, of any series executed by the
Issuer to the Trustee for authentication, together with a Authentication Order
for the authentication and delivery of such Senior Secured Notes, and the
Trustee in accordance with the Authentication Order shall authenticate and
deliver such Senior Secured Notes. The Trustee shall authenticate and deliver:
(i) on the Closing Date, an aggregate principal amount of $190,000,000 8 1/4%
Senior Secured Notes Due 2020, (ii) Additional Notes for an original issue in an
aggregate principal amount specified in an Authentication Order pursuant to this
Section 2.05 and (iii) Exchange Notes for issue only in an Exchange Offer
pursuant to a Registration Rights Agreement, for a like principal amount of
Initial Notes or Additional Notes, in each case upon an Authentication Order of
the Issuer signed by an Authorized Officer of the Issuer. Such order will
specify the amount of the Senior Secured Notes to be authenticated and the date
on which the original issue of the Senior Secured Notes is to be authenticated.
If the form or terms of the Senior Secured Notes have been established by or
pursuant to an Officer's Certificate of the Issuer or a Supplemental Indenture
as permitted by Section 2.01 in authenticating such Senior Secured Notes, and
accepting any additional responsibilities under this Indenture in relation to
such Senior Secured Notes, the Trustee shall be entitled to receive, and shall
be fully protected in relying upon, an Opinion of Counsel stating,

                  (a) that such form has been established in conformity with the
provisions of this Indenture;

                  (b) that such terms have been established in conformity with
the provisions of this Indenture; and

                  (c) that such Senior Secured Notes, when authenticated and
delivered by the Trustee and issued by the Issuer in the manner and subject to
any conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Issuer, enforceable against the Issuer in
accordance with their terms (subject to customary qualifications or exceptions).

                  The Trustee shall not be required to authenticate such Senior
Secured Notes if the issue of such Senior Secured Notes pursuant to this
Indenture will affect the Trustee's own rights, duties or immunities under the
Senior Secured Notes and this Indenture or otherwise in a manner which is not
reasonably acceptable to the Trustee.



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                  Except as otherwise provided in the Series Supplemental
Indenture relating to the Senior Secured Notes of a series, each Senior Secured
Note of such series shall be dated the date of its authentication.

                  No Senior Secured Note shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose unless there appears on
such Senior Secured Note a certificate of authentication substantially in the
form provided for herein executed by the Trustee by manual signature of an
Authorized Officer, and such certificate upon any Senior Secured Note shall be
conclusive evidence, and the only evidence, that such Senior Secured Note has
been duly authenticated and delivered hereunder. Notwithstanding the foregoing,
if any Senior Secured Note shall have been authenticated and delivered hereunder
but never issued and sold by the Issuer, and the Issuer shall deliver such
Senior Secured Note to the Trustee for cancellation as provided in Section 2.11,
for all purposes of this Indenture such Senior Secured Note shall be deemed
never to have been authenticated and delivered hereunder and shall never be
entitled to the benefits of this Indenture.

                  Section 2.06 Temporary Senior Secured Notes. Pending the
preparation of definitive Senior Secured Notes, the Issuer may execute, and upon
Authentication Order the Trustee shall authenticate and deliver, temporary
Senior Secured Notes which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Senior Secured Notes in lieu of which they are issued
and with such appropriate insertions, omissions, substitutions and other
variations as the officers of the Issuer executing the same may determine, as
evidenced by their execution of such Senior Secured Notes.

                  If temporary Senior Secured Notes are issued, the Issuer will
cause definitive Senior Secured Notes to be prepared without unreasonable delay.
After the preparation of definitive Senior Secured Notes, the temporary Senior
Secured Notes shall be exchangeable for definitive Senior Secured Notes upon
surrender of the temporary Senior Secured Notes at the office or agency of the
Issuer in a Place of Payment, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Senior Secured Notes, the Issuer shall
execute and the Trustee shall authenticate and deliver in exchange therefor one
or more definitive Senior Secured Notes of any authorized denominations and of
like tenor and aggregate principal amount. Until so exchanged, the temporary
Senior Secured Notes shall in all respects be entitled to the same benefits
under this Indenture as definitive Senior Secured Notes.

                  Section 2.07 Registration, Registration of Transfer and
Exchange.

                  (a) General. The Issuer shall cause to be kept at the
Corporate Trust Office of the Trustee a register in which, subject to such
reasonable regulations as it may prescribe, the Issuer shall provide for the
registration of Senior Secured Notes and for transfers of Senior Secured Notes.
The Trustee is hereby appointed "Registrar" for the purpose of registering
Senior Secured Notes and transfers of Senior Secured Notes as herein provided.
The Issuer also shall cause to be kept an office or agency where Senior Secured
Notes may be presented for payment



                                      -41-


                                                                         Page 42

("Paying Agent") and where notices and demands to or upon the Issuer in respect
of the Senior Secured Notes may be served.

                  Notwithstanding anything to the contrary set forth herein, the
Trustee shall not be required and shall have no obligation to monitor compliance
with any federal or state securities laws.

                  Upon surrender for registration of transfer of any Senior
Secured Note at the office or agency of the Issuer in a Place of Payment, the
Issuer shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Senior Secured
Notes, of any authorized denominations and of like tenor and aggregate principal
amount.

                  At the option of the Holder, Senior Secured Notes may be
exchanged for other Senior Secured Notes, of any authorized denominations and of
like tenor and aggregate principal amount, upon surrender of the Senior Secured
Notes to be exchanged at such office or agency. Whenever any Senior Secured
Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee
shall authenticate and deliver, the Senior Secured Notes which the Holder making
the exchange is entitled to receive.

                  All Senior Secured Notes issued upon any registration of
transfer or exchange of Senior Secured Notes shall be the valid obligations of
the Issuer, evidencing the same debt, and entitled to the same benefits under
this Indenture as the Senior Secured Notes surrendered upon such registration of
transfer or exchange.

                  Every Senior Secured Note presented or surrendered for
registration of transfer or for exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Registrar duly executed by the Holder thereof or his attorney
duly authorized in writing.

                  No service charge shall be made for any registration of
transfer or exchange of Senior Secured Notes, but the Issuer may require payment
of a sum sufficient to cover any tax or other governmental charge that maybe
imposed in connection with any registration of transfer or exchange of Senior
Secured Notes, other than exchanges pursuant to Section 2.06 or Section 3.06 not
involving any transfer.

                  If the Senior Secured Notes are to be redeemed in part, the
Issuer shall not be required (A) to issue, register the transfer of, or
exchange, any Senior Secured Notes during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of any
such Senior Secured Notes selected for redemption under Section 3.03 and ending
at the close of business on the day of such mailing or (B) to register the
transfer of or exchange any Senior Secured Note so selected for redemption in
whole or in part, except the unredeemed portion of any Senior Secured Note being
redeemed in part.

                  (b) Restricted Notes.

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                                                                         Page 43

                  Every Restricted Note shall be subject to the restrictions on
offers, Transfers and exchanges provided in the applicable legend(s) required to
be set forth on the face of each Restricted Note pursuant to Exhibit A-1/A-2 and
Section 2.02, unless such restrictions on Transfer shall be waived by the
written consent of the Issuer, and the Holder of each Restricted Note, by such
Holder's acceptance thereof, agrees to be bound by such restrictions on
Transfer. Whenever any Restricted Note is presented or surrendered for
registration of Transfer or for exchange for a Senior Secured Note registered in
a name other than that of the Holder, such Restricted Note must be accompanied
by an appropriately completed certificate in substantially the form set forth in
Exhibit B, in the case of Transfer, or, in the case of any exchange, Exhibit C
or as contemplated by Section 2.13(c) (which may be attached to or set forth in
the Restricted Note), appropriately completed, dated the date of such surrender
and signed by the Holder of such Restricted Note, as to compliance with such
restrictions on Transfer, unless the Issuer shall have notified the Trustee in
writing pursuant to this Section 2.07 that there is an effective registration
statement under the Securities Act with respect to such Restricted Note. The
Registrar shall not be required to accept for such registration of Transfer or
exchange any Restricted Note not so accompanied by a properly completed
certificate.

                  Except as otherwise provided in the preceding paragraph, if
Senior Secured Notes are issued upon the Transfer, exchange or replacement of
Senior Secured Notes bearing a legend or legends setting forth restrictions on
Transfer, or if a request is made to remove such legend(s) on a Senior Secured
Note, the Senior Secured Notes so issued shall bear such legend(s) or such
legend(s) shall not be removed, as the case may be, unless the transferor
delivers to the Issuer such satisfactory evidence (which may include an opinion
of independent counsel experienced in matters of United States securities law as
may be reasonably satisfactory to the Issuer), as may be reasonably required by
the Issuer, that neither such legend(s) nor the restrictions on Transfer set
forth therein are required to ensure that Transfers thereof comply with the
provisions of Rule 144A or Rule 144 or Regulation S or that such Senior Secured
Notes are not restricted securities within the meaning of Rule 144. Upon
provision of such satisfactory evidence to the Issuer, the Trustee, at the
written direction of the Issuer set forth in an Officer's Certificate of the
Issuer, shall authenticate and deliver a Senior Secured Note that does not bear
such legend(s). In the absence of bad faith on its part, the Trustee may
conclusively rely upon such direction of the Issuer in authenticating and
delivering a Senior Secured Note that does not bear such legend(s).

                  After a Transfer of any Initial Notes pursuant to and during
the period of the effectiveness of a Shelf Registration Statement with respect
to such Initial Notes, all requirements pertaining to legends relating to the
restrictions on Transfer relating to the Securities Act on such Initial Note
will cease to apply, the requirements requiring that any such Initial Note
issued to certain Holders be issued in global form will cease to apply, and a
certificated Initial Note or an Initial Note in global form, in each case
without restrictive Transfer legends, will be available to the transferee of the
Holder of such Initial Notes upon exchange of such transferring Holder's
certificated Initial Note or appropriate directions to Transfer such Holder's
interest in the Global Note, as applicable.

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                                                                         Page 44

                  Upon the consummation of an Exchange Offer with respect to the
Initial Notes, all requirements pertaining to such Initial Notes that Initial
Notes issued to certain Holders be issued in global form will still apply with
respect to Holders of such Initial Notes that do not exchange their Initial
Notes, and Exchange Notes in certificated or global form, in each case without
the restrictive securities legend relating to the restrictions on Transfer
relating to the Securities Act set forth in Exhibit A-1/A-2 hereto will be
available to Holders that exchange such Initial Notes in such Exchange Offer.

                  Upon registration of Transfer of or exchange of Senior Secured
Notes that are no longer Restricted Notes, the Issuer shall execute, and the
Trustee shall authenticate and deliver, a Senior Secured Note that does not bear
restrictive legends.

                  As used in this Section 2.07(b), the term "Transfer"
encompasses any sale, pledge or other transfer of any Senior Secured Notes
referred to herein.

                  (c) Global Notes. This Section 2.07(c) shall apply to Global
Notes.

                  (i) Each Global Note authenticated under this Indenture shall
         be registered in the name of the Depository designated for such Global
         Note or a nominee thereof and delivered to such Depository or a nominee
         thereof or custodian therefor, and each such Global Note shall
         constitute a single Global Note for all purposes of this Indenture. The
         Senior Secured Notes may be represented by one or more Global Notes,
         and such Global Notes may be Restricted Global Notes, Temporary
         Regulation S Global Notes or Regulation S Unrestricted Global Notes, or
         any combination thereof.

                  (ii) Notwithstanding any other provision in this Indenture, no
         Global Note may be exchanged in whole or in part for Senior Secured
         Notes registered, and no transfer of a Global Note in whole or in part
         may be made, in the name of any Person other than the Depository for
         such Global Note or a nominee thereof unless (A) such Depository (1)
         has notified the Issuer that it is unwilling or unable to continue as
         Depository for such Global Note or (2) has ceased to be a clearing
         agency registered under the Exchange Act, and, in either case, a
         successor Depository is not appointed within 90 days thereof, (B) the
         Issuer executes and delivers to the Trustee a Authentication Order
         providing that such Global Note shall be so transferable, registrable
         and exchangeable, or (C) there shall have occurred and be continuing an
         Event of Default with respect to the Global Notes. Any Global Note
         exchanged pursuant to subclause (A) above shall be so exchanged in
         whole and not in part and any Global Note exchanged pursuant to
         subclause (B) or (C) above may be exchanged in whole or from time to
         time in part as directed by the Depository for such Global Note.
         Notwithstanding any other provision in this Indenture, a Global Note to
         which the restriction set forth in the second preceding sentence shall
         have ceased to apply may be transferred only to, and may be registered
         and exchanged for Senior Secured Notes registered only in the name or
         names of, such Person or Persons as the Depository for such Global Note
         shall have directed and no transfer thereof other than such a transfer
         may be registered.

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                                                                         Page 45

                  (iii) Subject to clause (ii) above, any exchange of a Global
         Note for other Senior Secured Notes may be made in whole or in part,
         and all Senior Secured Notes issued in exchange for a Global Note or
         any portion thereof shall be registered in such name or names as the
         Depository for such Global Note shall direct.

                  (iv) Every Senior Secured Note authenticated and delivered
         upon registration of transfer of, or in exchange for or in lieu of, a
         Global Note or any portion thereof, whether pursuant to this Section
         2.07, Section 2.06, 2.09 or 3.06 or otherwise shall be authenticated
         and delivered in the form of, and shall be, a Global Note, unless such
         Senior Secured Note is registered in the name of a Person other than
         the Depository for such Global Note or a nominee thereof.

                  (v) Notwithstanding any other provision of this Indenture or
         of the Senior Secured Notes, transfers of interests in a Global Note of
         the kind described in Section 2.01 and in subclauses (B), (C), (D) and
         (E) of this clause (v) below shall be made only in accordance with this
         clause (v), and all transfers of an interest in a Temporary Regulation
         S Global Note shall comply with subclause (F) of this clause (v). The
         provisions of this clause (v) providing for transfers of Senior Secured
         Notes or beneficial interests in Global Notes to Persons who wish to
         take delivery in the form of beneficial interests in a Restricted
         Global Note, Temporary Regulation S Global Note or Regulation S
         Unrestricted Global Note shall only apply if there is a Restricted
         Global Note, Temporary Regulation S Global Note or Regulation S
         Unrestricted Global Note, as the case may be.

                           (A) Transfer of Global Note. A Global Note may not be
                  transferred, in whole or in part to any Person other than the
                  Depository or a nominee thereof, and no such transfer to any
                  such other Person may be registered; provided that this
                  subclause (A) shall not prohibit any transfer of a Senior
                  Secured Note that is issued in exchange for a Global Note but
                  is not itself a Global Note. No transfer of a Senior Secured
                  Note to any Person shall be effective under this Indenture or
                  the Senior Secured Notes unless and until such Senior Secured
                  Note has been registered in the name of such Person. Nothing
                  in this Section 2.07 shall prohibit or render ineffective any
                  transfer of a beneficial interest in a Global Note effected in
                  accordance with the other provisions of this Section
                  2.07(c)(v).

                           (B) Restricted Global Note to Regulation S Global
                  Note. If the holder of a beneficial interest in a Restricted
                  Global Note wishes at any time to transfer such interest to a
                  person who wishes to take delivery thereof in the form of a
                  beneficial interest in a Regulation S Global Note, such
                  transfer may be effected, subject to the rules and procedures
                  of the Depository for such Global Note, Euroclear and
                  Clearstream, in each case to the extent applicable (the
                  "Applicable Procedures"), only in accordance with the
                  provisions of this Section 2.07(c)(v)(B). Upon receipt by the
                  Trustee, as Registrar, at the Corporate Trust Office of (1)
                  written instructions given in accordance with the Applicable
                  Procedures from a member of, or participant in, the Depository
                  for such Restricted Global Note (each, an "Agent Member")
                  directing the Trustee to credit or cause to be credited to a
                  specified Agent Member's account a beneficial interest in a
                  Regulation S Global Note in a principal amount equal to that
                  of the beneficial interest in the Restricted Global Note to be
                  so transferred, (2) a written order given in accordance with
                  the Applicable



                                      -45-


                                                                         Page 46

                  Procedures containing information regarding the account of
                  the Agent Member (and the Euroclear or Clearstream account,
                  as the case may be) to be credited with, and the account of
                  the Agent Member to be debited for, such beneficial interest
                  and (3) an appropriately completed certificate in
                  substantially the form set forth in or contemplated by
                  Section 2.13(a) given by the holder of such beneficial
                  interest, the Trustee, as Registrar, shall instruct the
                  Depository for such Notes to reduce the principal amount of
                  the Restricted Global Note, and to increase the principal
                  amount of the Regulation S Global Note, by the principal
                  amount of the beneficial interest in the Restricted Global
                  Note to be so transferred, and to credit or cause to be
                  credited to the account of the Person specified in such
                  instructions (which shall be the Agent Member for Euroclear
                  or Clearstream or both, as the case may be) a beneficial
                  interest in the Regulation S Global Note having a principal
                  amount equal to the amount by which the principal amount of
                  the Restricted Global Note was reduced upon such transfer.

                           (C) Regulation S Global Note to Restricted Global
                  Note. If the holder of a beneficial interest in a Regulation S
                  Global Note wishes at any time to transfer such interest to a
                  Person who wishes to take delivery thereof in the form of a
                  beneficial interest in a Restricted Global Note, such transfer
                  may be effected, subject to the Applicable Procedures, only in
                  accordance with this Section 2.07(c)(v)(C). Upon receipt by
                  the Trustee, as Registrar, at the Corporate Trust Office of
                  (1) written instructions given in accordance with the
                  Applicable Procedures from an Agent Member directing the
                  Trustee, as Registrar, to credit or cause to be credited to a
                  specified Agent Member's account a beneficial interest in the
                  Restricted Global Note equal to that of the beneficial
                  interest in the Regulation S Global Note to be so transferred,
                  (2) a written order given in accordance with the Applicable
                  Procedures containing information regarding the account of the
                  Agent Member to be credited with, and the account of the Agent
                  Member (or, if such account is held for Euroclear or
                  Clearstream, the Euroclear or Clearstream account, as the case
                  may be) to be debited for, such beneficial interest and (3)
                  with respect to a transfer of a beneficial interest in the
                  Regulation S Global Note, an appropriately completed
                  certificate in substantially the form set forth in or
                  contemplated by Section 2.13(b) given by the holder of such
                  beneficial interest, the Trustee, as Registrar, shall instruct
                  the Depository for such Regulation S Global Note to reduce the
                  principal amount of the Regulation S Global Note and to
                  increase the principal amount of the Restricted Global Note,
                  by the principal amount of the beneficial interest in the
                  Regulation S Global Note to be so transferred, and to credit
                  or cause to be credited to the account of the



                                      -46-


                                                                         Page 47

                  Person specified in such instructions a beneficial interest
                  in the Restricted Global Note having a principal amount
                  equal to the amount by which the principal amount of the
                  Regulation S Global Note was reduced upon such transfer.

                           (D) Restricted Note (other than a Restricted Global
                  Note) to Global Note. If the Holder of a Restricted Note
                  (other than a Restricted Global Note) wishes at any time to
                  transfer such Restricted Note to a Person who wishes to take
                  delivery thereof in the form of a beneficial interest in a
                  Restricted Global Note or an Unrestricted Global Note, such
                  transfer may be effected, subject to the Applicable
                  Procedures, only in accordance with this Section
                  2.07(c)(v)(D). Upon receipt by the Trustee, as Registrar, at
                  the Corporate Trust Office of (1) the Restricted Note to be
                  transferred, (2) written instructions given in accordance with
                  the Applicable Procedures from an Agent Member directing the
                  Trustee to credit or cause to be credited to a specified Agent
                  Member's account a beneficial interest in the Restricted
                  Global Note or the Unrestricted Global Note, as the case may
                  be, in a principal amount equal to the principal amount of the
                  Restricted Note to be so transferred, (3) a written order
                  given in accordance with the Applicable Procedures containing
                  information regarding the account of the Agent Member (and, in
                  the case of any transfer pursuant to Regulation S, the
                  Euroclear or Clearstream account for which such Agent Member's
                  account is held or, if such account is held for Euroclear or
                  Clearstream, the Euroclear or Clearstream account, as the case
                  may be) to be credited with such beneficial interest and (4)
                  an appropriately completed certificate in substantially the
                  form set forth in or contemplated by Section 2.13(c) (which
                  may be attached to or set forth in the Restricted Note), the
                  Trustee, as Registrar, shall cancel the Restricted Note, the
                  Issuer shall execute, and the Trustee shall authenticate and
                  deliver, a new Definitive Note for the principal amount, if
                  any, of the Restricted Note not so transferred, registered in
                  the name of the Holder transferring such Restricted Note, and
                  the Trustee shall instruct the Depository for such Notes to
                  increase the principal amount of the Restricted Global Note or
                  the Unrestricted Global Note, as the case may be, by the
                  principal amount of the Restricted Note so transferred, and to
                  credit or cause to be credited to the account of the Person
                  specified in such instructions (which, in the case of any
                  increase of the principal amount of an Unrestricted Global
                  Note as the result of a transfer pursuant to Regulation S,
                  shall be the Agent Member for Euroclear or Clearstream or
                  both, as the case may be) a corresponding principal amount of
                  the Restricted Global Note or the Unrestricted Global Note.
                  The transfer of a Restricted Note to a Person who wishes to
                  take delivery thereof in the form of a beneficial interest in
                  an Unrestricted Global Note may be effected only in accordance
                  with Regulation S or Rule 144A (as evidenced by the
                  certificate delivered pursuant to Section 2.13(c)).

                           (E) Other Exchanges. In the event that a Global Note
                  or any portion thereof is exchanged for Senior Secured Notes
                  other than Global Notes, the Trustee, as Registrar, shall
                  instruct the Depository for the Global Note to reduce



                                      -47-


                                                                         Page 48

                  the principal amount of the Global Note by the principal
                  amount of the Notes other than Global Notes issued upon such
                  exchange. Such other Notes may in turn be exchanged (on
                  transfer or otherwise) for beneficial interests in a Global
                  Note (if any are then outstanding) only in accordance with
                  such procedures, which shall be substantially consistent
                  with the provisions of subclauses (A) through (D) above
                  (including the certification requirements intended to insure
                  that transfers of beneficial interests in a Global Note
                  comply with Rule 144A, Rule 144 or Regulation S, as the case
                  may be) and any other procedures as may be from time to time
                  adopted by the Issuer and the Trustee.

                           (F) Interests in Temporary Regulation S Global Note
                  to be Held Through Euroclear or Clearstream. Until the
                  termination of the Restricted Period with respect to Senior
                  Secured Notes represented by a Temporary Regulation S Global
                  Note, interests in any Temporary Regulation S Global Note may
                  be held only through Agent Members acting for and on behalf of
                  Euroclear and Clearstream, provided that this subclause (F)
                  shall not prohibit any transfer in accordance with subclause
                  (D) of this Section 2.07(c)(v).

                  Section 2.08 Mutilated, Destroyed, Lost and Stolen Senior
Secured Notes. If any mutilated Senior Secured Note is surrendered to the
Trustee, the Issuer shall execute and, upon the Issuer's written request, the
Trustee shall authenticate and deliver a new definitive Senior Secured Note, of
like tenor and aggregate principal amount and equal face amount of principal,
registered in the same manner, dated the date of its authentication and bearing
interest from the date to which interest has been paid on such Senior Secured
Note, in exchange and substitution for such Senior Secured Note (upon surrender
and cancellation thereof); provided, that the applicant for such new Senior
Secured Note shall furnish to the Issuer and to the Trustee such reasonable bond
or indemnity as may be required by them to save each of them harmless.

                  If there shall be delivered to the Issuer and the Trustee (a)
evidence to their satisfaction of the destruction, loss or theft of any Senior
Secured Note and (b) such bond or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Issuer or the Trustee that such Senior Secured Note has been
acquired by a bona fide purchaser, the Issuer shall execute and, upon the
Issuer's request, the Trustee shall authenticate and deliver a new definitive
Senior Secured Note, of like tenor and aggregate principal amount and equal face
amount of principal registered in the same manner, dated the date of its
authentication and bearing interest from the date to which interest has been
paid on such Senior Secured Note, in lieu of and substitution for such Senior
Secured Note.

                  In case any such mutilated, destroyed, lost or stolen Senior
Secured Note has become or is about to become due and payable, the Issuer in its
discretion may, instead of issuing a new Senior Secured Note, pay such Senior
Secured Note (without surrender thereof, except in the case of a mutilated
Senior Secured Note) if the applicant for such payment shall furnish to the
Issuer and the Trustee such reasonable bond or indemnity as they may require to
save each of



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                                                                         Page 49

them harmless, and in case of destruction, loss or theft, evidence to the
satisfaction of the Issuer and the Trustee of the destruction, loss or theft of
such Senior Secured Note.

                  Upon the issuance of any new Senior Secured Note under this
Section 2.08, the Issuer may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee) connected
therewith.

                  Every new Senior Secured Note issued pursuant to this Section
2.08 in lieu of any destroyed, lost or stolen Senior Secured Note shall
constitute an original additional contractual obligation of the Issuer, whether
or not the destroyed, lost or stolen Senior Secured Note shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Senior Secured
Notes duly issued hereunder.

                  The provisions of this Section 2.08 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Senior
Secured Notes.

                  Section 2.09 Payments; Interest Rights Preserved. Interest on
any Senior Secured Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Senior Secured Note (or one or more Predecessor Senior Secured Notes)
is registered at the close of business on the Regular Record Date for such
interest.

                  Any interest or Liquidated Damages on any Senior Secured Note
which is payable; but is not punctually paid or duly provided for, on any
Interest Payment Date (herein called "Overdue Interest") shall forthwith cease
to be payable to the Holder on the relevant Regular Record Date by virtue of
having been such Holder, and such Overdue Interest may be paid by the Issuer, at
its election in each case, as provided in clause (a) or (b) below:

                  (a) The Issuer may elect to make payment of any Overdue
Interest to the Persons in whose names the Senior Secured Notes (or their
respective Predecessor Notes) are registered at the close of business on a
Special Record Date for the payment of such Overdue Interest, which shall be set
in the following manner. The Issuer shall notify the Trustee in writing of the
amount of Overdue Interest proposed to be paid on each Senior Secured Note and
the date of the proposed payment, and at the same time the Issuer shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Overdue Interest or shall make arrangements satisfactory
to the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such Overdue Interest as in this clause (a) provided. Thereupon, the Issuer
shall fix a Special Record Date for the payment of such Overdue Interest which
shall be not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly, in the name
and at the expense of the Issuer, mail a written notice of the proposed



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payment of such Overdue Interest and the Special Record Date therefor to be
given to each Holder of Senior Secured Notes, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such Overdue
Interest and the Special Record Date therefor having been so mailed, such
Overdue Interest shall be paid to the Persons in whose names the Senior Secured
Notes (or their respective Predecessor Notes) are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant to
the following clause (b).

                  (b) The Issuer may make payment of any Overdue Interest on the
Senior Secured Notes in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Senior Secured Notes may
be listed, and upon such notice as may be required by such exchange, if, after
notice given by the Issuer to the Trustee of the proposed payment pursuant to
this clause (b), such manner of payment shall be deemed practicable by the
Trustee.

                  Subject to the foregoing provisions of this Section 2.09, each
Senior Secured Note delivered under this Indenture upon registration of transfer
of, or in exchange for, or in lieu of, any other Senior Secured Note shall carry
the rights to interest accrued and unpaid, and to accrue, which were carried by
such other Senior Secured Note.

                  All payments of principal, premium, or Liquidated Damages, if
any, and interest on Senior Secured Notes will be made by check or, with respect
to Senior Secured Notes the Holders of which have provided the Issuer with wire
transfer instructions, will be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof. Unless such designation
is revoked in writing, any designation made by such Holder with respect to such
Senior Secured Notes will remain in effect with respect to any future payments
with respect to such Senior Secured Notes payable to such Holder. The Issuer
will indemnify and hold the Trustee and the Paying Agent harmless against any
loss, liability or expense (including attorneys' fees) resulting from any act or
omission to act on the part of the Trustee, the Paying Agent or any such Holder
in connection with any such designation or which the Paying Agent or Trustee may
incur as a result of making any payment in accordance with any such designation.

                  All payments of principal, premium or Liquidated Damages, if
any, on the Senior Secured Notes shall be made upon presentation and surrender
thereof at the office or agency of the Issuer maintained for such purpose in the
Borough of Manhattan, The City of New York.

                  Section 2.10 Persons Deemed Owners. Prior to due presentment
of a Senior Secured Note for registration of transfer, the Issuer, the Trustee
and any agent of the Issuer or the Trustee shall treat the Person in whose name
such Senior Secured Note is registered as the owner of such Senior Secured Note
for the purpose of receiving payment of principal of and any premium or
Liquidated Damages and (subject to Section 2.09) any interest on such Senior
Secured Note and for all other purposes whatsoever, whether or not such Senior
Secured Note be overdue, and neither the Issuer, the Trustee nor any agent of
the Issuer or the Trustee shall be affected by notice to the contrary.



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                  Section 2.11 Cancellation. All Senior Secured Notes
surrendered for payment, redemption, registration of transfer or exchange shall,
if surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Issuer may at any time deliver to the
Trustee for cancellation any Senior Secured Notes previously authenticated and
delivered hereunder which the Issuer may have acquired in any manner whatsoever,
and may deliver to the Trustee (or to any other Person for delivery to the
Trustee for cancellation) any Senior Secured Notes previously authenticated
hereunder which the Issuer has not issued and sold, and all Senior Secured Notes
so delivered shall be promptly canceled by the Trustee. No Senior Secured Notes
shall be authenticated in lieu of or in exchange for any Senior Secured Notes
canceled as provided in this Section 2.11, except as expressly permitted by this
Indenture. All canceled Senior Secured Notes held by the Trustee shall be
disposed of as directed by an Authentication Order.

                  Section 2.12 Computation of Interest. Except as otherwise
provided in the Series Supplemental Indenture relating to the Senior Secured
Notes of a series, interest on the Senior Secured Notes of such series shall be
computed on the basis of a 360-day year comprised of twelve 30-day months.

                  Section 2.13 Certification Forms. (a) Whenever any
certification is to be given by a beneficial owner of a portion of a Restricted
Global Note pursuant to Section 2.07(c)(v)(D) in connection with the initial
transfer of a beneficial interest in a Restricted Global Note to a Person who
wishes to take delivery thereof in the form of a beneficial interest in a
Regulation S Global Note, such certification shall be provided substantially in
the form set forth in Exhibit C hereto.

                  (b) Whenever any certification is to be given by a beneficial
owner of a portion of a Regulation S Global Note pursuant to Section
2.07(c)(v)(D) in connection with the initial transfer of a beneficial interest
in the Regulation S Global Note to a Person who wishes to take delivery thereof
in the form of a beneficial interest in the Restricted Global Note, such
certification shall be provided substantially in the form set forth in Exhibit C
hereto.

                  (c) Whenever any certification is to be given by a beneficial
owner of a Restricted Note or Holder of a Restricted Note (other than a
Restricted Global Note) pursuant to Section 2.07(b) in connection with the
transfer or exchange of a Restricted Note, such certification shall be provided
substantially in the form set forth in Exhibit B (which may be attached to or
set forth on the Restricted Note).

                  Section 2.14 CUSIP Numbers. The Issuer in issuing the Senior
Secured Notes may use "CUSIP" or "ISIN" numbers (if then generally in use), and,
if so, the Trustee shall use "CUSIP" or "ISIN" numbers in notices of redemption
as a convenience to Holders; provided that the Trustee shall assume no
responsibility for the accuracy of such numbers and any such redemption shall
not be affected by any defect in or omission of such numbers.

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                  Section 2.15 Issuance of Additional Notes. The Issuer shall be
entitled, subject to its compliance with Section 4.18 hereof, to issue
Additional Notes under this Indenture with identical terms as the Initial Notes
issued on the Closing Date, other than with respect to the date of issuance and
issue price. The Initial Notes issued on the Closing Date, any Additional Notes
and all Exchange Notes issued in exchange therefor will be treated as a single
class for all purposes under this Indenture.

                  With respect to any Additional Notes, the Issuer will set
forth in a resolution of the Board of Directors of the Issuer and an Officers'
Certificate, copies of which will be delivered to the Trustee, the following
information:

                  (i) the aggregate principal amount of such Additional Notes to
         be authenticated and delivered pursuant to this Indenture;

                  (ii) the issue price, the issue date and the CUSIP number of
         such Additional Notes; provided, however, that no Additional Notes may
         be issued at a price that would cause such Additional Notes to have
         "original issue discount" within the meaning of Section 1273 of the
         Internal Revenue Code of 1986, as amended; and

                  (iii) whether such Additional Notes will be Transfer
         Restricted Securities or will be issued in the form of Exchange Notes.

                                  ARTICLE III

                            REDEMPTION AND PREPAYMENT

                  Section 3.01 Notices to Trustee. If the Issuer elects to
redeem Senior Secured Notes pursuant to the optional redemption provisions of
Section 3.07 hereof, it shall furnish to the Trustee and Paying Agent, at least
30 days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the Redemption Date, (iii) the principal amount of
Senior Secured Notes to be redeemed and (iv) the redemption price.

                  Section 3.02 Selection of Senior Secured Notes to Be Redeemed.
If less than all of the Senior Secured Notes are to be redeemed at any time,
selection of Senior Secured Notes for redemption will be made by the Trustee on
a pro rata basis; provided that no Senior Secured Notes of $1,000 or less will
be redeemed in part. Notices of redemption will be mailed by first class mail at
least 30 but not more than 60 days before the Redemption Date to each Holder of
Senior Secured Notes to be redeemed at its registered address. Notices of
redemption may not be conditional. If any Senior Secured Note is to be redeemed
in part only, the notice of redemption that relates to such Senior Secured Note
will state the portion of the principal amount thereof to be redeemed. A new
Senior Secured Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon cancellation of the
original Senior Secured Note. Senior Secured Notes called for redemption become
due on



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the date fixed for redemption. Unless the Issuer defaults in payment of the
redemption price, interest and Liquidated Damages, if any, will cease to accrue
on Senior Secured Notes or portions of them called for redemption on and after
the Redemption Date.

                  The Trustee shall promptly notify the Issuer in writing of the
Senior Secured Notes selected for redemption and, in the case of any Senior
Secured Note selected for partial redemption, the principal amount thereof to be
redeemed. Senior Secured Notes and portions of Senior Secured Notes selected
shall be in denominations of $1,000 and integral multiples of $1,000; except
that if all of the Senior Secured Notes of a Holder are to be redeemed, the
entire outstanding amount of Senior Secured Notes held by such Holder, even if
not a multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Senior Secured Notes called
for redemption also apply to portions of Senior Secured Notes called for
redemption.

                  Section 3.03 Notice of Redemption. At least 30 days but not
more than 60 days before a Redemption Date, the Issuer shall mail or cause to be
mailed, by first class mail, a notice of redemption to each Holder whose Senior
Secured Notes are to be redeemed at its registered address.

                  The notice shall identify the Senior Secured Notes to be
redeemed and shall state:

                  (a) the Redemption Date;

                  (b) the redemption price;

                  (c) if any Senior Secured Note is being redeemed in part, the
portion of the principal amount of such Senior Secured Note to be redeemed and
that, after the redemption date upon surrender of such Senior Secured Note, a
new Senior Secured Note or Senior Secured Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Senior
Secured Note;

                  (d) the name, address and telephone number of the Paying
Agent;

                  (e) that Senior Secured Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;

                  (f) that, unless the Issuer defaults in making such redemption
payment, interest and Liquidated Damages, if any, on Senior Secured Notes called
for redemption ceases to accrue on and after the Redemption Date;

                  (g) the paragraph of the Senior Secured Notes and/or Section
of this Indenture pursuant to which the Senior Secured Notes called for
redemption are being redeemed; and



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                                                                         Page 54

                  (h) the CUSIP number (provided that the Issuer may state that
no representation is made as to the correctness or accuracy of the CUSIP number,
if any, listed in such notice or printed on the Senior Secured Notes).

                  At the Issuer's request, the Trustee or the Paying Agent shall
give the notice of redemption in the Issuer's name and at its expense; provided,
however, that the Issuer shall have delivered to the Trustee, at least 45 days
prior to the redemption date, an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.

                  Section 3.04 Effect of Notice of Redemption. Once notice of
redemption is mailed in accordance with Section 3.03 hereof, Senior Secured
Notes called for redemption become irrevocably due and payable on the Redemption
Date at the redemption price. A notice of redemption may not be conditional.

                  Section 3.05 Deposit of Redemption Price. One Business Day
prior to the Redemption Date, the Issuer shall deposit with the Trustee or with
the Paying Agent (other than the Issuer or an Affiliate of the Issuer) money
sufficient to pay the redemption price of and accrued interest and Liquidated
Damages, if any, on, all Senior Secured Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Issuer any money
deposited with the Trustee or the Paying Agent by the Issuer in excess of the
amounts necessary to pay the redemption price of, and accrued interest and
Liquidated Damages, if any, on, all Senior Secured Notes to be redeemed.

                  If the Issuer complies with the provisions of the preceding
paragraph and the other provisions of this Article III, on and after the
Redemption Date, interest and Liquidated Damages, if any, shall cease to accrue
on the Senior Secured Notes or the portions of Senior Secured Notes called for
redemption. If a Senior Secured Note is redeemed on or after an interest record
date but on or prior to the related Interest Payment Date, then any accrued and
unpaid interest and Liquidated Damages, if any, shall be paid to the Person in
whose name such Senior Secured Note was registered at the close of business on
such record date. If any Senior Secured Note called for redemption shall not be
so paid upon surrender for redemption because of the failure of the Issuer to
comply with the preceding paragraph, interest and Liquidated Damages, if any,
shall be paid on the unpaid principal, from the Redemption Date until such
principal is paid, and to the extent lawful on any interest, and Liquidated
Damages, if any, not paid on such unpaid principal, in each case at the rate and
in the manner provided in the Senior Secured Notes and in Section 4.01 hereof.

                  Section 3.06 Senior Secured Notes Redeemed in Part. Upon
surrender of a Senior Secured Note that is redeemed in part, the Issuer shall
issue and, upon the Issuer's written request, the Trustee shall authenticate for
the Holder at the expense of the Issuer a new Senior Secured Note equal in
principal amount to the unredeemed portion of the Senior Secured Note
surrendered.



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                                                                         Page 55

                  Section 3.07 Optional Redemption.

                  (a) The Senior Secured Notes shall be redeemable at the
Issuer's option at any time and from time to time, in whole or in part, upon not
less than 30 nor more than 60 days' notice to the Trustee and each Holder of
Senior Secured Notes, at a redemption price equal to the outstanding principal
amount thereof plus accrued interest and Liquidated Damages, if any, plus the
Make-Whole Premium, such redemption price to be set forth in the notice to the
Trustee. In no event shall the sum of the redemption price plus the Make-Whole
Premium ever be less than 100% of the Senior Secured Notes being redeemed plus
accrued and unpaid interest thereon to the Redemption Date. Unless the Issuer
defaults in payment of the redemption price, on and after the Redemption Date
interest and Liquidated Damages, if any, shall cease to accrue on the Senior
Secured Notes or portions thereof called for redemption.

                  (b) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Sections 3.01 through 3.06 hereof.

                  Section 3.08 Mandatory Redemption.

                  (a) The Senior Secured Notes shall be subject to mandatory
redemption, in whole or in part, at a redemption price equal to the principal
amount of the Senior Secured Notes being redeemed plus accrued and unpaid
interest and Liquidated Damages, if any, to the Redemption Date, if the Issuer
or any Subsidiary receives more than $5.0 million of Loss Proceeds or Eminent
Domain Proceeds because of an Event of Loss or an Event of Eminent Domain and:

                  (i) the Issuer determines that all or such portion of the
         applicable Plant cannot be rebuilt, repaired or restored to permit
         operations on a commercially reasonable basis, or the Issuer determines
         not to rebuild, repair or restore the applicable Plant or such portion,
         in which case the Issuer shall have to use the Net Available Amount of
         such proceeds for such redemption; or

                  (ii) only a portion of the applicable Plant is capable of
         being rebuilt, repaired or restored on a commercially reasonable basis
         and the Issuer determines to so rebuild, repair or restore, in which
         case the Issuer will have to use only the amount of such Loss Proceeds
         or Eminent Domain Proceeds not used to rebuild, repair or restore such
         Plant for such redemption, except as set forth in the immediately
         following paragraph.

                  If the Issuer or any Subsidiary receives less than $5 million
of Loss Proceeds or Eminent Domain Proceeds or has less than $5 million
remaining after rebuilding, repairing or restoring a portion of the applicable
Plant because of an Event of Loss or Event of Eminent Domain the Issuer will
cause such amounts to be deposited into the Revenue Account.

                  (b) If the Issuer or any Subsidiary (a) receives more than
$5.0 million of Title Event Proceeds in connection with a Title Event and is
unable to remedy the Title Event, or (b) has more than $5.0 million of Title
Event Proceeds remaining after remedying the Title Event, the Issuer will have
to use the Net Available Amount of such proceeds, to the extent not



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                                                                         Page 56

used to cure the Title Event, on a pro rata basis to redeem the Senior Secured
Notes at a redemption price equal to the principal amount of the Senior Secured
Notes being redeemed plus accrued and unpaid interest and Liquidated Damages, if
any, to the Redemption Date. If the Issuer or any Subsidiary receives less than
$5 million of Title Event Proceeds in connection with a Title Event or has less
than $5 million remaining after remedying a Title Event the Issuer will cause
such amounts to be deposited into the Revenue Account.

                  (c) If on or prior to September 30, 2005, the Issuer has not
satisfied the Initial Galena Re-powering Account Withdrawal Conditions, then the
Issuer will have to use the proceeds of the Galena Re-powering Account to redeem
Senior Secured Notes at a price equal to 101% of the principal amount of Senior
Secured Notes being redeemed plus accrued and unpaid interest and Liquidated
Damages, if any, to the Redemption Date.

                  (d) If Final Completion is not achieved by March 31, 2006 or
the Galena Re-powering does not result in a minimum net electrical output of 18
MW as determined in accordance with performance tests conducted pursuant to the
Galena Re-powering Contract (as certified by the Independent Engineer), then
from and after March 31, 2006, the Issuer will not be able to make any
Restricted Payments until the Issuer has used any amounts the Issuer receives as
Performance Liquidated Damages and amounts in the Distribution Suspense Account
to redeem or has otherwise redeemed (a "Galena Re-powering Performance
Redemption") Senior Secured Notes in an amount equal to the product of (x)
$1,100,000 times (y) the difference between (i) 18 MW minus (i) the actual
number of Megawatts of the Galena Re-powering as demonstrated by the Performance
Guarantee Tests and certified by the Independent Engineer. The Issuer will
redeem the Senior Secured Notes in connection with a Galena Re-powering
Performance Redemption at a price equal to 101% of the principal amount of the
Senior Secured Notes required to be redeemed plus accrued and unpaid interest
and Liquidated Damages, if any, to the Redemption Date.

                  (e) If, as of January 1, 2006, the Mammoth Enhancement has not
improved the net electrical output of the Mammoth Plant by at least 3.6 MW (as
certified by the Independent Engineer), then from and after January 1, 2006, the
Issuer will not be able to make any Restricted Payments until the Issuer has
used amounts in the Distribution Suspense Account to redeem or has otherwise
redeemed (a "Mammoth Enhancement Redemption") Senior Secured Notes in an amount
equal to the product of (x) $1,100,000 times (y) the difference between (i) 3.6
MW minus (ii) the actual number of Megawatts that the Mammoth Enhancement
increases the net electrical output of the Mammoth Plant. The Issuer shall
redeem the Senior Secured Notes in connection with a Mammoth Enhancement
Redemption at a price equal to 101% of the principal amount of the Senior
Secured Notes required to be redeemed plus accrued and unpaid interest and
Liquidated Damages, if any, to the Redemption Date.

                  In the event that any Senior Secured Obligations (other than
the Senior Secured Notes) are required to be redeemed before their scheduled
maturity pursuant to documents governing such Senior Secured Obligations for any
reason not otherwise giving rise to a redemption of the Senior Secured Notes,
the Issuer shall offer to repurchase the Senior Secured



                                      -56-


                                                                         Page 57

Notes on a pro rata basis with the other Senior Secured Obligations as are
required to be redeemed at a redemption price equal to the principal amount of
the Senior Secured Notes the Issuer offers to repurchase plus accrued and unpaid
interest and Liquidated Damages, if any, to the Redemption Date, but without any
premium.

                  Other than as specifically provided in this Section 3.08, any
purchase or redemption pursuant to this Section 3.08 shall be made pursuant to
the provisions of Sections 3.01 through 3.06 hereof.

                                   ARTICLE IV

                                    COVENANTS

                  The Issuer and each of the Issuer's Subsidiaries (other than
Ormesa LLC, which shall only be subject to these covenants prior to the Ormesa
Support Date to the extent compliance therewith would not violate the Ormesa
Credit Agreement) shall be subject to the following covenants.

                  Section 4.01 Payment of Senior Secured Notes. The Issuer shall
pay or cause to be paid the principal of, premium, if any, interest and
Liquidated Damages, if any, on the Senior Secured Notes on the dates and in the
manner provided on Exhibits A-1 and A-2 attached hereto including the Schedule
of Principal Payments set forth on Schedule I attached thereto. Principal,
premium, if any, interest and Liquidated Damages, if any, shall be considered
paid on the date due if the Paying Agent, if other than the Issuer or a
Subsidiary or an Affiliate thereof, holds as of 10:00 a.m. Eastern Time on the
due date money deposited by the Issuer in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, interest
and Liquidated Damages, if any, then due.

                  The Issuer shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Senior Secured Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) and
Liquidated Damages, if any, at the same rate to the extent lawful.

                  Section 4.02 Maintenance of Office or Agency. The Issuer shall
maintain in the Borough of Manhattan, the City of New York, and in such other
places, if any, as shall be specified for the Senior Secured Notes of any series
in the related Series Supplemental Indenture an office or agency (which may be
an office of the Trustee or an affiliate of the Trustee, Registrar or
co-registrar) where Senior Secured Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon the Issuer in
respect of the Senior Secured Notes and this Indenture may be served. The Issuer
shall give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Issuer shall fail
to maintain any such required office or agency or shall fail to



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furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.

                  The Issuer may also from time to time designate one or more
other offices or agencies where the Senior Secured Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Issuer of its obligation to maintain an office or agency
in the Borough of Manhattan, the City of New York for such purposes. The Issuer
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.

                  The Issuer hereby designates the Corporate Trust Office of the
Trustee as the initial office or agency of the Issuer where the Senior Secured
Notes may be presented or surrendered in accordance with the foregoing.

                  Section 4.03 Reporting Requirements. Whether or not required
by the SEC, so long as any Senior Secured Notes are outstanding, the Issuer
shall furnish to the Trustee for mailing to the Holders (directly to any
Beneficial Owner (as such term is defined Rule 13d-3 and Rule 13d-5 under the
Exchange Act) with notice of ownership on file with the Trustee), within the
time periods specified in the SEC's rules and regulations:

                  (a) all quarterly and annual financial information that would
         be required to be contained in a filing with the SEC on Forms 10-Q and
         10-K if the Issuer were required to file such Forms, including a
         "Management's Discussion and Analysis of Financial Conditions and
         Results of Operations" and, with respect to the annual information
         only, a report on the annual financial statements by the Issuer's
         certified independent accountants; and

                  (b) all current reports that would be required to be filed
         with the SEC on Form 8-K if the Issuer were required to file such
         reports.

In addition, following the consummation of the Exchange Offer contemplated by
the Registration Rights Agreement, whether or not required by the SEC, the
Issuer shall file a copy of all of the information and reports referred to in
clauses (1) and (2) above with the SEC for public availability within the time
periods specified in the SEC's rules and regulations (unless the SEC will not
accept such a filing) and make such information available to prospective
investors upon request. In addition, the Issuer and the Guarantors agree that
they shall furnish to the Holders and to prospective investors, upon the request
of such Holders, the information required to be delivered pursuant to Rule
144(d)(4) under the Securities Act so long as the Senior Secured Notes are not
freely transferable under the Securities Act.

Notwithstanding the foregoing, the Issuer shall not be required to present
financial information (i) for itself or any Subsidiary for any period prior to
September 30, 2003 that is not presented in



                                      -58-


                                                                         Page 59

the Offering Memorandum or (ii) pursuant to Rule 3-16 of Regulation S-X, in each
case, unless required to do so by the SEC in connection with the Exchange Offer.

                  The receipt by the Trustee of any such reports and documents
pursuant to this Section 4.03 shall not constitute notice or constructive notice
of any information contained in such documents or determinable from information
contained in such documents, including the Issuer's compliance with any
covenants hereunder (as to which the Trustee is entitled to rely exclusively on
an Officers' Certificate).

                  Section 4.04 Delivery of Notices to Trustee. The Issuer shall,
and shall cause each of its Subsidiaries to, so long as any of the Senior
Secured Notes are outstanding, deliver to the Trustee and the Collateral Agent,
forthwith upon any officer becoming aware of any Default, Event of Default,
Event of Loss, Event of Eminent Domain or Title Event or, an Officers'
Certificate specifying with particularity any such Default, Event of Default,
Event of Loss, Event of Eminent Domain or Title Event and, if applicable, what
action the Issuer is taking or proposes to take with respect thereto.

                  Section 4.05 Stay, Extension and Usury Laws. The Issuer
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay, extension or usury law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or the performance of
its obligations under this Indenture and the Senior Secured Notes; and the
Issuer (to the extent it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.

                  Section 4.06 Restrictions on Sale of Assets. The Issuer shall
not nor shall the Issuer permit any of its Subsidiaries to sell, lease (as
lessor) or transfer (as transferor) any property or assets (other than to a
Guarantor) except:

              (a) in the ordinary course of business; or

              (b) property which is worn out, obsolete or no longer useful or
necessary in connection with the operation of a Project as certified by the
Issuer, including the 50% undivided interest of Mammoth-Pacific in those certain
BLM geothermal resource leases CA 14414, CA 14405, CA 14406, CA 14407 and CA
11672 or the interest of Steamboat Development in that certain BLM Right of Way
N-77428 or as a result of the lapse of geothermal leases due to the failure to
commence commercial production of geothermal resources under such leases; or

              (c) property comprising the Desert Peak 1 Plant and related real
estate rights if the Issuer improves the output of the other facility currently
located at the Brady Plant or adds a facility on the Brady site so that the
overall output of the facilities located at Brady equals or exceeds the
aggregate of (i) the then current output of the Desert Peak 1 Plant plus (ii)
the current



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output of the other facility currently located at the Brady Plant (the aggregate
of (i) and (ii) referred to as the "Combined Brady Output"); provided, that
prior to any such sale, lease or transfer, (i) the Geothermal Consultant shall
have certified that after giving effect to such sale, lease or transfer, the
Brady Plant has the necessary geothermal resources to enable the Brady Plant to
produce the Combined Brady Output through the Final Maturity Date (subject to
normal geothermal resource degradation in an amount no worse than that which is
projected for the Desert Peak 1 Plant) and (ii) the power purchase agreement
pursuant to which the Brady Plant operates at such time continues to be in full
force and effect after giving effect to such sale, lease or transfer and
provides for delivery of output not less than the Combined Brady Output.

                  The Collateral Agent shall be obligated to release the Lien of
the Security Documents upon the Issuer's transfer of any property or assets in
compliance with this covenant and receipt by the Collateral Agent of an
Officer's Certificate stating that such transfer is in compliance with this
covenant.

                  Section 4.07 Insurance. The Issuer shall, and shall cause each
of its Subsidiaries to, maintain or cause to be maintained business interruption
insurance, casualty insurance, including flood and earthquake coverage, and
primary and excess liability insurance, as well as customary worker's
compensation (upon hiring of employees) and automobile insurance and such other
insurance, if any, as is generally carried by companies engaged in similar
businesses and owning similar properties in the same general areas and financed
in a similar manner. To the extent any such casualty insurance covers both the
Issuer, its Subsidiaries and/or a Project, on the one hand, and any other owner
and/or plant, on the other hand, the Issuer shall ensure that it has
specifically designated as applicable solely to it, its Subsidiaries and the
Projects "all risk" property insurance coverage in an amount based upon the
estimated full replacement value of the Plants (provided that earthquake and
flood coverages may be subject to an annual aggregate limit with respect to the
Issuer and its Affiliates' facilities of not less than $5 million with respect
to flood and $10 million with respect to earthquake) and business interruption
insurance in an amount of not less than the maximum fixed expenses projected
over any four month period during the succeeding twelve month period (including,
without limitation, debt service expenses). The Issuer shall not, nor shall the
Issuer permit any of its Subsidiaries to, reduce or change such insurance
coverages if the Insurance Consultant determines that such reduction or
cancellation would not be reasonable under the circumstances and the insurance
coverages sought to be reduced or changed are available on commercially
reasonable terms or that another level of coverage greater than that proposed by
the Issuer is available on commercially reasonable terms (in which case such
coverage may be reduced to the higher of such available levels). The Issuer
shall, and the Issuer shall cause each of its Subsidiaries (other than Ormesa
prior to the Ormesa Support Date) to, cause the Collateral Agent to be named as
loss payee and/or as an additional insured, as appropriate; all insurance
policies shall provide for at least 30 days' written notice to the Collateral
Agent of a cancellation (except cancellation due to failure to pay premiums,
which may be on no less than 10 days prior written notice to the Collateral
Agent) or reduction in the amount of coverage or of a material change in
coverage.



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                  Section 4.08 Governmental Approvals; Title. The Issuer shall,
and shall cause each of its Subsidiaries to, at all times (i) obtain and
maintain in full force and effect the Governmental Approvals and other consents
and approvals required at any time in connection with the Issuer's business and
(ii) preserve and maintain good and valid title to our properties and assets
(subject to no Liens other than Permitted Liens), except in each case where the
failure to do so in clause (i) or (ii) could not reasonably be expected to have
a Material Adverse Effect.

                  Section 4.09 Limitation on Nature of Business. The Issuer
shall not, and shall not permit or cause any of its Subsidiaries to, engage or
enter into any business other than, directly or indirectly the ownership,
operation and maintenance of the Plants and activities incidental thereto.

                  Section 4.10 Prohibition on Merger or Other Fundamental
Changes. The Issuer shall not, nor shall it permit any of its Subsidiaries to,
enter into any transaction of merger or consolidation, sell all or substantially
all of its or their respective assets to any other Person (other than a merger,
consolidation or sale to or into the Issuer or any of the Guarantors), change
its or their respective forms of organization or its or their respective
businesses, liquidate or dissolve its or their self (or suffer any liquidation
or dissolution) or discontinue its or their respective businesses. The Issuer
shall not, nor shall it permit any of its Subsidiaries to, purchase or otherwise
acquire all or substantially all of the assets of any other Person (other than
(x) the acquisition of the Capital Stock of Mammoth-Pacific that the Issuer does
not own as of the Closing Date, (y) an acquisition by the Issuer or a Guarantor
of assets of another Guarantor and (z) the acquisition of a Qualified Project in
accordance with the terms of this Indenture).

                  Section 4.11 Restricted Payments. The Issuer shall not, nor
shall it permit or cause any of its Subsidiaries to, make any Restricted
Payments, except (i) if the Issuer meets the Distribution Conditions set forth
in Section 3.8(b) of the Depositary Agreement and has satisfied Sections 3.08
(d) and (e) hereof, if applicable, and (ii) Restricted Payments made by any of
its Subsidiaries; provided, that such Restricted Payments in the case of clause
(ii) are made to the Issuer or a Guarantor.

                  Section 4.12 Revenue Account. The Issuer shall, and it shall
cause each of its Subsidiaries (other than Ormesa prior to the Ormesa Support
Date) to, take all actions as may be necessary to cause all revenues actually
received by them from the Projects or otherwise to be deposited in the Revenue
Account to the extent required by the Depositary Agreement. The Issuer shall,
and shall cause its Subsidiaries (other than Ormesa prior to the Ormesa Support
Date) to (x) provide irrevocable written instruction to each power purchaser
related to a Project, to pay all revenues paid under power purchase agreements
with respect to the Projects directly into the Revenue Account (other than with
respect to the Mammoth Plant; provided, however, if at any time the Issuer or
any Guarantor acquires that portion of the Capital Stock of Mammoth-Pacific that
the Issuer does not own as of the Closing Date or the Issuer otherwise acquires
control of 100% of the Mammoth Project, the Issuer shall, or the Issuer shall
cause such Guarantor, as the case may be, to arrange for all revenues paid under
power purchase agreements with respect to the Mammoth Project to be paid
directly into the Revenue Account), (y) use



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commercially reasonable efforts to arrange for all other revenues to be paid
directly into the Revenue Account and (z) cause any other revenues received by
the Issuer or any of its Subsidiaries to be promptly paid into the Revenue
Account.

                  Section 4.13 Transactions with Affiliates. The Issuer shall
not, and shall not permit any of its Subsidiaries to, make any payment to, or
sell, lease, transfer or otherwise dispose of any of its respective properties
or assets to, or purchase any property or assets from, or enter into or make or
amend any transaction, contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any of its respective Affiliates (each,
an "Affiliate Transaction"), unless:

                  (a) the Affiliate Transaction is on terms that are no less
         favorable to the Issuer or the relevant Subsidiary than those that
         would have been obtained in a comparable transaction by the Issuer or
         such Subsidiary with an unrelated Person; and

                  (b) the Issuer delivers to the Trustee:

                           (i) with respect to any Affiliate Transaction or
                  series of related Affiliate Transactions involving aggregate
                  consideration in excess of $5 million, a resolution of the
                  Board of Directors set forth in an Officers' Certificate
                  certifying that such Affiliate Transaction complies with this
                  covenant and that such Affiliate Transaction has been approved
                  by a majority of the Board of Directors; and

                           (ii) with respect to any Affiliate Transaction or
                  series of related Affiliate Transactions involving aggregate
                  consideration in excess of $25 million, a positive opinion as
                  to the fairness to the Issuer of such Affiliate Transaction
                  from a financial point of view issued by an accounting,
                  appraisal or investment banking firm of national standing. The
                  Trustee shall have no obligation to review the fairness
                  opinion, but shall hold such opinion for the benefit of the
                  Holders.

                  The following items shall not be deemed to be Affiliate
Transactions and, therefore, shall not be subject to the provisions of the prior
paragraph:

                  (a) any employment agreement, employee benefit plan, officer
         and director indemnification agreement or any similar arrangement
         entered into by the Issuer or any of its Subsidiaries in the ordinary
         course of business;

                  (b) transactions between or among the Issuer and/or its
         Wholly-Owned Subsidiaries;

                  (c) payment of reasonable directors' fees to Persons who are
         not otherwise Affiliates of the Issuer;

                  (d) Restricted Payments that do not violate the provisions of
         Section 4.11 of this Indenture;

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                  (e) loans or advances to employees in the ordinary course of
         business not to exceed $1.0 million in the aggregate at any one time
         outstanding;

                  (f) transactions pursuant to written agreements with the
         Issuer's Affiliates in place as of the date of this Indenture;

                  (g) the transfer of the 50% undivided interest of OrMammoth in
         those certain BLM geothermal resource leases CA 14414, CA 14405, CA
         14406, CA 14407 and CA 11672 or the interest of Steamboat Development
         in that certain BLM Right of Way N-77428 to any Affiliate of the
         Issuer;

                  (h) any amendments, modifications or replacements of, or
         waivers under, any written agreement described under clause (f) of this
         paragraph that is not a Material Project Document; provided that no
         such amendment, modification or waiver alters any such agreement in a
         manner than is materially adverse to the interests of Holders; and

                  (i) any agreement to do anything set forth in items (a)
         through (h) of this paragraph.

                  Section 4.14 Exercise of Rights. The Issuer shall not, and
shall not permit any of its Subsidiaries to, exercise, or fail to exercise, its
or their respective rights under the Project Documents in a manner which could
reasonably be expected to result in a Material Adverse Effect with respect to
the Issuer or the applicable Subsidiary. The Issuer shall, and shall cause each
of its Subsidiaries to, diligently pursue all rights to distributions or
dividends and Loss Event Proceeds, Eminent Domain Proceeds and Title Proceeds
upon the occurrence of a Loss Event, an Event of Eminent Domain or a Title
Event, as the case may be.

                  Section 4.15 Termination or Amendment to Material Project
Documents. The Issuer shall not, and shall not permit any of its Subsidiaries
to, terminate, amend in any material adverse respect, replace, modify in any
material adverse respect or assign, other than pursuant to the Security
Documents (or consent to any of the foregoing) any of the Material Project
Documents to which the Issuer or they are a party, provided that (x) Material
Project Documents may be terminated so long as the Issuer enters into one or
more replacement agreements, and (y) the Issuer's Subsidiaries may terminate
Material Project Documents with respect to the rights and obligations of the
Desert Peak 1 Plant if the Issuer improves the output of the Brady Plant and
otherwise complies with the provisions set forth in Section 4.06(c) of this
Indenture.

                  Section 4.16 Additional Project Documents. The Issuer shall
not, and shall not permit any of its Subsidiaries to, enter into any Additional
Project Documents (a) if entering into such document could reasonably be
expected to result in a Material Adverse Effect, provided, however, that nothing
in the foregoing is intended to preclude the Issuer or any of its Subsidiaries
from entering into agreements to sell Renewable Energy Credits in connection
with any Project as contemplated by the terms of the Project Documents or
required by Applicable Law or (b) if entering into any such Additional Project
Document constituting power purchase agreements,



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fuel supply and transportation agreements, transmission agreements and other
agreements, contracts or other arrangements for the purchase of fuel for, or the
sale of electricity from, the Project results in the breach of, or conflict with
the terms of, any then-existing power purchase agreement.

                  Section 4.17 Performance of Project Documents. The Issuer
shall, and shall cause each of its Subsidiaries to, perform and observe their
respective covenants and obligations under all of the Project Documents, except
where the failure to do so could not reasonably be expected to result in a
Material Adverse Effect. Section 4.18 Limitations on Indebtedness. The Issuer
shall not create, incur or suffer to exist any Indebtedness except the following
Indebtedness (collectively, "Permitted Indebtedness"):

                  (a) Indebtedness represented by the Senior Secured Notes to be
         issued on the Closing Date and the Exchange Notes to be issued pursuant
         to the Registration Rights Agreement;

                  (b) Indebtedness incurred by the Issuer to (x) make capital
         improvements to a Project that are required by law or the terms of the
         Project Documents, and (y) purchase that portion of the Capital Stock
         of Mammoth-Pacific that the Issuer does not own as of the Closing Date;
         provided, that:

                           (i) no Default or Event of Default has occurred and
                  is continuing at the time such Indebtedness is proposed to be
                  incurred or would result from the incurrence of such
                  additional Indebtedness; and

                           (ii) (1) the Issuer's calculations demonstrate that
                  after giving effect to the incurrence of such additional
                  Indebtedness, the minimum projected Debt Service Coverage
                  Ratio for each Annual Period (each such period taken as a
                  single accounting period) following the Quarterly Period in
                  which such additional Indebtedness is incurred through the
                  Final Maturity Date (provided, however, (x) with respect to
                  Indebtedness incurred within one year of the Final Maturity
                  Date, the period tested shall be a period commencing on the
                  first day of the Quarterly Period immediately following such
                  incurrence and ending on the Final Maturity Date, and (y) with
                  respect to the Annual Period in which such Indebtedness is
                  incurred (unless such Indebtedness is incurred on the first
                  day of such Annual Period), the first period tested shall be
                  the period commencing with the first day of the Quarterly
                  Period immediately following such incurrence and ending on the
                  last day of the Annual Period in which such Indebtedness is
                  incurred), shall not be less than 1.40 to 1.0; and (2) the
                  Issuer shall have delivered a certificate to the Collateral
                  Agent confirming the foregoing clause (b)(i) and clause
                  (b)(ii)(1) and stating that the Capital Expenditures proposed
                  by the Issuer conform to such legal or Project Document
                  requirements;


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                  (c) Indebtedness incurred by the Issuer to make discretionary
         capital improvements to a Project, provided, that:

                           (i) no Default or Event of Default has occurred and
                  is continuing at the time such Indebtedness is proposed to be
                  incurred or would result from the incurrence of such
                  additional Indebtedness; and

                           (ii) (1) the Issuer's calculations demonstrate that
                  (x) the minimum projected Debt Service Coverage Ratio for each
                  Annual Period through the Final Maturity Date and (y) the
                  average projected Debt Service Coverage Ratio for the Annual
                  Periods through the Final Maturity Date, equals or exceeds the
                  projected Debt Service Coverage Ratio for the corresponding
                  Annual Period or Annual Periods, as the case may be,
                  immediately prior to the incurrence of such additional
                  Indebtedness and the making of any such capital improvement
                  (provided, however, (i) with respect to Indebtedness incurred
                  within one year of the Final Maturity Date, the period tested
                  shall be a period commencing on the first day of the Quarterly
                  Period immediately following such incurrence and ending on the
                  Final Maturity Date, and (ii) with respect to the Annual
                  Period in which such Indebtedness is incurred (unless such
                  Indebtedness is incurred on the first day of such Annual
                  Period), the first period tested shall be the period
                  commencing with the first day of the Quarterly Period
                  immediately following such incurrence and ending on the last
                  day of the Annual Period in which such Indebtedness is
                  incurred) and (2) the Issuer shall have delivered a
                  certificate to the Collateral Agent confirming the foregoing
                  clause (c)(i) and clause (c)(ii)(1);

                  (d) additional Indebtedness incurred by the Issuer not to
         exceed an aggregate principal amount outstanding at any time of $10
         million;

                  (e) Subordinated Debt;

                  (f) Indebtedness incurred by the Issuer in order to refinance
         existing Indebtedness incurred pursuant to clause (b), (c) or (e)
         above, provided, (1) such refinancing Indebtedness has an average life
         equal to or greater than the average life of the Indebtedness being
         refinanced, (2) the aggregate amount of such refinancing Indebtedness
         does not exceed the principal amount of the Indebtedness being
         refinanced and (3) to the extent that the original incurrence of the
         refinanced Indebtedness was subject to certain conditions and
         requirements pursuant to this Indenture, such refinancing Indebtedness
         shall comply with all of the conditions and requirements applicable to
         the refinanced Indebtedness;

                  (g) Indebtedness outstanding under the Ormesa Credit Agreement
         prior to the Ormesa Support Date; and


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                  (h) additional Senior Secured Notes issued by the Issuer to
         purchase not more than one Qualified Project through the Final Maturity
         Date of the Senior Secured Notes; provided, that:

                           (i) no Default or Event of Default has occurred and
                  is continuing at the time such Indebtedness is proposed to be
                  incurred or would result from the incurrence of such
                  additional Indebtedness;

                           (ii) no Indebtedness (other than the Senior Secured
                  Notes and Subordinated Debt issued under the Ormat Nevada
                  Subordinated Loan) is incurred or assumed in connection with
                  the purchase of the Qualified Project;

                           (iii) (1) the Issuer's calculations demonstrate that
                  the minimum projected Debt Service Coverage Ratio for each
                  Annual Period (each such period taken as a single accounting
                  period) following the Quarterly Period in which such
                  additional Indebtedness is incurred through the Final Maturity
                  Date (provided, however, (i) with respect to Indebtedness
                  incurred within one year of the Final Maturity Date, the
                  period tested shall be the period commencing on the first day
                  of the Quarterly Period immediately following such incurrence
                  and ending on the Final Maturity Date, and (ii) with respect
                  to the Annual Period in which such Indebtedness is incurred
                  (unless such Indebtedness is incurred on the first day of such
                  Annual Period), the first period tested shall be the period
                  commencing with the first day of the Quarterly Period
                  immediately following such incurrence and ending on the last
                  day of the Annual Period in which such Indebtedness is
                  incurred), shall not be less than 1.55 to 1.0, and (2) the
                  Issuer shall have delivered a certificate to the Collateral
                  Agent confirming the foregoing clauses (h)(i), (h)(ii), and
                  clause (h)(iii)(1) and stating that the Project acquired is a
                  Qualified Project.

                  Section 4.19 Limitation on Indebtedness of Subsidiaries. The
Issuer shall not permit any of its Subsidiaries to create, incur or suffer to
exist any Indebtedness other than (i) Indebtedness owed to the Issuer
represented by an intercompany note and (ii) Indebtedness represented by the
Guarantees.

                  Section 4.20 Limitations on Guarantees. The Issuer shall not,
and shall not permit any of its Subsidiaries to, contingently or otherwise, be
or become liable in connection with any Guarantee, except for (i) endorsements
and similar obligations in the ordinary course of business and (ii) Guarantees
of the Senior Secured Notes.

                  Section 4.21 Prohibitions on Other Obligations or Assignments.
The Issuer shall not, and shall not permit any of its Subsidiaries to, assign
any of its or its Subsidiaries' respective rights or obligations under any
Financing Document.

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                  Section 4.22 Books and Records, Inspection. The Issuer shall,
and shall cause each of its Subsidiaries to, maintain books and records in
accordance with GAAP and provide the Trustee, the Collateral Agent and the
Independent Engineer with reasonable inspection rights with respect to the
Projects and such books and records.

                  Section 4.23 Maintenance of Existence. The Issuer shall, and
shall cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve and keep in full force and effect its and their (i)
existence and good standing under the laws of their respective states of
organization, in accordance with their organizational documents (as the same may
be amended from time to time), (ii) qualification to do business in each
jurisdiction in which the character of the properties owned or leased by it or
in which the transaction of its business as conducted or proposed to be
conducted makes such qualification necessary and (iii) powers, rights (charter
and statutory), privileges, licenses and franchises with respect to the Projects
except where the failure to maintain any of the foregoing in clause (iii) could
not reasonably be expected to have a Material Adverse Effect.

                  Section 4.24 Additional Documents; Filings and Recordings. The
Issuer shall, and shall cause each of its Subsidiaries to, execute and deliver,
as requested by the Trustee or the Collateral Agent, such other documents as
shall reasonably be necessary or advisable in order to effect or protect the
rights and remedies of the Trustee or the Collateral Agent, as the case may be,
granted or provided for by the Security Documents to which the Issuer is a party
and to consummate the transactions contemplated therein. The Issuer shall, at
its own expense, take all reasonable actions (a) that are requested by the
Trustee or the Collateral Agent, or (b) that an Authorized Officer of the Issuer
has actual knowledge are necessary as a legal matter, to establish, maintain and
perfect the first priority security interests of Trustee and the Collateral
Agent in the Collateral, subject to Permitted Liens. Without limiting the
generality of the foregoing, the Issuer shall execute or cause to be executed
and shall file or cause to be filed such financing statements, continuation
statements, and fixture filings and such mortgages, or deeds of trust in all
places necessary or advisable to establish, maintain and perfect the Liens
purported to be provided for in the Security Documents, subject to Permitted
Liens.

                  Section 4.25 Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Issuer shall not, nor shall it permit any of its Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any of its Subsidiaries
to:

                  (a) pay dividends or make any other distributions on its
         Capital Stock to the Issuer or any of its Subsidiaries, or with respect
         to any other interest or participation in, or measured by, its profits,
         or pay any Indebtedness owed to the Issuer or any of its Subsidiaries;

                  (b) make loans or advances to the Issuer or any of its
         Subsidiaries; or

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                  (c) transfer any of its properties or assets to the Issuer or
         any of its Subsidiaries.

                  However, the preceding restrictions shall not apply to
encumbrances or restrictions existing under or by reason of:

                  (a) any of the Financing Documents;

                  (b) Applicable Law;

                  (c) customary non-assignment provisions in contracts,
         agreements, leases, permits or licenses entered into or issued in the
         ordinary course of business and consistent with past practices;

                  (d) purchase money obligations for property acquired in the
         ordinary course of business and Capital Lease Obligations that impose
         restrictions on the property purchased or leased of the nature
         described in clauses (a) and (c) of the preceding paragraph;

                  (e) Indebtedness incurred pursuant to clause (f) of the
         definition of Permitted Indebtedness; provided that the restrictions
         contained in the agreements governing such Indebtedness are not
         materially more restrictive, taken as a whole, than those contained in
         the agreements governing the Indebtedness being refinanced;

                  (f) Liens securing Indebtedness otherwise permitted to be
         incurred under Section 4.27 that limit the right of the debtor to
         dispose of the assets subject to such Liens or to use the proceeds of
         any such disposition; and

                  (g) restrictions on cash or other deposits or net worth
         imposed by customers under contracts entered into in the ordinary
         course of business.

                  Section 4.26 Budget And Expenditures. The Issuer shall, and
shall cause each of its Subsidiaries to, deliver, at its own expense, an annual
Operating Budget to the Trustee, the Collateral Agent and the Independent
Engineer at least 30 days prior to the beginning of each fiscal year of the
Issuer.

                  Section 4.27 Limitation on Liens. The Issuer shall not, and
shall not permit any of its Subsidiaries to, grant, create, incur or suffer to
exist any Liens upon any of its or their assets, except for the Permitted Liens.

                  Section 4.28 Compliance With Laws. The Issuer shall, and shall
cause each of its Subsidiaries to, comply with all applicable laws and
Governmental Approvals, except where non-compliance could not reasonably be
expected to have a Material Adverse Effect.



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                  Section 4.29 Operation and Maintenance. The Issuer shall, and
shall cause each of its Subsidiaries to, at all times maintain and operate each
Project in compliance with Prudent Industry Practices.

                  Section 4.30 Additional Subsidiaries; Bank Accounts. The
Issuer shall own at all times, directly or indirectly, 100% of the issued and
outstanding Capital Stock of each of its Subsidiaries. The Issuer shall own at
all times directly or indirectly, not less than 50% of the issued and
outstanding Capital Stock of Mammoth-Pacific. The Issuer shall not, and shall
not permit any of its Subsidiaries to, acquire or create any additional
Subsidiaries; provided, however, this shall not limit the Issuer's ability or
the ability of any Guarantor to create a Wholly-Owned Subsidiary that becomes a
Guarantor in accordance with Article IX of the Indenture by execution of a
Supplemental Indenture in the form of Exhibit G hereto on or prior to the date
of acquisition, to (i) acquire the Capital Stock of Mammoth-Pacific that the
Issuer does not own as of the Closing Date or (ii) acquire a Qualified Project
in accordance with the terms of this Indenture. The Issuer shall not, and shall
not permit any of its Subsidiaries to, establish any bank account other than the
Accounts and not more than two checking accounts (each, a "Checking Account"),
provided that the Secured Parties shall have a perfected security interest in
such Checking Accounts pursuant to an agreement which is reasonably satisfactory
to the Collateral Agent.

                  Section 4.31 Maintenance of Water Supply; Access Rights. The
Issuer shall, and shall cause its Subsidiaries to, at all times maintain in full
force and effect the agreements and other arrangements to ensure that (i) the
Projects have a constant and continuous supply of water to the extent necessary
to permit the operation of the Projects at levels contemplated in the
Projections and (ii) the Projects have such real estate rights as may be
necessary to ensure the ingress to and egress from each of the Projects.

                  Section 4.32 No Abandonment. The Issuer shall, and shall cause
its Subsidiaries not to permit the occurrence of any Event of Abandonment.

                  Section 4.33 Consents to Assignment of Unassigned Leases
Additional Project Documents. The Issuer shall, and shall cause its Subsidiaries
to, use its commercially reasonable efforts to obtain executed consents to the
assignment of each Unassigned Lease and each Additional Project Document.

                  Section 4.34 Loans. The Issuer shall not, and shall not permit
its Subsidiaries to, make any loan or advance other than in the ordinary course
of business (other than a loan or advance to a Guarantor that constitutes
Indebtedness owed to the Issuer and that is represented by an intercompany
note); provided, however, the Issuer may direct the investment of funds on
deposit in the accounts in Permitted Investments in accordance with the terms of
the Financing Documents.

                  Section 4.35 Amendments to Organizational Documents. The
Issuer shall not, and shall cause its Subsidiaries not to, amend, modify or
supplement its or their Organizational



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Documents except such amendments as (i) could not reasonably be expected to
result in a Material Adverse Effect and (ii) could not reasonably be expected to
adversely affect any provisions of such organizational documents that relate to
the bankruptcy remoteness of the Issuer.

                  Section 4.36 Removal of Independent Consultant. The Issuer
shall not remove or otherwise replace any of the Independent Consultants;
provided that any Independent Consultant may be replaced or removed by the
Issuer at any time (i) in the event that any such Independent Consultant shall
have become incapable of acting or performing its services, or otherwise fails
to perform its function as the Independent Consultant in the manner contemplated
by this Indenture and the other Financing Documents, or shall have been adjudged
bankrupt or insolvent, or a receiver of such Independent Consultant or of its
property shall have been appointed, or any public office shall have taken
control or charge of such Independent Consultant or its property or affairs for
the purpose of rehabilitation, conservation or liquidation at any time or (ii)
so long as the Issuer shall have certified to the Trustee (which certification
shall have been delivered by an Authorized Representative of the Issuer) that
the replacement Independent Consultant being retained to perform the services of
the removed or replaced Independent Consultant is properly qualified to perform
such services at least to the same degree, extent and quality as the replaced or
removed Independent Consultant and the same could not reasonably be expected to
materially adversely affect the rights of the Holders.

                  Section 4.37 Payments for Consent. The Issuer shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, pay or
cause to be paid any consideration to or for the benefit of any holder of Senior
Secured Obligations for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of any Financing Document unless such
consideration is offered to be paid and is paid to all Holders of Senior Secured
Notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.

                  Section 4.38 Limitations on Ormesa. On the Ormesa Support
Date, the Issuer shall cause Ormesa to provide a Lien on substantially all of
its property in favor of the Collateral Agent (including, without limitation,
the consent of Southern California Edison) pursuant to the terms of the Security
Agreement and to execute a Guarantee in accordance with Article IX of this
Indenture by execution of a Supplemental Indenture in the form of Exhibit G
hereto. The Issuer shall not grant any Liens on the Capital Stock it holds of
Ormesa except to the Collateral Agent and shall not permit Ormesa to incur any
Indebtedness or become subject to any Lien other than the Liens contemplated in
this Section 4.38 and Liens under the Ormesa Credit Agreement.

                  Section 4.39 Limitation on Issuance and Sale of Capital Stock
of Subsidiaries. The Issuer shall not permit any of its Subsidiaries to
transfer, convey, sell or otherwise dispose of Capital Stock in any of its
Subsidiaries to any Person, other than the Issuer or one of the Guarantors.

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                  Section 4.40 Maintenance of Qualifying Facility Status. The
Issuer shall, and shall cause each of its Operating Subsidiaries to, operate and
maintain each Plant as a Qualifying Facility.

                  Section 4.41 Payment of taxes and claims. The Issuer shall and
shall cause each of its Subsidiaries to pay and discharge (a) all taxes,
assessments and governmental charges or levies imposed upon it, or upon its
income or profits, or upon any of its properties before they shall become
delinquent, (b) all lawful claims (including claims for labor, materials and
supplies) which, if unpaid, could reasonably be expected to give rise to a Lien
upon any of its properties; and (c) except as prohibited under the Financing
Documents, all of its other Indebtedness as it shall become due; provided,
however, neither the Issuer nor its Subsidiaries shall be required to pay any
such tax, assessment, charge, levy, claim or Indebtedness which is being
contested in good faith by appropriate proceedings, as to which adequate
reserves have been established in accordance with GAAP, unless the failure to
make such payment (i) could reasonably be expected to give rise to an immediate
right to foreclose on a Lien securing such amounts or (ii) could reasonably be
expected to have a Material Adverse Effect.

                  Section 4.42 Repayment of Ormesa Credit Agreement. As
consideration for the Lien and Guarantees to be provided by Ormesa pursuant to
Section 4.38 hereof, a portion of the proceeds of the Initial Notes shall be
deposited in the Ormesa Repayment Account and the Issuer shall use its
commercially reasonable efforts to cause the Ormesa Credit Agreement to be
repaid in full with proceeds from the Ormesa Repayment Account or otherwise in
accordance with the Depositary Agreement and cause all liabilities of Ormesa
under the Ormesa Credit Agreement to be discharged on or prior to January 31,
2005.

                  Section 4.43 Provision of Additional Liens. The Issuer shall
cause Liens to be provided in favor of the Collateral Agent and the relevant
Guarantor shall become party to the Security Documents with respect to (i) the
Mammoth Plant if, at any time, the Issuer or one of the Guarantors acquires that
portion of the Capital Stock of Mammoth-Pacific that the Issuer or the
Guarantors do not own as of the Closing Date, or the Issuer or one of the
Guarantors otherwise acquires control of 100% of the interests in the Mammoth
Plant and (ii) a Qualified Project upon an acquisition of a Qualified Project.

                  Section 4.44 Galena Re-powering. The Issuer shall, and shall
cause its Subsidiaries to, use their commercially reasonable efforts to effect
the Galena Re-Powering.

                  Section 4.45 Title Policies. The Issuer shall use its
commercially reasonable efforts to remove any survey exceptions with respect to
Title Policies.

                  Section 4.46 Preservation of Liens. The Issuer shall take all
actions and shall cause it Subsidiaries to take all actions necessary to
preserve the validity, perfection and priority of the Liens and security
interests in the Collateral created pursuant to the Security Documents.

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                  Section 4.47 Title Reports. In connection with all real estate
over which the Collateral Agent holds a Deed of Trust, the Issuer shall provide
to the Collateral Agent a title report and title policy, including endorsements,
or title opinion in form and substance satisfactory to the Collateral Agent, and
evidence that the Deed of Trust has been filed for recording; provided, that,
subject to Section 4.45 hereof, such title policies may contain a survey
exception.

                                   ARTICLE V

                              DEFAULTS AND REMEDIES

                  Section 5.01 Events of Default. The following events
constitute an "Event of Default" under this Indenture:

                  (a) the failure to pay or cause to be paid any principal of,
interest, premium, Liquidated Damages, if any, fees or any other obligations on
the Senior Secured Notes for five or more days after the same becomes due and
payable, whether by scheduled maturity or required prepayment or by acceleration
or otherwise;

                  (b) any representation or warranty made by the Issuer, any
Subsidiary or Ormat Nevada under any Financing Document shall prove to have been
untrue or misleading as of the time made, confirmed or furnished and the fact,
event or circumstance that gave rise to such inaccuracy has had or could
reasonably be expected to result in a Material Adverse Effect and such fact,
event or circumstance shall continue to be uncured for 30 or more days from the
date a Responsible Officer of the Issuer, such Subsidiary or Ormat Nevada, as
the case may be, obtains knowledge thereof; provided, that if the Issuer, such
Subsidiary or Ormat Nevada, as the case may be, commences efforts to cure such
fact, event or circumstance within such 30-day period, the Issuer, such
Subsidiary or Ormat Nevada, as the case may be, may continue to effect such cure
and such misrepresentation will not be deemed an Event of Default for an
additional 90 days so long as the Issuer, such Subsidiary or Ormat Nevada, as
the case may be, is diligently pursuing such cure;

                  (c) the failure by the Issuer or any Subsidiary to perform or
observe any covenant contained in Sections 4.06, 4.07, 4.09, 4.10, 4.11, 4.15,
4.16, 4.18, 4.19, 4.20, 4.23, 4.27 and 4.46 and such failure shall continue
uncured for 30 or more days after a Responsible Officer of the Issuer obtains
knowledge thereof;

                  (d) the failure by the Issuer, any Subsidiary or Ormat Nevada
to perform or observe any of the other covenants in the Financing Documents that
the Issuer, such Subsidiary or Ormat Nevada is a party to (other than such
failures described in clause (a) or (c) above) and such failure shall continue
uncured for 30 or more days after a Responsible Officer of the Issuer, any
Subsidiary or Ormat Nevada, as the case may be, obtains knowledge thereof;
provided that if the Issuer, any Subsidiary or Ormat Nevada, as the case may be,
commence efforts to cure such default within such 30-day period, the Issuer, any
Subsidiary or Ormat Nevada, as the case may



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be, may continue to effect such cure of the default and such default will not be
deemed an Event of Default for an additional 90 days so long as the Issuer, any
Subsidiary or Ormat Nevada, as the case may be, is diligently pursuing such
cure;

                  (e) the Issuer or any Subsidiary of the Issuer:

                     (i)   admits in writing its inability, or is generally
                           unable, to pay its debts as the debts become due
                           or makes a general assignment for the benefit of
                           creditors; or

                     (ii)  commences any case, proceeding or other action
                           seeking reorganization, arrangement, adjustment,
                           liquidation, dissolution or composition of it or its
                           debts under any applicable liquidation,
                           conservatorship, bankruptcy, moratorium, arrangement,
                           adjustment, insolvency, reorganization or similar
                           laws affecting the rights or remedies of creditors
                           generally, as in effect from time to time
                           (collectively, "Debtor Relief Law"); or

                     (iii) in any involuntary case, proceeding or other action
                           commenced against it which seeks to have an order for
                           relief (injunctive or otherwise) entered against it,
                           as debtor, or seeks reorganization, arrangement,
                           adjustment, liquidation, dissolution or composition
                           of it or its debts under any Debtor Relief Law, (A)
                           fails to obtain a dismissal of such case, proceeding
                           or other action within ninety (90) days of its
                           commencement, or (B) converts the case from one
                           chapter of the Bankruptcy Reform Act of 1978, as
                           amended, to another chapter, or (C) is the subject of
                           an order for relief that remains unstayed and in
                           effect for a period of ninety (90) days; or

                     (iv)  has a trustee, receiver, custodian or other official
                           appointed for or to take possession of all or any
                           part of its property or has any court take
                           jurisdiction of any of its property, which action
                           remains undismissed for a period of ninety (90) days;

                  (f) the entry of one or more final and non-appealable judgment
or judgments for the payment of money in excess of $10.0 million (exclusive of
judgment amounts covered by insurance) against the Issuer or any Subsidiary,
which remain unpaid or unstayed for a period of 60 or more consecutive days;

                  (g) an event of default under any Permitted Indebtedness
(other than Indebtedness referred to in clause (a) above) that results in
Indebtedness in excess of $10.0 million becoming due and payable prior to its
stated maturity;

                  (h) any Governmental Approval required for the operation of
any Project or any material portion thereof owned by the Issuer or any
Subsidiary is revoked, terminated,



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withdrawn or ceases to be in full force and effect if such revocation,
termination, withdrawal or cessation has had or could reasonably be expected to
have a Material Adverse Effect and such revocation, termination, withdrawal or
cessation is not cured within 60 days following the occurrence thereof;

                  (i) any Material Project Document or Third Party Consent or
any material provision thereof (i) ceases to be valid and binding and in full
force and effect prior to its stated maturity date other than as a result of an
amendment or termination permitted under this Indenture or (ii) a party thereto
fails to perform or observe any of its covenants or obligations thereunder or
makes any material misrepresentation thereunder and such event has had or could
reasonably be expected to have a Material Adverse Effect; provided that, in any
such event no such event shall be an Event of Default if within 180 days from
the occurrence of any such event, (a) such Material Project Document or Third
Party Consent or material provision thereof is reinstated as a valid and binding
agreement among the parties thereto, (b) any breaching party resumes performance
and otherwise cures such misrepresentation or failure to perform or observe its
covenants or obligations under the Material Project Documents or Third Party
Consents or (c) in the case of Material Project Documents, the Issuer enters
into an Additional Project Document in replacement thereof, as permitted under
this Indenture;

                  (j) any of the Security Documents or any other Financing
Document ceases to be in full force and effect or any Lien granted therein
ceases to be a valid and perfected Lien in favor of the Secured Parties on the
Collateral described therein with the priority purported to be created thereby;
provided, however, that the Issuer shall have 10 days after any of the Issuer or
its Subsidiaries' Responsible Officers obtains knowledge thereof to cure any
such cessation or to furnish to the Trustee, the Collateral Agent or the
Depositary all documents or instruments required to cure any such cessation;

                  (k) the occurrence of a Change of Control; or

                  (l) the failure of Ormesa to prepay all of the amounts
outstanding under the Ormesa Credit Agreement on or prior to January 31, 2005 or
the failure of the Issuer to cause Ormesa to comply with its obligations under
Sections 4.20 and 4.38 of this Indenture.

                  Section 5.02 Enforcement of Remedies

                  (a) If one or more Events of Default have occurred and are
continuing, then:

                  (i) in the case of an Event of Default described in clause (e)
         above with respect to the Issuer, the entire outstanding principal
         amount of the Senior Secured Notes, all interest and Liquidated
         Damages, if any, accrued and unpaid thereon, and all premium, if any,
         and other amounts payable under this Indenture, if any, shall
         automatically become due and payable without presentment, demand,
         protest or notice of any kind; or

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                  (ii) in the case of an Event of Default described in:

                           (A)      clause (a) above, upon the written direction
                                    of the Holders of no less than 25% in
                                    aggregate principal amount of the
                                    Outstanding Senior Secured Notes, the
                                    Trustee shall declare the outstanding
                                    principal amount of the Senior Secured Notes
                                    to be accelerated and due and payable and
                                    all interest and Liquidated Damages, if any,
                                    accrued and unpaid thereon, and all premium,
                                    if any, and other amounts payable under this
                                    Indenture, if any, to be due and payable; or

                           (B)      clause (b), (c), (d), (e) (with respect to
                                    our Subsidiaries), (f), (g), (h), (i), (j),
                                    (k) or (l) above, upon the written direction
                                    of the Required Holders, the Trustee shall
                                    declare the outstanding principal amount of
                                    the Senior Secured Notes to be accelerated
                                    and due and payable and all interest and
                                    Liquidated Damages, if any, accrued and
                                    unpaid thereon, and all premium, if any, and
                                    other amounts payable under this Indenture,
                                    if any, to be due and payable.

                  (b) At any time after the principal of the Senior Secured
Notes has become due and payable upon a declared acceleration, and before any
judgment or decree for the payment of the money so due, or any portion thereof,
has been entered, the Required Holders, by written notice to the Issuer and the
Trustee, shall rescind and annul such declaration and its consequences if:

                  (i) there has been paid to or deposited with the Trustee a sum
         sufficient to pay

                           (A)      all overdue interest and Liquidated Damages,
                                    if any, on the Senior Secured Notes,

                           (B)      the principal of and premium, if any, on any
                                    Senior Secured Notes that have become due
                                    (including overdue principal) other than by
                                    such declaration of acceleration and
                                    interest thereon at the respective rates
                                    provided in the Senior Secured Notes for
                                    overdue principal;

                           (C)      to the extent that payment of such interest
                                    is lawful, interest upon overdue interest
                                    and Liquidated Damages, if any, at the
                                    respective rates provided in the Senior
                                    Secured Notes for overdue interest; and

                           (D)      all sums paid or advanced by the Trustee and
                                    the Collateral Agent and the reasonable
                                    compensation, expenses, disbursements, and


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                                                                         Page 76

                                    advances of the Trustee, the Depositary, the
                                    Collateral Agent and their respective agents
                                    and counsel; and

                  (ii) all Events of Default, other than the nonpayment of the
         principal of the Senior Secured Notes that has become due solely by
         such acceleration, have been cured or waived in accordance with this
         Indenture.

                  (c) If an Event of Default has occurred and is continuing and
an acceleration has occurred, the Trustee may (as the Required Holders request)
direct the Collateral Agent to take possession of any or all of the Collateral
or to exercise any or all other rights of the Secured Parties under the Security
Documents.

                  If an Event of Default occurs and is continuing and is
actually known to a Responsible Officer of the Trustee, the Trustee will mail to
each Holder notice of the Event of Default within 30 days after the occurrence
thereof. Except in the case of an Event of Default in payment of principal of,
interest, premium or Liquidated Damages, if any, on any Senior Secured Note, the
Trustee may withhold the notice to the Holders if the Trustee in good faith
determines that withholding the notice is in the interest of the Holders.

                  If an Event of Default relating to failure to pay amounts owed
on the Senior Secured Notes has occurred and is continuing, the Trustee may
declare the principal amount of the Outstanding Senior Secured Notes, all
interest accrued and unpaid thereon, and all premium and Liquidated Damages, if
any, and other amounts payable under the Senior Secured Notes and this
Indenture, if any, to be due and payable notwithstanding the absence of written
direction from Holders of at least 25% in aggregate principal amount of the
Outstanding Senior Secured Notes directing the Trustee in writing to accelerate
the principal maturity of the Senior Secured Notes, unless the Required Holders
direct the Trustee not to accelerate the maturity of such Senior Secured Notes,
if in the good faith exercise of its discretion the Trustee determines that such
action is necessary to protect the interests of the Holders.

                  In addition, if one or more of the Events of Default referred
to in clause (a)(ii)(B) of this Section 5.02 has occurred and is continuing, the
Trustee may declare the entire principal amount of the Outstanding Senior
Secured Notes, all interest accrued and unpaid thereon, and all premium and
Liquidated Damages, if any, and other amounts payable under the Senior Secured
Notes and this Indenture, if any, to be due and payable notwithstanding the
absence of written direction from the Required Holders directing the Trustee to
accelerate the maturity of the Senior Secured Notes, unless the Required Holders
direct the Trustee not to accelerate the maturity of the Senior Secured Notes,
if in the good faith exercise of its discretion the Trustee determines that such
action is necessary to protect the interests of the Holders.

                  Section 5.03 Other Remedies. If an Event of Default occurs and
is continuing, the Trustee may pursue any available remedy to collect the
payment of principal, interest, premium, and Liquidated Damages, if any, on the
Senior Secured Notes or to enforce the performance of any provision of the
Senior Secured Notes or this Indenture.

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                                                                         Page 77

                  The Trustee may maintain a proceeding even if it does not
possess any of the Senior Secured Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder of a Senior Secured
Note in exercising any right or remedy accruing upon an Event of Default shall
not impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.

                  Section 5.04 Waiver of Past Defaults. Required Holders by
notice to the Trustee may on behalf of the Holders of all of the Senior Secured
Notes waive an existing Default or Event of Default and its consequences
hereunder, except a continuing Default or Event of Default in the payment of the
principal of, premium, Liquidated Damages if any, or interest on, the Senior
Secured Notes; provided, however, that the Required Holders may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.

                  Section 5.05 Control by Majority. The Required Holders have
the right to direct the time, place and method of conducting any proceeding for
any right or remedy available to the Trustee or exercising any trust or power
conferred on the Trustee in this Indenture.

                  Section 5.06 Limitation on Suits. A Holder of a Senior Secured
Note may pursue a remedy with respect to this Indenture or the Senior Secured
Notes only if:

                  (a) the Holder of a Senior Secured Note gives to the Trustee
written notice of a continuing Event of Default;

                  (b) the Holders of at least 25% in aggregate principal amount
of the then outstanding Senior Secured Notes make a written request to the
Trustee to pursue the remedy;

                  (c) such Holder of a Senior Secured Note or Holders of Senior
Secured Notes offer and, if requested, provide to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;

                  (d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the provision
of indemnity; and

                  (e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Senior Secured Notes do not give the
Trustee a direction inconsistent with the request.

                  A Holder of a Senior Secured Note may not use this Indenture
to prejudice the rights of another Holder of a Senior Secured Note or to obtain
a preference or priority over another Holder of a Senior Secured Note.

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                  Section 5.07 Rights of Holders of Senior Secured Notes to
Receive Payment. Notwithstanding any other provision of this Indenture, the
right of any Holder of a Senior Secured Note to receive payment of principal,
premium, Liquidated Damages if any, and interest on the Senior Secured Notes, on
or after the respective due dates expressed in the Senior Secured Notes
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.

                  Section 5.08 Collection Suit by Trustee. If an Event of
Default specified in Section 5.01(a) occurs and is continuing, the Trustee is
authorized to recover judgment in its own name and as trustee of an express
trust against the Issuer for the whole amount of principal of, premium,
Liquidated Damages if any, and interest remaining unpaid on the Senior Secured
Notes and interest on overdue principal and, to the extent lawful, interest,
Liquidated Damages and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.

                  Section 5.09 Trustee May File Proofs of Claim. The Trustee is
authorized to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and the Holders of the Senior Secured Notes
allowed in any judicial proceedings relative to the Issuer (or any other obligor
upon the Senior Secured Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 6.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Senior Secured Notes or the rights of any Holder, or
to authorize the Trustee to vote in respect of the claim of any Holder in any
such proceeding.

                  Section 5.10 Priorities. If the Trustee collects any money
pursuant to this Article, it shall be applied to amounts owed with respect to
all Senior Secured Notes and will be applied ratably to the Holders of Senior
Secured Notes in the following order from time to time (to the extent such order
does not conflict with Section 5 of the Collateral Agency Agreement),



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                                                                         Page 79

on the date or dates fixed by the Trustee: (i) first, to the payment of all
amounts due to the Trustee or any predecessor Trustee under this Indenture; (ii)
second; (A) in case the unpaid principal amount of the Outstanding Senior
Secured Notes has not become due, to the payment of any overdue interest, (B) in
case the unpaid principal amount of a portion of the Outstanding Senior Secured
Notes has become due, first to the payment of accrued interest and Liquidated
Damages, if any, on all Outstanding Senior Secured Notes for overdue principal,
premium, Liquidated Damages if any, and overdue interest, and next to the
payment of the overdue principal on all Senior Secured Notes or (C) in case the
unpaid principal amount of all the Outstanding Senior Secured Notes has become
due, first to the payment of the whole amount then due and unpaid upon the
Outstanding Senior Secured Notes for principal, premium, Liquidated Damages if
any, and interest, together with interest for overdue principal, premium,
Liquidated Damages if any, and overdue interest; and (iii) third, in case the
unpaid principal amount of all the Outstanding Senior Secured Notes has become
due, and all of the outstanding principal, premium, Liquidated Damages if any,
interest and other amounts owed in connection with the Senior Secured Notes have
been fully paid, any surplus then remaining will be paid to the Issuer, or to
whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct.

                  The Trustee may fix a record date and payment date for any
payment to Holders of Senior Secured Notes pursuant to this Section 5.10.

                  Section 5.11 Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as a Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder of a Senior Secured Note pursuant to
Section 5.07 hereof, or a suit by Holders of more than 10% in principal amount
of the then outstanding Senior Secured Notes.

                                   ARTICLE VI

                                     TRUSTEE

                  Section 6.01 Duties of Trustee.

                  (a) If an Event of Default actually known to a Responsible
Trust Officer has occurred and is continuing, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of
care and skill in its exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.



                                      -79-


                                                                         Page 80

                  (b) Except during the continuance of an Event of Default:

                  (i) the duties of the Trustee shall be determined solely by
         the express provisions of this Indenture and the Trustee need perform
         only those duties that are specifically set forth in this Indenture and
         no others, and no implied covenants or obligations shall be read into
         this Indenture against the Trustee; and

                  (ii) in the absence of bad faith on its part, the Trustee may
         conclusively rely, as to the truth of the statements and the
         correctness of the opinions expressed therein, upon certificates or
         opinions furnished to the Trustee and conforming to the requirements of
         this Indenture. However, the Trustee shall examine the certificates and
         opinions to determine whether or not they conform to the requirements
         of this Indenture.

                  (c) The Trustee may not be relieved from liabilities for its
own grossly negligent action, its own negligent failure to act, or its own
willful misconduct, except that:

                  (i) this paragraph does not limit the effect of paragraph (b)
         of this Section;

                  (ii) the Trustee shall not be liable for any error of judgment
         made in good faith by a Responsible Trust Officer, unless it is proved
         that the Trustee was grossly negligent in ascertaining the pertinent
         facts; and

                  (iii) the Trustee shall not be liable with respect to any
         action it takes or omits to take in good faith in accordance with a
         direction received by it pursuant to Section 6.05 hereof.

                  (d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section.

                  (e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.

                  (f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuer. Money
held in trust by the Trustee need not be segregated from other funds except to
the extent required by law.

                  Section 6.02 Rights of Trustee.

                  (a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.

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                                                                         Page 81

                  (b) Before the Trustee acts or refrains from acting, it may
require and shall be entitled to an Officer's Certificate or an Opinion of
Counsel or both. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officers' Certificate or Opinion
of Counsel. The Trustee may consult with counsel and the advice, promptly
confirmed in writing thereafter, of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.

                  (c) The Trustee may act through its attorneys, custodians,
nominees and agents and shall not be responsible for the misconduct or
negligence of any agent, attorney, custodian or nominee appointed with due care.

                  (d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.

                  (e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Issuer shall be sufficient if
signed by an Officer of the Issuer.

                  (f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee security or indemnity satisfactory to the Trustee against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request or direction.

                  (g) In no event shall the Trustee be required to take notice
of any default or breach hereof or any Event of Default hereunder, except for
Events of Default specified in Section 5.01(a) hereof, unless and until the
Trustee shall have received from a Holder or from the Issuer express written
notice of the circumstances constituting the breach, default or Event of Default
and stating that said circumstances constitute an Event of Default hereunder.

                  (h) If the Trustee is acting as Paying Agent, Registrar,
Collateral Agent, Depositary Agent or Securities Intermediary hereunder, the
rights and protections afforded to the Trustee pursuant to this Article VI
(other than the Trustee's right to require, and entitlement to, an Opinion of
Counsel pursuant to Section 6.02(b) hereof) will also be afforded to such Paying
Agent, Registrar, Collateral Agent, Depositary Agent and Securities
Intermediary.

                  Section 6.03 Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Senior
Secured Notes and may otherwise deal with the Issuer or any Affiliate of the
Issuer with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
trustee or resign. Any Agent may do the same with like rights and duties. The
Trustee is also subject to Sections 6.10 and 6.11 hereof.

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                  Section 6.04 Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Senior Secured Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Senior Secured Notes or any money paid to
the Issuer or upon the Issuer's direction under any provision of this Indenture,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee, and it shall not be responsible for any
statement or recital herein or any statement in the Security Documents, the
Senior Secured Notes or any other document in connection with the sale of the
Senior Secured Notes or pursuant to this Indenture other than its certificate of
authentication.

                  The Trustee makes no representations as to and shall not be
responsible for the existence, genuineness, value, sufficiency or condition of
any of the Collateral or as to the security afforded or intended to be afforded
thereby, hereby or by any Security Document, or for the validity, perfection,
priority or enforceability of the Liens or security interests in any of the
Collateral created or intended to be created by any of the Security Documents,
whether impaired by operation of law or by reason of any action or omission to
act on its part hereunder, except to the extent such action or omission
constitutes gross negligence or willful misconduct on the part of the Trustee,
for the validity of the title of the Issuer to the Collateral, for insuring the
Collateral or for the payment of taxes, charges, assessments or Liens upon the
Collateral or otherwise as to the maintenance of the Collateral.

                  References to the Trustee in this Section 6.04 shall include
the Trustee in its role as a Collateral Agent.

                  Section 6.05 Notice of Defaults. If a Default or Event of
Default occurs and is continuing and if it is actually known to a Responsible
Trust Officer, or if appropriate notice is provided in writing in accordance
with Section 6.02(g), as applicable, the Trustee shall mail to Holders of Senior
Secured Notes a notice of the Default or Event of Default within 30 days after
it occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium, Liquidated Damages, if any, or interest on any Senior
Secured Note, the Trustee may withhold the notice if and so long as a committee
of its Responsible Trust Officers in good faith determines that withholding the
notice is in the interests of the Holders of the Senior Secured Notes.

                  Section 6.06 Reports by Trustee to Holders of the Senior
Secured Notes.

                  (a) Within 60 days after each May 15 beginning with the May 15
following the date hereof, and for so long as any Senior Secured Notes remain
outstanding, the Trustee shall mail to the Holders of the Senior Secured Notes a
brief report dated as of such reporting date that complies with TIA (section)
313(a) (but if no event described in TIA (section) 313(a) has occurred within
the twelve months preceding the reporting date, no report need be transmitted).
The Trustee also shall comply with TIA (section) 313(b)(2). The Trustee shall
also transmit by mail all reports as required by TIA (section) 313(c).



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                  (b) A copy of each report at the time of its mailing to the
Holders of Senior Secured Notes shall be mailed to the Issuer and filed with the
SEC and each stock exchange on which the Senior Secured Notes are listed in
accordance with TIA (section) 313(d). The Issuer shall promptly notify the
Trustee in writing when the Senior Secured Notes are listed on any stock
exchange.

                  Section 6.07 Compensation and Indemnity.

                  (a) The Issuer shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder as is now or hereafter agreed to in writing by the Issuer and the
Trustee. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuer shall reimburse the
Trustee promptly upon request for all reasonable and properly documented
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable and
properly documented fees, disbursements and expenses of the Trustee's agents and
counsel.

                  (b) The Issuer shall indemnify the Trustee against any and all
losses, liabilities, damages or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture and the other Financing Documents, including the costs and expenses of
enforcing this Indenture against the Issuer (including this Section 6.07) and
defending itself against any claim (whether asserted by the Issuer or any Holder
or any other person) or liability in connection with the exercise or performance
of any of its powers or duties hereunder or in connection with the storage, use,
presence, disposal or release of any Hazardous Substance on, under or about any
properties encumbered by the Deeds of Trust, except to the extent any such loss,
liability or expense may be attributable to its gross negligence or bad faith.
The Trustee shall notify the Issuer promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Issuer shall not relieve the
Issuer of its obligations hereunder. The Issuer shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have separate counsel
(reasonably acceptable to the Issuer) and the Issuer shall pay the reasonable
fees and expenses of such counsel. The Issuer need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.

                  (c) The obligations of the Issuer under this Section 6.07
shall survive the satisfaction and discharge of this Indenture.

                  (d) To secure the Issuer's payment obligations in this
Section, the Trustee shall have a Lien prior to the Senior Secured Notes on all
money or property held or collected by the Trustee, except that held in trust to
pay principal, interest, premium and Liquidated Damages, if any, on particular
Senior Secured Notes.

                  (e) When the Trustee incurs expenses or renders services after
an Event of Default specified in Section 5.01(e) hereof occurs, the expenses and
the compensation for the



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services (including the fees and expenses of its agents and counsel) are
intended to constitute expenses of administration under any Bankruptcy Law.

                  (f) The Trustee shall comply with the provisions of TIA
(section) 313(b)(2) to the extent applicable.

                  (g) The provisions of this Section 6.07 shall extend to the
Trustee acting in the capacities of Paying Agent and Registrar, Collateral
Agent, Depositary Agent and Securities Intermediary under this Indenture and the
other Financing Documents.

                  Section 6.08 Replacement of Trustee.

                  (a) A resignation or removal of the Trustee and appointment of
a successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.

                  (b) The Trustee may resign in writing at any time and be
discharged from the trust hereby created by giving thirty (30) days written
notice to the Issuer. The Required Holders may remove the Trustee by so
notifying the Trustee and the Issuer in writing. The Issuer may remove the
Trustee if:

                  (i) the Trustee fails to meet the eligibility criteria set
         forth in this Indenture;

                  (ii) the Trustee is adjudged a bankrupt or an insolvent or an
         order for relief is entered with respect to the Trustee under any
         bankruptcy law;

                  (iii) no Default or Event of Default on our part has occurred
         and is continuing and the Trustee has failed to observe or perform any
         of its material obligations under the Financing Documents;

                  (iv) a custodian or public officer takes charge of the Trustee
         or its property; or

                  (v) the Trustee becomes incapable of acting.

                  (c) If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Issuer shall promptly
appoint a successor Trustee. Within one year after the successor Trustee takes
office, the Holders of a majority in principal amount of the then outstanding
Senior Secured Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Issuer.

                  (d) The Issuer shall give notice of each resignation and
removal of the Trustee and each appointment of a successor to all Holders.

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                  (e) If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Issuer, or the Holders of Senior Secured Notes of at least 10% in principal
amount of the then outstanding Senior Secured Notes may petition any court of
competent jurisdiction for the appointment of a successor Trustee.

                  (f) If the Trustee, after written request by any Holder of a
Senior Secured Note who has been a Holder of a Senior Secured Note for at least
six months, fails to comply with Section 6.10, such Holder of a Senior Secured
Note may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.

                  (g) A successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee and to the Issuer. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Senior Secured Notes. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
provided all sums owing to the Trustee hereunder have been paid and subject to
the Lien provided for in Section 6.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 6.08, the Issuer's obligations under Section
6.07 hereof shall continue for the benefit of the retiring Trustee.

                  (h) If a Trustee is removed with or without cause, all fees
and expenses (including the reasonable fees and expenses of counsel) of the
Trustee incurred in the administration of the trust or in performing of the
duties hereunder shall be paid to the Trustee.

                  Section 6.09 Successor Trustee by Merger, etc. If the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.

                  Section 6.10 Eligibility; Disqualification. There will at all
times be a Trustee under this Indenture, which shall be a corporation having
either (a) a combined capital and surplus of at least $50.0 million, or (b) a
combined capital and surplus of at least $10.0 million and being a Wholly-Owned
Subsidiary of a corporation having a combined capital and surplus of at least
$50.0 million, in each case subject to supervision or examination by a federal
or state or District of Columbia authority and having a corporate trust office
in New York, New York, to the extent there is such an institution eligible and
willing to serve.

                  This Indenture shall always have a Trustee who satisfies the
requirements of TIA (section) 310(a)(1), (2) and (5). The Trustee is subject to
TIA (section) 310(b).

                  Section 6.11 Preferential Collection of Claims Against the
Issuer. The Trustee is subject to TIA (section) 311(a), excluding any creditor
relationship listed in TIA (section) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (section) 311(a) to the extent indicated
therein.



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                  Section 6.12 Receipt of Documents. In no event shall receipt
by the Trustee of financial and other reports from the Issuer as provided in
this Indenture, review of which could lead to the conclusion that an Event of
Default exists hereunder, result, without further action, in the occurrence of
an Event of Default, or impose upon the Trustee the obligation to review and
examine the same, it being understood that all such information shall be
received by the Trustee as repository for said information and documents with no
obligation on the part of the Trustee to review the same.

                                  ARTICLE VII

                    LEGAL DEFEASANCE AND COVENANT DEFEASANCE

                  Section 7.01 Option to Effect Legal Defeasance or Covenant
Defeasance. The Issuer may, at its option evidenced by a resolution set forth in
an Officers' Certificate, at any time, elect to have either Section 7.02 or 7.03
hereof be applied to all outstanding Senior Secured Notes and all obligations of
the Guarantors with respect to their Guarantees upon compliance with the
conditions set forth below in this Article VII.

                  Section 7.02 Legal Defeasance and Discharge. Upon the Issuer's
exercise under Section 7.01 hereof of the option applicable to this Section
7.02, the Issuer shall, subject to the satisfaction of the conditions set forth
in Section 7.04 hereof, be deemed to have been discharged from its obligations
with respect to all outstanding Senior Secured Notes and the Guarantors shall be
deemed to be discharged from all of their obligations with respect to their
Guarantees and the Collateral Agent shall release all of its liens on the
Collateral other than pursuant to Section 7.04(a) hereof, on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, Legal Defeasance means that the Issuer shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Senior Secured Notes and the Guarantees, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 7.05 hereof and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Senior Secured Notes, the
Guarantees and this Indenture (and the Trustee, on demand of and at the expense
of the Issuer, shall execute proper instruments acknowledging the same), except
for the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Senior Secured
Notes to receive payments in respect of the principal of, or interest or premium
and Liquidated Damages, if any, on such Senior Secured Notes when such payments
are due from the trust referred to below, (b) the Issuer's obligations with
respect to the Senior Secured Notes concerning issuing temporary Senior Secured
Notes, registration of Senior Secured Notes, replacing mutilated, destroyed,
lost or stolen Senior Secured Notes and the maintenance of an office or agency
for payment and money for security payments held in trust, (c) the rights,
powers, trusts, duties and immunities of the trustee, and our and the
Guarantors' obligations in connection therewith, and (d) this Article VII.
Subject to compliance with this Article VII, the Issuer may exercise its option
under this Section 7.02 notwithstanding the prior exercise of its option under
Section 7.03 hereof.

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                  Section 7.03 Covenant Defeasance. Upon the Issuer's exercise
under Section 7.01 hereof of the option applicable to this Section 7.03, the
Issuer shall and the Guarantors shall, subject to the satisfaction of the
conditions set forth in Section 7.04 hereof, be released from their obligations
under any of the covenants contained in this Indenture other than under Sections
4.01, 4.02, 4.03, 4.05 and clauses (i) and (ii) of Section 4.23 hereof with
respect to the outstanding Senior Secured Notes and may terminate the Liens of
the Security Documents on the Collateral to the extent that such Liens run to
the benefit of the Trustee, the Holders or other agents under any of the
Security Documents on and after the date the conditions set forth in Section
7.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Senior Secured
Notes and all obligations of the Guarantors with respect to the Guarantees shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Senior Secured Notes and all obligations of the Guarantors with respect to the
Guarantees shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Senior
Secured Notes, the Issuer and the Guarantors may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 5.01 hereof, but, except as specified above, the remainder of this
Indenture and such Senior Secured Notes shall be unaffected thereby. In
addition, upon the Issuer's exercise under Section 7.01 hereof of the option
applicable to this Section 7.03 hereof, subject to the satisfaction of the
conditions set forth in Section 7.04 hereof, Sections 5.01(b) through 5.01(d)
and Sections 5.01(g) through 5.01(l) hereof shall not constitute Events of
Default.

                  Section 7.04 Conditions to Legal or Covenant Defeasance. The
following shall be the conditions to the application of either Section 7.02 or
7.03 hereof to the outstanding Senior Secured Notes:

                  In order to exercise either Legal Defeasance or Covenant
Defeasance:

                  (a) the Issuer must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
shall be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium and Liquidated
Damages, if any, and interest on the outstanding Senior Secured Notes on the
stated date for payment thereof or on the applicable Redemption Date, as the
case may be, and the Issuer must specify whether the Senior Secured Notes are
being defeased to maturity or to a particular redemption date;

                  (b) in the case of an election under Section 7.02 hereof, the
Issuer shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Issuer has
received from, or there has been published by, the



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                                                                         Page 88

Internal Revenue Service a ruling or (B) since the date hereof, there has been a
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that, the Holders
of the outstanding Senior Secured Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred;

                  (c) in the case of an election under Section 7.03 hereof, the
Issuer shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Senior Secured Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred;

                  (d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Senior Secured Notes pursuant to this
Article 7 concurrently with such incurrence);

                  (e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Issuer is a
party or by which the Issuer is bound;

                  (f) the Issuer shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Issuer with
the intent of preferring the Holders over any other creditors of the Issuer or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Issuer; and

                  (g) the Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.

                  Section 7.05 Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions. Subject to Section 7.06 hereof,
all money and non-callable Government Securities (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 7.05, the "Trustee") pursuant to Section 7.04
hereof in respect of the outstanding Senior Secured Notes shall be held in trust
and applied by the Trustee, in accordance with the provisions of such Senior
Secured Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Issuer acting as Paying Agent) as the Trustee may
determine, to the Holders of such Senior Secured Notes of all sums due and to
become due thereon in respect of principal, premium, Liquidated Damages, if any,
and interest, but such money need not be segregated from other funds except to
the extent required by law.

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                                                                         Page 89

                  The Issuer shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 7.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Senior
Secured Notes.

                  Anything in this Article VII to the contrary notwithstanding,
the Trustee shall deliver or pay to the Issuer from time to time upon the
request of the Issuer any money or non-callable Government Securities held by it
as provided in Section 7.04 hereof which, in the opinion of a nationally
recognized investment bank or firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee (which may be the
opinion delivered under Section 7.04(a) hereof), are in excess of the amount
thereof that would then be required to be deposited to effect an equivalent
Legal Defeasance or Covenant Defeasance.

                  Section 7.06 Repayment to Issuer. Any money deposited with the
Trustee or any Paying Agent, or then held by the Issuer, in trust for the
payment of the principal of, premium, Liquidated Damages, if any, or interest on
any Senior Secured Note and remaining unclaimed for two years after such
principal, and premium, Liquidated Damages, if any, or interest has become due
and payable shall be paid to the Issuer on its request or (if then held by the
Issuer) shall be discharged from such trust; and the Holder of such Senior
Secured Note shall thereafter, as a secured creditor, look only to the Issuer
for payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Issuer as trustee thereof,
shall thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Issuer cause to be published once, in the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining shall be repaid to the Issuer.

                  Section 7.07 Reinstatement. If the Trustee or Paying Agent is
unable to apply any United States dollars or non-callable Government Securities
in accordance with Section 7.02 or 7.03 hereof, as the case may be, by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the Issuer's
obligations under this Indenture and the Senior Secured Notes shall be revived
and reinstated as though no deposit had occurred pursuant to Section 7.02 or
7.03 hereof until such time as the Trustee or Paying Agent is permitted to apply
all such money in accordance with Section 7.02 or 7.03 hereof, as the case may
be; provided, however, that, if the Issuer makes any payment of principal of,
premium, Liquidated Damages, if any, or interest on any Senior Secured Note
following the reinstatement of its obligations, the Issuer shall be subrogated
to the rights of the Holders of such Senior Secured Notes to receive such
payment from the money held by the Trustee or Paying Agent.

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                                  ARTICLE VIII

                        AMENDMENT, SUPPLEMENT AND WAIVER

                  Section 8.01 Without Consent of Holders of Senior Secured
Notes. Notwithstanding Section 8.02 of this Indenture, the Issuer and the
Trustee may amend or supplement this Indenture and any of the other Financing
Documents without the consent of any Holder of a Senior Secured Note:

                  (a) to cure any ambiguity, defect or inconsistency;

                  (b) to add additional covenants of the Issuer or its
Subsidiaries, to surrender rights conferred upon the Issuer or its Subsidiaries,
or to confer additional benefits upon the Holders;

                  (c) to increase the assets securing the Issuer's obligations
under this Indenture;

                  (d) to allow any Subsidiary to execute a Supplemental
Indenture and/or Guarantee with respect to the Senior Secured Notes;

                  (e) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the Trust Indenture Act;

                  (f) to make any change not inconsistent with the terms of this
Indenture that does not adversely affect the legal rights thereunder of any
Holder of the Senior Secured Notes; or

                  (g) to establish the form and terms of Senior Secured Notes of
any series permitted by Sections 2.01 and 2.03.

                  Upon the request of the Issuer accompanied by a resolution of
the Issuer's Board of Directors authorizing the execution of any such amended or
supplemental Indenture or amendments to the other Financing Documents, and upon
receipt by the Trustee of the documents described in Section 6.02 hereof, the
Trustee and the Collateral Agent shall join with the Issuer in the execution of
any amended or supplemental Indenture and any amendment to any of the other
Financing Documents authorized or permitted by the terms of this Indenture and
to make any further appropriate agreements and stipulations that may be therein
contained, but the Trustee and the Collateral Agent shall not be obligated to
enter into such amended or supplemental Indenture or amendments to the Financing
Documents that affects its own rights, duties, immunities, or indemnities under
this Indenture or otherwise.

                  Section 8.02 With Consent of Holders of Senior Secured Notes.
Except as provided below in this Section 8.02, the Issuer and the Trustee may
amend or supplement this Indenture (including Section 4.23 hereof) and the other
Financing Documents with the consent of the Required Holders voting as a single
class (including consents obtained in connection with a



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                                                                         Page 91

tender offer or exchange offer for, or purchase of, the Senior Secured Notes),
and, subject to Sections 5.04 and 5.07 hereof, any existing Default or Event of
Default (other than a Default or Event of Default in the payment of the
principal of, premium, Liquidated Damages, if any, or interest on the Senior
Secured Notes, except a payment default resulting from an acceleration that has
been rescinded) or compliance with any provision of this Indenture or the other
Financing Documents may be waived with the consent of the Required Holders
voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Senior Secured Notes);
provided, however, that if there shall be Senior Secured Notes of more than one
series Outstanding hereunder and if a proposed supplemental indenture shall
directly affect the rights of the Holders of one or more, but less than all, of
such series, then the consent only of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Senior Secured Notes of all series
so directly affected, considered as one class, shall be required. Section 2.08
hereof shall determine which Senior Secured Notes are considered to be
"outstanding" for purposes of this Section 8.02.

                  Upon the request of the Issuer accompanied by a resolution of
the Issuer's Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Senior Secured
Notes as aforesaid, and upon receipt by the Trustee of the documents described
in Section 6.02 hereof, the Trustee shall join with the Issuer in the execution
of such amended or supplemental Indenture and amendments to the other Financing
Documents unless such amended or supplemental Indenture or amendments to the
Financing Documents directly affects the Trustee's own rights, duties,
immunities or indemnities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
amended or supplemental Indenture or such amendments.

                  It shall not be necessary for the consent of the Holders of
Senior Secured Notes under this Section 8.02 to approve the particular form of
any proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.

                  After an amendment, supplement or waiver under this Section
becomes effective, the Issuer shall mail to the Holders of Senior Secured Notes
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Issuer to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such amended
or supplemental Indenture or waiver or amendments to the Financing Documents.
Subject to Sections 5.04 and 5.07 hereof, the Required Holders may waive
compliance in a particular instance by the Issuer with any provision of this
Indenture or the Senior Secured Notes. However, without the consent of all
Holders of Outstanding Senior Secured Notes directly affected thereby, an
amendment or waiver under this Section 8.02 may not (with respect to any such
Senior Secured Notes held by a non-consenting Holder):

                  (a) modify the principal, interest, premium or Liquidated
Damages, if any, payable upon the Senior Secured Notes;



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                                                                         Page 92

                  (b) modify the dates on which principal, interest, premium and
Liquidated Damages, if any, on any Senior Secured Notes are paid;

                  (c) release any Guarantor from its obligations under a
Guarantee;

                  (d) modify the dates of maturity of any Senior Secured Notes;
and

                  (e) make any change in the preceding procedures for amendment,
supplement or waiver.

                  This Indenture and the other Security Documents may be amended
or supplemented to provide for the release of Collateral, by the Issuer and the
Trustee, with the consent of Holders of not less than 66% of the Outstanding
Senior Secured Notes.

                  A supplemental indenture that changes or eliminates any
covenant or other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Senior Secured Notes,
or which modifies the rights of the Holders of Senior Secured Notes of such
series with respect to such covenant or other provision, shall be deemed not to
affect the rights under this Indenture of the Holders of Senior Secured Notes of
any other series.

                  Upon the request of the Issuer accompanied by a resolution of
the issuer's Board of Directors authorizing the execution of any such amended or
supplemental Indenture or amendments to the other Financing Documents, and upon
receipt by the Trustee of the documents described in Section 6.02 hereof, the
Trustee and the Collateral Agent shall join with the Issuer in the execution of
any amended or supplemental Indenture and any amendment to any of the other
Financing Documents authorized or permitted by the terms of this Indenture and
to make any further appropriate agreements and stipulations that may be therein
contained, but the Trustee and the Collateral Agent shall not be obligated to
enter into such amended or supplemental Indenture or amendments to the Financing
Documents that affects its own rights, duties, immunities, or indemnities under
this Indenture or otherwise.

                  It shall not be necessary for any act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such act shall approve the substance thereof.

                  Section 8.03 Revocation and Effect of Consents. Until an
amendment, supplement or waiver becomes effective, a consent to it by a Holder
of a Senior Secured Note is a continuing consent by the Holder of a Senior
Secured Note and every subsequent Holder of a Senior Secured Note or portion of
a Senior Secured Note that evidences the same debt as the consenting Holder's
Senior Secured Note, even if notation of the consent is not made on any Senior
Secured Note. However, any such Holder of a Senior Secured Note or subsequent
Holder of a Senior Secured Note may revoke the consent as to its Senior Secured
Note if the Trustee receives written notice of revocation before the date the
waiver, supplement or amendment



                                      -92-

                                                                         Page 93

becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.

                  Section 8.04 Notation on or Exchange of Senior Secured Notes.
The Trustee may place an appropriate notation about an amendment, supplement or
waiver on any Senior Secured Note thereafter authenticated. The Issuer in
exchange for all Senior Secured Notes may issue and the Trustee shall, upon
receipt of an Authentication Order, authenticate new Senior Secured Notes that
reflect the amendment, supplement or waiver.

                  Failure to make the appropriate notation or issue a new Senior
Secured Note shall not affect the validity and effect of such amendment,
supplement or waiver.

                  Section 8.05 Trustee to Sign Amendments, etc. The Trustee and
the Collateral Agent shall sign any amended or Supplemental Indenture and
amendments to the other Financing Documents authorized pursuant to this Article
VIII if the amendment or supplement does not adversely affect the rights,
duties, liabilities, immunities or indemnities of the Trustee or the Collateral
Agent. The Issuer may not sign an amendment or Supplemental Indenture until its
shareholders approve it. In executing any amended or Supplemental Indenture or
amendments to the other Financing Documents, the Trustee and the Collateral
Agent shall be entitled to receive and (subject to Section 6.01 hereof) shall be
fully protected in relying upon, in addition to the documents required by
Section 10.04 hereof, an Officer's Certificate and an Opinion of Counsel stating
that the execution of such amended or supplemental indenture or amendment to the
other Financing Documents is authorized or permitted by this Indenture.

                  Section 8.06 Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by any Series Supplemental
Indenture or other supplemental indenture permitted by this Article VIII or the
modifications thereby of the trusts created by this Indenture, the Trustee shall
be entitled to receive, and (subject to Sections 6.01 and 6.02) shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture.

                  Section 8.07 Effect of Supplemental Indentures. Upon the
execution of any Supplemental Indenture under this Article VIII, this Indenture
shall be modified in accordance therewith, and such Supplemental Indenture shall
form a part of this Indenture for all purposes; and every Holder of Senior
Secured Notes theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.

                  Section 8.08 Conformity with Trust Indenture Act. Every
Supplemental Indenture executed pursuant to this Article VIII shall conform to
the requirements of the Trust Indenture Act as then in effect.

                  Section 8.09 Reference in Senior Secured Notes to Supplemental
Indentures. Senior Secured Notes authenticated and delivered after the execution
of any Supplemental Indenture pursuant to this Article VIII may, and shall if
required by the Issuer, bear a notation in



                                      -93-


                                                                         Page 94

form approved by the Issuer as to any matter provided for in such Supplemental
Indenture; and, in such case, suitable notation may be made upon Outstanding
Senior Secured Notes after proper presentation and demand. If the Issuer shall
so determine, new Senior Secured Notes so modified as to conform, in the opinion
of the Issuer and the Trustee, to any such Supplemental Indenture may be
prepared and executed by the Issuer and authenticated and delivered by the
Trustee in exchange for Outstanding Senior Secured Notes.

                                   ARTICLE IX

                                    GUARANTEE

                  Section 9.01 Agreement to Guarantee.

                  (a) Each of the Guarantors, hereby jointly and severally with
all other Guarantors, unconditionally guarantees to each Holder of a Senior
Secured Note authenticated and delivered by the Trustee and to the Trustee and
its successors and assigns, regardless of the validity and enforceability of
this Indenture, the Senior Secured Notes or the other Senior Secured Obligations
of the Issuer under this Indenture or the Senior Secured Notes, that:

                  (i) the principal of, premium, interest and Liquidated
         Damages, if any, on the Senior Secured Notes will be promptly paid in
         full when due, whether at maturity, by acceleration, redemption or
         otherwise, and interest on the overdue principal of, premium and
         Liquidated Damages, if any, and interest on the Senior Secured Notes,
         to the extent lawful, and all other Senior Secured Obligations of the
         Issuer to the Holders or the Trustee under this Indenture or the Senior
         Secured Notes will be promptly paid in full, all in accordance with the
         terms hereof or thereof; and

                  (ii) in case of any extension of time for payment or renewal
         of any Senior Secured Note or any of such other Senior Secured
         Obligations, that the same will be promptly paid in full when due in
         accordance with the terms of the extension or renewal, whether at
         stated maturity, by acceleration or otherwise.

                  (b) Notwithstanding the foregoing, in the event that this
Guarantee would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability of the
Guarantors under this Indenture will be reduced to the maximum amount
permissible under such fraudulent conveyance or similar law.

                  (c) Failing payment when due of any amount so guaranteed or
any performance so guaranteed for whatever reason, the Guarantors will be
jointly and severally obligated to pay, perform or cause the performance of the
same immediately. Each Guarantor agrees that this is a guarantee of payment and
not a guarantee of collection.

                                      -94-


                                                                         Page 95

                  Section 9.02 Execution and Delivery of Guarantee.

                  (a) To evidence its Guarantee set forth in this Indenture,
each Guarantor hereby agrees that a notation of such Guarantee substantially in
the form attached as Exhibit F to this Indenture will be endorsed by an
Authorized Officer of such Guarantor on each Senior Secured Note authenticated
and delivered by the Trustee on or after the date hereof.

                  (b) Notwithstanding the foregoing, each Guarantor hereby
agrees that its Guarantee set forth herein will remain in full force and effect
notwithstanding any failure to endorse on each Senior Secured Note a notation of
such Guarantee.

                  (c) If an Authorized Officer whose signature is on this
Indenture or on a Guarantee no longer holds that office at the time the Trustee
authenticates the Senior Secured Note on which a Guarantee is endorsed, the
Guarantee will be valid nevertheless.

                  (d) The delivery of any Senior Secured Note by the Trustee,
after the authentication thereof under this Indenture, will constitute due
delivery of the Guarantee set forth in this Indenture on behalf of each
Guarantor.

                  (e) Each Guarantor hereby agrees that its Senior Secured
Obligations hereunder will be unconditional, regardless of the validity,
regularity or enforceability of the Senior Secured Note or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
of the Senior Secured Notes with respect to any provisions hereof or thereof,
the recovery of any judgment against the Issuer, any action to enforce the same
or any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.

                  (f) Each Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Issuer, any right to require a proceeding first against the
Issuer, protest, notice and all demands whatsoever and covenants that its
Guarantee made pursuant to this Indenture will not be discharged except by
complete performance of the Senior Secured Obligations contained in the Senior
Secured Notes and this Indenture.

                  (g) If any Holder or the Trustee is required by any court or
otherwise to return to the Issuer or any Guarantor, or any custodian, Trustee,
liquidator or other similar official acting in relation to either the Issuer or
such Guarantor, any amount paid by either to the Trustee or such Holder, the
Guarantee made pursuant to this Indenture, to the extent theretofore discharged,
will be reinstated in full force and effect.

                  (h) Each Guarantor agrees that it will not be entitled to any
right of subrogation in relation to the Holders in respect of any Senior Secured
Notes guaranteed hereby until payment in full of all Senior Secured Notes
guaranteed hereby. Each Guarantor further agrees that, as between such
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand:



                                      -95-


                                                                         Page 96

                  (i) the maturity of the Senior Secured Notes guaranteed hereby
         may be accelerated as provided in Article V hereof for the purposes of
         the Guarantee made pursuant to this Indenture, notwithstanding any
         stay, injunction or other prohibition preventing such acceleration in
         respect of the Senior Secured Notes guaranteed hereby; and

                  (ii) in the event of any declaration of acceleration of such
         Senior Secured Notes as provided in Article V hereof, such Senior
         Secured Notes (whether or not due and payable) will forthwith become
         due and payable by such Guarantor for the purpose of the Guarantee made
         pursuant to this Indenture.

                  (i) Each Guarantor will have the right to seek contribution
from any other non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders or the Trustee under the Guarantee made
pursuant to this Indenture.

                  Section 9.03 Guarantors May Consolidate, etc. on Certain
Terms.

                  (a) Except as set forth in Article IV, and notwithstanding
Section 9.03(b) hereof, nothing contained in this Indenture or in the Senior
Secured Notes will prevent any consolidation or merger of any Guarantor with or
into the Issuer or any other Guarantor or will prevent any transfer, sale or
conveyance of the property of any Guarantor as an entirety or substantially as
an entirety to the Issuer or any other Guarantor.

                  (b) No Guarantor may sell or otherwise dispose of all or
substantially all of its assets to, or consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person), another Person, other
than the Issuer or another Guarantor.

                  Section 9.04 Covenants of the Guarantors and Ormesa. Each
Guarantor and Ormesa (to the extent compliance therewith would not violate the
Ormesa Credit Agreement) agrees that to the extent the Issuer has agreed to
cause a Subsidiary to take certain actions, or to prohibit, prevent, or
otherwise limit the ability of a Subsidiary to take certain actions, that such
agreement shall constitute a direct obligation of each Guarantor and Ormesa (to
the extent compliance therewith would not violate the Ormesa Credit Agreement).
Nothing in this Section 9.04 shall be construed to permit any Guarantor to incur
Indebtedness permitted to be incurred by the Issuer pursuant to Section 4.18
hereof.

                                   ARTICLE X

                                  MISCELLANEOUS

                  Section 10.01 Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with the duties imposed by TIA
(section) 318(c), the imposed duties shall control.

                                      -96-


                                                                         Page 97

                  Section 10.02 Notices. Any notice or communication by the
Issuer or the Trustee to the others is duly given if in writing and delivered in
Person or mailed by first class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery, to the others' address:

                  If to the Issuer or the Guarantors:

                  Ormat Funding Corp.
                  980 Greg Street
                  Sparks, Nevada  89431
                  Tel.: (775) 356-9029
                  Fax:  (775) 356-9039
                  Attention:  President


                  with a copy to:

                  Latham & Watkins LLP
                  701 "B" Street
                  Suite 2100
                  San Diego, CA  92101
                  Tel.:  (619) 238-2869
                  Fax:  (619) 696-7419
                  Attention:  Andrew Singer, Esq.


                  If to the Trustee:

                  Union Bank of California, N.A.
                  475 Sansome Street, 12th Floor
                  San Francisco, CA 94111
                  Tel.:  (415) 296-6754
                  Fax:  (415) 296-6757
                  Attention:  Corporate Trust Department

                  The Issuer or the Trustee, by notice to the other, may
designate additional or different addresses for subsequent notices or
communications.

                  All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.

                                      -97-


                                                                         Page 98

                  Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA (section) 313(c), to the extent required
by the TIA. Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders.

                  If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.

                  If the Issuer mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.

                  Section 10.03 Communication by Holders of Senior Secured Notes
with Other Holders of Senior Secured Notes. Holders may communicate pursuant to
TIA (section) 312(b) with other Holders with respect to their rights under this
Indenture or the Senior Secured Notes. The Issuer, the Trustee, the Registrar
and anyone else shall have the protection of TIA (section) 312(c).

                  Section 10.04 Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Issuer to the Trustee to take
any action under this Indenture, the Issuer shall furnish to the Trustee:

                  (a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and

                  (b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.

                  Section 10.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (section) 314(a)(4)) shall comply with the provisions of TIA
(section) 314(e) and shall include:

                  (a) a statement that the Person making such certificate or
opinion has read such covenant or condition;

                  (b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;

                  (c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and

                                      -98-


                                                                         Page 99

                  (d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.

                  Section 10.06 Rules by Trustee and Agents. The Trustee may
make reasonable rules for action by or at a meeting of Holders. The Registrar or
Paying Agent may make reasonable rules and set reasonable requirements for its
functions.

                  Section 10.07 No Personal Liability of Directors, Officers,
Employees and Stockholders. No past, present or future director, officer,
employee, organizer, manager or agent of the Issuer or any Affiliate of any such
party (other than the Issuer), as such, shall have any liability for any
obligations of the Issuer under the Senior Secured Notes, this Indenture, any
Financing Document or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder by accepting a Senior Secured
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Senior Secured Notes.

                  Section 10.08 Governing Law. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE SENIOR SECURED
NOTES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

                  Section 10.09 Submission to Jurisdiction. The Issuer and the
Guarantors hereby submit to the nonexclusive jurisdiction of the New York State
Courts and the federal courts sitting in the State of New York for the purposes
of all legal proceedings arising out of or relating to this Indenture or the
transactions contemplated hereby. The Issuer and Guarantors hereby irrevocably
waive, to the fullest extent permitted by applicable law, any objection which
they may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such
court has been brought in an inconvenient forum.

                  Section 10.10 Waiver of Jury Trial. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS INDENTURE OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER THIS INDENTURE BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

                                      -99-

                                                                        Page 100

                  Section 10.11 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
Indebtedness agreement of the Issuer or its Subsidiaries or of any other Person.
Any such indenture, loan or Indebtedness agreement may not be used to interpret
this Indenture.

                  Section 10.12 Successors. All agreements of the Issuer in this
Indenture and the Senior Secured Notes shall bind its successors. All agreements
of the Trustee in this Indenture shall bind its successors.

                  Section 10.13 Severability. In case any provision in this
Indenture or in the Senior Secured Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

                  Section 10.14 Counterpart Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.

                  Section 10.15 Table of Contents, Headings, etc. The Table of
Contents, and headings of the Articles and Sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part of
this Indenture and shall in no way modify or restrict any of the terms or
provisions hereof.

                         [Signatures on following page]



                                     -100-


                                                                        Page 101

                                   SIGNATURES:




                                        ORMAT FUNDING CORP.


                                        By: /s/ Connie Stechman
                                           ---------------------------------
                                        Name: Connie Stechman
                                        Title: Assistant Secretary




                                     -101-


                                                                        Page 102



                                        UNION BANK OF CALIFORNIA, N.A.
                                        as Trustee



                                        By: /s/ Sonia N. Flores
                                           ---------------------------------
                                           Name:  Sonia N. Flores
                                           Title: Vice President




                                     -102-


                                                                        Page 103

ORMESA LLC,

By: ORMAT FUNDING CORP.,
      a Delaware corporation
      Its: Sole Member and Manager


By:   /s/ Connie Stechman
    ----------------------------
Name:  Connie Stechman
Title: Assistant Secretary


GUARANTORS:

BRADY POWER PARTNERS
as a Guarantor

By: ORNI 1 LLC,
      a Delaware limited liability company
      Its: General Partner

      By: ORMAT FUNDING CORP.,
          a Delaware corporation
          Its:  Sole Member and Manager


By:   /s/ Connie Stechman
    ----------------------------
Name:   Connie Stechman
Title:  Assistant Secretary


STEAMBOAT GEOTHERMAL LLC,
as a Guarantor

By: ORNI 7 LLC,
      a Delaware limited liability company
      Its: General Partner

     By: ORMAT FUNDING CORP.,
         a Delaware corporation
         Its: Sole Member and Manager


                                     -103-


                                                                        Page 104

By:   /s/ Connie Stechman
    ----------------------------
Name:  Connie Stechman
Title: Assistant Secretary


STEAMBOAT DEVELOPMENT CORPORATION
as a Guarantor


By:   /s/ Connie Stechman
    ----------------------------
Name:  Connie Stechman
Title: Assistant Secretary



ORMAMMOTH INC.
as a Guarantor


By:  /s/ Connie Stechman
    ----------------------------
Name:  Connie Stechman
Title: Assistant Secretary


ORNI 1 LLC
as a Guarantor

By: ORMAT FUNDING CORP.,
      a Delaware corporation
      Its: Sole Member and Manager


By:   /s/ Connie Stechman
    ----------------------------
Name:  Connie Stechman
Title: Assistant Secretary


ORNI 2 LLC
as a Guarantor

By: ORMAT FUNDING CORP.,
      a Delaware corporation


                                     -104-


                                                                        Page 105


      Its: Sole Member and Manager

By:   /s/ Connie Stechman
    ----------------------------
Name:  Connie Stechman
Title: Assistant Secretary

ORNI 7 LLC
as a Guarantor

By: ORMAT FUNDING CORP.,
      a Delaware corporation
      Its: Sole Member and Manager


By:   /s/ Connie Stechman
    ----------------------------
Name:  Connie Stechman
Title: Assistant Secretary




                                     -105-



                                                                  EXHIBIT 10.1.8

                                 LOAN AGREEMENT

     THIS LOAN AGREEMENT (the "Agreement") is entered into as of October 1st
2003 by and between Ormat Technologies Inc. Delaware Corporation ("OTI" or
"Borrower") and Ormat Industries Ltd., an Israeli Corporation, ("Ormat" or
Lender") in effect from January 1st, 2003.

                                    RECITALS

A.   At Borrower's request, Ormat is willing to make a loan to Borrower.

B.   The parties desire or set forth their mutual understanding with respect to
     the loan.

     The parties therefore agree as follows:

1.   LOAN

     (a)       Lender hereby agrees to make a loan to Borrower in one or more
          advances up to a total aggregate amount of up to $150,000,000 USD (One
          Hundred & Fifty Million United States Dollars) (the "Loan"), pursuant
          to the terms and conditions set forth in this Agreement.

     (b)    If Borrower elects to borrow any funds from Lender, then within 5
          (five) business days of a written request from Borrower for an
          advance, Lender shall consider making such advance in accordance with
          the terms hereof. Lender shall note on Schedule A attached hereto the
          date and amount of each advance and the total of all unpaid advances
          shall be the outstanding balance of the Loan.

2.   USE OF PROCEEDS

          Borrower may use the proceeds of the Loan in connection with its
     general corporate activities and investments.




3.   PAYMENT

     (a)       Schedule B defines the repayment schedule by combining the
          advances made to an aggregate principle amount to be repaid on each
          due date ("Aggregate Amount") Borrower shall repay the Loan and
          accrued interest in accordance with Section 5 below in full in
          accordance with specific schedules agreed upon payment dates according
          to schedule B attached ("Minimum Repayment Dates") and in any event on
          or before June 5th, 2010.

     (b)       Upon repayment of the Loan and accrued interest, amounts repaid
          shall be applied first against costs, damages and expenses due Lender,
          then against amounts due for accrued interest and, thereafter, against
          overdue principle and then against the first principle Loan amounts
          becoming due, after the date of the prepayment, in accordance with
          Schedule B. A partial repayment of an Aggregate Amount shall be
          allocated in a pari passu manner between the Advances constituting
          that Aggregate Amount.

     (c)       Borrower may at any time, upon prior written notice of 2 (two)
          business days, prepay the Loan and accrued interest in whole or in
          part.

     (d)       All amounts payable hereunder shall be payable at the Lender's
          address listed below or other place of payment as directed by Lender.

4.   REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants to Lender as follows:

     (a)       Borrower is a company duly organized and validly existing under
          the laws of Delaware and is in good standing under the laws of that
          nation. Borrower has all requisite power and authority to own and
          lease its property, to conduct its business as presently conducted and
          to enter into and perform its obligations under this Agreement.



     (b)       This Agreement has been duly executed and delivered by Lender and
          constitutes valid and binding obligations of Borrower, enforceable in
          accordance with its terms, except as enforcement may be limited by
          applicable bankruptcy laws or other similar laws affecting creditors'
          rights generally.

     (c)       Borrower is not in violation or default of any provision of its
          organizational documents, of any indenture, agreement, instrument,
          judgment, order, writ, decree or contract to which it is a party or by
          which it or any of its properties, assets or rights is bound or
          affected or of any statute, rule or regulation applicable to Borrower
          which violation or default would have a material adverse effect on
          Borrower's business or property. The execution, delivery and
          performance of this Agreement by Borrower and the consummation of the
          transactions contemplated thereby will not result in any such
          violation by Borrower of, require any consent to be obtained by
          Borrower under, be in conflict with, or constitute, with or without
          the passage of time and giving of notice, either a default by Borrower
          under any such provision, instrument, judgment, order, writ, decree or
          contract or an event which results in the creation of any material
          lien, charge or encumbrance.

     (d)       There are no actions, suits, investigations or proceedings
          pending or, to the knowledge of Borrower, threatened against Borrower
          before or by any governmental department, commission board, bureau,
          agency or instrumentality, or before any arbitrator or arbitration
          board which may have a material adverse effect on the assets or
          financial condition of the Borrower.

5.   NATURE OF THE LOAN

     (a)       The loan and accrued interest shall be repaid in full on or
          before the Minimum Repayment Date, or as specifically stated in
          Schedule B per advance.




     (b)       Interest on the Loan shall be calculated on the balance from the
          date of the receipt of each advance until the date of payment at a
          rate per annum of Lender's average effective interest rate plus 0.3%
          percent in United States Dollars, which represents a rate of 7.5% for
          the advances made during year 2003. All computations of interest shall
          be made by the Lender on the year basis of 360 days.

     (c)       Borrower shall pay or cause to be paid all present and future
          taxes, duties and other charges of whatsoever nature levied or imposed
          by the government of Israel or any jurisdiction through or out of
          which a payment is made on or in connection with any and all amounts
          due under this Agreement,

               All payments of principal and interest due under this Agreement
          shall be made without deduction for or on account, and free and clear,
          of any such taxes, duties or other charges other than withholding
          income tax pertaining to the Lender, if applicable in the Borrower's
          country and provided that Borrower will provide a certificate
          indicating such a transaction.

     (d)       Nothing contained in this Agreement shall impair the validity of
          the Loan or in any way impair the rights of Lender to exercise all
          remedies available to it under law.

6.   DEFAULT

               The occurrence of one or more of the following events shall
          constitute a default under this Agreement ("Event of Default").

     (a)       Borrower's failure to pay the Loan and accrued interest in full
          or in part as it becomes due and payable, and such failure shall not
          be cured within 10 (ten) business days after Lender gives written
          notice thereof to Borrower;




     (b)       Borrower's failure to comply with any of its obligations an
          undertakings under this Agreement;

     (c)       Any representation, warranty or covenant made herein shall prove
          to have been false or misleading in any material respect when made;

     (d)       Borrower's application for, consent to or acquiescence in the
          appointment of a trustee, receiver, liquidator, assignee, or other
          similar official Borrower or

               Borrower's property, or the making of a general assignment for
          the benefit of creditors, or the filing of a petition or an answer
          seeking reorganization in proceeding under any bankruptcy or other
          insolvency law, or the making of an agreement, composition, extension
          or adjustment with its creditors; or

     (e)       Any bankruptcy, reorganization, debt arrangement or other
          proceeding under any bankruptcy or other insolvency law being
          instituted by or Borrower and not dismissed within 60 (sixty) days
          thereafter.

7.   REMEDIES

               Upon the occurrence of an Event of Default hereunder, all amounts
          outstanding under the Loan and accrued interest shall, at the option
          of Lender, become immediately due and payable upon Lender's written
          notice to Borrower. If Lender elects to declare all amounts
          immediately due and payable, then Lender shall be entitled to exercise
          all rights and remedies available to it under law. In addition, upon
          the occurrence of an Event of Default and so long as such Event of
          Default is continuing, Lender shall be under no obligation to make
          additional advances pursuant to Subsection 2(b) above.

8.   NOTICE

               Any notice, request, instruction or other document to be given
          hereunder by a party hereto shall be in writing, delivered in person,
          or mailed by certified or




          registered mail, return receipt requested, or transmitted by facsimile
          transmission with electronic confirmation of receipt to the
          addressee's address or facsimile number set forth below (or such other
          address of facsimile number as the party changing its address
          specifies in a notice to the other parties):

               If to Ormat Technologies Inc.
               980 Greg Street
               Sparks, NV 89431-6030, USA
               Attention: President
               Telephone:  1-702-356-9029
               Facsimile:  1-702-356-9039

               If to Ormat Industries Ltd.
               P.O. Box 68
               Yavne 81100 Israel
               Attention:  President
               Telephone:  972-8-9433702
               Facsimile:  972-8-9439901

          Notice shall be deemed given the earlier of when actually received and
          three days after Notice is sent in accordance with the above.

9.   MODIFICATION; ENTIRE AGREEMENT; TERMINATION OF PRIOR AGREEMENT

               No change or modification of this Agreement shall be valid unless
          it is in writing and signed by both Lender and Borrower. This
          Agreement sets forth the entire agreement and understanding among the
          parties as to the subject matter treated herein and merges and
          supersedes all prior discussions, agreements and understandings.

10.  INVALID PROVISION

               The invalidity or unenforceability of any provision of this
          Agreement shall not affect



          the other provisions, hereof, and this Agreement shall be construed in
          all respects as if such invalid or unenforceable provisions were
          omitted.

11.  INTERPRETATION

               This Agreement and each of the terms and provisions hereof are
          deemed to have been explicitly negotiated among the parties and the
          language in all parts of this Agreement shall in all cases be
          construed according to its fair meaning and not strictly for or
          against any party.

12.  COUNTERPARTS

               This Agreement May be signed in two or more counterparts, each of
          which shall be deemed an original, and all of which, taken together
          shall be deemed one and the same document.

13.  APPLICABLE LAW

               This Agreement shall be governed by, and interpreted and
          construed under the laws of Israel.

14.  EXPENSES AND ATTORNEY'S FEES

               In the event that any party to this Agreement brings an action or
          proceeding for the declaration of rights of the parties hereunder, for
          injunctive relief, for an alleged breach or default of or any other
          action arising out of this Agreement, the non-prevailing party in any
          action pursued in courts of competent jurisdiction (the finality of
          which is not legally contested) shall pay to the prevailing party all
          reasonable costs, damages, and expenses including attorney's fees
          expended or incurred in connection therewith.

15.  SURVIVAL

               The representations, warranties, covenants and agreement made by
          the parties hereto in this Agreement shall survive the closing of the
          transactions contemplated by this Agreement.



16.  SUCCESSORS AND ASSIGNS

               Except as otherwise expressly provided in this Agreement, the
          provisions of this Agreement shall insure to the benefit of, and be
          binding upon, the successors an designs of the parties to this
          Agreement; provided that Lender shall not be obligated to make
          advances under Section 1 of this Agreement to any successor or assign
          of Borrower, but may do so pursuant to the terms of this Agreement as
          Lender's sole discretion.

17.  TITLES

               The titles of the Sections of this Agreement are for convenience
          of reference only and are not to be considered in construing this
          Agreement.

               IN WITNESS WHEREOF, the parties hereto make this Agreement as of
          the date first set forth above.

                                       ORMAT TECHNOLOGIES, INC.

                                       By:  /s/ Connie Stechman
                                           ------------------------------------

                                       Its: Vice President
                                           ------------------------------------

                                       ORMAT INDUSTRIES LTD.

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

                                       Its: Managing Director
                                           ------------------------------------



                                                                  EXHIBIT 10.1.9



                                    ORMAT(R)  [ORMAT LOGO OMITTED]
                             ORMAT TECHNOLOGIES INC
                 980 GREG STREET, SPARKS, NEVADA 89431-6039, USA



                                  CAPITAL NOTE

1.   The undersigned, Ormat Technologies INC, a company organized and existing
     under the laws of Delaware, USA, acknowledges that it is to receive from
     Ormat Industries Ltd., a company organized and existing under the laws of
     Israel, located at Sheydlowski Road, Yavne, Israel, a non-interest bearing
     loan in the amount of NIS 240,000,000 [Two Hundred and Forty Million] but
     in any event, an amount not to exceed the amount in NIS equal to $
     50,664,977 US on the date of the transfer of such loan) (the "Loan").

2.   For Value Received and upon demand at any time after November 30th, 2005,
     Ormat Technologies INC hereby promises to repay the Loan to Ormat
     Industries Ltd. without any interest.

3.   Ormat Industries Ltd. acknowledges that this non-interest bearing Loan is
     subordinated to all other liabilities of Ormat Technologies Inc.

4.   Ormat Industries Ltd. will not accelerate the repayment of this capital
     note.

5.   In any and all events, the Loan shall be repaid not later than December
     30th, 2006.

IN WITNESS WHEREOF, this Capital Note has been duly signed on behalf of Ormat
Technologies INC. this 22nd day of December, 2003 value of January 1st, 2003.


Ormat Technologies Inc.

By  /s/ Connie Stechman
   ----------------------------

Connie Stechman
-------------------------------
Name

Vice President
-------------------------------
Title

ORMAT TECHNOLOGIES, INC.
980 Greg Street  o  Sparks, NV 89431-6039  o  Telephone:(775) 356-9029
 o  Facsimile:(775)356-9039



                                                                 EXHIBIT 10.1.10

                                    ORMAT(R) [ORMAT LOGO OMITTED]

                             GUARANTEE FEE AGREEMENT

                                     BETWEEN

                         Ormat Technologies, Inc. (OTI)

                                       and

                           Ormat Industries Ltd. (OIL)


Effective as of January 1, 1999



At OTI's request OIL has agreed to issue certain Standby letters of Credit on
behalf of OTI, as well as guarantees in forms acceptable to the end customers.

o    A fee on Standby Letters of Credit and on corporate guarantees will be
     calculated each quarter at a rate of 1% (one percent) per annum, on all
     amounts effective during that quarter.

o    All out of pocket expenses will be billed at cost.

The billing will be issued at the end of each quarter for the current quarter
and due upon receipt.

This Agreement is the entire agreement between the parties hereto with respect
to the subject matter hereof, and supersedes all prior agreements,
understandings and discussions between them with respect to such subject matter.




/s/ Indecipherable                         /s/ Yehudit Bronicki
-------------------------------------     --------------------------------------
Ormat Industries Ltd.                     Ormat Technologies Inc.


ORMAT INDUSTRIES LTD

NEW INDUSTRIAL AREA, P.O.B. 68 YAVNE 81100, ISRAEL  o  TELEPHONE 972-8-9433777
  o  FACSIMILE 972-8-9439901



                                                                 Exhibit 10.1.11

                             REIMBURSEMENT AGREEMENT


     THIS AGREEMENT (this "Agreement") between Ormat Industries Ltd., an Israeli
corporation ("OIL"), and Ormat Technologies, Inc., a Delaware corporation
("OTI"), is made and entered into as of July 15, 2004.


                                    RECITALS

     WHEREAS, OIL and OTI have entered into a Guarantee Fee Agreement dated as
of January 1, 1999 (the "Guarantee"), pursuant to which OIL has agreed to issue
certain standby letters of credit on OTI's behalf, as well as guarantees in
forms acceptable to the end customers;

     WHEREAS, OIL requires that OTI execute this Agreement and OTI is willing to
execute this Agreement;

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

1.   Unconditional Reimbursement Obligations. OTI, together with its successors
     and permitted assigns, hereby unconditionally agrees that on the fifth
     business day following receipt of notice (the "Due Date") from OIL of (i)
     any draw made on a standby letter of credit issued by OIL pursuant to the
     Guarantee or (ii) any payments made in accordance with a guarantee made by
     OIL pursuant to the Guarantee (each, a "Payment"), OTI shall reimburse OIL
     in full for such Payment. Any payment that is not made on the Due Date
     shall bear interest, accruing from such Due Date until repayment in full,
     at an interest rate per annum equal to OIL's average cost of funds plus
     0.3% in United States dollars.

2.   Indemnification. OTI agrees at all times to indemnify OIL and hold OIL
     harmless from and against any and all liabilities, losses, damages, costs,
     and expenses, including reasonable attorney fees, which OIL may sustain or
     incur from time to time by reason of having executed the Guarantee or any
     modification, amendment, limitation, renewal or extension thereof, except
     as a result of OIL's gross negligence or willful misconduct.

3.   Representations and Warranties of OTI. OTI hereby represents and warrants
     that (i) it has the requisite corporate power to execute, deliver and
     perform this



     Agreement and has taken all necessary corporate action to authorize the
     execution, delivery and performance of this Agreement, (ii) the execution,
     delivery and performance of this Agreement does not and will not violate,
     create a breach of or a default under any contract or agreement to which
     OTI is a party or by which it is bound, and (iii) the execution, delivery
     and performance of this Agreement does not require any approval of any
     person, except for such approvals or consents which have been obtained
     prior to the date hereof.

4.   Defense of Legal Action. In the event any legal action is taken against OIL
     under the Guarantee, either jointly with OTI or alone, OTI shall defend
     such action at its own expense and OIL shall cooperate with OTI in the
     defense thereof, or, at its election, OIL shall assume the defense, at the
     expense of OTI. OIL shall have the right to join OTI as party defendant in
     any legal action brought against it alone under the Guarantee and OTI
     hereby consents to the entry of an order making it a party defendant.

5.   Miscellaneous. This Agreement (i) embodies the entire agreement and
     understandings between OIL and OTI (or any subsidiary to which the
     underlying interest may be assigned) and supersedes all prior agreements
     and understandings between OIL and OTI relating to the subject matter
     hereof; (ii) may be modified or amended only by written instrument executed
     by each party hereto; (iii) shall be governed by and construed according to
     the laws of the State of New York; and (iv) may be executed in several
     counterparts, each of which is an original, but all of which together
     constitute one and the same agreement. If any provisions of this Agreement
     shall be held to be invalid, illegal or unenforceable, the remaining
     provisions shall not in any way be effected or impaired.

     IN WITNESS WHEREOF, OIL and OTI have duly executed this Agreement as of the
date first written above.



ORMAT INDUSTRIES LTD.                                ORMAT TECHNOLOGIES, INC.



By: /s/ Yehudit Bronicki                             By: /s/ Yehudit Bronicki
   ---------------------                                 -----------------------
Name: Y. Bronicki                                    Name: Y. Bronicki
Title: Managing Director                             Title: President


                                        2



                                                                 Exhibit 10.1.12

                               SERVICES AGREEMENT


                    ENTERED INTO THIS 15TH DAY OF JULY, 2004

         THIS SERVICES AGREEMENT (this "Agreement") is made and entered into as
of the 1st day of July, 2004 (the "Effective Date") by and among Ormat
Industries Ltd., an Israeli Public corporation with principal place of business
at the Industrial Area, Yavne ("OIL"), and Ormat Systems Ltd., an Israeli
corporation with principal place of business at the Industrial Area, Yavne
("OSL").

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, OIL and OSL have entered, into a purchase agreement dated as
of the date hereof (the "PURCHASE AGREEMENT") pursuant to which OSL has agreed
to purchase and assume from OIL, and OIL has agreed to sell and assign to OSL,
certain assets and liabilities related to the Business (as defined in the
Purchase Agreement) all under the terms and subject to the conditions set forth
therein; and

         WHEREAS, the parties to the Purchase Agreement agreed therein that OSL
shall provide corporate, financial, secretarial and administrative services to
OIL as would be set forth in a services agreement; and



         NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants herein contained, and other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:

1.     Definitions. Unless otherwise expressly defined in this Agreement, any
       capitalized term used herein shall bear the meaning ascribed to it in the
       Purchase Agreement.

2.     The Services. For the purposes of this Agreement, the term "SERVICES"
       means corporate, financial, secretarial and administrative services as
       more fully set forth in SCHEDULE 2 attached hereto. The Services shall
       also include the use of office space and office equipment which is either
       owned or leased or used by OSL and which may be necessary from time to
       time for the provision of the Services.



                                       2

       In addition, upon the request of OIL, to the extent that at the relevant
       time OSL employs the adequate personnel for such tasks, OSL shall provide
       to OIL engineering services related to the business of Opti Canada, Inc.
       and of Opti Technologies, BV (the "ENGINEERING SERVICES").

3.     Hire of Services.

       3.1  Effective upon the Effective Date and until this Agreement is
            terminated in accordance with its terms, OIL hereby retains OSL
            to perform and provide the Services and OSL undertakes to perform
            and provide the Services and the Engineering Services, if so
            required, to OIL.

       3.2  It is hereby agreed and clarified that the Services shall be
            subject to and supervised by the Board of Directors of OIL, or
            any person duly authorized by such Board of Directors.

       3.3  OSL undertakes to provide the Services hereunder which are
            typically performed by key officers, only through the persons
            listed in SCHEDULE 3.3, attached hereto (the "SERVICE PERSONNEL")
            or any amendment thereto effected pursuant to Section 3.4 below.

       3.4  The list of Service Personnel may be amended either (a) by OSL,
            provided the prior written consent of OIL for such amendment will
            have been obtained by OSL; or (b) by a written notice from OIL to
            OSL which shall be binding upon its receipt by OSL. It is hereby
            clarified that any amendment to the Service Personnel initiated
            by OIL shall not require any prior or subsequent OSL's approval
            and/or consent in any form whatsoever. Such decision of OSL or
            OIL to amend the list of Service Personnel, will be at the sole
            discretion of the board of directors of the respective company,
            without it being necessary to obtain the approval of the general
            meeting of the shareholders of the relevant company.

       3.5  Nothing in this Agreement shall prevent OIL from engaging any
            other persons and/or entities in connection with the Services
            provided that OSL shall not be liable or responsible in any
            manner for any loss, damage, liability, expense, claim, etc. to
            OIL as a result of any such other person or entities providing
            Services.



                                       3

4.     Acceptance by OSL. OSL hereby accepts the engagement set forth in Section
       2 above and agrees to render the Services to OIL in accordance with the
       terms and conditions of this Agreement and further agrees to provide for
       the benefit of OIL its best judgment, efforts and skill in rendering its
       Services under this Agreement.

5.     Consideration. For all Services to be provided by OSL to OIL hereunder
       throughout the term of this Agreement: OIL shall pay to OSL monetary
       consideration of US$ Ten Thousand (10,000$) per month (the "MONTHLY
       FEES") and all out of pocket expenses borne by OSL with respect to the
       Services rendered hereunder. In addition, OIL shall pay OSL in
       consideration for the Engineering Services a fee equal to the cost of
       such services to OSL plus 10% (the "ENGINEERING FEES"), as well as any
       other out of pocket expenses borne by OSL with respect to such
       services. For the purpose of this section, "cost" of Engineering
       Services shall be based on salaries and other benefits paid by OSL to
       those employees of OSL through whom such Engineering Services are
       provided to OIL, calculated in proportion to the actual time spent for
       the provision of said services.

       On each anniversary of this Agreement, commencing 12 months from January
       1, 2005, the Monthly Fees shall be increased by the rate of increase in
       the CPI in Israel during the previous 12 months period plus 10% (of such
       increase).

       OIL shall pay to OSL the Monthly Fees, the Engineering Fees and out of
       pocket expenses, as set forth above, on a monthly basis, until the
       fifteenth day of each month with respect to the previous month. Any
       payment hereunder shall be paid together with VAT at the applicable rate
       added to the fees mentioned above and be made by wire transfer to OSL's
       bank account, the details of which shall be provided to OIL by OSL in
       writing, as may be amended from time to time.

6.     Term and Termination. This Agreement shall continue in effect from the
       Effective Date through and including December 31, 2009 (the "INITIAL
       PERIOD") and shall automatically renew for an unlimited number of
       successive one (1) year renewal periods thereafter (each, a "RENEWAL
       PERIOD"), unless (i) OIL provides written notice to the other that it
       elects to terminate this Agreement, which such written notice must be
       given not less than one hundred and eighty (180) days prior to the
       expiration of the Initial Period or any Renewal Period, as the case
       may be; (ii) either OIL or OSL provides written notice to the other
       that it elects to immediately terminate this Agreement if the other
       party becomes insolvent, makes a general assignment for the benefit of
       creditors, files a voluntary petition of bankruptcy, suffers or





                                       4

       permits the appointment of a receiver for its business or assets, or
       becomes subject to any proceedings under any bankruptcy or insolvency
       law, voluntarily or otherwise, in which case the notifying party may
       regard the other party as in default under this Agreement; (iii) a
       party hereto is in breach of, or default under, this Agreement, and
       the other party serves a thirty (30) days' written termination notice
       to the breaching party. Said notice shall become effective at the end
       of such period, unless during said period the breaching party shall
       cure such breach or default. In the event of such termination, the
       non-breaching party shall have all rights and remedies available at
       law or in equity.

7.     Insurance. OSL hereby undertakes that immediately following the signing
       of this Agreement, a Directors and Officers' insurance policy shall be
       procured for any persons listed on the Service Personnel list, as shall
       be amended from time to time, in the minimum amount of US$ Five Million
       ($5,000,000), per incident and per period, and that such insurance policy
       shall be maintained effective with respect to each person so insured, for
       at least until seven years following the termination of such person's
       employment with OSL. OSL shall either execute such undertaking by
       procuring such insurance policy on its own account or by ensuring such
       coverage as part of a D&O insurance policy obtained by any of its parent
       companies.

8.     Confidentiality. Each party recognizes that it and its officers,
       directors, employees and agents may obtain knowledge of the trade
       secrets and other confidential information of the other party which is
       valuable, special or unique to the continued business of that party.
       Accordingly, each party agrees to hold such information in confidence
       and to use its best efforts to ensure that such information is held in
       confidence by its officers, directors and employees. Notwithstanding
       the foregoing, each party may make such disclosure to outside parties
       as may be necessary to comply with applicable governmental laws,
       rules, and regulations and judicial orders or if any confidential
       information is or was in the public domain or generally available to
       the public through no unauthorized act or omission of the disclosing
       party. The parties acknowledge that each party's confidential
       information represents unique and valuable assets.

9.     OSL as Independent Contractor. OSL and its employees shall, for all
       purposes of this Agreement, be deemed to be an independent contractor and
       not an agent or employee of the OIL and, except as otherwise expressly
       provided herein and/or authorized by the Board of Directors of OIL, shall
       have no authority to act for or to represent OIL or otherwise to be
       deemed an agent of OIL.




                                       5

10.    Binding Effect; Successors and Assigns; Assignment. This Agreement shall
       be binding upon and inure to the benefit of the parties hereto and their
       respective heirs, successors, permitted assigns and legal
       representatives. This Agreement shall be for the sole benefit of the
       parties to this Agreement and their respective heirs, successors,
       permitted assigns and legal representatives. This Agreement may not be
       assigned by either party without the prior written consent of the other
       party. Any attempted assignment in violation of this Section 10 shall be
       null and void.

11.    Counterparts; Signatures; Titles and Headings. This Agreement may be
       executed in counterparts, each of which shall be deemed an original
       agreement, but all of which together shall constitute one and the same
       instrument. This Agreement shall be deemed executed and delivered upon
       the delivery of original signed copies, or facsimile copies containing
       telecopied signatures, to each other party hereto. The headings in this
       Agreement are for reference purposes only and shall not in any way affect
       the meaning or interpretation of this Agreement.

12.    Governing Law; Jurisdiction and Venue. This Agreement shall be governed
       by and construed in accordance with the laws of the State of Israel,
       without reference to choice of law principles thereof, and the parties
       agree to exclusively submit to the jurisdiction and venue of Israel and
       the courts of Tel-Aviv-Jaffa, Israel.

       Each Party hereto waives any claim of consequential damages from the
       other unless: (a) the foreseeability of such damages at the time of the
       contract; and (b) the amount of such damages are proven by clear and
       convincing evidence.

       Each party hereto hereby waives any claim to punitive, multiplied or
       exemplary damages from the other.

       It is hereby clarified that in case the first paragraph of this Section
       12 is found, by a court of competent jurisdiction, to be unenforceable or
       otherwise invalid, each party hereto waives its right to trial of any
       issue by jury.

13.    Warranty. This Services Agreement is entered into on an "AS IS" basis
       without a warranty of any kind. All express or implied representations
       and/or warranty, including without limitation any implied warranty,
       are hereby excluded. The entire risk as to the quality of Services is
       borne by OIL.



                                       6

14.    Severability. If any provision of this Agreement shall be determined by
       any court of competent jurisdiction (or any other agreed-upon dispute
       resolving body) to be unenforceable or otherwise invalid as written, the
       same shall be enforced and validated to the fullest extent permitted by
       law. All provisions of this Agreement are severable, and the
       unenforceability or invalidity of any single provision hereof shall not
       affect the remaining provisions.

15.    Notices. Except as otherwise provided herein, all notices shall be in
       writing and shall be effective upon receipt, if delivered personally or
       if mailed by overnight courier, postage prepaid, or upon generation of a
       confirmation if sent by facsimile (provided that such transmission is
       followed by mailing of a conforming copy) to the parties at their
       addresses set forth in the first paragraph of this Agreement or such
       other address as subsequently may be specified in writing by a party to
       the other parties.

16.    No Strict Construction; Interpretation. The parties hereto acknowledge
       that this Agreement has been prepared jointly by the parties hereto and
       their respective legal counsel, and shall not be strictly construed
       against any party as a result of the party drafting any given provision
       hereof. Unless otherwise indicated to the contrary herein by the context
       or use thereof, (a) the words "herein," "hereto," "hereof," and words of
       similar import refer to this Agreement as a whole and not to any
       particular Section, subsection or paragraph hereof, (b) words importing
       the masculine gender shall include the feminine and neutral genders and
       vice versa, and (c) words importing the singular shall include the plural
       and vice versa.

17.    Entire Agreement; Modification and Waiver. Except for the agreements
       specifically referenced in or contemplated by this Agreement, this
       Agreement constitutes the entire agreement between the parties with
       respect to the matters covered hereby and supersedes all previous
       written, oral or implied understandings between them with respect to
       such matters. This Agreement may be amended or modified only by a
       writing signed by the party against whom enforcement of such amendment
       or modification is sought. Any of the terms or conditions of this
       Agreement may be waived at any time by the party or parties entitled
       to the benefit thereof, but only by a writing signed by the party or
       parties waiving such terms or conditions. No waiver of any provisions
       of this Agreement or of any rights or benefits arising hereunder shall
       be deemed to constitute or shall constitute a waiver of any other
       provisions of this Agreement (whether or not similar) nor shall such
       waiver constitute a continuing waiver unless otherwise expressly
       provided in writing.




                                       7


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the day first above written.



ORMAT INDUSTRIES LTD


By: /s/ Lucien Y. Bronicki
    ----------------------------------
    Name: Lucien Y. Bronicki
    Title: Chairman of the Board




ORMAT SYSTEMS LTD


By: /s/ Etty Rosner
    ----------------------------------
    Name: Etty Rosner
    Title: V.P. Contract Administrator






                                       8



                                  SCHEDULE 2


SERVICES PROVIDED BY OSL TO OIL:

OSL will provide corporate, financial, secretarial and administrative services
to OIL which shall encompass, among other, the following detailed services:
Corporate executive and statutory services providing personnel to fulfill the
statutory positions required by law for public entities, all bookkeeping and
accounting services, public and investment relations services, management of
assets, obligations, liabilities, corporate reporting requirements, any
administrative functions and services required to maintain a public entity.




                                       9



                                  SCHEDULE 3.3

SERVICE PERSONNEL:

Lucien Y. Bronicki - Chairman of the Board of Directors

Yehudit Bronicki - Managing Director and Director

Lisa Kidron - Chief Financial Officer

Etty Rosner - Corporate Secretary

Amit Gorka - Controller Moti Katz - Head Bookkeeper

Accounting, treasury and secretarial staff - as required



                                                                  Exhibit 10.2.1

                                                                 EXECUTION COPY





                           PURCHASE AND SALE AGREEMENT


                                  by and among


                      CONSTELLATION POWER, INC., as Seller


                                       and

                                 COSI PUNA, INC.


                                       and

                            ORNI 8 LLC, as Purchaser


                                       and

                    ORMAT NEVADA INC., as Purchaser's Parent

                          for the Sale of the Shares of


                                 CE PUNA I, INC.

                                       and

                                CE PUNA II, INC.

                   which includes the transfer of interests in

                           CE PUNA LIMITED PARTNERSHIP

                                       and

                             PUNA GEOTHERMAL VENTURE




                           Dated as of April 22, 2004






                                TABLE OF CONTENTS
                                                                          Page

ARTICLE 1 DEFINITIONS.....................................................2

   SECTION 1.1       CERTAIN DEFINED TERMS................................2
   SECTION 1.2       CERTAIN INTERPRETIVE MATTERS........................13

ARTICLE 2 PURCHASE AND SALE..............................................14

   SECTION 2.1       PURCHASE AND SALE...................................14


ARTICLE 3 CLOSING; PURCHASE PRICE........................................15


   SECTION 3.1       CLOSING.............................................15
   SECTION 3.2       INITIAL PURCHASE PRICE..............................16
   SECTION 3.3       ADJUSTMENT TO INITIAL PURCHASE PRICE................16
   SECTION 3.4       ESTIMATED ADJUSTMENT STATEMENT......................16
   SECTION 3.5       FINAL ADJUSTMENT STATEMENT..........................17

ARTICLE 4 REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER............18

   SECTION 4.1       ORGANIZATION AND EXISTENCE..........................18
   SECTION 4.2       EXECUTION, DELIVERY AND ENFORCEABILITY..............18
   SECTION 4.3       NO VIOLATION........................................19
   SECTION 4.4       LITIGATION..........................................19
   SECTION 4.5       BROKERS.............................................20
   SECTION 4.6       SELLER'S AND COSI PUNA'S QUALIFICATIONS.............20
   SECTION 4.7       CONSENTS AND APPROVALS..............................20
   SECTION 4.8       COMPLIANCE WITH LAWS................................20

ARTICLE 5 REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES.........20

   SECTION 5.1       ORGANIZATION AND EXISTENCE..........................20
   SECTION 5.2       OWNERSHIP...........................................21
   SECTION 5.3       CAPITALIZATION......................................22
   SECTION 5.4       NO VIOLATION:.......................................22
   SECTION 5.5       BUSINESS............................................22
   SECTION 5.6       COMPLIANCE WITH LAWS................................23
   SECTION 5.7       PERMITS.............................................23
   SECTION 5.8       LITIGATION..........................................23
   SECTION 5.9       EXISTING CONTRACTS..................................23
   SECTION 5.10      PERSONAL PROPERTY...................................24
   SECTION 5.11      REAL PROPERTY.......................................24
   SECTION 5.12      LEASES..............................................24
   SECTION 5.13      INTELLECTUAL PROPERTY...............................24
   SECTION 5.14      ENVIRONMENTAL COMPLIANCE............................25
   SECTION 5.15      TAX MATTERS.........................................25
   SECTION 5.16      NO SUBSIDIARIES.....................................27
   SECTION 5.17      FINANCIAL STATEMENTS................................27
   SECTION 5.18      UNDISCLOSED LIABILITIES.............................27
   SECTION 5.19      ABSENCE OF CERTAIN FINANCIAL CHANGES OR EVENTS......28
   SECTION 5.20      CONSENTS AND APPROVALS..............................28
   SECTION 5.21      LABOR MATTERS.......................................28
   SECTION 5.22      INSURANCE...........................................28
   SECTION 5.23      EMPLOYEE BENEFIT PLANS..............................29


                                     - i -


ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER....................29

   SECTION 6.1       ORGANIZATION AND EXISTENCE..........................29
   SECTION 6.2       EXECUTION, DELIVERY AND ENFORCEABILITY..............29
   SECTION 6.3       NO VIOLATION........................................29
   SECTION 6.4       COMPLIANCE WITH LAWS................................30
   SECTION 6.5       LITIGATION..........................................30
   SECTION 6.6       BROKERS.............................................30
   SECTION 6.7       FINANCING...........................................31
   SECTION 6.8       PURCHASER QUALIFICATIONS............................31
   SECTION 6.9       "AS IS" SALE; DISCLAIMER OF REPRESENTATIONS AND
                     WARRANTIES; FURTHER ACKNOWLEDGEMENTS BY PURCHASER...31
   SECTION 6.10      CHARACTERISTICS OF PURCHASER; NO DISTRIBUTION.......32
   SECTION 6.11      INTENTIONALLY OMITTED...............................32
   SECTION 6.12      INSPECTION..........................................32
   SECTION 6.13      CONSENTS AND APPROVALS..............................33
   SECTION 6.14      BANKRUPTCY..........................................33

ARTICLE 7 COVENANTS OF EACH PARTY........................................34

   SECTION 7.1       EFFORTS TO CLOSE....................................34
   SECTION 7.2       UPDATING.  .........................................34
   SECTION 7.3       CONDUCT PENDING CLOSING.............................35
   SECTION 7.4       REGULATORY APPROVALS................................37
   SECTION 7.5       TAX MATTERS.........................................38
   SECTION 7.6       RISK OF LOSS........................................42
   SECTION 7.7       INSURANCE...........................................44
   SECTION 7.8       ANNOUNCEMENTS.......................................44
   SECTION 7.9       POST CLOSING - FURTHER ASSURANCES...................44
   SECTION 7.10      POST CLOSING - INFORMATION AND RECORDS..............45
   SECTION 7.11      USE OF SELLER'S MARKS...............................46
   SECTION 7.12      EXCLUDED ASSETS.....................................46
   SECTION 7.13      EXCLUDED LIABILITIES.  .............................47
   SECTION 7.14      EMPLOYEES...........................................47
   SECTION 7.15      ADDITIONAL COVENANTS OF PURCHASER...................50
   SECTION 7.16      ASSUMPTION OF OBLIGATIONS...........................50
   SECTION 7.17      COMPANY GUARANTEES.  ...............................50
   SECTION 7.18      ACTION TAKEN IN CONNECTION WITH THE LOAN DOCUMENTS..50
   SECTION 7.19      PAYMENT OF INTERCOMPANY ARRANGEMENTS................50
   SECTION 7.20      REPAIR OF WELL KS-11R...............................51


ARTICLE 8 ACCESS AND CONFIDENTIALITY; TRANSITION PROCEDURES..............51

   SECTION 8.1       GENERAL ACCESS......................................51
   SECTION 8.2       TRANSITION PERIOD PROCEDURES........................52
   SECTION 8.3       INDEMNIFICATION. ...................................52
   SECTION 8.4       CONFIDENTIAL INFORMATION............................53
   SECTION 8.5       NO OTHER CONTACT....................................53

ARTICLE 9 INDEMNIFICATION AND RELEASE....................................53

   SECTION 9.1       EXCLUSIVITY.  ......................................53
   SECTION 9.2       INDEMNIFICATION BY SELLER...........................53

                                     - ii -



   SECTION 9.3       INDEMNIFICATION BY PURCHASER........................54
   SECTION 9.4       NOTICE OF CLAIM. ...................................55
   SECTION 9.5       DEFENSE OF THIRD PARTY CLAIMS.......................55
   SECTION 9.6       COOPERATION.........................................56
   SECTION 9.7       MITIGATION AND LIMITATION OF CLAIMS.................56
   SECTION 9.8       ADJUSTMENT TO PURCHASE PRICE........................57
   SECTION 9.9       SPECIFIC PERFORMANCE................................57
   SECTION 9.10      SURVIVAL; TIME LIMITATION FOR INDEMNIFICATION.......58
   SECTION 9.11      RELEASE.............................................58

ARTICLE 10 PURCHASER'S CONDITIONS TO CLOSING.............................59

   SECTION 10.1      COMPLIANCE WITH PROVISIONS.  .......................59
   SECTION 10.2      HSR ACT.  ..........................................59
   SECTION 10.3      NO RESTRAINT........................................59
   SECTION 10.4      REQUIRED REGULATORY APPROVALS AND CONSENTS..........59
   SECTION 10.5      REPRESENTATIONS AND WARRANTIES......................60
   SECTION 10.6      OFFICER'S CERTIFICATE...............................60
   SECTION 10.7      MATERIAL ADVERSE EFFECT.............................60
   SECTION 10.8      LEGAL OPINION.......................................60
   SECTION 10.9      NO TERMINATION......................................60
   SECTION 10.10     RECEIPT OF OTHER DOCUMENTS..........................60
   SECTION 10.11     LOAN DOCUMENTS......................................61

ARTICLE 11 SELLER'S CONDITIONS TO CLOSING................................61

   SECTION 11.1      COMPLIANCE WITH PROVISIONS..........................61
   SECTION 11.2      HSR ACT.  ..........................................62
   SECTION 11.3      NO RESTRAINT........................................62
   SECTION 11.4      REQUIRED REGULATORY APPROVALS AND CONSENTS..........62
   SECTION 11.5      REPRESENTATIONS AND WARRANTIES......................63
   SECTION 11.6      OFFICER'S CERTIFICATE...............................63
   SECTION 11.7      LEGAL OPINION.......................................63
   SECTION 11.8      NO TERMINATION......................................63
   SECTION 11.9      LOAN DOCUMENTS......................................63
   SECTION 11.10     RECEIPT OF OTHER DOCUMENTS..........................63

ARTICLE 12 TERMINATION...................................................64

   SECTION 12.1      TERMINATION.........................................64
   SECTION 12.2      PROCEDURE AND EFFECT OF TERMINATION.................65

ARTICLE 13 GENERAL PROVISIONS............................................65

   SECTION 13.1      EXPENSES. ..........................................65
   SECTION 13.2      ENTIRE DOCUMENT; MODIFICATION OR AMENDMENT..........65
   SECTION 13.3      SCHEDULES AND EXHIBITS..............................66
   SECTION 13.4      COUNTERPARTS........................................66
   SECTION 13.5      SEVERABILITY. ......................................66
   SECTION 13.6      ASSIGNABILITY.......................................67
   SECTION 13.7      CAPTIONS............................................67
   SECTION 13.8      GOVERNING LAW AND FORUM.  ..........................67
   SECTION 13.9      NOTICES. ...........................................67


                                    - iii -



   SECTION 13.10        NO THIRD PARTY BENEFICIARIES.....................69
   SECTION 13.11        NO RELATIONSHIP.  ...............................69
   SECTION 13.12        CONSTRUCTION OF AGREEMENT........................69
   SECTION 13.13        CLOSING OVER BREACHES OR UNSATISFIED CONDITIONS..69
   SECTION 13.14        WAIVER OF COMPLIANCE.............................70
   SECTION 13.15        CONSENTS NOT UNREASONABLY WITHHELD...............70
   SECTION 13.16        SURVIVAL.........................................70
   SECTION 13.17        TIME OF ESSENCE..................................71


   SECTION 13.18        PURCHASER'S PARENT SUPPORT. .....................71

                                     - iv -







                             EXHIBITS AND SCHEDULES


ITEM                         DESCRIPTION

Exhibit 10.8                 Legal Opinion of Seller's Counsel

Exhibit 11.7                 Legal Opinion of Purchaser's Counsel

Schedule 1.1A                Company Guarantees

Schedule 1.1B                Company Insurance Policies

Schedule 1.1C                Intercompany Arrangements

Schedule 1.1D                Seller's Persons With Knowledge

Schedule 1.1E                Purchaser's Required Consents

Schedule 1.1F                Purchaser's Required Regulatory Approvals

Schedule 1.1G                Seller's Required Consents

Schedule 1.1H                Seller's Required Regulatory Approvals

Schedule 3.4                 Working Capital Adjustment

Schedule 5.3                 Capitalization

Schedule 5.4                 No Violation

Schedule 5.6                 Compliance With Laws

Schedule 5.7                 Permits

Schedule 5.9                 Existing Contracts

Schedule 5.10                Personal Property

Schedule 5.12                Leases

Schedule 5.14                Environmental Compliance

Schedule 5.15                Tax Matters

Schedule 5.18                Undisclosed Liabilities




Schedule 5.19                Absence of Certain Financial Changes or Events

Schedule 5.23                Employee Benefit Plans

Schedule 7.3(b)              Conduct Pending Closing


Schedule 7.5(b)              Purchase Price Allocation

Schedule 7.5(h)              Tax Refunds

Schedule 7.14                Employees and Purchaser's Replacement Benefit Plans







                           PURCHASE AND SALE AGREEMENT


         THIS PURCHASE AND SALE AGREEMENT dated as of April 22, 2004 (the
"Effective Date"), is made and entered into by and among CONSTELLATION POWER,
INC., a Maryland corporation ("CPI" or "Seller"), COSI PUNA, INC., a Maryland
corporation ("COSI PUNA"), ORNI 8 LLC, a Delaware limited liability company
("ORNI 8" or "Purchaser") and ORMAT NEVADA INC., a Delaware corporation
("Purchaser's Parent")(each of the foregoing sometimes referred to herein as a
"Party" and, collectively, as the "Parties").

                                    RECITALS

         A. CPI is the record and beneficial owner of 100% of the issued and
outstanding capital stock of (i) CE Puna I, Inc. (the "CE PUNA I Shares"), a
Maryland corporation ("CE PUNA I") and (ii) CE Puna II, Inc. (the "CE PUNA II
Shares"), a Maryland corporation ("CE PUNA II").

         B. Each of CE PUNA I and CE PUNA II is the record and beneficial owner
of 50% of the partnership interests (collectively, the "CE PUNA LP Interests")
of CE Puna Limited Partnership, a Maryland limited partnership ("CE PUNA LP").

         C. CE PUNA I and CE PUNA LP are the record and beneficial owners of all
of the partnership interests of Puna Geothermal Venture (collectively, the "PGV
Interests"), a Hawaii general partnership ("PGV").

         D. PGV owns the Plant (as defined in Section 1.1).

         E. COSI PUNA operates the Plant pursuant to the O&M Agreement (as
defined in Section 1.1).

         F. The CE PUNA I Shares and the CE PUNA II Shares may sometimes be
referred to herein collectively as the "Purchased Shares", the CE PUNA LP
Interests and the PGV Interests may sometimes be referred to herein collectively
as the "Partnership Interests" and CE PUNA I, CE PUNA II, CE PUNA LP and PGV may
sometimes be referred to herein collectively as the "Companies."

         G. CPI desire to sell to Purchaser, and Purchaser desires to purchase
and acquire from CPI, all of the Purchased Shares on the terms and subject to
the conditions hereinafter set forth.

         H. COSI PUNA and PGV desire to terminate the O&M Agreement effective as
of the Closing Date.

                                       1



         I. Seller and Purchaser are entering into this Agreement to evidence
their respective duties, obligations and responsibilities in respect of the
purchase and sale of the Purchased Shares contemplated hereby (the
"Transactions");

         J. The Parties desire that Purchaser's Parent support certain of the
obligations of Purchaser hereunder as set forth herein.

         NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, do hereby agree as follows:

                                   ARTICLE 1

                                   DEFINITIONS

         SECTION 1.1 Certain Defined Terms. The following terms when used in
this Agreement (or in the Schedules and Exhibits to this Agreement) with initial
letters capitalized have the meanings set forth below:

         "338 Allocation Statement" has the meaning set forth in Section 7.5(b).

         "Affiliate" of a specified Person means any other Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with the specified Person. For the purposes of this
definition, "control," when used with respect to any specified Person, means the
possession of the power to direct the management or policies of the specified
Person, directly or indirectly, whether through the ownership of voting
securities, partnership or limited liability company interests, by contract or
otherwise.

         "Agreement" means this Purchase and Sale Agreement, together with the
Schedules and Exhibits hereto.

         "Applicable Laws" means all statutes, rules, regulations, ordinances,
orders and codes of Governmental Authorities which apply to Seller, Purchaser,
the Companies, the Plant, this Agreement, or the Transactions, as applicable.

         "Balance Sheet" has the meaning set forth in Section 5.17.

         "Business" means the business and operations of PGV.

         "Business Day" means a day other than Saturday, Sunday or a day on
which banks are authorized to be closed for business in the City of New York,
New York.

                                       2




         "Cause" means (a) subject Transferred Employee's conviction of (i) a
felony, (ii) a crime against the Transferred Employee's employer, (iii) a crime
involving substance abuse, fraud or moral turpitude, or (iv) a crime which would
materially compromise the reputation of the Transferred Employee's employer, (b)
misconduct on the part of a Transferred Employee that adversely reflects upon
the business, affairs or reputation of his or her employer or upon the
Transferred Employee's ability to perform his or her duties for such employer,
including sexual harassment or public disparagement of such employer or its
Affiliates, (c) the Transferred Employee's failure to pass any narcotics test,
violation of the terms of any agreement entered into with his or her employer or
material violation of other reasonable work rules of the Transferred Employee's
employer, or (d) the failure or refusal by the Transferred Employee to perform
the duties and responsibilities of his or her position with the Transferred
Employee's employer in any material respect, provided that such Transferred
Employee is given 14 days in which to attempt to correct such failure.

         "CE PUNA I" has the meaning set forth in the Recitals to this
Agreement.

         "CE PUNA I Shares" has the meaning set forth in the Recitals to this
Agreement.

         "CE PUNA II" has the meaning set forth in the Recitals to this
Agreement.

         "CE PUNA II Shares" has the meaning set forth in the Recitals to this
Agreement.

         "CE PUNA LP" has the meaning set forth in the Recitals to this
Agreement.

         "CE PUNA LP Interests" has the meaning set forth in the Recitals to
this Agreement.

         "Closing" has the meaning set forth in Section 3.1.

         "Closing Date" has the meaning set forth in Section 3.1.

         "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and the rules and regulations promulgated thereunder.

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

         "Companies" has the meaning set forth in the Recitals to this
Agreement.

         "Company Guarantees" means any and all obligations relating to the
contracts, agreements, guarantees, letters of credit, bonds and other credit
assurances of a comparable nature of Seller or any of its Affiliates (other than
the Companies) for the benefit of any counterparties of the Companies and listed
or described in Schedule 1.1A.

         "Company Insurance Policies" means all insurance policies carried by or
for the benefit of the Companies or COSI PUNA with respect to the ownership,
operation or maintenance of the Plant as set forth on Schedule 1.1B.

                                       3



         "Condemned Portion" has the meaning set forth in Section 7.6(b).

         "Confidentiality Agreement" means that certain confidentiality
agreement, dated as of December 10, 2003 entered into between Purchaser (or an
Affiliate of Purchaser) and CPI in connection with the Transactions.

         "COSI PUNA" has the meaning set forth in the introductory paragraph to
this Agreement.

         "CPI" has the meaning set forth in the introductory paragraph of this
Agreement.

         "Credit Agreement" means that certain Amended and Restated Credit
Agreement Term Loan Facility by and among Puna Geothermal Venture, Credit Suisse
First Boston New York Branch, and the Lenders that are signatories thereto,
dated as of December 2, 1996 and as amended by that certain First Amendment,
dated April 24, 1997, that certain Second Amendment, dated as of August 21,
2002, and that certain Third Amendment, dated as of December 10, 2003.

         "CSFB Swap Agreement" means that certain ISDA Master Agreement, dated
as of December 23, 1996 by and between Credit Suisse, New York Branch and PGV.

         "Damaged Portion" has the meaning set forth in Section 7.6(c).

         "Debt Payoff Amount" means the outstanding principal and accrued
interest as of the Closing Date under the Credit Agreement.

         "Debt Service Reserve Guaranty" means that certain Constellation Debt
Service Reserve Guaranty, dated as of December 2, 1996, made by Constellation
Investments, Inc. in favor of Credit Suisse, New York Branch, for the benefit of
the Lenders (as defined in the Credit Agreement).

         "Dollars" or "$" means dollars in lawful currency of the United States.

         "Dresdner Swap Agreement" means that certain ISDA Master Agreement,
dated as of December 23, 1996 by and between Dresdner Bank, AG and PGV.

         "Due Diligence Materials" means (a) the due diligence materials
distributed or otherwise made available in written or digital form by or on
behalf of Seller to Purchaser including, without limitation, the materials made
available on the IntraLinks web site established on behalf of Seller and that
certain Preliminary Report, dated April 16, 2004, prepared by Title Guaranty of
Hawaii, Inc., (b) all written answers to questions provided by or on behalf of
Seller to Purchaser, and (c) the documents and materials made available to
Purchaser during any on-site due diligence visit of the Plant.

                                       4



         "Effective Date" has the meaning set forth in the introductory
paragraph of this Agreement.

         "Employee Benefit Plans" means any retirement, pension, profit sharing,
deferred compensation, stock bonus, 401(k), savings, bonus, incentive,
cafeteria, medical, dental, vision, hospitalization, life insurance, accidental
death and dismemberment, medical expense reimbursement, dependent care
assistance, tuition reimbursement, disability, sick pay, holiday, vacation,
severance, change of control, stock purchase, stock option, restricted stock,
phantom stock, stock appreciation rights, fringe benefit or other employee
benefit plan, fund, policy, program, contract, arrangement or payroll practice
of any kind (including any "employee benefit plan," as defined in Section 3(3)
of ERISA) or any employment, consulting or personal services contract, whether
written or oral, qualified or nonqualified, funded or unfunded, or domestic or
foreign, (a) sponsored, maintained or contributed to by any of COSI PUNA, the
Companies or an ERISA Affiliate or to which any of COSI PUNA, the Companies or
an ERISA Affiliate is a party, (b) covering or benefiting any current or former
officer, employee, agent, director or independent contractor of any of COSI
PUNA, the Companies or an ERISA Affiliate (or any dependent or beneficiary of
any such individual), or (c) with respect to which any of COSI PUNA, the
Companies or an ERISA Affiliate has (or could have) any obligation or liability.

         "Encumbrances" means any and all mortgages, pledges, claims, liens,
security interests, options, warrants, purchase rights, conditional and
installment sales agreements, easements, equities, charges, activity and use
restrictions and limitations, covenants, encroachments, exceptions,
rights-of-way, deed restrictions, defects or imperfections of title,
encumbrances and charges of any kind, and any restrictions on rights to receive
income or voting rights.

         "Environmental Laws" means all federal, state, and local civil and
criminal laws, regulations, rules, ordinances, codes, decrees, judgments,
directives, or judicial or administrative orders or common law relating to
pollution or protection of the environment, plants, animals, natural resources
or human health and safety, as the same may be amended or adopted, including,
without limitation, laws relating to Releases or threatened Releases of
Hazardous Materials (including, without limitation, Releases to ambient air,
surface water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
Release, transport, disposal or handling of Hazardous Materials, including, but
not limited to: the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. (section)9601 et seq.; the Resource Conservation and
Recovery Act, 42 U.S.C. (section)6901 et seq.; the Federal Water Pollution
Control Act, 33 U.S.C. (section)1251 et seq.; the Clean Air Act, 42 U.S.C.
(section)7401 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
(section)1471 et seq.; the Toxic Substances Control Act, 15 U.S.C.
(sections)2601 through 2629; the Oil Pollution Act, 33 U.S.C. (section)2701 et
seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
(section)11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. (section)300f
through 300j; the Occupational Safety and Health Act, 29 U.S.C. (section) 651 et
seq.; the

                                       5




Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. (section)1201 et
seq.; and similar laws of the State of Hawaii or of any other Governmental
Authority having jurisdiction over the site at which the Plant is located or
otherwise applicable to the Plant or its owner or operator.

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

         "ERISA Affiliate" means any person or entity that, together with any of
the Companies or COSI PUNA, is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code.

         "Estimated Adjustment Statement" has the meaning set forth in Section
3.4(a).

         "Excluded Assets" has the meaning provided in Section 7.12.

         "Excluded Liabilities" has the meaning set forth in Section 7.13.

         "Existing Contracts" means the contracts, agreements, arrangements and
leases of any nature, other than the Permits, to which PGV is a party or by or
to which it, the Plant or any of PGV's other assets is or are bound, affected or
subject.

         "Final Adjustment Statement" has the meaning set forth in Section
3.5(a).

         "GAAP" means United States generally accepted accounting principles as
in effect from time to time.

         "Governmental Authority" means: (a) any federal, state, local, foreign
or other government; (b) any governmental, regulatory or administrative agency,
commission, body or other authority exercising or entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory, custodial,
or authority or power with respect to Taxes; and (c) any court or governmental
tribunal; provided, however, that it does not include Purchaser, Seller, any
Affiliate thereof, or any of their respective successors in interest or any
owner or operator of the Plant (if otherwise a Governmental Authority).

         "Hazardous Substances" means any chemical, material or substance in any
form, whether solid, liquid, gaseous, semisolid, or any combination thereof,
whether waste material, raw material, chemical, finished product, byproduct, or
any other material or article, that is listed or regulated under applicable
Environmental Laws as a "hazardous" or "toxic" substance or waste, or as a
"contaminant," or is otherwise listed or regulated under applicable
Environmental Laws because it poses a hazard to human health or the environment,
including without limitation, petroleum products, asbestos, urea formaldehyde
foam insulation, and lead-containing paints or coatings.

                                       6



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

         "Income Tax" means any Tax imposed by any Governmental Authority (a)
based upon, measured by or calculated with respect to gross or net income,
profits or receipts (including capital gains Taxes and minimum Taxes), or (b)
based upon, measured by or calculated with respect to multiple bases (including
corporate franchise Taxes) if one or more of such bases is described in clause
(a), in each case together with any interest, penalties or additions
attributable to such Tax. The general excise tax set forth in Hawaii Revised
Statutes Section 237-13 is not an "Income Tax" under this Agreement.

         "Indemnifiable Claim" has the meaning set forth in Section 9.7.

         "Indemnitee" has the meaning set forth in Section 9.4.

         "Indemnitor" has the meaning set forth in Section 9.4.

         "Independent Accounting Firm" means such nationally recognized,
independent accounting firm as is mutually appointed by Seller and Purchaser for
purposes of this Agreement.

         "Initial Purchase Price" has the meaning set forth in Section 3.2.

         "Intercompany Arrangements" means, collectively, any contract or
arrangement in respect of any intercompany transaction between any of the
Companies, on the one hand, and Seller or any of its Affiliates (other than the
Companies) on the other hand, whether or not such transaction relates to any
contribution to capital, loan, the provision of goods or services, tax sharing
arrangements, payment arrangements, intercompany advances, charges or balances
or the like, and including without limitation, the contracts and arrangements
set forth in Schedule 1.1C.

         "Inventory" means any and all spare parts, inventory and supplies used
in connection with the ownership, operation and maintenance of the Plant.

         "IRS" means the Internal Revenue Service.

         "Knowledge" or similar terms used in this Agreement with respect to a
Party means: (a) in the case of Seller, the extent of the actual and current
knowledge of the individuals listed in Schedule 1.1D (or their respective
successors) as of the Effective Date (or, with respect to the officer's
certificate delivered pursuant to Section 10.6, the date of delivery of the
certificate); and (b) in the case of Purchaser, the extent of the actual and
current knowledge as of the Effective Date (or, with respect to the officer's
certificate delivered pursuant to Section 11.6, the date of delivery of the
certificate) of any officer or employee of each of Purchaser or any Affiliate of
Purchaser who has actually participated in the negotiation or review of this
Agreement or due diligence with respect to the Transactions on Purchaser's
behalf.

                                       7



         "Loan Documents" means, collectively, the Credit Agreement and all
documents related and incidental thereto, including, but not limited to, the
CSFB Swap Agreement, Dresdner Swap Agreement, Pledge Agreement, Debt Service
Reserve Guaranty and the agreements and instruments identified in Item 1 of
Schedule 5.9.

         "Losses" has the meaning set forth in Section 9.2(a).

         "Material Adverse Effect" means (a) any event, circumstance or
condition materially impairing a Party's authority, right, or ability to (i)
consummate the Transactions or (ii) transfer the Purchased Shares or the
Partnership Interests, or (b) any change in, or effect on, the Plant that is
materially adverse to the finances, operations or physical condition of the
Plant, taken as a whole, but excluding:

                  (1) any change or effect generally affecting the State of
Hawaii, the Big Island of Hawaii, or the international, national, or local
electric generating, transmission or distribution industry as a whole;

                  (2) any change or effect resulting from changes in the State
of Hawaii, the Big Island of Hawaii, or the international, national, or local
wholesale or retail markets for electric power;

                  (3) any change in or effect on the State of Hawaii, the Big
Island of Hawaii, or the North American, national, or local transmission system;

                  (4) any change or changes cured (including by the payment of
money) before the earlier of the Closing and the termination of the Agreement
pursuant to Section 12.1;

                  (5) any order or act of any Governmental Authority applicable
to providers of generation, transmission or distribution of electricity
generally that imposes restrictions, regulations or other requirements thereon,
except to the extent specifically relating to PGV, the Plant or the
Transactions;

                  (6) any change or effect resulting from one or more changes in
the rules established by any independent system operator or regional
transmission organization with jurisdiction over PGV or the Plant;

                  (7) the financial or other condition of the purchaser under
the Power Purchase Agreement or its Affiliates;

                  (8) any change or effect resulting from changes in the
national or international securities markets; or

                  (9) any change or effect resulting from or associated with
acts of war, national disaster, acts of God, or terrorism that does not directly
affect the Plant.

                                       8



         Any determination as to whether any condition or other matter has a
Material Adverse Effect shall be made only after taking into account proceeds
received under all effective insurance coverages and effective third party
indemnifications with respect to such condition or matter.

         "Notice of Claim" has the meaning set forth in Section 9.4.

         "O&M Agreement" means that certain Operation and Maintenance Agreement
between PGV and COSI PUNA, dated as of December 2, 1996.

         "ordinary course of business" means, with respect to PGV, the operation
of the Plant in the ordinary course consistent with past custom and practice.

         "Partnership Interests" has the meaning set forth in the Recitals to
this Agreement.

         "Party" has the meaning set forth in the introductory paragraph of this
Agreement.

         "Permits" has the meaning provided in Section 5.7.

         "Permitted Encumbrances" means:

                  (a) liens for Property Taxes and other governmental charges
and assessments which are not yet due and payable, or Taxes the validity of
which are being contested in good faith by appropriate proceedings as listed on
Schedule 5.15 and for which adequate provision is made on the Balance Sheet;

                  (b) all exceptions, restrictions, easements, charges,
rights-of-way and monetary and non-monetary encumbrances which are set forth in
any Permit;

                  (c) mechanics', carriers', workers', repairers' and other
similar liens and the rights of customers, suppliers and subcontractors arising
or incurred in the ordinary course of business for amounts that are not yet due
and payable or that are contested in good faith by appropriate proceedings as
listed on Schedule 5.8;

                  (d) purchase money security interests in respect of personal
property arising or incurred in the ordinary course of business;

                  (e) zoning, entitlement, conservation restriction and other
land use and environmental regulations of any Governmental Authority;

                  (f) Encumbrances of record (other than Encumbrances securing
indebtedness of Seller for money borrowed which are not covered by any other
clause of this definition);

                                       9



                  (g) restrictions and regulations imposed by any Governmental
Authority or any local, state, regional, national or international reliability
council, or any independent system operator or regional transmission
organization with jurisdiction over either PGV or the Plant;

                  (h) Encumbrances with respect to the assets of Plant created
by or resulting from the acts or omissions of Purchaser;

                  (i) claims, equities and other Encumbrances arising under the
Existing Contracts, or which will be and are discharged or released either prior
to, or simultaneously with, the Closing;

                  (j) any restrictions contained in or imposed by Seller's and
Purchaser's Required Regulatory Approvals and Seller's and Purchaser's Required
Consents; and

                  (k) such other Encumbrances or imperfections in or failures of
title that would not, individually or in the aggregate, have a Material Adverse
Effect.

         "Person" means an individual, partnership, joint venture, corporation,
limited liability company, trust, association or unincorporated organization,
any Governmental Authority, or any other entity.

         "PGV" has the meaning set forth in the Recitals to this Agreement.

         "PGV Interests" has the meaning set forth in the Recitals to this
Agreement.

         "Plant" means, to the extent of PGV's ownership interests therein, the
geothermal electricity generation facilities located on the Big Island of Hawaii
and all related personal and real property interests therein.

         "Pledge Agreement" means that certain Stock Pledge Agreement (CEI)
dated as of December 21, 1990, by CPI to Credit Suisse, New York Branch, as
amended by that certain Confirmation and Amendment of Pledge Agreement - CPI, by
CPI to Credit Suisse, New York Branch, dated as of December 2, 1996.

         "Power Purchase Agreement" means that certain Power Purchase Contract
for Unscheduled Energy Made Available From a Qualifying Facility, dated as of
March 24, 1986, by and between PGV and Hawaii Electric Light Company, Inc., as
amended on July 28, 1989, October 19, 1993, March 7, 1995, and February 12,
1996.

         "Price Allocation" has the meaning set forth in Section 7.5(b).

         "Property Taxes" means real, personal and intangible property Taxes.

         "Purchase Price" has the meaning set forth in Section 3.3.

                                       10



         "Purchased Shares" has the meaning set forth in the Recitals to this
Agreement.

         "Purchaser" has the meaning set forth in the introductory paragraph of
this Agreement.

         "Purchaser Claims" has the meaning set forth in Section 9.2(a).

         "Purchaser Indemnified Parties" has the meaning set forth in Section
9.2(a).

         "Purchaser's Parent" has the meaning set forth in the introductory
paragraph of this Agreement.

         "Purchaser's Required Consents" means the consent of any Person
specified in Schedule 1.1E, other than a Governmental Authority, necessary for
Purchaser's consummation of the Transactions.

         "Purchaser's Required Regulatory Approvals" means approval of the
purchase and sale contemplated hereby by any Governmental Authority specified in
Schedule 1.1F.

         "Recognized Environmental Condition" means the presence or Release, or
threatened Release, to the environment, at the Plant, of Hazardous Substances,
including any migration of Hazardous Substances through air, soil or groundwater
at, to or from the Plant regardless of when such presence or Release occurred or
is discovered.

         "Records" has the meaning set forth in Section 7.10(a).

         "Release" means any release, spill, leak, discharge, abandonment,
disposal, pumping, pouring, emitting, emptying, injecting, leaching, dumping,
depositing, dispersing, allowing to escape or migrate into or through the
environment (including ambient air, surface water, ground water, land surface
and subsurface strata or within any building, structure, facility or fixture) of
any Hazardous Substance, including the abandonment or discarding of Hazardous
Substances in barrels, drums, or other containers.

         "Remediation" means any action of any kind to address a Recognized
Environmental Condition or Release or threatened Release or the presence of
Hazardous Substances on or in the air, soil, surface water or groundwater,
including the following: (a) monitoring, investigation, cleanup, containment,
remediation, removal, mitigation, response or restoration work; (b) obtaining
any permits, consents, approvals or authorizations of any Governmental Authority
necessary to conduct any such work; (c) preparing and implementing any plans or
studies for such work; (d) obtaining a written notice from a Governmental
Authority with jurisdiction under applicable Environmental Laws that no material
additional work is required by such Governmental Authority; (e) any response to,
or preparation for, any inquiry, order, hearing or other proceeding by or

                                       11



before any Governmental Authority with respect to any such Recognized
Environmental Condition, Release or threatened Release or presence of Hazardous
Substances; and (f) any other activities reasonably determined by Seller or PGV
to be necessary or appropriate or required under Environmental Laws to address a
Recognized Environmental Condition, the presence of or Release of Hazardous
Substances in the air, soil, surface water or groundwater at the Plant or any
other off-site location.

         "Replacement Benefit Plans" has the meaning set forth in Section
7.14(d).

         "Replacement Welfare Plans" has the meaning set forth in Section
7.14(c).

         "Section 338(h)(10) Election" has the meaning set forth in Section
7.5(b).

         "Securities Act" has the meaning set forth in Section 6.10.

         "Seller" has the meaning set forth in the introductory paragraph of
this Agreement.

         "Seller's Claims" has the meaning set forth in Section 9.3(a).

         "Seller's Indemnified Parties" has the meaning set forth in Section
9.3(a).

         "Seller's Marks" means the name "Constellation," "Constellation
Energy", "COSI" and all derivatives thereof and corresponding logos, excluding
the name "Puna Geothermal Venture".

         "Seller's Required Consents" means (a) the consent of any Person
specified in Schedule 1.1G other than a Governmental Authority necessary for
Seller's consummation of the Transactions, and (b) the consent of any Person
required by any of the Existing Contracts or the Permits for Seller's
consummation of the Transactions.

         "Seller's Required Regulatory Approvals" means approval of the purchase
and sale contemplated hereby by any Governmental Authority specified in Schedule
1.1H.

         "Tax" or "Taxes" means (i) all taxes, charges, fees, levies, penalties
or other assessments imposed by any federal, state or local or foreign taxing
authority, including but not limited to, income, excise, real or personal
property, sales, transfer, franchise, payroll, withholding, social security,
receipts, license, stamp, occupation, employment or other taxes, and any
payments to any state, local or foreign taxing authorities in lieu of any such
taxes, charges, fees, levies or assessments, (ii) any interest, penalty or
addition attributable thereto, whether disputed or not, and (iii) any item for
which liability arises as a transferee or successor-in-interest, operation of
law or Treasury regulation Section 1.1502-6(a) (or any predecessor or successor
thereof or similar provision of law).

         "Tax Proceeding" has the meaning set forth in Section 7.5(d).

                                       12




         "Tax Return" means any return, report, information return, declaration,
claim for refund, or other document, together with all amendments and
supplements thereto, required to be filed with any Governmental Authority
responsible for the administration of Applicable Laws governing Taxes.

         "Termination Date" has the meaning set forth in Section 12.1(b).

         "Third Party Claim" means a claim by a Person that is not included
among the Seller's Indemnified Parties or the Purchaser Indemnified Parties,
including any claim for the costs of conducting Remediation, or seeking an order
or demanding that a Person undertake Remediation.

         "Transactions" has the meaning set forth in the Recitals to this
Agreement.

         "Transfer Tax" means any sales Tax, transfer Tax, conveyance fee,
recording fee, use Tax, stamp Tax, stock transfer Tax or other similar Tax,
including any related penalties, interest and additions thereto, but excluding
for all purposes Income Taxes.

         "Transferred Employees" has the meaning set forth in Section 7.14(a).

          "Transition Period" means the period commencing with the execution of
this Agreement by both Parties and ending upon Closing (or earlier termination
of this Agreement).

         "Transition Representative" has the meaning set forth in Section 8.2.

         "Unaudited Financial Statements" has the meaning set forth in Section
5.17.

         SECTION 1.2 Certain Interpretive Matters. In this Agreement, unless the
context otherwise requires:

                  (a) the singular number includes the plural number and vice
versa;

                  (b) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity;

                  (c) reference to any agreement (including this Agreement),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof;

                  (d) reference to any Article, Section, Schedule or Exhibit
means such Article, Section, Schedule or Exhibit of or to this Agreement, and
references in any

                                       13



Article, Section, Schedule, Exhibit or definition to any clause means such
clause of such Article, Section, Schedule, Exhibit or definition;

                  (e) any accounting term used and not otherwise defined in this
Agreement has the meaning assigned to such term in accordance with GAAP;

                  (f) "hereunder," "hereof," "hereto" and words of similar
import are references to this Agreement as a whole and not to any particular
Section or other provision hereof or thereof;

                  (g) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding or
succeeding such term;

                  (h) relative to the determination of any period of time,
"from" means "from and including," "to" means "to but excluding" and "through"
means "through and including;"

                  (i) reference to any law (including statutes and ordinances)
means such law as amended, modified codified or reenacted, in whole or in part,
and in effect from time to time, including rules and regulations promulgated
thereunder; and

                  (j) any agreement, instrument, insurance policy, statute,
regulation, rule or order defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument,
insurance policy, statute, regulation, rule or order as from time to time
amended, modified, or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes, regulations,
rules or orders) by succession of comparable successor statutes, regulations,
rules or orders and references to all attachments thereto and instruments
incorporated therein.

                                   ARTICLE 2

                                PURCHASE AND SALE

         SECTION 2.1 Purchase and Sale. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, at the Closing,
Seller shall sell and transfer to Purchaser, and Purchaser shall purchase and
accept from Seller, all of the Purchased Shares; and (b) COSI PUNA and PGV shall
terminate the O&M Agreement.

                                       14



                                   ARTICLE 3

                             CLOSING; PURCHASE PRICE

         SECTION 3.1 Closing. Subject to the terms and conditions hereof,
proceedings for the consummation of the Transactions (the "Closing") will take
place at the offices of Constellation Energy Group, Inc., 750 East Pratt Street,
Baltimore, Maryland, at 10:00 a.m. local time, on a mutually acceptable date
within ten (10) Business Days following the date on which the conditions set
forth in ARTICLE 10 and ARTICLE 11, other than those conditions that by their
nature are to be satisfied at the Closing (and for purposes of setting the
Closing Date, the matters contemplated by Section 11.9 shall be assumed to have
been satisfied), have been either satisfied or waived by the Party for whose
benefit such conditions exist, or at such other time and place as the Parties
may mutually agree, and in no event later than the Termination Date. The date on
which such proceedings actually occur is referred to herein as the "Closing
Date." At the Closing, and subject to the terms and conditions hereof, the
following will occur:

                  (a) Deliveries by Seller. At Closing, Seller shall execute and
deliver, or cause to be executed and delivered, to Purchaser the following:

                       (i) an instrument of assignment from CPI which is in a
form sufficient to evidence and effect the valid transfer of full title to the
Purchased Shares free and clear of all Encumbrances and all of the original
issued and outstanding Purchased Shares stock certificates;

                       (ii) the minute books, company records and files of the
Companies and the records of COSI PUNA related to the Transferred Employees (as
permitted by Applicable Laws) and those related to the operation and maintenance
of the Plant; provided, however, that Seller shall not be required to deliver
any of the foregoing to Purchaser to the extent that the same would (A) violate
any court or administrative order, (B) disclose information about the activities
of Seller, COSI PUNA or any of their Affiliates (other than the Companies) that
is unrelated to the Companies, the Business or the Plant, or (C) disclose
proprietary models of Seller or any of its Affiliates pertaining to energy
project evaluation, energy or natural gas price curves or projections, or other
economic predictive models;

                       (iii) those documents required to be delivered to
Purchaser by Seller pursuant to ARTICLE 10;

                       (iv) evidence of termination of the O&M Agreement. the
Credit Documents and the Intercompany Arrangements, reasonably satisfactory to
Purchaser;

                       (v) a listing as of the Closing Date of (A) the amounts
accrued, (B) the amounts actually paid, and (C) any remaining amounts
anticipated to be incurred

                                       15



but not yet accrued or paid, by any of the Companies in connection with the
repairs contemplated by Item 1 of Schedule 5.19; and

                       (vi) any other documents or instruments as may be
reasonably necessary to effect the Transactions to the extent reasonably
requested by Purchaser of Seller.

                  (b) Deliveries by Purchaser. At Closing, Purchaser shall
deliver, or cause to be delivered, to Seller the following:

                       (i) the Initial Purchase Price, subject to the provisions
of Section 3.3, if any, by wire transfer of immediately available funds to an
account or accounts designated by Seller in writing prior to the Closing Date.

                       (ii) those documents required to be delivered to Seller
by Purchaser pursuant to ARTICLE 11; and

                       (iii) any other documents or instruments as may be
reasonably necessary to effect the Transactions to the extent requested by
Seller of Purchaser a reasonable period of time prior to the Closing Date.

         SECTION 3.2 Initial Purchase Price. The initial purchase price for the
Purchased Shares shall be Seventy One Million Dollars ($71,000,000) (the
"Initial Purchase Price").

         SECTION 3.3 Adjustment to Initial Purchase Price. The Initial Purchase
Price shall be subject to such adjustments as are specified in Section 3.4,
Section 3.5, Section 7.5, Section 7.6 and ARTICLE 9, if any (the Initial
Purchase Price as so adjusted is herein referred to as the "Purchase Price").

         SECTION 3.4 Estimated Adjustment Statement.

                   (a) By or before 10:00 a.m. on the third Business Day prior
to the scheduled Closing Date, Seller shall prepare and deliver to Purchaser a
statement (the "Estimated Adjustment Statement") that sets forth as of the close
of business on the Closing Date the net working capital of the Companies as of
the Closing Date as calculated as set forth on Schedule 3.4; provided, however
the following shall be excluded from such calculation: (i) any and all
liabilities under the Loan Documents; and (ii) any amounts related to Inventory;
and (iii) the Intercompany Arrangements. In connection with the foregoing
calculation, Seller shall also determine any and all costs, expenses or other
liabilities paid by any of the Companies prior to the Closing Date and any of
the foregoing accrued by any of the Companies prior to the Closing Date related
to the repairs contemplated by Item 1 of Schedule 5.19 prior to the Closing Date
and all such accrued unpaid amounts shall be included in the calculation of net
working capital as provided above. Insurance proceeds to be paid under the
Company Insurance Policies with regard to such repair shall be allocated among
Seller and Purchaser as provided in

                                       16




Section 7.7. In the event the Closing is not scheduled to occur on the last day
of a given month, then the items that are included in the Estimated Adjustment
Statement shall be prorated to the extent applicable as of the Closing Date by
multiplying the amount of each such item representing the full calendar month by
a fraction, the numerator of which is the Closing Date and the denominator of
which is the number of days there are in the month in which the Closing occurs.
The Estimated Adjustment Statement will be prepared in conformity with GAAP,
applied on a basis consistent with the financial statements made available to
Purchaser under Section 5.17, using the example and format set forth in Schedule
3.4.

                   (b) In the event the result of the Estimated Adjustment
Statement is a negative number, then the Initial Purchase Price will be reduced
by an amount equal to absolute value of such number and if the result is a
positive number, then the Initial Purchase Price will be increased by an amount
equal to such number.

         SECTION 3.5 Final Adjustment Statement.

                   (a) Within forty-five (45) days following the Closing Date,
Purchaser shall prepare and deliver to Seller a final statement (the "Final
Adjustment Statement") that sets forth the same information as included in the
Estimated Adjustment Statement provided pursuant to Section 3.4(a) above,
adjusted to take into account the final figures as of 12:01 a.m. on the Closing
Date determined in accordance with the standard set forth in Section 3.4. Seller
shall provide to Purchaser copies of all invoices or other billing information
actually received or sent by Seller during this forty-five (45) day period to
allow Purchaser to prepare the Final Adjustment Statement in accordance with
this Section. The Final Adjustment Statement shall be accompanied by such backup
information and schedules as are reasonably required in order for Seller to
understand and verify the accuracy of the computation of the amount(s) set forth
therein. In the event the Closing does not occur on the last day of a given
month, then the items that are included in the Final Adjustment Statement shall
be prorated to the extent applicable as of the Closing Date by multiplying the
amount of each such item representing the full calendar month by a fraction, the
numerator of which is the Closing Date and the denominator of which is the
number of days there are in the month in which the Closing occurs.

                   (b) The Parties shall attempt to agree upon the Final
Adjustment Statement within thirty (30) days following the delivery thereof to
Seller. If Seller disputes any item set forth on the Final Adjustment Statement,
Seller shall give Purchaser written notice thereof within thirty (30) days
following the delivery to Seller of the Final Adjustment Statement setting forth
in reasonable detail the disputed item or items. If Seller has not delivered
such notice to Purchaser within such thirty (30) day period, the Final
Adjustment Statement shall be deemed to be final and, to the extent the Final
Adjustment Statement reflects an adjustment to the Initial Purchase Price that
is different from the adjustment calculated pursuant to Section 3.4(a), the
Party that benefited from

                                       17



the variance in the adjustment made on the Closing Date shall pay to the other
Party the variance amount within five (5) days following the expiration of such
thirty (30) day period. If Seller has delivered a notice of a dispute to
Purchaser, the undisputed portion of the variance amount, if any, shall be paid
to the Party entitled to receive the same within five (5) Business Days
following the delivery of the notice by Seller to Purchaser, and the Parties
shall jointly engage the Independent Accounting Firm and shall direct the
Independent Accounting Firm to make a final, binding determination of all such
disputes within forty-five (45) days of presentation to the Independent
Accounting Firm by the Parties of the information that each such Party believes
supports its position with respect to each disputed item. Such information shall
be presented by each Party to the Independent Accounting Firm within ten (10)
days following the selection thereof. The Parties will further direct the
Independent Accounting Firm to deliver a written notice to Purchaser and Seller
setting forth its determination with respect to each disputed item. The results
of such determination will be final and binding, and the balance of the variance
amount, if any, resulting from such determination will be paid to the Party
entitled to receive the same within ten (10) days of the Independent Accounting
Firm's notice of its determination. The fees and expenses of the Independent
Accounting Firm shall be borne in equal parts by the Purchaser on the one hand,
and the Seller, on the other, and further agree that in connection with the
engagement of the Independent Accounting Firm, each of the Purchaser and the
Seller will, if requested by the Auditors, execute a reasonable engagement
letter including customary indemnities.

                                   ARTICLE 4

               REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER

         Except as set forth in the Schedules to this Agreement as noted below,
or in the Due Diligence Materials, Seller represents and warrants to Purchaser
as of the Effective Date as follows:

         SECTION 4.1 Organization and Existence.

                  (a) CPI is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Maryland.

                  (b) COSI PUNA is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Maryland.

         SECTION 4.2 Execution, Delivery and Enforceability. Each of Seller and
COSI PUNA has all requisite corporate power and authority to execute and
deliver, and perform their obligations under, this Agreement and to consummate
the Transactions. The execution, delivery and performance by Seller and COSI
PUNA of this Agreement and the consummation of the Transactions have been duly
and validly authorized by all necessary corporate action required on the part of
Seller and COSI PUNA and no other corporate proceedings on the part of Seller or
COSI PUNA are necessary to authorize this Agreement or to consummate the
Transactions. Assuming Purchaser's due authorization,

                                       18




execution and delivery of this Agreement, this Agreement constitutes the valid
and legally binding obligation of Seller and COSI PUNA, enforceable against
Seller and COSI PUNA in accordance with its terms.

         SECTION 4.3 No Violation. Subject to Seller obtaining Seller's Required
Regulatory Approvals and Seller's Required Consents, and except for compliance
with the requirements of the HSR Act, neither the execution or delivery by
Seller or COSI PUNA of this Agreement, nor Seller's or COSI PUNA's compliance
with any provision hereof, nor Seller's or COSI PUNA's consummation of the
Transactions will:

                  (a) violate, or conflict with, or result in a breach of any
provisions of the certificate of incorporation or by-laws of Seller or COSI
PUNA;

                  (b) result in a default (or give rise to any right of
termination, cancellation or acceleration) under, or conflict with any of the
terms, conditions or provisions of, any note, bond, mortgage, indenture,
license, or agreement (including, without limitation, the Existing Contracts) or
other instrument or obligation to which Seller or COSI PUNA is a party or by
which Seller or COSI PUNA may be bound, except for such defaults (or rights of
termination or acceleration) as to which requisite waivers or consents have
been, or prior to the Closing will have been, obtained;

                  (c) violate, contravene or conflict with, or result in a
breach of, any law, rule, regulation, order, writ, injunction, license, permit
or decree, applicable to Seller or COSI PUNA which would, individually or in the
aggregate, have a Material Adverse Effect and will not affect the validity or
enforceability of this Agreement or the validity of the Transactions; or

                  (d) require the consent or approval of, filing with, or notice
to any Person which, if not obtained, would prevent Seller or COSI PUNA from
performing its obligations hereunder.

         SECTION 4.4 Litigation. There is no claim, action, proceeding or,
investigation pending or, to Seller's or COSI PUNA's Knowledge, threatened
against or relating to Seller or COSI PUNA before any court, arbitrator or
Governmental Authority, or any judgment, decree or order of any court,
arbitrator or Governmental Authority, which would, individually or in the
aggregate, reasonably be expected to result, or has resulted, in:

                  (a) the institution of legal proceedings to prohibit or
restrain the performance of this Agreement or the consummation of the
Transactions by Seller or COSI PUNA;

                  (b) a claim against Purchaser or its Affiliates for damages as
a result of Seller or COSI PUNA entering into this Agreement or the consummation
by Seller or COSI PUNA of the Transactions; or

                                       19




                  (c) a material impairment of Seller's or COSI PUNA`s ability
to perform its obligations under this Agreement.

         SECTION 4.5 Brokers. All negotiations relating to this Agreement or the
Transactions for the benefit of Seller, COSI PUNA or the Companies have been
carried on by Seller and COSI PUNA and in such a manner as not to give rise to
any valid claim against Purchaser or Companies (by reason of Seller's, COSI
PUNA's, the Companies' or any of their respective Affiliates' actions) for a
brokerage commission, finder's fee or other like payment to any Person.

         SECTION 4.6 Seller's and COSI PUNA's Qualifications. Neither Seller nor
COSI PUNA has any Knowledge of any reason(s) that the Closing conditions set
forth in Articles 10 and 11 (other than the closing conditions set forth in
Section 10.4 as to Purchaser's Consents and Purchaser's Regulatory Approvals)
cannot be satisfied. To Seller's Knowledge, Seller is qualified to sell the
Purchased Shares and there are no conditions in existence which could reasonably
be expected to delay, impede or condition the receipt by Seller of Seller's
Required Regulatory Approvals or Seller's Required Consents. The provisions of
this Section 4.6 are qualified to the extent that the receipt of any Seller's
Required Regulatory Approval is subject to the discretion of the applicable
Governmental Authority.

         SECTION 4.7 Consents and Approvals. No consent, approval,
authorization, or permit of, or filing with or notification to, any Person is
required for or in connection with the execution and delivery of this Agreement
by Seller or COSI PUNA or for or in connection with the consummation of the
Transactions and performance of the terms and conditions contemplated hereby by
Seller or COSI PUNA, except for: (a) Seller's Required Regulatory Approvals; (b)
Seller's Required Consents; and (c) requirements under the HSR Act.

         SECTION 4.8 Compliance with Laws. Neither Seller nor COSI PUNA is in
violation of any laws, orders, ordinances, rules, regulations or judgments of
any Governmental Authority which could result in a Material Adverse Effect.

                                   ARTICLE 5

             REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES

         Except as set forth in the Schedules to this Agreement as noted below,
or in the Due Diligence Materials, Seller represents and warrants to Purchaser
as of the Effective Date as follows:

         SECTION 5.1 Organization and Existence

                  (a) CE PUNA I is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
all requisite power and

                                       20



authority to own, lease and operate its properties and to carry on its business
as it is now being conducted.

                  (b) CE PUNA II is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted.

                  (c) CE PUNA LP is a limited partnership, duly formed, validly
existing and in good standing under the laws of the State of Maryland and has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted.

                  (d) PGV is a general partnership, duly formed and in good
standing under the laws of the State of Hawaii and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted.

                  (e) Each of the Companies is duly qualified to do business and
is in good standing in each jurisdiction, if any, in which it is required to be
so qualified except in those jurisdictions where the failure to be so duly
qualified would not reasonably be expected to result in a Material Adverse
Effect.

         SECTION 5.2 Ownership.

                  (a) CPI owns beneficially and of record 100% of the CE PUNA I
Shares which constitute all of the issued and outstanding capital stock of, and
the only class of capital stock of, CE PUNA I.

                  (b) CPI owns beneficially and of record 100% of the CE PUNA II
Shares which constitute all of the issued and outstanding capital stock of, and
the only class of capital stock of, CE PUNA II.

                  (c) CE PUNA I and CE PUNA II each own 50% of the CE PUNA LP
Interests which constitute all of the partnership interests of CE PUNA LP.

                  (d) CE PUNA I and CE PUNA LP own all of the PGV Interests
which constitute all of the partnership interests of PGV.

                  (e) All of the Purchased Shares have been duly authorized and
validly issued and are fully paid and nonassessable.

                  (f) At the Closing, (i) Seller will own all of the Purchased
Shares, (ii) CE PUNA I and CE PUNA II will own all of the CE PUNA LP Interests,
and (iii) CE PUNA I and CE PUNA LP will own all of the PGV Interests, free and
clear of any

                                       21



Encumbrances, except purchase rights granted to Purchaser pursuant to the terms
of this Agreement.

         SECTION 5.3 Capitalization. Other than this Agreement and except as set
forth on Schedule 5.3, there are no outstanding options, warrants, purchase
rights, subscription rights, conversion rights or other rights of any kind
(preemptive or otherwise) to acquire any capital stock or partnership interests
in the Companies, or securities convertible into or exchangeable for, or which
otherwise confer on the holder thereof any right to acquire, any capital stock
or partnership interests, nor is any of the Companies committed to issue, sell
or otherwise cause to become outstanding any such option, warrant, right or
security, except obligations to Purchaser under this Agreement and there are no
agreements or understandings concerning the ownership, voting, or disposition of
the Purchased Shares or the Partnership Interests.

         SECTION 5.4 No Violation. Except as set forth on Schedule 5.4 and
subject to Seller obtaining Seller's Required Regulatory Approvals and Seller's
Required Consents, and except for compliance with the requirements of the HSR
Act, neither the execution or delivery by Seller of this Agreement, nor Seller's
compliance with any provision hereof, nor Seller's consummation of the
Transactions will:

                  (a) violate, conflict with, or result in a breach of any
provisions of, as applicable, the certificate of incorporation or by-laws, or
the certificate of partnership or partnership agreement, of the Companies;

                  (b) result in a default (or give rise to any right of
termination, cancellation or acceleration) under, or conflict with any of the
terms, conditions or provisions of, any note, bond, mortgage, indenture,
license, or agreement (including, without limitation, the Existing Contracts) or
other instrument or obligation to which the Companies are a party or by which
the Companies may be bound;

                  (c) violate, contravene or conflict with, or result in a
breach of, any law, rule, regulation, order, writ, injunction, license, permit
or decree, applicable to the Companies which would, individually or in the
aggregate, have a Material Adverse Effect.

         SECTION 5.5 Business.

                  (a) The ownership of CE PUNA LP is the only business conducted
by CE PUNA II, and, except as set forth on Schedule 1.1C, the 50% of the CE PUNA
LP Interests owned by it are the only assets owned by and liability of CE
PUNA II.

                  (b) The ownership of CE PUNA LP and PGV is the only business
conducted by CE PUNA I and, except as set forth on Schedule 1.1C, the 50% of the
CE PUNA LP Interests owned by it and its ownership of its portion of the PGV
Interests are the only assets owned by and liability of CE PUNA I.

                                       22



                  (c) The ownership of PGV is the only business conducted by CE
PUNA LP and, except as set forth on Schedule 1.1C, its ownership of its portion
of the PGV Interests is the only assets owned by and liability of CE PUNA LP.

                  (d) The only business engaged in by COSI PUNA has been the
services carried out pursuant to the O&M Agreement and COSI PUNA owns and holds
all interest of the Operator (as such term is defined in the O&M Agreement)
under the O&M Agreement.

                  (e) The only business engaged in by PGV is the ownership,
operation, and maintenance of the Plant, the generation and sale of electric
energy and capacity from the Plant and any and all other activities related or
incidental to the foregoing. As of the Closing, PGV will own all of the assets,
Inventory, software licenses, properties and rights necessary to own, operate
and maintain the Plant in substantially the same manner as it has been owned,
operated and maintained prior thereto.

         SECTION 5.6 Compliance with Laws. Except as set forth in Schedule 5.6,
there is no uncured violation by any of the Companies of any laws, orders,
ordinances, rules, regulations or judgments of any Governmental Authority, which
would, individually, or in the aggregate, result in a Material Adverse Effect.

         SECTION 5.7 Permits. Except as set forth in Schedule 5.7, PGV holds or
has received all permits, registrations, notifications, franchises, licenses,
certificates, and other authorizations, consents and approvals of all
Governmental Authorities required in order for PGV to own, operate and maintain
the Plant and generate and sell electric energy and capacity as set forth in the
Power Purchase Agreement (collectively, "Permits"), except for such Permits
which if not held would not, individually or in the aggregate, result in a
Material Adverse Effect.

         SECTION 5.8 Litigation. There is no claim, action, proceeding, audit or
investigation pending or, to Seller's Knowledge, threatened against or relating
to PGV or the Plant before any court, arbitrator or Governmental Authority, nor
has any judgment, decree or order of any court, arbitrator or Governmental
Authority been issued to PGV or the Plant.

         SECTION 5.9 Existing Contracts.

                  (a) Except for Existing Contracts (i) listed in Schedule
5.9(a), (ii) which will expire prior to the Closing Date, (iii) which do not
require known or liquidated expenditures or payments by PGV in excess of one
hundred thousand Dollars ($100,000) within a twelve (12) month period (and such
agreements within the scope of this clause (iii) in the aggregate not requiring
known or liquidated expenditures or payments by PGV in excess of two hundred
fifty thousand Dollars ($250,000) within a twelve (12) month period), or (iv)
which, if not performed by PGV, would not result in a

                                       23



Material Adverse Effect, PGV is not a party to, and neither PGV nor the Plant is
bound by, any Existing Contract.

                  (b) Except as set forth in Schedule 5.9(b), there is not under
any of the Existing Contracts listed in Schedule 5.9(a) any default or event
which, with notice or lapse of time or both, would constitute an event of
default by PGV except for such events of default and other events as to which
requisite waivers have been, or prior to Closing will have been, obtained or
which would not, individually or in the aggregate, result in a Material Adverse
Effect.

                  (c) No claim, action, proceeding or investigation is pending
or, to Seller's Knowledge, threatened against PGV challenging the enforceability
of any of the Existing Contracts specified in Schedule 5.9(a), as applicable.

                  (d) Seller has delivered or made available to Purchaser true
and complete copies of all Existing Contracts listed in Schedule 5.9(a)
including all amendments thereto. There are no oral amendments to any of the
Existing Contracts listed in Schedule 5.9(a).

         SECTION 5.10 Personal Property. Except as listed in Schedule 5.10, PGV
has good and valid title to its personal property, including, without
limitation, all improvements and fixtures located at the Plant, free and clear
of all Encumbrances other than Permitted Encumbrances with regard to any
fixtures included in such personal property.

         SECTION 5.11 Real Property. PGV does not own any real property.

         SECTION 5.12 Leases. Schedule 5.12 lists, as of the date of this
Agreement, all leases pertaining to real property under which PGV is a lessee or
lessor and other related agreements and which (a) provide for annual payments of
more than $100,000, or (b) are material to the Business of PGV. Except as set
forth in Schedule 5.12, there is not, under any such leases, any event of
default or event which, with notice or lapse of time or both, would constitute
an event of default by PGV or, to Seller's Knowledge the lessors of such real
property, as applicable, except for such events of default and other events as
to which requisite waivers have been, or prior to Closing will have been,
obtained or which would not, individually or in the aggregate, result in a
Material Adverse Effect. Except as set forth in Schedule 5.12, to Seller's
Knowledge the owners of the real property being leased by PGV have good and
valid title to that real property, free and clear of all Encumbrances other than
Permitted Encumbrances.

         SECTION 5.13 Intellectual Property. PGV owns, is licensed or otherwise
possesses sufficient legally enforceable rights to use, all patents, copyrights,
trademarks, service marks, technology, know-how, computer software programs and
applications, databases and tangible or intangible proprietary information or
materials that are currently used in the operation of the Plant except for such
items for which the failure to

                                       24



possess such rights would not, individually or in the aggregate, result in a
Material Adverse Effect.

         SECTION 5.14 Environmental Compliance. Except as disclosed in Schedule
5.14, or which would not, individually or in the aggregate, have a Material
Adverse Effect:

                  (a) There has not been a Release of Hazardous Substances at or
otherwise affecting the Plant that: (i) constitutes an unremedied violation of
any Environmental Law if the effect of such violation imposes a current
remediation obligation on the part of PGV; (ii) currently imposes any
release-reporting obligations on PGV under any Environmental Law that have not
been or are not being complied with; or (iii) currently imposes any clean-up or
remediation obligations on PGV under any Environmental Law;

                  (b) PGV is currently in compliance with all Environmental Laws
applicable to the Plant;

                  (c) PGV holds and is in compliance with all Permits required
under applicable Environmental Laws, and has not received any written notice
that: (i) any such existing Permit will be revoked; or (ii) any pending
application for any new such Permit or renewal of any such existing Permit will
be denied; and

                  (d) PGV has not received any currently outstanding written
notice of any material proceedings, action, or other claim, liability or
potential liability arising under any Environmental Laws from any Person or
Governmental Authority regarding the Plant.

         SECTION 5.15 Tax Matters. Except as set forth in Schedule 5.15, or as
would not, individually or in the aggregate, have a Material Adverse Effect:

                  (a) for all periods ending prior to or on the Closing Date,
all Tax Returns required to be filed by or with respect to the Companies have
been or will be timely filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns are required to be filed;

                  (b) for all periods ending prior to or on the Closing Date,
such Tax Returns are or will be true and correct in all material respects, and
all Taxes legally due on or prior to the Closing Date have been or will be
timely paid;

                  (c) none of the Companies have extended or waived the
application of any statute of limitations of any jurisdiction regarding the
assessment or collection of any Tax and no power of attorney has been granted by
or with respect to any of the Companies with regard to any matters relating to
Taxes thereof;


                                       25




                  (d) no notice of deficiency or assessment has been received
from or threatened by any taxing authority with respect to liabilities for Taxes
of any of the Companies, which have not been fully paid or finally settled;
provided, however, that any such deficiency shown in Schedule 5.15 is being
contested in good faith through appropriate proceedings;

                  (e) for all periods prior to Closing, the Companies have
withheld and paid over to the appropriate taxing authority all Taxes required to
be withheld and paid over in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party;

                  (f) the Companies do not conduct any business in or derive
income from any state, local or foreign jurisdiction other than those
jurisdictions for which Tax Returns have been duly filed by the Companies;

                  (g) Seller have delivered to Purchaser correct and complete
copies of (i) the general excise/use tax returns for the period beginning
January 1, 1999, (ii) all other Tax Returns for the periods beginning January 1,
1998, and (iii) all examination reports of the Companies and statements of
deficiencies assessed against or agreed to by the Companies within the last 5
years;

                  (h) none of the Companies has made any payment or payments, is
obligated to make any payment or payments or is a party to (or participating
employer in) any agreement or plan that could obligate it or their successors or
Affiliates to make any payment or payments that as a result of the transactions
contemplated by this Agreement would constitute an "excess parachute payment" as
defined in Section 280(G) of the Code (or comparable provisions of state or
local law);

                  (i) the Companies have (i) never been a member of an
affiliated group (within the meaning of Section 1504(a) of the Code) filing a
consolidated federal income Tax Return (other than a group the common parent of
which was either Baltimore Gas and Electric Company (prior to April 30, 1999) or
Constellation Energy Group, Inc. (after May 1, 1999)), and (b) no liability for
Taxes of any Person (other than Baltimore Gas and Electric Company (prior to
April 30, 1999), Constellation Energy Group, Inc. (after May 1, 1999), or any of
their respective subsidiary Affiliates) under Treasury regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise;

                  (j) CE Puna I and CE Puna II are members of an affiliated
group of corporations filing a consolidated federal income tax return with
Constellation Energy Group, Inc. as common parent; and

                  (k) the Partnerships are properly characterized as
"partnerships" within the meaning of Section 7701(a)(2) of the Code and any
comparable provision of state,



                                       26


local or foreign law, and none of the Partnerships has every been a
"corporation" within the meaning of Section 7701(a)(3) of the Code.

         SECTION 5.16 No Subsidiaries. Except as described in Section 5.2, none
of the Companies own or hold, directly or indirectly, nor have any right or
obligation to acquire, any equity or other ownership interest in any
corporations, limited liability companies, partnerships, joint ventures, or
other Person.

         SECTION 5.17 Financial Statements. CPI has made available to Purchaser
the unaudited financial statements of PGV, including a balance sheet as of
December 31, 2003, and an income statement and a statement of cash flows for the
12 months ending December 31, 2003 (collectively, the "Unaudited Financial
Statements"). The foregoing balance sheet is referred to herein as the "Balance
Sheet". The Unaudited Financial Statements were prepared in accordance with GAAP
consistently applied (except that the Unaudited Financial Statements do not
include footnotes required by GAAP) and fairly present, in all material
respects, the financial position and results of operations of PGV as of the date
thereof and for the periods covered thereby. Seller has made available to
Purchaser an unaudited balance sheet and income statement for the combination of
CE PUNA I and CE PUNA II as of December 31, 2003 and such balance sheet and
income statement were prepared in accordance with GAAP (except that such
statements do not include footnotes required by GAAP and such statements do not
reflect income taxes which were reported on the financial statements of Seller)
and fairly present, in all material respects, the financial position and results
of operations of the combination of CE PUNA I and CE PUNA II as of the date
thereof and for the periods covered thereby. From January 1, 2004 to the
Effective Date, none of the Companies have distributed any cash to Seller or any
Affiliate of Seller other than as payment for goods and services rendered in the
ordinary course of business or to satisfy the Intercompany Arrangements as
provided herein. Either (i) the books and records in the possession of the
Companies or Purchaser upon Closing will include the backup accounting and
financial information reasonably necessary for an experienced certified public
accountant to prepare audited financial statements for each of the Companies for
the 2001, 2002 and 2003 calendar years and that portion of the 2004 calendar
year prior to Closing or (ii) the Seller will provide the Purchaser with such
backup accounting and financial information and records reasonably necessary for
an experienced certified public accountant to prepare audited financial
statements for each of the Companies for the 2001, 2002 and 2003 calendar years
and that portion of the 2004 calendar year prior to Closing.

         SECTION 5.18 Undisclosed Liabilities. To Seller's Knowledge and except
as set forth in Schedule 5.18, none of the Companies has any liability or
obligation, secured or unsecured, of a nature required by GAAP to be reflected
on its respective balance sheet or disclosed in the notes thereto, which are not
accrued or reserved against on its respective balance sheet or disclosed in the
notes thereto, except those which either (i) were incurred in the ordinary
course of business after the date of the respective balance sheet in accordance
with Section 7.3, (ii) would not, individually or in the aggregate,



                                       27


have a Material Adverse Effect or (iii) in the case of CE PUNA LP, are disclosed
in the balance sheet for the combination of CE PUNA I and CE PUNA II.

         SECTION 5.19 Absence of Certain Financial Changes or Events. Except as
(a) set forth in Schedule 5.19, and (b) otherwise contemplated by this
Agreement, there has not been : (i) since the date of the Unaudited Financial
Statements any event or occurrence resulting in a Material Adverse Effect; (ii)
since the date of the Unaudited Financial Statements and prior to the Effective
Date any damage, destruction or casualty loss, whether covered by insurance or
not, which had a Material Adverse Effect; (iii) since the date of the Unaudited
Financial Statements any entry into any agreement, commitment or transaction
(including, without limitation, any borrowing, capital expenditure or capital
financing) by any of the Companies which is material to the Business of PGV or
the business of such other Companies, except agreements, commitments or
transactions in the ordinary course of business or as contemplated hereby; or
(iv) since the date of the Unaudited Financial Statements any change by any of
the Companies in accounting methods, principles or practices except as required
or permitted by GAAP.

         SECTION 5.20 Consents and Approvals. No consent, approval,
authorization or permit of, or filing with or notification to, any Person is
required for or in connection with the execution and delivery of this Agreement
by Seller or for or in connection with the consummation of the Transactions and
performance of the terms and conditions contemplated hereby by Seller, except
for: (a) Seller's Required Regulatory Approvals; (b) Seller's Required Consents;
(c) requirements under the HSR Act; and (d) consents, approvals, authorizations,
permits, filings, or notices that, if not obtained or made, would not,
individually or in the aggregate, have a Material Adverse Effect.

         SECTION 5.21 Labor Matters. With respect to the ownership or operation
of the Plant, and except for such matters as will not, individually or in the
aggregate, create a Material Adverse Effect, COSI PUNA and each of the Companies
are in compliance with all Applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours. As of the
date hereof, Seller has no Knowledge of any claim of representation by a third
party, organizing drive by a third party seeking to represent all or any portion
of employees working at the Plant, or representation petition concerning the
workforce at the Plant including, without limitation, the Transferred Employees.

         SECTION 5.22 Insurance. All Company Insurance Policies 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. The Company Insurance Policies cover the
property damage to the Plant described in Schedule 5.19.



                                       28


         SECTION 5.23 Employee Benefit Plans. Schedule 5.23 contains a complete
and accurate list of all Employee Benefit Plans in which a Transferred Employee
is eligible to participate. The Companies do not have any agreement,
arrangement, commitment or obligation to create, enter into or contribute to any
additional Employee Benefit Plan or to modify any existing Employee Benefit Plan
in connection with the Transferred Employees.

                                   ARTICLE 6

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

         Except as set forth in the Schedules to this Agreement, Purchaser
represents and warrants to Seller as of the Effective Date as follows:

         SECTION 6.1 Organization and Existence. Purchaser is a limited
liability company, duly organized, validly existing and in good standing under
the laws of State of Delaware, 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.

         SECTION 6.2 Execution, Delivery and Enforceability. Purchaser has all
requisite limited liability company power and authority to execute and deliver,
and to perform its obligations under, this Agreement and to consummate the
Transactions. The execution, delivery and performance of this Agreement and the
consummation of the Transactions have been duly and validly authorized by all
necessary limited liability company action required on the part of Purchaser,
and no other limited liability company proceedings on the part of Purchaser are
necessary to authorize this Agreement or to consummate the Transactions.
Assuming the due authorization, execution and delivery of this Agreement by
Seller, this Agreement constitutes the valid and legally binding obligations of
Purchaser, enforceable against Purchaser in accordance with its terms.

         SECTION 6.3 No Violation. Subject to Purchaser obtaining the
Purchaser's Required Regulatory Approvals and the Purchaser's Required Consents,
and except for compliance with the requirements of the HSR Act, neither the
execution or delivery by Purchaser of this Agreement, nor Purchaser's compliance
with any provision hereof, nor Purchaser's consummation of the Transactions
will:

                  (a) violate, or conflict with, or result in a breach of any
provisions of the limited liability company organization documents of Purchaser;



                                       29


                  (b) result in a default (or give rise to any right of
termination, cancellation or acceleration) under or conflict with any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
or agreement or other instrument or obligation to which Purchaser is a party or
by which Purchaser may be bound, except for such defaults (or rights of
termination or acceleration) as to which requisite waivers or consents have
been, or prior to the Closing will have been, obtained, or which would not,
individually or in the aggregate, create a Material Adverse Effect;

                  (c) violate any law, rule, regulation, order, writ,
injunction, or decree, applicable to Purchaser or any of its assets, except
where such violations, individually or in the aggregate, would not create a
Material Adverse Effect and will not affect the validity or enforceability of
this Agreement or the validity of the Transactions; or

                  (d) require the consent or approval of, filing with, or notice
to any Person which, if not obtained, would prevent Purchaser from performing
its obligations hereunder.

         SECTION 6.4 Compliance with Laws. Purchaser is not in violation of any
laws, orders, ordinances, rules, regulations or judgments of any Governmental
Authority which could result in a Material Adverse Effect.

         SECTION 6.5 Litigation. There is no claim, action, proceeding or
investigation pending or, to Purchaser's Knowledge, threatened against or
relating to Purchaser or its Affiliates before any court, arbitrator or
Governmental Authority, or any judgment, decree or order of any court,
arbitrator or Governmental Authority, which would, individually or in the
aggregate, reasonably be expected to result, or has resulted, in:

                  (a) the institution of legal proceedings to prohibit or
restrain the performance of this Agreement or the consummation of the
Transactions by Purchaser;

                  (b) a claim against Seller or its Affiliates for damages as a
result of Purchaser entering into this Agreement or the consummation by
Purchaser of the Transactions;

                  (c) a material impairment of Purchaser's ability to perform
its obligations under this Agreement; or

                  (d) a Material Adverse Effect.

         SECTION 6.6 Brokers. All negotiations relating to this Agreement or the
Transactions for the benefit of Purchaser have been carried on by Purchaser in
such a manner as not to give rise to any valid claim against Seller (by reason
of Purchaser's actions) for a brokerage commission, finder's fee or other like
payment to any Person.



                                       30


         SECTION 6.7 Financing. Purchaser has now, and at the Closing Purchaser
will have, liquid capital or committed sources therefor sufficient to permit
Purchaser to perform fully and timely its obligations under this Agreement and
has provided evidence of same to Seller.

         SECTION 6.8 Purchaser Qualifications. Purchaser has no Knowledge of any
reason(s) that the Closing conditions set forth in Articles 10 and 11 cannot be
satisfied. To Purchaser's Knowledge, Purchaser is qualified to obtain and there
are no conditions in existence which could reasonably be expected to delay,
impede or condition the receipt by Purchaser of Purchaser's Required Regulatory
Approvals or Purchaser's Required Consents. The provisions of this Section 6.8
are qualified to the extent that the receipt of any Purchaser's Required
Regulatory Approval is subject to the discretion of the applicable Governmental
Authority.

         SECTION 6.9 "As Is" Sale; Disclaimer of Representations and Warranties;
Further Acknowledgements by Purchaser.

                  (a) "As Is" Sale. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
ANY OTHER PROVISION OF THIS AGREEMENT AND EXCEPT FOR THE REPRESENTATIONS,
WARRANTIES OR COVENANTS SET FORTH IN THIS AGREEMENT, PURCHASER UNDERSTANDS AND
AGREES THAT SELLER IS NOT MAKING ANY REPRESENTATION, WARRANTY OR COVENANT
WHATSOEVER, EXPRESS, IMPLIED, AT COMMON LAW, STATUTORY OR OTHERWISE, AND
PURCHASER FURTHER UNDERSTANDS AND AGREES THAT THE ASSETS OF THE COMPANIES,
INCLUDING THE PLANT AND ALL OF THE PARTNERSHIP INTERESTS, ACQUIRED THEREBY
THROUGH ACQUISITION OF THE PURCHASED SHARES, ARE BEING ACQUIRED "AS IS, WHERE
IS" ON THE CLOSING DATE, AND IN THEIR CONDITION ON THE CLOSING DATE "WITH ALL
FAULTS," AND THAT PURCHASER IS RELYING ON ITS OWN EXAMINATION OF THE COMPANIES
AND SUCH ASSETS IN PURCHASING THE PURCHASED SHARES HEREUNDER.

                  (b) Disclaimer of Representations and Warranties. WITHOUT
LIMITING THE GENERALITY OF SECTION 6.9(a) AND EXCEPT FOR THE REPRESENTATIONS,
WARRANTIES AND COVENANTS EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER
UNDERSTANDS AND AGREES THAT SELLER EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATIONS, WARRANTIES OR COVENANTS, EXPRESS OR IMPLIED, AT COMMON LAW,
STATUTORY, OR OTHERWISE AS TO (i) OPERATION OF THE ASSETS OF THE COMPANIES,
INCLUDING THE PLANT, TITLE, CONDITION, VALUE OR QUALITY OF SUCH ASSETS OR THE
BUSINESS, CONDITION (FINANCIAL OR OTHERWISE), OR PROSPECTS OF THE COMPANIES,
RISKS AND OTHER INCIDENTS OF THE PURCHASED SHARES OR SUCH ASSETS, (ii) ANY
REPRESENTATION OR WARRANTY OF




                                       31


MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH
RESPECT TO SUCH ASSETS OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF OR
THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, (iii) THE PRESENCE
OR ABSENCE OF ANY HAZARDOUS MATERIALS IN, ON, OR DISPOSED OR DISCHARGED FROM,
THE PLANT AND OTHER ASSETS OF THE COMPANIES, OR (iv) ANY INFRINGEMENT BY SELLER,
THE COMPANIES, OR ANY OF THEIR AFFILIATES OF ANY PATENT OR PROPRIETARY RIGHT OF
ANY THIRD PARTY. PURCHASER FURTHER AGREES THAT NO INFORMATION OR MATERIAL
PROVIDED BY OR COMMUNICATION MADE BY SELLER OR ANY REPRESENTATIVE OF SELLER WILL
CONSTITUTE, CREATE OR OTHERWISE CAUSE TO EXIST ANY REPRESENTATION OR WARRANTY
DISCLAIMED BY THE FOREGOING.

         SECTION 6.10 Characteristics of Purchaser; No Distribution. Purchaser
or its Affiliates are experienced and knowledgeable investors in the United
States power generation and development business. Prior to entering into this
Agreement, Purchaser was advised by its counsel, accountants, financial
advisors, and such other Persons it has deemed appropriate concerning this
Agreement and has relied solely on Seller's representations and warranties
expressly contained herein and its independent investigation and evaluation of,
and appraisal and judgment with respect to, PGV, the Business, assets, including
the Plant, liabilities, results of operations, condition (financial or
otherwise), and prospects of PGV, and the revenue, price, and expense
assumptions applicable thereto. Purchaser hereby acknowledges that the Purchased
Shares are not registered under the Securities Act of 1933, as amended from time
to time (the "Securities Act"), or registered or qualified for sale under any
state securities laws and cannot be resold without registration thereunder or
exemption therefrom. Purchaser is an "accredited investor," as such term is
defined in Regulation D of the Securities Act and will acquire the Purchased
Shares for its own account and not with a view to a sale or distribution thereof
in violation of the Securities Act, and the rules and regulations thereunder,
any applicable state "blue sky" laws or any other applicable securities laws.
Purchaser has sufficient knowledge and experience in financial and business
matters to enable it to evaluate the risks of investment in the Purchased Shares
and has the ability to bear the economic risk of this investment for an
indefinite period of time.

         SECTION 6.11 Intentionally Omitted.

         SECTION 6.12 Inspection. Purchaser acknowledges that, prior to its
execution of this Agreement:

                  (a) it has been afforded access to and the opportunity to
inspect each of the Plant, the Existing Contracts, the Permits, and all other
Due Diligence Materials;

                  (b) it has inspected the Plant, and as of the Closing Date, it
will have inspected the Plant and reviewed the Existing Contracts, the Permits,
and all other Due



                                       32


Diligence Materials to the extent it deems necessary or advisable in connection
with its decision to enter into this Agreement, and to consummate the
Transactions;

                  (c) it is relying upon Seller's representations and warranties
expressly set forth in this Agreement and its own inspections and investigation
in order to satisfy itself as to the condition and suitability of the Business,
assets, including the Plant, liabilities, results of operations, condition
(financial or otherwise), and prospects of the Companies. Purchaser has not
relied upon any representation, warranty, statement, advice, Records, Due
Diligence Materials, projections, or other information of any type provided by
Seller, COSI PUNA, any of the Companies, their respective Affiliates, or any of
their respective representatives, except for those expressly set forth in this
Agreement. In deciding to enter into this Agreement, and to consummate the
Transactions, Purchaser has relied solely upon its own knowledge, investigation,
and analysis (and that of its representatives) and not on any disclosure or
representation made by Seller, COSI PUNA, any of the Companies, their respective
Affiliates, or any of their respective representatives, other than the
representations and warranties of Seller expressly set forth herein; and

                  (d) it acknowledges and agrees that, except as provided in
Articles 4 and 5, Seller makes no representation or warranty, express, implied,
at common law, statutory or otherwise, with respect to the accuracy or
completeness of the Records or Due Diligence Materials now, heretofore, or
hereafter made available to Purchaser in connection with this Agreement
(including any description of PGV or the Plant, revenue, price and expense
assumptions, production forecasts, or environmental information, or any other
information furnished to Purchaser by Seller, COSI PUNA, any of the Companies or
any of their respective Affiliates or any director, officer, employee, counsel,
agent, or advisor thereof).

         SECTION 6.13 Consents and Approvals. No consent, approval,
authorization, or permit of, or filing with or notification to, any Person is
required for or in connection with the execution and delivery of this Agreement
by Purchaser or for or in connection with the consummation of the Transactions
and performance of the terms and conditions contemplated hereby by Purchaser,
except for: (a) Purchaser's Required Regulatory Approvals; (b) Purchaser's
Required Consents; and (c) requirements under the HSR Act.

         SECTION 6.14 Bankruptcy. There are no bankruptcy, reorganization, or
arrangement proceedings pending against, being contemplated by, or to the
Knowledge of Purchaser threatened against, Purchaser.

                                       33


                                   ARTICLE 7

                             COVENANTS OF EACH PARTY

         SECTION 7.1 Efforts to Close.

                  (a) Subject to this Section 7.1, each of the Parties agrees to
use its commercially reasonable efforts to consummate and make effective, as
soon as reasonably practicable, and in any event on or prior to the date that is
one hundred (100) days from the Effective Date, the Transactions, including, but
not limited to, the satisfaction of all conditions thereto set forth herein.
Such actions shall include exerting their commercially reasonable efforts to
obtain the consents, authorizations and approvals of all private parties and any
Governmental Authority whose consent is reasonably necessary to effectuate the
Transactions, including, in the case of Seller, Seller's Required Regulatory
Approvals and Seller's Required Consents, and in the case of Purchaser,
Purchaser's Required Regulatory Approvals and Purchaser's Required Consents, and
effecting all other necessary registrations and filings, including filings under
Applicable Laws, including the HSR Act, and all other necessary filings with any
Governmental Authority. In furtherance of this Section 7.1, each Party shall
designate a representative to act as the primary point of contact for all
communications between the Parties between the Effective Date and the Closing
Date with respect to this Agreement and the Transactions.

                  (b) All appearances, presentations, briefs, and proposals made
or submitted by or on behalf of either Party before any Governmental Authority
in connection with the approval of this Agreement or the Transactions shall be
subject to the joint approval or disapproval in advance and the joint control of
the Parties, acting with the advice of their respective counsel, and each Party
will consult and fully cooperate with the other Party, and consider in good
faith the views of the other Party, in connection with any such appearance,
presentation, brief, or proposal; provided, however, that nothing will prevent a
Party from responding to a subpoena or other legal process as required by law or
submitting factual information in response to a request therefor. Each Party
will provide the other with copies of all written communications from
Governmental Authorities relating to the approval or disapproval of this
Agreement or the Transactions.

         SECTION 7.2 Updating. Each Party shall promptly notify the other Party
of any changes or additions to any of the Schedules to this Agreement provided
by such Party, if any, to correct any matter that would constitute a breach of
any representation or warranty of such Party in Articles 4, 5 or 6, as the case
may be, of this Agreement as of a reasonably current date prior to the Closing,
but in any event not later than three (3) Business Days prior thereto. Subject
to Section 13.13, no such updates made pursuant to this Section 7.2 shall be
deemed to cure any inaccuracy of any representation or warranty made in this
Agreement as of the date hereof, unless the Party for whose benefit such
representation or warranty was made specifically agrees thereto in writing, nor
shall any



                                       34


such notification be considered to constitute or give rise to a waiver by the
Party for whose benefit such representation or warranty was made of any
condition set forth in this Agreement; provided, however, that if the Closing
shall occur, then all matters disclosed by either Party pursuant to any such
change or addition at or prior to the Closing shall be deemed to be matters of
which the other Party had Knowledge for purposes of Section 13.13. Each Party
agrees to advise the other Party promptly in writing of any matter or occurrence
of which it has or obtains Knowledge which may constitute a breach by either
Party of any representation, warranty or covenant contained in this Agreement,
or of any reason of which it has or obtains Knowledge why a condition to the
performance of either Party's obligations hereunder may not be satisfied on or
before the Closing Date.

         SECTION 7.3 Conduct Pending Closing.

                  (a) Prior to the consummation of the Transactions or the
termination or expiration of this Agreement pursuant to its terms, unless
Purchaser shall otherwise consent in writing, which consent shall not be
unreasonably withheld, conditioned or delayed, Seller shall cause each of the
Companies, as applicable to, and Seller shall, in the case of subsection (x)
below, and COSI PUNA shall in the case of subsection (i) and (vii) below, do the
following:

                       (i) operate and maintain the Plant in accordance in all
material respects with the ordinary course of business consistent with past
practices;

                       (ii) except as required by their terms and except for the
Loan Documents as provided in Section 7.18, not amend, terminate prior to the
expiration date, renew, or renegotiate in any material respect any Existing
Contract required to be listed in Schedule 5.9 or enter into any new contract or
agreement that would (if it existed on the date hereof) have been required to be
listed in Schedule 5.9, except in the ordinary course of business consistent
with past practices and except for Intercompany Arrangements that will be
terminated and paid in full at or before Closing, or fail to comply in all
material respects with its obligations under any such Existing Contract;

                       (iii) other than pursuant to the requirements of any
Existing Contract, not sell, lease, transfer or dispose of, or make any contract
for the sale, lease, transfer or disposition of, any material assets or
properties of PGV, except sales, leases, transfers or dispositions in the
ordinary course of business and other than terminating the O&M Agreement as
provided herein;

                       (iv) not (A) issue any ownership rights or securities
convertible into ownership rights, or repurchase, redeem, or otherwise acquire
any such ownership rights; (B) merge into or with or consolidate with any other
Person or acquire all or substantially all of the business or assets of any
Person; (C) make any material change in its partnership agreement; (D) purchase
any securities of any Person, except for investments made in the ordinary course
of business consistent with past practices; (E) incur any additional obligations
for borrowed money or guarantee or otherwise become



                                       35


liable for the obligations of, or make any loans or advances to, any Person,
except obligations for loans or advances from Seller or any of its Affiliates;
or (F) authorize, declare, or pay any cash dividend or any other similar
distribution to Seller or any Affiliate of Seller other than as payment for
goods and services rendered in the ordinary course, including, but not limited
to, payments made pursuant to Section 7.19.

                       (v) not take any action or enter into any commitment with
respect to or in contemplation of any liquidation, dissolution,
recapitalization, reorganization, or other winding up of its Business;

                       (vi) not change its accounting policies or practices
(including, without limitation, any change in depreciation or amortization
policies), except as required under GAAP;

                       (vii) not enter into any employment agreement not
terminable at will and will not increase any compensation of the Transferred
Employees other than in the ordinary course of business;

                       (viii) not grant any express Encumbrance on any assets of
PGV, except to the extent (i) required or permitted incident to the operation of
the assets of PGV and the business of PGV in the ordinary course of business of
PGV, or (ii) required or evidenced by any Existing Contract;

                       (ix) maintain in force and effect the Company Insurance
Policies; and

                       (x) not take any action which would cause any of Seller's
representations and warranties set forth in Articles 4 and 5 to be incorrect in
any material respect as of the Closing.

                  (b) Notwithstanding anything to the contrary in Section
7.3(a), Seller shall not be (i) obligated to make or cause PGV to make
expenditures other than in the ordinary course of business consistent with past
practices or to otherwise suffer any economic detriment, or (ii) precluded from,
and PGV shall not be precluded from, instituting, participating in or completing
any program designed to promote compliance or comply with Applicable Laws or
other good business practices with respect to the Plant; provided, however, that
notwithstanding anything to the contrary in Section 7.3(a), Seller may take or
may cause PGV to take (w) actions which are required by Applicable Law, (x)
reasonable actions in connection with any emergency or other force majeure
event, or (y) actions otherwise contemplated by this Agreement or disclosed in
Schedule 7.3(b) or any other Schedule to this Agreement.

                                       36


         SECTION 7.4 Regulatory Approvals.

                  (a) As promptly as practicable but in no event later than the
twentieth (20th) day after the date of the execution and delivery of this
Agreement, Seller and Purchaser shall each file or cause to be filed with the
Federal Trade Commission and the Department of Justice all notifications
required to be filed under the HSR Act and the rules and regulations promulgated
thereunder with respect to the Transactions. The Parties shall consult with each
other as to the appropriate time of filing such notifications and shall agree in
good faith upon the timing of such filings, respond promptly to any requests for
additional information made by either of such agencies, and cause the waiting
periods under the HSR Act to terminate or expire at the earliest possible date
after the date of filing. All filing fees to be paid in connection with such
filing shall be borne by the Purchaser.

                  (b) Subject to Section 7.1, Seller and Purchaser shall
cooperate with each other and (i) promptly prepare and file all necessary
documentation, (ii) effect all necessary applications, notices, petitions and
filings and execute all agreements and documents, and (iii) 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) and (iii), necessary or advisable to consummate the
Transactions. Seller and Purchaser shall use their best efforts to file for all
Seller's Required Regulatory Approvals and Purchaser Required Regulatory
Approvals, respectively, within thirty (30) days after the Effective Date.
Seller shall have the right to review and approve in advance all
characterizations of the information relating to PGV or its assets; and each of
Seller and Purchaser shall have the right to review in advance all
characterizations of the information relating to the Transactions which appear
in any filing made in connection with the Transactions.

                  (c) Without limiting the generality of Purchaser's
undertakings pursuant to Sections 7.4(a) and 7.4(b):

                       (i) Purchaser shall promptly take any or all of the
following actions to the extent necessary to eliminate any concerns on the part
of any Governmental Authority regarding the legality of Purchaser's acquisition
of the Purchased Shares under any Applicable Laws: (A) enter into negotiations;
(B) provide information; (C) make proposals; or (D) enter into and perform
agreements or submit to judicial or administrative orders, whether before or
after the Closing; and

                       (ii) Purchaser and Seller shall use commercially
reasonable efforts (including taking the steps contemplated by Section
7.4(b)(i)) to prevent the entry, in a judicial or administrative proceeding
brought under any Applicable Laws by any Governmental Authority or any other
party, of a permanent or preliminary injunction or other order that would make
consummation of the Transactions unlawful or that would otherwise prevent or
delay such consummation; and

                                       37


                       (iii) Purchaser and Seller shall promptly take, in the
event that such an injunction or order has been issued in such a proceeding, any
and all reasonable steps, including the appeal thereof, the posting of a bond,
or the steps contemplated by Section 7.4(b)(i), necessary to vacate, modify, or
suspend such injunction or order so as to permit such consummation on a schedule
as close as possible to that contemplated by this Agreement.

                  (d) Purchaser shall have the primary responsibility for
securing any required transfer, reissuance or procurement of the Permits
effective as of the Closing Date. Seller shall use commercially reasonable
efforts to cooperate with Purchaser's efforts in this regard and assist in any
transfer or reissuance of Permits.

         SECTION 7.5 Tax Matters.

                  (a) All Transfer Taxes incurred in connection with this
Agreement and the Transactions, whether levied on Purchaser or Seller, shall be
paid by Purchaser when due. Purchaser will file, to the extent required by
Applicable Laws, all necessary Tax Returns and other documentation with respect
to all such Transfer Taxes. To the extent required by Applicable Laws, but
subject to such review and approval, Seller or any of its Affiliates will join
in the execution of any such Tax Returns or other documentation. Seller will be
entitled to review in advance such Tax Returns as it or its Affiliates may be
required to join and execute and such Tax Returns shall be subject to Seller's
approval (which shall not be unreasonably withheld, conditioned or delayed).

                  (b) As soon as practicable after the Closing, Seller and
Purchaser agree to join in making a timely, effective and irrevocable election
under Section 338(h)(10) of the Code and the comparable election under the laws
of the State of Hawaii with respect to CE PUNA I and CE PUNA II (the "Section
338(h)(10) Election"). At least two (2) days prior to the Closing Date, Seller
shall deliver to Purchaser two Internal Revenue Service Forms 8023 with respect
to CE PUNA I and CE PUNA II. At the Closing Seller shall deliver to Purchaser
executed versions of such forms, which Purchaser shall counter-execute and file
with the IRS within two (2) weeks thereafter. Purchaser shall use commercially
reasonable efforts to deliver to CPI within 90 days after the Closing Date, but
in any event Purchaser shall deliver to CPI within 120 days after the Closing
Date, a statement (the "338 Allocation Statement") allocating the ADSP (as such
term is defined in Treasury regulations Section 1.338-4) of the assets of CE
PUNA I and CE PUNA II in accordance with the Treasury regulations promulgated
under Section 338 of the Code. Purchaser shall deliver a revised 338 Allocation
Statement to account for any adjustment to the Purchase Price pursuant to
Article 3 that was not previously taken into account in the preparation of the
338 Allocation Statement within 10 days after the payment of such Purchase Price
adjustment. CPI shall have the right to review the 338 Allocation Statement for
compliance with the Treasury regulations promulgated under Section 338 and
Section 755 of the Code. The parties agree that the ADSP (including any revised
ADSP) will be allocated in accordance with Schedule 7.5(b). If



                                       38


CPI notifies Purchaser in writing within 30 days after receipt of the 338
Allocation Statement or a revised 338 Allocation Statement that the allocation
of one or more items reflected in the 338 Allocation Statement or a revised 338
Allocation Statement does not comply with the Treasury regulations promulgated
under Section 338 and Section 755 of the Code, Purchaser and CPI will negotiate
in good faith to resolve such dispute. Upon resolution of the disputed items,
the allocation reflected on the 338 Allocation Statement (as such may have been
adjusted) shall be the "Price Allocation" and shall be binding on the parties
except as set forth herein. Seller and Purchaser agree to act in accordance with
the Price Allocation in the preparation, filing and audit of any Tax return. No
Party hereto shall file any form or document required to effect a valid and
timely Section 338(h)(10) Election (or similar state or local election),
including Internal Revenue Service Forms 8023 and 8883, any similar form under
any Applicable Laws and any schedules or attachments thereto, unless it shall
have obtained the consent of the other Party hereto, which consent shall not be
unreasonably withheld, conditioned or delayed, or otherwise required pursuant by
a "determination" within the meaning of Section 1313 of the Code. As soon as
practicable after the Closing, Seller will make a timely election under Section
754 of the Code for PGV and CE PUNA LP. Within two (2) weeks of making such
elections, Seller will provide copies of such elections to Purchaser.

                  (c) Any Tax Return to be prepared pursuant to the provisions
of this Section 7.5 shall be prepared in a manner consistent with practices
followed in prior years with respect to similar Tax Returns, except for changes
required by changes in Applicable Laws or fact. Purchaser shall not file an
amended Tax Return for any period ending on or prior to the Closing Date without
the consent of CPI, which consent shall not be unreasonably withheld,
conditioned or delayed. The filing of any Tax Returns, or the payment of any
Taxes, described in this Section 7.5 shall be made on a timely basis in
accordance with Applicable Laws. The following provisions shall govern the
allocation of responsibility as between the Parties for certain Tax matters
following the Closing Date:

                       (i) CPI shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Companies for all periods ending on or
prior to the Closing Date regardless of when such Tax Returns are to be filed.
CPI shall pay, or cause to be paid, the Taxes attributable to the Companies with
respect to such periods (including any Income Taxes resulting from the
338(h)(10) Election), other than Transfer Taxes incurred in connection with this
Agreement and the Transactions, which shall be the responsibility of Purchaser.

                       (ii) Purchaser shall prepare or cause to be prepared and
file or cause to be filed any Tax Returns of the Companies for Tax periods which
begin before or on the Closing Date and end after the Closing Date, excluding
those returns for which a Tax Return must be filed for a short year return
ending on or prior to the Closing Date, which shall be subject to subparagraph
(i) above. To the extent that such Taxes have not been included as a liability
on the Final Adjustment Statement, Seller shall pay, or cause


                                       39


to be paid, to Purchaser within fifteen (15) days after the date on which Taxes
are paid with respect to such periods an amount equal to the portion of such
Taxes, which relates to the portion of such Tax period ending on the Closing
Date, other than Transfer Taxes incurred in connection with this Agreement and
the Transactions, which shall be the responsibility of Purchaser.

                  (d) Each Party shall provide the other Party with such
assistance as may reasonably be requested by the other Party in connection with
the preparation of any Tax Return, or any audit or other examination by any
taxing authority, or any judicial or administrative proceedings relating to any
liability for Taxes (a "Tax Proceeding"), and each will retain and provide the
requesting Party with any records or information which may be relevant to such
Tax Return or Tax Proceeding. Any reasonable out-of-pocket expenses incurred in
providing such assistance shall be borne by the requesting party. Any
information obtained pursuant to this Section 7.5 or pursuant to any other
Section hereof providing for the sharing of information relating to or review of
any Tax Return or other schedule relating to Taxes shall be kept confidential by
the Parties in accordance with the Confidentiality Agreement.

                  (e) After the Closing Date, in the case of any Tax Proceeding
with respect to a Taxable period for which Seller is or may be liable for the
Taxes pursuant to this Agreement, other than a claim for Taxes or a Purchaser
Claim described in Section 7.5(f) or (g), Purchaser shall inform Seller within
ten (10) days of the receipt of any notice of such Tax Proceeding, and shall
afford Seller, at Seller's expense, the opportunity to control the conduct of
such Tax Proceedings. Purchaser shall execute or cause to be executed powers of
attorney or other documents necessary to enable Seller to take all actions
desired by Seller with respect to such Tax Proceeding. Seller shall have the
right to control, in its sole discretion, any such Tax Proceedings and to
initiate any claim for refund, file any amended return, pay such Taxes, or enter
into any settlement agreement with a Governmental Authority, or take any other
action which it deems appropriate with respect to such Taxes; provided, however,
that Seller shall not, without Purchaser's consent (which consent shall not be
unreasonably withheld, conditioned or delayed) agree to any settlement with
respect to any Tax if such settlement would adversely affect the Tax liability
of Purchaser.

                  (f) Notwithstanding any other provision of this Agreement,
this Section 7.5(f) and Section 7.5(g), the dollar limitations contained in
Section 9.2(b), the dollar threshold contained in Section 9.7(c), and the time
limitations contained in Section 9.10 shall apply to indemnifications by Seller
to Purchaser for, and such indemnification shall be the sole remedy of Purchaser
in respect of, the Losses in respect of Taxes. Seller shall indemnify and hold
harmless Purchaser and the Companies from and against the entirety of any and
all Losses that Purchaser may suffer for any Taxes attributable to the Companies
with respect to any Tax year or portion thereof ending on or before the Closing
Date (or for any Tax year beginning before and ending after the Closing Date to

                                       40


the extent allocable to the portion of such period beginning before and ending
on the Closing Date).

                  (g) The provisions of this Section 7.5(g) shall apply only to
the indemnification provided for under Section 7.5(f) and a Purchaser Claim with
respect to Taxes. If a Purchaser Claim exists for Taxes or if a claim for Taxes
is made against Purchaser for which Purchaser intends to seek indemnity with
respect thereto under Section 7.5(f), Purchaser shall promptly furnish written
notice to Seller of such Purchaser Claim or claim. Failure of Purchaser to so
notify Seller within thirty (30) days of the claim being made against Purchaser
shall release Purchaser's rights to indemnity by Seller with respect to such
claim to the extent that such failure materially prejudiced Seller's ability to
defend or settle such claim. Seller shall have fifteen (15) days after receipt
of such notice to undertake, conduct, and control (through counsel of its own
choosing and at its own expense) the settlement or defense thereof, and
Purchaser shall cooperate with Seller in connection therewith. Seller shall
permit Purchaser to participate in such settlement or defense through counsel
chosen by Purchaser (but the fees and expenses of such counsel shall be paid by
Purchaser). So long as Seller, at Seller's cost and expense, (i) have undertaken
the defense of, and assumed full responsibility for all indemnified Losses with
respect to, such claim, (ii) are contesting such claim in good faith, by
appropriate proceedings, and (iii) have taken such action (including the posting
of a bond, deposit, or other security) as may be necessary to prevent any action
to foreclose a lien against or attachment of the property of Purchaser or
Companies for payment of such claim so long as Purchaser shall not be subject to
payment obligations in excess of the limits on Seller's indemnification set
forth under this Agreement, Purchaser shall not pay or settle any such claim.
Notwithstanding compliance by Seller with the preceding sentence, Purchaser may
elect to pay or settle any such claim, but upon such election it shall thereby
automatically, and without any further action by any Party, irrevocably waive
any right to indemnity by Seller with respect to such claim. If within fifteen
(15) days after the receipt of Purchaser's notice of a claim of indemnity
hereunder, Seller do not notify Purchaser that it elects (at Seller's sole cost
and expense) to undertake the defense thereof and assume full responsibility for
all indemnified Losses with respect thereto, or gives such notice and thereafter
fails to contest such claim in good faith or to prevent action to foreclose a
lien against or attachment of Purchaser's or Companies' property or material
harm to Purchaser or the Companies as provided above, Purchaser shall have the
right to contest, settle, or compromise such claim and Purchaser shall not
thereby waive any right to indemnity with respect to such claim under this
Agreement.

                  (h) Any refund of Taxes paid or payable with respect to Taxes
attributable to the Companies shall be promptly paid as follows (or to the
extent payable but not paid due to offset against other Taxes shall be promptly
paid by the Party receiving the benefit of the offset as follows): (i) to Seller
if attributable to Taxes with respect to any Tax year or portion thereof ending
on or before the Closing Date (or for any Tax year beginning before and ending
after the Closing Date to the extent allocable


                                       41


to the portion of such period beginning before and ending on the Closing Date),
including, but not limited to, the potential tax refunds described on Schedule
7.5(h); and (ii) to Purchaser if attributable to Taxes with respect to any Tax
year or portion thereof beginning after the Closing Date (or for any Tax year
beginning before and ending after the Closing Date to the extent allocable to
the portion of such period ending after the Closing Date).

                  (i) In the event that a dispute arises between Seller and
Purchaser as to the amount of Taxes, the Parties shall attempt in good faith to
resolve such dispute, and any amount so agreed upon shall be paid to the
appropriate Party. If such dispute is not resolved within thirty (30) days
thereafter, the Parties shall submit the dispute to the Independent Accounting
Firm for resolution, which resolution shall be final, conclusive and binding on
the Parties. The Independent Accounting Firm shall be instructed to deliver to
the Parties a written resolution of the dispute within twenty (20) Business Days
from the date of its engagement. For purposes of this Section 7.5(i), the
Independent Accounting Firm may determine the issues in dispute following such
procedures, consistent with the provisions of this Agreement, as it deems
appropriate to the circumstances and with reference to the amounts in issue. The
Parties do not intend to impose any particular procedures upon the Independent
Accounting Firm, it being the desire of the Parties that any such disagreement
shall be resolved as expeditiously and inexpensively as reasonably practicable.
The Independent Accounting Firm shall have no liability to the Parties in
connection with such services except for acts of bad faith, willful misconduct
or gross negligence, and the Parties shall provide such indemnities to the
Independent Accounting Firm as it may reasonably request. Notwithstanding
anything in this Agreement to the contrary, the fees and expenses of the
Independent Accounting Firm in resolving the dispute shall be borne equally by
Seller and Purchaser. Any payment required to be made as a result of the
resolution of the dispute by the Independent Accounting Firm shall be made
within ten (10) days after such resolution, together with any interest
determined by the Independent Accounting Firm to be appropriate.

                  (j) Except as provided in Section 9.2(a), Section 9.2(b),
Section 9.7(c), Section 9.8, and Section 9.10, from and after the Closing, the
provisions of this Section 7.5 shall be the exclusive agreement among the
parties (including Seller's indemnities and the Purchaser's indemnities), with
respect to Tax matters, including, but not limited to, indemnification for Tax
matters. In the event of any inconsistency between Section 7.5(g) and Sections
9.4 and 9.5 with respect to Tax matters, Section 7.5(g) shall control.

         SECTION 7.6 Risk of Loss.

                  (a) Between the date hereof and the Closing Date, all risk of
loss or damage to the assets and properties of PGV, including the Plant, shall
be borne by Seller except as set forth in Section 8.3.

                                       42


                  (b) If before the Closing Date all or any portion of the Plant
becomes subject to any condemnation or eminent domain proceeding (the "Condemned
Portion"), Seller shall notify Purchaser promptly in writing of such fact. If
the fair market value of the Condemned Portion is less than twenty-five percent
(25%) of the Initial Purchase Price and the remaining portion of the Plant may
be operated and generate electricity in a manner and amount substantially
similar to that in which the entire Plant was operated immediately prior to the
Effective Date, Seller shall, at its option, either (i) reduce the Initial
Purchase Price by the fair market value of the Condemned Portion (such value to
be determined as of the date immediately prior to such condemnation or eminent
domain proceeding), or (ii) assign to Purchaser at the Closing any claim,
settlement, or proceeds thereof related to such proceeding to which Seller or
any Affiliate of Seller may be entitled. Any failure of a condition to Closing
related to any such proceeding of which Seller shall have so notified Purchaser
shall be deemed not to exist, provided, that Seller exercises its election
pursuant to the preceding sentence within a reasonable period of time. If,
before the Closing Date, all or any portion of the Plant becomes subject to or
is threatened with any condemnation or eminent domain proceeding and the fair
market value of the Condemned Portion is greater than twenty-five percent (25%)
of the Initial Purchase Price, then Purchaser may elect either to (x) require
Seller upon the Closing to assign to Purchaser any claim, settlement, or
proceeds thereof related to such proceeding to which Seller or any Affiliate of
Seller may be entitled and proceed with the Transactions, or (y) terminate this
Agreement.

                  (c) If before the Closing Date all or any portion of the Plant
is damaged or destroyed (the "Damaged Portion") (whether by fire, theft,
vandalism or other casualty) in whole or in part, and the fair market value of
Damaged Portion or the cost of repair of the Damaged Portion is less than
twenty-five percent (25%) of the Initial Purchase Price, and the undamaged
portion of the Plant may be repaired so that the Plant may be operated and
generate electricity in a manner and amount substantially similar to that in
which it was operated immediately prior to the Effective Date, Seller shall, at
its option, either (i) reduce the Initial Purchase Price by the lesser of the
actual cash value of the Damaged Portion (such value to be determined as of the
date immediately prior to such damage or destruction and calculated as the
replacement cost of the Damaged Portion), or the estimated cost to repair or
restore the same, or (ii) bear the costs of repairing or restoring the Damaged
Portion and, at Seller's election, delay the Closing and any right to terminate
this Agreement for a reasonable time necessary to accomplish the same. Any
failure of a condition to Closing related to any such damage or destruction of
which Seller shall have so notified Purchaser shall be deemed not to exist,
provided, that Seller exercises its election pursuant to the preceding sentence
within a reasonable period of time. If the Plant is damaged or destroyed
(whether by fire, theft, vandalism or other casualty) in whole or in part prior
to the Closing and the lesser of the actual cash value of the Damaged Portion
(determined as provided above) or the cost of repair of the Damaged Portion is
greater than twenty-five percent (25%) of the Initial Purchase Price, then
Purchaser may elect either to (x) require Seller upon the Closing to transfer to
Purchaser the proceeds (or the right to the proceeds) of applicable insurance to


                                       43


which Seller or any Affiliate of Seller (other than PGV) may be entitled and
proceed with the Transactions, or (y) terminate this Agreement.

         SECTION 7.7 Insurance. Purchaser shall be obligated at or before
Closing to obtain at its sole cost and effective upon Closing insurance coverage
for the Plant. The proceeds from any Company Insurance Policies (without
reduction for the payment of any deductible related thereto) related to
post-Closing expenses actually paid by Purchaser or the Companies (which shall
exclude any such amounts that were previously accrued by the Companies prior to
the Closing Date and included in the Estimated Adjustment Statement and/or the
Final Adjustment Statement set forth in Sections 3.4 and 3.5) with regard to the
repairs described in Item 1 of Schedule 5.19 (Purchaser shall submit invoices
and other supporting documentation of such expenses to Seller) will be paid by
Seller to Purchaser as soon as practicable after such proceeds are received by
Seller or Seller's Affiliate from the insurance company. Seller and Seller's
Affiliates shall be entitled to retain any additional proceeds they receive
under such Company Insurance Policies with regard to such repairs. For the
avoidance of doubt, Seller or Seller's Affiliate (other than the Companies)
shall bear the cost of any deductible related to the foregoing.

         SECTION 7.8 Announcements. Subject to Section 7.1, prior to the Closing
Date no press release or other public announcement, or public statement or
comment in response to any inquiry, relating to this Agreement or the
Transactions shall be issued or made by Purchaser or Seller without the joint
approval of both Purchaser and Seller; provided, however, that a press release
or other public announcement, regulatory filing, statement or comment made
without such joint approval shall not be in violation of this Section 7.8 if it
is made in order to comply with Applicable Laws or stock exchange rules and in
the reasonable judgment of the Party making such release or announcement, based
upon advice of counsel, prior review and joint approval, despite reasonable
efforts to obtain the same, would prevent dissemination of such release or
announcement in a timely enough fashion to comply with such Applicable Laws or
rules; provided, further, that in all instances prompt notice from one Party to
the other shall be given with respect to any such release, announcement,
statement or comment.

         SECTION 7.9 Post Closing - Further Assurances. At any time or from time
to time after the Closing, each Party will, upon the reasonable request of the
other Party, execute and deliver any further instruments or documents, and
exercise commercially reasonable efforts to take such further actions as may
reasonably be required, to fulfill and implement the terms of this Agreement or
realize the benefits intended to be afforded hereby. After the Closing, and upon
prior reasonable request, each Party shall exercise commercially reasonable
efforts to cooperate with the other, at the requesting Party's expense
(including, but not limited to, out-of-pocket expenses to third parties incurred
by any Party), in furnishing non-confidential and non-privileged Records,
information, testimony and other assistance in connection with any inquiries,
actions, audits, proceedings or disputes involving either of the Parties (other
than in connection with


                                       44


disputes between the Parties) and based upon contracts, arrangements or acts of
Seller or Purchaser, which were in effect or occurred on, prior to, or after
Closing and which relate to PGV or the Plant, including, without limitation,
arranging discussions with (and calling as a witness) officers, directors,
employees, agents, and representatives of Purchaser or Seller. Without limiting
the generality of the foregoing, Seller has provided to Purchaser copies of the
audited financial statements (of the type described in Section 5.17) for PGV for
each of the three full fiscal years prior to Closing and, upon Purchaser's
request, will make the auditors for the Companies reasonably available to answer
clarification questions regarding those financial statements and the financial
statements of the other Companies that the Purchaser may have.

         SECTION 7.10 Post Closing - Information and Records.

                  (a) For a period of five (5) years after the Closing (or, if
requested in writing by Seller within five (5) years after the Closing, until
the closing of any Tax Proceeding with respect to Seller's Tax Returns for all
periods prior to and including the Closing, if later), Purchaser will not
dispose of any books, records, documents, contracts, data or information,
whether in electronic or physical form, and the software and computer hardware
necessary to retrieve such data or information ("Records"), reasonably relating
to the Companies delivered to it by Seller or in the possession of the Companies
as of the Closing without first giving notice to Seller thereof and permitting
Seller to retain or copy such books and records as it may select. During such
period, Purchaser will permit Seller to examine (during normal business hours
and upon reasonable notice) and make copies, at Seller's expense and subject to
such confidentiality restrictions as Purchaser may reasonably impose, of such
Records for any reasonable purpose, including any litigation now pending or
hereafter commenced against Seller or its Affiliates, or the preparation of
income or other Tax Returns.

                  (b) During such five (5) year time period, Purchaser will
provide to Seller, at Seller's expense, copies of such Records reasonably
relating to the Companies delivered to it by Seller or in the possession of the
Companies as of the Closing for any reasonable purpose, including any litigation
now pending or hereafter commenced against Seller or its Affiliates by any
Person (including Purchaser). Seller will provide reasonable notice to Purchaser
of its need to access such Records.

                  (c) If privileged and/or attorney work product documents or
information, including communications between Seller or its Affiliates and any
of their respective counsel, are disclosed to Purchaser in the Records delivered
by Seller or in the possession of the Companies as of the Closing, then
Purchaser agrees that (i) such disclosure is inadvertent, (ii) such disclosure
will not constitute a waiver, in whole or in part, of any privilege or work
product, (iii) such information will constitute confidential information subject
to the provisions of Section 8.4, and (iv) it will promptly return to Seller all
copies of such Records in the possession of the Companies, Purchaser or


                                       45


Purchaser's Affiliates, agents, employees or representatives (including lenders
and financial advisors).

         SECTION 7.11 Use of Seller's Marks. Except as provided in the next
sentence, Purchaser acknowledges and agrees that it does not have and, upon
consummation of the Transactions shall not have, any right, title, interest,
license, or any other right whatsoever to the Seller's Marks. As soon as
practicable and in no event later than thirty (30) days following the Closing
Date, Purchaser shall (a) remove any Seller's Marks from, or cover or conceal
the Seller's Marks on, the assets of the Companies, including signage at the
Plant, and provide written verification thereof to Seller promptly after
completing such removal, and (b) return or destroy (with proof of destruction)
all other assets of the Companies that contain any Seller's Marks that are not
removable or that cannot be permanently covered or concealed, other than in the
case of the Companies' books and records transferred pursuant to this Agreement.
Purchaser agrees never to challenge Seller's (or its Affiliates') ownership of
the Seller's Marks or any application for registration thereof or any
registration thereof or any rights of Seller or its Affiliates therein as a
result, directly or indirectly, of its ownership of the Companies. Purchaser
will not conduct any business or offer any goods or services under any Seller's
Marks. Purchaser will not send, or cause to be sent, any correspondence or other
materials to any Person on any stationery that contains any Seller's Marks or
otherwise operate the Companies in any manner which would or might reasonably be
expected to confuse any Person into believing that Purchaser has any right,
title, interest, or license to use any Seller's Marks.

         SECTION 7.12 Excluded Assets.

                  (a) Notwithstanding anything to the contrary contained in this
Agreement, the Transactions shall exclude the following (the "Excluded Assets"):

                       (i) Except as required in Section 5.22 and Section
7.6(c)(x), all Company Insurance Policies and rights under any Company Insurance
Policies in respect of any and all claims made under such policies whether such
claims are asserted before or after the Closing Date and all rights to any
proceeds payable under any such policy including, without limitation, any
proceeds received by Seller or any of its Affiliates from any Company Insurance
Policies related to Item 1 of Schedule 5.19; and

                       (ii) the Seller's Marks. Seller's representations and
warranties in Articles 4 and 5 shall not apply to any of the items described in
7.12(a)(ii).

                  (b) Prior to the Closing Date, Seller may cause the Companies
to transfer any Excluded Asset to Seller or any of its Affiliates; provided,
however, that any Excluded Asset not so transferred prior to the Closing Date
shall be deemed to have been transferred to Seller without any further action.


                                       46



         SECTION 7.13 Excluded Liabilities. Notwithstanding anything to the
contrary contained in this Agreement, the Transactions shall exclude, and Seller
hereby assumes as of the Closing Date, any liabilities or obligations of the
Companies in respect of the following: (the "Excluded Liabilities"):

                  (a) any Excluded Asset;

                  (b) any Employee Benefit Plan;

                  (c) any Intercompany Arrangements; and

                  (d) any liability to the State of Hawaii for tax credit
refunds received prior to Closing including, without limitation, the tax credit
refunds identified in Schedule 5.15.

         SECTION 7.14 Employees.

                  (a) Purchaser agrees to offer employment to, or cause
Purchaser's Parent to offer employment, commencing as of the Closing Date, to
all of the employees employed at, or whose work responsibilities involve
principally the operation of, the Plant, which employees are listed on Schedule
7.14(a), as amended between the date of this Agreement and the Closing Date to
reflect any changes in the identities of work force personnel, it being
understood that any such change shall not be deemed to be material for purposes
of Section 10.5; provided, however, that such offer shall be subject to each
such employee's satisfaction of reasonable customary hiring requirements of
Purchaser or Purchaser's Parent, as the case may be, which shall be limited to
background checks and post-offer drug screening and the execution of customary
employee agreements regarding confidentiality, inventions and the like, and
shall contain the base salary and incentive compensation and replacement welfare
plans that are set forth on Schedule 7.14(c). Purchaser or Purchaser's Parent
shall continue to provide base salary and incentive compensation at not less
than then the levels set forth on Schedule 7.14(c) for a period of eighteen (18)
months after the Closing Date and shall maintain replacement welfare plans that
are substantially similar when considered in the aggregate to the replacement
welfare plans set forth on Schedule 7.14(c) for a period of eighteen (18) months
after the Closing Date. Each such employee who is offered and accepts employment
with Purchaser or Purchaser's Parent will be referred to herein as a
"Transferred Employee." With regard to the calendar year which includes the
Closing Date, Purchaser shall pay Transferred Employees the amount of any annual
incentive earned and payable under the terms of an annual incentive plan of
Purchaser or Purchaser's Parent that offers incentive compensation in an amount
and terms meeting the standards specified above, prorated based on the portion
of the full calendar year from the Closing Date to December 31, 2004. Purchaser
agrees that it shall also pay the reasonable relocation costs of any Transferred
Employee who shall relocate at Purchaser's or Purchaser's Parent's request
during the period of 18 months after the Closing Date.

                                       47


                  (b) Any individual who is otherwise a Transferred Employee but
who on the day immediately preceding the Closing Date is not actively at work
due to an approved leave of absence due to illness, military leave or disability
shall nevertheless be treated as Transferred Employees but only if he or she is
able to perform the essential functions of his/her job, with or without a
reasonable accommodation, within the period established under COSI PUNA's
applicable leave of absence policy.

                  (c) As of the Closing Date, all Transferred Employees shall
cease to participate in the employee welfare benefit plans (as such term is
defined in Section 3(1) of ERISA) maintained or sponsored by Seller or its
Affiliates and shall commence participation in the then-current employee welfare
benefit plans of Purchaser, Purchaser's Parent or their Affiliates (the
"Replacement Welfare Plans") which are included in the summary of benefit plans
of Purchaser and Purchaser's Parent that are in effect as of the Effective Date
and that are described in Schedule 7.14(c). Subject to the approval of
Purchaser's or Purchaser's Parent's insurers and third party administrators, as
needed (which approval shall be requested by Purchaser or Purchaser's Parent
immediately after the Effective Date), Purchaser or Purchaser's Parent, as
applicable shall (i) waive all limitations as to pre-existing condition
exclusions and waiting periods with respect to the Transferred Employees under
the Replacement Welfare Plans, other than, but only to the extent of,
limitations or waiting periods that were in effect with respect to such
employees under the welfare plans maintained by Seller or its Affiliates and
that have not been satisfied as of the Closing Date, and (ii) provide each
Transferred Employee with credit for any co-payments (if permitted under the
applicable Replacement Welfare Plan) and deductibles paid prior to the Closing
Date during a plan year under Seller's or its Affiliates' plan that has not
ended as of the Closing Date, in satisfying any deductible or out of pocket
requirements under the applicable Replacement Welfare Plans with respect to any
plan year that has not ended as of the Closing Date.

                  (d) Purchaser shall give or cause Purchaser's Parent to give
all Transferred Employees credit for all service recognized by Seller and its
Affiliates immediately prior to the Closing Date under all Replacement Welfare
Plans and arrangements maintained by Purchaser or Purchaser's Parent, as
applicable in which the Transferred Employees become participants. Prior to the
Closing Date, Seller shall provide Purchaser with a description of all such
service recognized by it and its Affiliates, itemized by individual Transferred
Employee. Purchaser agrees that the service credit to be given to Transferred
Employees by Purchaser and its Affiliates is for purposes of eligibility, and
vesting, but not benefit accrual (except for vacation and severance benefits).

                  (e) To the extent allowable by Applicable Law, including,
without limitation, ERISA's fiduciary provisions, and by the tax qualified
401(k) plan sponsored by the Seller or its Affiliates in effect for Transferred
Employees immediately prior to the Closing Date (the "Seller's Savings Plan"),
Purchaser shall take any and all necessary action to cause the trustee of any
tax-qualified 401(k) plan of Purchaser or its Affiliates in




                                       48


which any Transferred Employee becomes a participant to accept a direct
"rollover" in cash (and any outstanding participant loans) of all or a portion
of said employee's "eligible rollover distribution" within the meaning of
Section 402 of the Code from the Seller's Savings Plan if requested to do so by
the Transferred Employee, except in the case where a participant has an
outstanding participant loan which in such case such participant shall
"rollover" all of its "eligible rollover distribution". However, any
tax-qualified 401(k) plan of Purchaser or its Affiliates accepting such a
rollover shall not be required to permit any investment to be made in
Constellation Energy Group, Inc. common stock on behalf of any Transferred
Employee after the Closing Date or to adopt any other provision of Seller's
Savings Plan except to the extent required by Applicable Law.

                  (f) Purchaser shall pay to each Transferred Employee whose
employment is terminated without Cause by Purchaser or one of its Affiliates
within eighteen months after the Closing Date a severance benefit package equal
to:

                o Two weeks of base pay for each full year of service (including
                  service with Purchaser or its Affiliates and service
                  recognized by Seller or Seller's Affiliates immediately prior
                  to Closing).

                o Insurance Benefits: Medical and dental coverage at active
                  employee rates during the period equal to two weeks for each
                  year of service (including service with Purchaser and service
                  recognized by Seller or Seller's Affiliates immediately prior
                  to the Closing); provided, however, that such coverage shall
                  be provided during such period only to the extent that a
                  Transferred Employee timely elects and continues to be
                  eligible for such coverage under COBRA and the terms of the
                  applicable benefit plans then maintained by Purchaser or its
                  Affiliates.

For purposes of calculating the level of severance benefits above to which a
terminated Transferred Employee is entitled, such calculation shall be made as
though the Transferred Employee's termination date is the eighteenth month
anniversary of the Closing Date, regardless of the actual date of termination.
The relocation of a Transferred Employee's employment at Purchaser's or
Purchaser's Parent's request from Purchaser or one of its Affiliates to another
Affiliate of Purchaser shall not constitute termination without Cause for
purposes of this Section.

                  (g) Seller shall notify Purchaser of (i) any increase in the
rate of compensation granted by COSI PUNA or the Companies payable to or to
become payable prior to the Closing Date to any Transferred Employee, and (ii)
any resignations or termination of any Transferred Employees prior to the
Closing Date.

                  (h) Neither Purchaser nor its Affiliates shall have any
liabilities or other obligations with respect to any Transferred Employees or
other former employees




                                       49


or consultants of COSI PUNA or its Affiliates arising from actions or inactions
of COSI PUNA or its Affiliates during periods prior to the Closing Date.

                  (i) Seller and COSI PUNA shall cause the employment of all
Transferred Employees by Seller, COSI PUNA or their Affiliates to be terminated,
and all salaries, wages, benefits, severance payments and benefits or other
amounts due and owing from Seller, COSI PUNA or their Affiliates to the
Transferred Employees as of the Closing Date or as a result of such termination
to be satisfied in full by Seller, COSI PUNA or their Affiliates of Seller,
prior to or concurrently with the Closing.

         SECTION 7.15 Additional Covenants of Purchaser. Purchaser hereby agrees
with and covenants to Seller that prior to consummation of the Transactions or
the termination or expiration of this Agreement pursuant to its terms, unless
Seller shall otherwise consent in writing, Purchaser shall not take any action
which would cause any of Purchaser's representations and warranties set forth in
Article 6 to be false as of the Closing in any material respect.

         SECTION 7.16 Assumption of Obligations. From and after the Closing,
Purchaser shall cause the Companies to fully perform and fulfill all of their
obligations and commitments, whether existing as of the Closing Date or arising
or incurred thereafter.

         SECTION 7.17 Company Guarantees. The Parties shall cooperate and use
commercially reasonable efforts (which shall not include any obligation of
Seller to pay any cost or expense or incur any obligation) in order that,
effective as of the Closing Date, (a) the Company Guarantees identified in Item
3 of Schedule 1.1A and any liabilities related thereto shall be released as to
Seller and its Affiliates, and (b) substitute arrangements, if required, of
Purchaser or its Affiliates shall be in effect.

         SECTION 7.18 Action Taken in connection with the Loan Documents.
Between the Effective Date and the Closing Date, Seller shall take all actions
and binding commitments necessary to irrevocably satisfy in full at the Closing
the Debt Payoff Amount and any other amounts required to satisfy in full the
Loan Documents (including, but not limited to, all fees, penalties, early
termination payments, costs, and the like), terminate all of the Loan Documents
and secure a release from all of the counterparties thereto, finally and forever
releasing the Companies, Seller and its Affiliates under the Loan Documents and
releasing all Encumbrances associated with the Loan Documents (such releases to
be in form and substance reasonably satisfactory to Seller and Purchaser),
including, but not limited to, the Debt Service Reserve Guaranty and the Pledge
Agreement.

         SECTION 7.19 Payment of Intercompany Arrangements. Seller shall cause
all Intercompany Arrangements to be cancelled and terminated, and all amounts
due and owing as of the Closing Date thereunder to be satisfied in full by the
Companies to Seller or any Affiliates of Seller, prior to or concurrently with
the Closing.



                                       50


         SECTION 7.20 Repair of Well KS-11R. Seller, at its expense, shall
repair, or shall cause the Companies to repair, the injection well at the Plant
known as KS-11R in accordance with the repair program identified in Schedule 5.7
(as the same may be modified as provided below) and Applicable Laws and the
requirements of Governmental Authorities having jurisdiction. Any payables or
liabilities of the Companies associated with such repairs that have not been
paid as of Closing shall be accounted for as a Purchase Price adjustment
pursuant to the procedures set forth in Sections 3.4 and 3.5. If such repairs
have not been completed prior to Closing, Seller shall reimburse Purchaser or
the Companies for any costs they reasonably incur after Closing to complete such
repairs in accordance with the repair program identified in Schedule 5.7 (as the
same may be modified as provided below). Purchaser shall have the right to
propose modifications to the repair program identified in Schedule 5.7 which
proposed modifications Seller will consider in good faith, but Seller may
condition acceptance of any such modifications upon, among other things, the
approval of its technical experts, the approval of such modifications by
Governmental Authorities having jurisdiction and Purchaser agreeing to pay any
additional costs and assuming any additional risk associated with implementing
such modifications. If the Parties are unable to reach agreement upon any
modifications proposed by Purchaser, then the repairs shall be conducted by or
for Seller as provided in the first sentence of this Section.

                                   ARTICLE 8

                ACCESS AND CONFIDENTIALITY; TRANSITION PROCEDURES

         SECTION 8.1 General Access. Subject to the provisions of Section 8.2,
during the Transition Period, Seller shall permit (and Seller shall cause the
Companies to permit) Purchaser and its representatives:

                  (a) to have reasonable access, at reasonable times and upon
reasonable advance notice and in a manner so as not to interfere unduly with the
business operations of Seller or the Companies, to the Records of the Companies
relating to their Business and the Plant insofar as the same may be disclosed
without (i) violating any legal constraints or any legal obligation, (ii)
waiving any attorney/client, work product, or like privilege, (iii) disclosing
information about the activities of Seller or its Affiliates (other than the
Companies) that is unrelated to the Companies, their Business or the Plant, or
(iv) disclosing proprietary models of Seller or any of its Affiliates pertaining
to energy project evaluation, energy or natural gas price curves or projections,
or other economic predictive models; and

                  (b) subject to Seller's receipt of any required consent of any
third Person and upon reasonable advance notice to Seller, to conduct at
reasonable times and at Purchaser's sole risk, cost, and expense, in the
presence of representatives of Seller, reasonable inspections of the Plant;
provided, however, that no soil, water, groundwater or other environmental
testing shall be conducted.

                                       51


         SECTION 8.2 Transition Period Procedures. The Parties acknowledge and
agree that in order to ensure that upon Closing the transition of the ownership
of the Purchased Shares and the operation of the Plant is as smooth and orderly
as is reasonably practicable, representatives of Purchaser shall be entitled to
become familiar with the Plant and be introduced to, and have the opportunity to
meet with, suppliers, other vendors and customers of any of the Companies. In
order to facilitate such transitions, not later than five (5) Business Days
following the Effective Date, Seller and Purchaser shall each designate a
representative (each a "Transition Representative") to coordinate the activities
contemplated by this Section 8.2 and shall provide the name and relevant contact
information of their respective Transition Representatives to the other Party.
Either Party may designate a different Transition Representative at any time and
from time to time by written notice to the other Party, which notice shall
specify the name of the relevant individual and his or her contact information.
Within ten (10) Business Days of their selection, the Transition Representatives
shall meet (in person or by telephone) to develop such procedures as such
persons determine to be reasonably necessary or appropriate under the
circumstances to accomplish the transitions contemplated by this Section 8.2;
provided, however, that any such procedures shall be consistent with the other
provisions of this Agreement; and provided, further, that in no event shall any
meetings with suppliers, other vendors or customers of any of the Companies
relating in manner to the Companies, the Transactions, the Plant or the Existing
Contracts be conducted prior to the Closing without Seller's Transition
Representative or other representative of Seller being present, nor shall
Purchaser or any of its Affiliates otherwise contact or communicate directly
with any supplier, other vendor or customer of any of the Companies regarding
the above-described matters prior to the Closing without Seller's prior written
consent, which consent shall not be unreasonably withheld, conditioned or
delayed, unless Seller's Transition Representative or other representative of
Seller shall participate therein.

         SECTION 8.3 Indemnification. Purchaser agrees to indemnify and hold
harmless, release, and defend the Seller's Indemnified Parties and the Companies
from and against any and all Losses arising, in whole or in part, from the acts
or omissions of the Purchaser Indemnified Parties in connection with Purchaser's
inspection or assessment of the Plant and other assets and Records of Seller or
any of the Companies, including claims for personal injuries (including, but not
limited to, injuries to employees of Seller), property damage (including, but
not limited to, property damage to the Plant), and reasonable attorneys' fees
and expenses, and all such inspections and assessments shall be at Purchaser's
sole risk. Nothing in this Article 8 shall be construed to permit Purchaser or
its representatives to have access to any Records of Seller or any of the
Companies relating to the Transactions, including any bids or offers received by
Seller or any of the Companies for the sale of the Purchased Shares or the
Plant, it being agreed that all such bids or offers shall be the sole property
of Seller. The provisions set forth in Sections 9.4, 9.5, 9.6, 9.7(a) and 9.7(b)
shall apply to any indemnification by Purchaser under this Section 8.3. For the
avoidance of doubt, Section 9.7(c) shall not apply to any indemnification by
Purchaser under this Section 8.3.

                                       52


         SECTION 8.4 Confidential Information. Between the Effective Date and
the Closing Date, Purchaser agrees to maintain all information made available to
it under this Agreement confidential and to cause its officers, directors,
agents, employees, representatives, consultants, and advisors to maintain all
information made available to them under this Agreement confidential, all as
provided in the Confidentiality Agreement, the terms of which are incorporated
herein by reference and made a part of this Agreement.

         SECTION 8.5 No Other Contact. Between the Effective Date and the
Closing Date, Purchaser shall not in any way contact or correspond with any
customer, employee, or other Person associated with any of the Companies or the
Seller regarding the Companies, the Plant or the Existing Contracts, without the
prior written consent of Seller.

                                   ARTICLE 9

                           INDEMNIFICATION AND RELEASE

         SECTION 9.1 Exclusivity. Except as provided in Section 7.5 and except
for fraud, willful misconduct, willful misrepresentation, or willful breach of a
representation, warranty, covenant or agreement hereunder, the rights and
remedies of Seller and the Seller's Indemnified Parties, on the one hand, and
Purchaser and the Purchaser Indemnified Parties, on the other hand, for money
damages under this Article are, solely as between Seller and the Seller's
Indemnified Parties on the one hand, and Purchaser and the Purchaser Indemnified
Parties on the other hand, exclusive and in lieu of any and all other rights and
remedies for money damages which each of Seller and the Seller's Indemnified
Parties on the one hand, and Purchaser and the Purchaser Indemnified Parties on
the other hand, may have under this Agreement or under Applicable Laws with
respect to any Indemnifiable Claim, whether at law or in equity.

         SECTION 9.2 Indemnification by Seller.

                  (a) Purchaser Claims. Except as otherwise provided in Section
7.5(f), Seller will indemnify, defend and hold harmless Purchaser and its
Affiliates, and each of their officers, directors, employees, attorneys, agents
and successors and assigns (collectively, the "Purchaser Indemnified Parties"),
from and against any and all demands, suits, penalties, fines, liens, judgments,
obligations, damages, claims, losses, liabilities, payments, costs and expenses,
including reasonable legal, accounting and other expenses in connection
therewith and costs and expenses incurred in connection with investigations and
settlement proceedings ("Losses"), which arise out of, are in connection with,
or relate to, the following (collectively, "Purchaser Claims"):

                       (i) any breach or violation of any covenant, obligation
or agreement of Seller set forth in this Agreement;

                                       53


                       (ii) any breach or inaccuracy of the representations or
warranties made, as of the Effective Date or the Closing Date, by Seller in
Articles 4 and 5;

                       (iii) Seller's ownership, operation or use of the
Excluded Assets after the Closing; or

                       (iv) if the Closing occurs, the Excluded Liabilities.

                  (b) Limitations on Seller Indemnification Obligation. As
between the Parties, except in the case of fraud or willful misconduct on the
part of Seller or its Affiliates, the Purchaser Indemnified Parties will not be
entitled to any punitive, incidental, indirect, special or consequential damages
resulting from or arising out of any Purchaser Claims, including damages for
lost revenues, income, or profits, diminution in value of the Plant or any other
damage or loss resulting from the disruption to or loss of operation of the
Plant. The aggregate damages to which the Purchaser Indemnified Parties will be
entitled for all Purchaser Claims shall be limited to ten percent (10%) of the
Initial Purchase Price.

         SECTION 9.3 Indemnification by Purchaser.

                  (a) Seller's Claims. Purchaser will indemnify, defend and hold
harmless Seller and its Affiliates and each of their officers, directors,
employees, attorneys, agents and successors and assigns (collectively, the
"Seller's Indemnified Parties"), from and against any and all Losses which arise
out of or relate to the following (collectively, "Seller's Claims"):

                       (i) any breach or violation of any covenant, obligation
or agreement of Purchaser set forth in this Agreement;

                       (ii) any breach or inaccuracy of any of the
representations or warranties made, as of the Effective Date or the Closing
Date, by Purchaser in Article 6;

                       (iii) if the Closing occurs, the Business of PGV, the
design, construction, ownership, operation or use of any of the assets of PGV,
including the Plant (but excluding the Excluded Assets), the failure to pay,
perform or discharge any liabilities or obligations of PGV (but excluding the
Excluded Liabilities), or any other matter relating to or arising out of the
Business of PGV, the design, construction, ownership, operation or use of any of
the assets of PGV, including the Plant (but excluding the Excluded Assets),
whether relating to periods of time prior to or after the Closing Date, to the
extent such Losses are not properly asserted by Purchaser under Section 7.5 or
Section 9.2(a) (subject to the limitations in this Agreement); or

                       (iv) if the Closing occurs, without limiting the
generality of Section 9.3(a)(iii), any liability, obligation or responsibility
under or related to former,


                                       54


current or future Environmental Laws, whether such liability or obligation or
responsibility is known or unknown, contingent or accrued, arising as a result
of or in connection with (A) any violation or alleged violation of Environmental
Law, before or after the Closing Date, with respect to the ownership or
operation of the Plant; (B) compliance with applicable Environmental Laws before
or after the Closing Date with respect to the ownership or operation of the
Plant; (C) loss of life, injury to persons or property or damage to natural
resources caused (or allegedly caused) by any Recognized Environmental Condition
on, in, under, adjacent to or migrating from the Plant before or after the
Closing Date, including, but not limited to, Hazardous Substances contained in
building materials at or adjacent to the Plant or in the soil, surface water,
sediments, groundwater, landfill cells, or in other environmental media at the
Plant; (D) the investigation and/or Remediation of Hazardous Substances that are
present or have been Released before or after the Closing Date at, on, in,
under, adjacent to or migrating from the Plant, including, but not limited to,
Hazardous Substances contained in building materials at the Plant or in the
soil, surface water, sediments, groundwater, landfill cells or in other
environmental media at or adjacent to the Plant; and (E) the investigation
and/or Remediation of Hazardous Substances that are disposed, stored,
transported, discharged, Released, recycled, or the arrangement of such
activities, in connection with the ownership or operation of the Plant, at any
off-site location.

Purchaser acknowledges and agrees that the Losses described in Sections
9.3(a)(iii) and 9.3(a)(iv) shall be retained by PGV and transferred with the
transfer of the Purchased Shares and shall continue to be the responsibility of
PGV and Purchaser.

         SECTION 9.4 Notice of Claim. Subject to the terms of this Agreement and
upon a Party's receipt of notice of the assertion of a claim or of the
commencement of any suit, action or proceeding made or brought by any Person who
is not a Party to this Agreement or an Affiliate of either Party, the Party
seeking indemnification hereunder (the "Indemnitee") will promptly notify the
Party against whom indemnification is sought (the "Indemnitor") in writing of
any damage, claim, loss, liability or expense which the Indemnitee has
determined has given or could give rise to a claim under Section 9.2 or Section
9.3. Such written notice is herein referred to as a "Notice of Claim." A Notice
of Claim will specify, in reasonable detail, the material facts known to the
Indemnitee regarding the claim. Subject to the terms of this Agreement, the
failure to provide (or timely provide) a Notice of Claim will not affect the
Indemnitee's rights to indemnification; provided, however, that the Indemnitor
is not obligated to indemnify the Indemnitee for the increased amount of any
claim which would otherwise have been payable to the extent that the increase
resulted from the Indemnitee's failure to timely deliver a Notice of Claim.

         SECTION 9.5 Defense of Third Party Claims. The Indemnitor will defend,
in good faith and at its expense, any claim or demand set forth in a Notice of
Claim relating to a Third Party Claim and the Indemnitee, at its expense, may
participate in the defense. The Indemnitee may not settle or compromise any
Third Party Claim so long as the



                                       55


Indemnitor is defending it in good faith. If the Indemnitor elects not to
contest a Third Party Claim, the Indemnitee may undertake its defense, and the
Indemnitor will be bound by the result obtained by the Indemnitee. The
Indemnitor may at any time request the Indemnitee to agree to the abandonment of
the contest of the Third Party Claim or to the payment or compromise by the
Indemnitor of the asserted claim or demand. If the Indemnitee does not object in
writing within fifteen (15) days of the Indemnitor's request, then the
Indemnitor may proceed with the action stated in the request. If, within that
fifteen (15) day period, the Indemnitee notifies the Indemnitor in writing that
it has determined that the contest should be continued, the Indemnitor will be
liable under this Article 9 only for an amount up to the amount which the
Indemnitor had proposed as payment or compromise for such Third Party Claim.
This Section 9.5 is subject to the rights of any insurance carrier of Indemnitee
that is defending the Third Party Claim.

         SECTION 9.6 Cooperation. The Party defending the Third Party Claim
will: (a) consult with the other Party throughout the pendency of the Third
Party Claim regarding the investigation, defense, settlement, trial, appeal or
other resolution of the Third Party Claim; and (b) afford the other Party the
opportunity to be associated in the defense of the Third Party Claim. The
Parties will cooperate in the defense of the Third Party Claim. The Indemnitee
will make available to the Indemnitor or its representatives all Records and
other materials reasonably required by them for use in contesting any Third
Party Claim (which Records and other materials shall be subject to the
Confidentiality Agreement). If requested by the Indemnitor, the Indemnitee will
cooperate with the Indemnitor and its counsel in contesting any Third Party
Claim that the Indemnitor elects to contest or, if appropriate, in making any
counterclaim against the Person asserting the claim or demand, or any
cross-complaint against any Person. The Indemnitor will reimburse the Indemnitee
for any expenses incurred by Indemnitee in cooperating with or acting at the
request of the Indemnitor.

         SECTION 9.7 Mitigation and Limitation of Claims. As used in this
Agreement, the term "Indemnifiable Claim" means any Purchaser Claims or Seller's
Claims. Notwithstanding anything to the contrary contained herein:

                  (a) the Indemnitee will take all commercially reasonable steps
to mitigate all losses, damages and the like relating to an Indemnifiable Claim,
including availing itself, to the extent the same are commercially reasonable,
of any defenses, limitations, rights of contribution, claims against third
Persons and other rights at law or equity, and will provide such evidence and
documentation of the nature and extent of the Indemnifiable Claim as may be
reasonably requested by the Indemnitor. The Indemnitee's reasonable steps
include the reasonable expenditure of money to mitigate or otherwise reduce or
eliminate any loss or expense for which indemnification would otherwise be due
under this Article 9, and the Indemnitor will reimburse the Indemnitee for the
Indemnitee's reasonable expenditures in undertaking the mitigation, together
with interest thereon from the date of payment to the date of repayment at the
"prime rate" in effect during such period as published in The Wall Street
Journal;

                                       56


                  (b) any Indemnifiable Claim shall be limited to the amount of
actual out-of-pocket damages sustained by the Indemnitee by reason of such
breach or nonperformance, net of insurance recoveries; provided, that, subject
to the limitations set forth in Sections 9.2(b) and 9.7(c), a Seller Claim for a
breach of this Agreement by Purchaser that results in a termination of this
Agreement or other failure to consummate the Transactions may include any excess
of the Initial Purchase Price over the (i) consideration to be received by
Seller from the sale of the Purchased Shares to a third Person in any subsequent
transaction, or (ii) fair market value of the Purchased Shares if they are not
subsequently sold; and

                  (c) if the Closing occurs, no Party shall have any liability
or obligation to indemnify under Section 9.2(a)(ii) or Section 9.3(a)(ii), as
the case may be, unless the aggregate amount for which such Party would be
liable thereunder, but for this provision, exceeds one million Dollars
($1,000,000), and recovery shall be limited only to such amounts as exceed one
million Dollars ($1,000,000). For purposes of the foregoing, individual claims
of one hundred thousand Dollars ($100,000) or less shall not be aggregated for
purposes of calculating such deductible threshold amount or for calculating
damages in excess of such amount. Nothing in this Section 9.7(c) is intended to
modify or limit a Party's liability or obligation hereunder for other
Indemnifiable Claims. Notwithstanding the foregoing, the limits in this Section
9.7(c) shall not apply to any claims relating to breach of Section 4.5 or
Section 6.6.

         SECTION 9.8 Adjustment to Purchase Price. Any and all payments required
to be made under this Article 9 and Section 7.5 will be treated as an adjustment
to the Purchase Price.

         SECTION 9.9 Specific Performance.

                  (a) Seller acknowledges that the Transactions are unique and
that Purchaser will be irreparably injured should such Transactions not be
consummated in a timely fashion. Consequently, Purchaser will not have an
adequate remedy at law if Seller shall fail to sell the Purchased Shares when
required to do so hereunder. In such event, Purchaser shall have the right, in
addition to any other remedy available in equity or law, to specific performance
of such obligation by Seller, subject to Purchaser's performance of its
obligations hereunder.

                  (b) Purchaser acknowledges that the Transactions are unique
and that Seller will be irreparably injured should such Transactions not be
consummated in a timely fashion. Consequently, Seller will not have an adequate
remedy at law if Purchaser shall fail to purchase the Purchased Shares when
required to do so hereunder. In such event, Seller shall have the right, in
addition to any other remedy available in equity or law, to specific performance
of such obligation by Purchaser, subject to Seller's performance of its
obligations hereunder.



                                       57


         SECTION 9.10 Survival; Time Limitation for Indemnification. The terms
and provisions of this Agreement shall survive the Closing. Notwithstanding the
foregoing, after Closing, any assertion by Purchaser or any Purchaser
Indemnified Party that Seller is liable to Purchaser or any Purchaser
Indemnified Party, or any assertion by Seller or any Seller's Indemnified Party
that Purchaser is liable to Seller or any Seller's Indemnified Party, for
indemnification under the terms of this Agreement or otherwise in connection
with the Transactions must be made in writing and must be given to Seller or
Purchaser, as the case may be (or not at all) on or prior to the date that is
twelve (12) months after the Closing Date, except, in the case of Purchaser, for
matters addressed in Sections 5.23 and 7.5(e), which must be made in writing and
must be given to Seller (or not at all) on or prior to the date that is ninety
(90) days after the date on which the applicable statute of limitations expires
with respect to the matters covered thereby.

         SECTION 9.11 Release. Except for the Excluded Liabilities and Seller's
obligations hereunder including, without limitation, under this Article 9
(including without limitation Seller's obligations under this Article 9 as the
result of the breach of any provision of this Agreement), Purchaser on behalf of
itself and each of its Affiliates, and on behalf of each of its and their
successors and assigns, hereby waives its right to recover from Seller and its
Affiliates and any Person acting on behalf of Seller or any such Affiliates, and
forever releases and discharges Seller, any such Affiliates and any such other
Person, from any and all Losses (including, without limitation, attorneys' fees
and costs), whether direct or indirect, known or unknown, foreseen or
unforeseen, that may arise on account of or in any way be connected with any of
the Companies or the Plant, including without limitation, (a) all liabilities or
obligations under or related to Environmental Laws or relating to any claim in
respect of Recognized Environmental Conditions or Hazardous Substances arising
under Applicable Laws, including Environmental Laws, and (b) all liabilities
that in any way arise out of or are related to or associated with the ownership,
possession, use or operation of any of the assets of any of the Companies,
including the Plant, before or after the Closing. In this regard, Purchaser, on
behalf of itself and each of its Affiliates, and each of its and their
successors and assigns, expressly waives any and all rights and benefits that it
now has or they now have, or in the future may have, conferred upon it or them
by virtue of any statute 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.
Purchaser, on behalf of itself and each of its Affiliates, and each of its and
their successors and assigns, hereby further acknowledges that it is aware that
factual matters now unknown to it or them may have given or may hereafter give
rise to claims, losses and liabilities that are presently unknown, unanticipated
and unsuspected, that the release contained herein has been negotiated and
agreed upon in light of such awareness, and that it nevertheless hereby intends
to be bound and to bind each of its Affiliates, and each of its and their
successors and assigns, to the release set forth above.


                                       58


                                   ARTICLE 10

                        PURCHASER'S CONDITIONS TO CLOSING

         The obligation of Purchaser to consummate the Transactions shall be
subject to fulfillment at or prior to the Closing of the following conditions,
except to the extent Purchaser waives such fulfillment in writing:

         SECTION 10.1 Compliance with Provisions. Seller shall have performed or
complied in all material respects with all covenants and agreements contained in
this Agreement on its part required to be performed or complied with at or prior
to the Closing.

         SECTION 10.2 HSR Act. The waiting period under the HSR Act applicable
to the consummation of the sale of the Purchased Shares contemplated hereby
shall have expired or been terminated.

         SECTION 10.3 No Restraint. There shall be no:

                  (a) injunction, restraining order or order of any nature
issued and outstanding by any Governmental Authority of competent jurisdiction
over the Parties which directs that the Transactions shall not be consummated as
herein provided;

                  (b) suit, action or other proceeding by any Governmental
Authority of competent jurisdiction over the Parties pending or threatened
(pursuant to a written notification), wherein such complainant seeks the
restraint or prohibition of the consummation of the Transactions; or

                  (c) action taken, or law enacted, promulgated or deemed
applicable to the Transactions, by any Governmental Authority of competent
jurisdiction over the Parties which would render the purchase and sale of the
Purchased Shares illegal;

provided, that the Parties will use their commercially reasonable efforts to
litigate against, and to obtain the lifting of, any such injunction, restraining
or other order, restraint, prohibition, action, suit, law or penalty.

         SECTION 10.4 Required Regulatory Approvals and Consents. Without
limiting the applicability of Sections 7.1 and 7.4, Purchaser shall have
received all of Purchaser's Required Regulatory Approvals and Purchaser's
Required Consents and Seller shall have received all of Seller's Required
Regulatory Approvals and Seller's Required Consents. In the event that any such
Approval requires any modification to this Agreement or the Transactions,
imposes any condition to the effectuation of the Transactions, or places any
restrictions upon Purchaser's ownership of the Plant, then such modifications,
conditions or restrictions shall be subject to Purchaser's approval to the
extent that such modifications, conditions and restrictions, if any, are not
contemplated by this Agreement and would, individually or in the aggregate,
result in a Material Adverse Effect upon


                                       59


Purchaser, its ownership of the Plant or the operation of the Plant after the
Closing; provided, however, that Purchaser shall be deemed to have approved of
any such modifications, conditions or restrictions to the extent that Purchaser
fails to disapprove of same in a written notice to Seller received no later than
fifteen (15) Business Days following in the case of a Purchaser's Required
Regulatory Approvals the public announcement of the decision of the Governmental
Authority imposing such modification, condition or restriction and in the case
of a Seller's Required Regulatory Approvals Purchaser's receipt of written
notice from Seller of the decision of the Governmental Authority imposing such
modification, condition or restriction.

         SECTION 10.5 Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement that are qualified with respect
to materiality (whether by reference to Material Adverse Effect or otherwise)
shall be true and correct, and the representations and warranties of Seller set
forth in this Agreement that are not so qualified shall be true and correct in
all material respects, on and as of the Closing Date, in each case as though
made on and as of the Closing Date.

         SECTION 10.6 Officer's Certificate. Purchaser shall have received a
certificate from Seller, executed on its behalf by an authorized officer, dated
the Closing Date, to the effect that the conditions set forth in Sections 10.1
and 10.5 have been satisfied by Seller.

         SECTION 10.7 Material Adverse Effect. Except in the case of matters
contemplated in Section 7.6 (which section shall, for the avoidance of doubt,
control all matters discussed thereby), since the Effective Date, no Material
Adverse Effect shall have occurred and be continuing with respect to the Plant
or the Companies.

         SECTION 10.8 Legal Opinion. Purchaser shall have received an opinion or
opinions from Seller's in-house legal counsel dated as of the Closing Date
substantially as to the matters set forth in Exhibit 10.8, subject to the
conditions and limitations therein and to such other customary conditions and
limitations as shall be reasonably acceptable to Purchaser and its legal
counsel.

         SECTION 10.9 No Termination. Neither Party shall have exercised any
termination right such Party is entitled to exercise pursuant to Section 12.1.

         SECTION 10.10 Receipt of Other Documents. Purchaser shall have received
the following:

                  (a) A certificate of good standing with respect to Seller, as
of a recent date, issued by the Secretary of State of the State of Maryland;

                  (b) A copy of Seller's certificates of incorporation certified
as of a recent date, by the Secretary of State of the State of Maryland, and a
copy of Seller's by-laws certified by the Secretary or an Assistant Secretary of
Seller, together with a



                                       60


certificate of the Secretary or an Assistant Secretary of Seller that neither of
such documents has been amended on or after the Effective Date;

                  (c) Copies, certified by the Secretary or an Assistant
Secretary of Seller, of resolutions of Seller authorizing the execution and
delivery by Seller of this Agreement, and authorizing or ratifying of all of the
other agreements and instruments to be executed and delivered by Seller in
connection herewith;

                  (d) A certificate of the Secretary or an Assistant Secretary
of Seller identifying the name and title and bearing the signatures of the
individuals authorized by Seller to execute and deliver this Agreement and the
other agreements and instruments contemplated hereby;

                  (e) Written resignations or terminations of each of the
directors and officers of each of the Companies, effective as of the Closing;

                  (f) A certificate of good standing with respect to each of the
Companies, as of recent date, issued by the Secretary of State of each of their
respective states of incorporation/formation and each other state in which the
Companies are qualified to do business; and

                  (g)      A listing of the items in Inventory.

         SECTION 10.11 Loan Documents. Pursuant to Section 7.18, Seller shall
have taken all steps and binding commitment necessary to irrevocably satisfy in
full at the Closing the Debt Payoff Amount and any other amounts required to
satisfy in full the Loan Documents (including, but not limited to, all fees,
penalties, early termination payments, costs, and the like), terminate all of
the Loan Documents and secure a release from all of the counterparties thereto,
finally and forever releasing the Companies, Seller and their Affiliates under
the Loan Documents and releasing all Encumbrances associated with the Loan
Documents (such releases to be in form and substance reasonably satisfactory to
Seller and Purchaser), including, but not limited to, the Debt Service Reserve
Guaranty and the Pledge Agreement.

                                   ARTICLE 11

                         SELLER'S CONDITIONS TO CLOSING

         The obligation of Seller to consummate the Transactions shall be
subject to fulfillment at or prior to the Closing of the following conditions,
except to the extent Seller waives such fulfillment in writing:

         SECTION 11.1 Compliance with Provisions. Purchaser shall have performed
or complied in all material respects with all covenants and agreements contained
in this Agreement on its part required to be performed or complied with at or
prior to the



                                       61


Closing, including but not limited to the payment of the Initial Purchase Price,
as adjusted pursuant to Section 3.3, to Seller.

         SECTION 11.2 HSR Act. The waiting period under the HSR Act applicable
to the consummation of the sale of the Purchased Shares contemplated hereby
shall have expired or been terminated.

         SECTION 11.3 No Restraint. There shall be no:

                  (a) injunction, restraining order or order of any nature
issued and outstanding by any Governmental Authority of competent jurisdiction
over the Parties which directs that the Transactions shall not be consummated as
herein provided;

                  (b) suit, action or other proceeding by any Governmental
Authority of competent jurisdiction over the Parties pending or threatened
(pursuant to a written notification), wherein such complainant seeks the
restraint or prohibition of the consummation of the Transactions; or

                  (c) action taken, or law enacted, promulgated or deemed
applicable to the Transactions, by any Governmental Authority of competent
jurisdiction over the Parties which would render the purchase and sale of the
Purchased Shares illegal;

provided, that the Parties will use their commercially reasonable efforts to
litigate against, and to obtain the lifting of, any such injunction, restraining
or other order, restraint, prohibition, action, suit, law or penalty.

         SECTION 11.4 Required Regulatory Approvals and Consents. Without
limiting the generality of Sections 7.1 and 7.4, Seller shall have received all
of Seller's Required Regulatory Approvals and Seller's Required Consents and
Purchaser shall have received all of Purchaser's Required Regulatory Approvals
and Purchaser's Required Consents. In the event that any such Approval requires
any modification to this Agreement or the Transactions, imposes any condition to
the effectuation of the Transactions, or places any restrictions upon Seller's
conveyance of the Purchased Shares, or the Companies' ownership of the Plant or
the operation of the Plant prior to the Closing, then such modifications,
conditions or restrictions shall be subject to Seller's approval to the extent
that such modifications, conditions and restrictions, if any, are not
contemplated by this Agreement and would, individually or in the aggregate,
result in a Material Adverse Effect upon Seller, the Companies' ownership of the
Plant or the operation of the Plant prior to the Closing; provided, however,
that Seller shall be deemed to have approved of any such modifications,
conditions or restrictions to the extent that Seller fail to disapprove of same
in a written notice to Seller received no later than fifteen (15) Business Days
following the public announcement of the decision of the Governmental Authority
imposing such modification, condition or restriction.

                                       62


         SECTION 11.5 Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement that are qualified with
respect to materiality (whether by reference to Material Adverse Effect or
otherwise) shall be true and correct, and the representations and warranties
that are not so qualified shall be true and correct in all material respects, on
and as of the Closing Date, in each case as though made on and as of the Closing
Date.

         SECTION 11.6 Officer's Certificate. Seller shall have received a
certificate from Purchaser, executed on its behalf by an authorized officer,
dated the Closing Date, to the effect that the conditions set forth in Sections
11.1 and 11.5 have been satisfied by Purchaser.

         SECTION 11.7 Legal Opinion. Seller shall have received an opinion or
opinions from Purchaser's counsel dated the Closing Date substantially as to the
matters set forth in Exhibit 11.7, subject to the conditions and limitations
therein and to such other customary conditions and limitations as shall be
reasonably acceptable to Seller and its counsel.

         SECTION 11.8 No Termination. Neither Party shall have exercised any
termination right such Party is entitled to exercise pursuant to Section 12.1.

         SECTION 11.9 Loan Documents. Pursuant to Section 7.18, Seller shall
have taken all steps and binding commitment necessary to irrevocably satisfy in
full at the Closing the Debt Payoff Amount and any other amounts required to
satisfy in full the Loan Documents (including, but not limited to, all fees,
penalties, early termination payments, costs, and the like), terminate all of
the Loan Documents and secure a release from all of the counterparties thereto,
finally and forever releasing the Companies, Seller and its Affiliates under the
Loan Documents releasing all Encumbrances associated with the Loan Documents
(such releases to be in form and substance reasonably satisfactory to Seller and
Purchaser), including, but not limited to, the Debt Service Reserve Guaranty and
the Pledge Agreement.

         SECTION 11.10 Receipt of Other Documents. Seller shall have received
the following:

                  (a) A certificate of good standing with respect to Purchaser,
as of a recent date, issued by the appropriate government official of its
jurisdiction of formation;

                  (b) Copies of the limited liability company agreement and
certificate of formation of Purchaser certified as of a recent date by the
appropriate government official of its jurisdiction of formation, together with
a certificate of a duly authorized manager of Purchaser that none of such
documents have been amended on or after the Effective Date;

                                       63


                  (c) Copies, certified by the manager of Purchaser, of
resolutions of Purchaser authorizing the execution and delivery by Purchaser of
this Agreement, and authorizing or ratifying all of the other agreements and
instruments, in each case, to be executed and delivered by Purchaser in
connection herewith;

                  (d) A certificate of the manager of Purchaser identifying the
name and title and bearing the signatures of the manager and officers of
Purchaser authorized to execute and deliver this Agreement, and the other
agreements and instruments contemplated hereby; and

                  (e) Insurance certificates evidencing compliance with Section
7.7.

                                   ARTICLE 12

                                   TERMINATION

         SECTION 12.1 Termination.

                  (a) This Agreement may be terminated at any time prior to the
Closing Date by mutual written consent of the Parties.

                  (b) This Agreement may be terminated by either Party if the
Closing shall not have occurred on or before one hundred (100) days following
the Effective Date (the "Termination Date"); provided, however, that the right
to terminate this Agreement under this Section 12.1(b) shall not be available to
a Party whose failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur on or before
such date.

                  (c) This Agreement may be terminated by Purchaser if there has
been a violation or breach by Seller of any agreement, covenant, representation
or warranty contained in this Agreement which has not been waived by Purchaser
and such violation or breach constitutes a Material Adverse Effect and is not
cured within thirty (30) days after Seller's receipt of notice from Purchaser
concerning such violation or breach.

                  (d) This Agreement may be terminated by Seller if there has
been a violation or breach by Purchaser of any agreement, covenant,
representation or warranty contained in this Agreement which has not been waived
by Seller and such violation or breach constitutes a Material Adverse Effect and
is not cured within thirty (30) days after Purchaser's receipt of notice from
Seller concerning such violation or breach.

                  (e) There has been a material adverse change in the financial
condition of Purchaser that constitutes a Material Adverse Effect.

                  (f) This Agreement may be terminated by either Party in
accordance with the provisions of Sections 7.6(b) or 7.6(c).


                                       64


         SECTION 12.2 Procedure and Effect of Termination.

                  (a) If there has been a termination pursuant to Section 12.1,
then this Agreement shall be deemed terminated, and all further obligations of
the Parties hereunder shall terminate, except that the obligations set forth in
Sections 7.8, 8.2, 8.3, and 8.4 and in Article 9, Article 12 and Article 13
shall survive. In the event of such termination of this Agreement, there shall
be no liability for damages on the part of a Party to the other Party under and
by reason of this Agreement or the Transactions except as set forth in Article 9
and except for fraud or willful misconduct of a Party, the remedies for which
shall not be limited by the provisions of this Agreement. The foregoing
provisions shall not, however, limit or restrict the availability of specific
performance or other injunctive or equitable relief to the extent that specific
performance or such other relief would otherwise be available to a Party
hereunder.

                  (b) In the event a Party shall elect to terminate this
Agreement pursuant to Section 12.1, such Party shall forthwith provide notice
thereof to the other Party whereupon this Agreement shall terminate and the
Transactions shall be abandoned. Upon any such termination, all filings,
applications and other submissions made pursuant to this Agreement shall, to the
extent practicable, be withdrawn from the respective Governmental Authority by
the Party having filed or submitted the same.

                                   ARTICLE 13

                               GENERAL PROVISIONS

         SECTION 13.1 Expenses. Whether or not the Transactions are consummated,
except as otherwise provided in any other provision of this Agreement, all costs
and expenses (including attorneys' and consultants' fees, costs and expenses)
incurred in connection with this Agreement and the Transactions shall be paid by
the Party incurring such expenses; provided, however, all fees, charges and
costs of economists and other experts, if any, jointly retained by the Parties
in connection with submissions made to any Governmental Authority and advice in
connection therewith respecting approval of the Transactions will be borne by
Purchaser.

         SECTION 13.2 Entire Document; Modification or Amendment. This Agreement
(including the Exhibits and Schedules hereto), and the Confidentiality Agreement
contain the entire agreement between the Parties with respect to the
Transactions, and supersede all negotiations, representations, warranties,
commitments, offers, contracts and writings (except for the Confidentiality
Agreement) prior to the execution date of this Agreement, written or oral. No
modification or amendment of any provision of this Agreement shall be effective
unless made in writing and duly signed by the Parties referring specifically to
this Agreement.

                                       65


         SECTION 13.3 Schedules and Exhibits.

                  (a) The Parties agree and acknowledge that the Schedules in
this Agreement may be incomplete or subject to revision prior to the Closing.
The Parties will cooperate and work in good faith to complete and update such
Schedules in a manner consistent with the provisions of Section 7.2 and the
other requirements of this Agreement. For purposes of determining whether
Purchaser's conditions set forth in Section 10.5 have been fulfilled, the
Schedules shall be deemed to include only the information contained therein on
the Effective Date, and shall be deemed to exclude all information contained in
any update, supplement or amendment thereto to the extent such information
relates to (i) periods prior to the "as of" dates of the Schedules attached to
this Agreement on the Effective Date, or (ii) any conditions or matters that do
not have a Material Adverse Effect; provided, however, that if Closing shall
occur, then all matters disclosed by either Party pursuant to any such update,
supplement or amendment at or prior to the Closing shall be deemed to be matters
of which the other Party had Knowledge.

                  (b) All Schedules and Exhibits hereto which are referred to
herein are hereby made a part hereof and incorporated herein by such reference.
Each Schedule to this Agreement shall be deemed to include and incorporate all
disclosures made on the other Schedules to this Agreement. Certain information
set forth in the Schedules is included solely for informational purposes, is not
an admission of liability with respect to the matters covered by the
information, and may not be required to be disclosed pursuant to this Agreement.
The specification of any dollar amount in the representations and warranties
contained in this Agreement or the inclusion of any specific item in the
Schedules is not intended to imply that such amounts (or higher or lower
amounts) are or are not material, and no Party shall use the fact of the setting
of such amounts or the fact of the inclusion of any such item in the Schedules
in any dispute or controversy between the Parties as to whether any obligation,
item, or matter not described herein or included in a Schedule is or is not
material for purposes of this Agreement.

         SECTION 13.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         SECTION 13.5 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid, binding and
enforceable under Applicable Laws, but if any provision of this Agreement is
held to be invalid, void (or voidable) or unenforceable under Applicable Laws,
such provision shall be ineffective only to the extent held to be invalid, void
(or voidable) or unenforceable, without affecting the remainder of such
provision or the remaining provisions of this Agreement. Upon such determination
that any term or other provision is invalid, illegal, or incapable of being
enforced, the Parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as possible in an
acceptable manner to



                                       66


the end that the Transactions are fulfilled to the extent possible. To the
extent permitted by Applicable Laws, the Parties waive any provision of
Applicable Law that renders any provision hereof prohibited or unenforceable in
any respect.

         SECTION 13.6 Assignability. The rights under this Agreement shall not
be assignable or transferable nor the duties delegable by any Party without the
prior written consent of the other Parties, which consent may be granted or
withheld in such other Party's sole discretion.

         SECTION 13.7 Captions. The captions of the various Articles, Sections,
Exhibits and Schedules of this Agreement have been inserted only for convenience
of reference and do not modify, explain, enlarge or restrict any of the
provisions of this Agreement.

         SECTION 13.8 Governing Law and Forum. This Agreement and the rights and
obligations of the parties hereunder and the Transactions shall be governed by,
and construed in accordance with, the law of the State of New York without
respect to its conflict of laws provisions. THE PARTIES HERETO AGREE THAT VENUE
IN ANY AND ALL ACTIONS AND PROCEEDINGS RELATED TO THE SUBJECT MATTER OF THIS
AGREEMENT SHALL BE IN THE STATE AND FEDERAL COURTS IN NEW YORK, NEW YORK, WHICH
COURTS SHALL HAVE EXCLUSIVE JURISDICTION FOR SUCH PURPOSE, AND THE PARTIES
HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY
SUCH ACTION OR PROCEEDING. SERVICE OF PROCESS MAY BE MADE IN ANY MANNER
RECOGNIZED BY SUCH COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

         SECTION 13.9 Notices. All notices, requests, demands and other
communications under this Agreement must be in writing and must be delivered in
person or sent by certified mail, postage prepaid, by overnight delivery, or by
telefacsimile and properly addressed as follows:

                  If to Seller:

                      Constellation Power, Inc.
                      750 East Pratt Street
                      Baltimore, Maryland 21202
                      Attention:  Bruce Douglas
                      Facsimile:  410.230.4609

                                       67


                  If to COSI PUNA:

                      COSI Puna, Inc.
                      750 East Pratt Street
                      Baltimore, Maryland 21202
                      Attention:  Bruce Douglas
                      Facsimile:  410.230.4609

                  With copies to:

                      Constellation Energy Group, Inc.
                      750 East Pratt Street, 18th Floor
                      Baltimore, Maryland 21202
                      Attention:  General Counsel
                      Facsimile:  410.783.3609

                        and

                      Constellation Energy Group, Inc.
                      750 East Pratt Street
                      Baltimore, Maryland 21202
                      Attention:  John Paffenbarger
                      Facsimile:  410.783.2819

                  If to Purchaser:

                      ORNI 8 LLC
                      c/o Ormat Nevada Inc.
                      980 Greg Street
                      Sparks, NV 89509
                      Attention:  President
                      Facsimile: 775.356.9039

                  If to Purchaser's Parent:

                      Ormat Nevada Inc.
                      980 Greg Street
                      Sparks, NV 89509
                      Attention:  President
                      Facsimile: 775.356.9039

                                       68


                  With a copy to:

                      Perkins Coie LLP
                      1201 Third Avenue, Suite 4000
                      Seattle, WA 98101
                      Attention:  Robert E. Giles
                      Facsimile: 206.583.8500

Any Party may from time to time change its address for the purpose of notices to
that Party by a similar notice specifying a new address, but no such change is
effective until it is actually received by the Party sought to be charged with
its contents. Notices which are addressed as provided in this Section 13.9 given
by overnight delivery or mail shall be effective (a) upon delivery, if delivered
personally or by overnight delivery, (b) five (5) days following deposit in the
United States mail, postage prepaid, if delivered by mail, or (c) at such time
as delivery is refused by the addressee upon presentation. Notices which are
addressed as provided in this Section 13.9 given by telefacsimile shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next business day after receipt if
not received during the recipient's normal business hours. All notices by
telefacsimile shall be confirmed promptly by the sender after transmission in
writing by certified mail or overnight delivery.

         SECTION 13.10 No Third Party Beneficiaries. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any Persons other than the Parties and their
respective permitted successors and assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third
Persons to any Party, nor give any third Persons any right of subrogation or
action against any Party.

         SECTION 13.11 No Relationship. Nothing in this Agreement creates or is
intended to create an association, trust, partnership, joint venture or any
other entity or similar legal relationship between the Parties, or impose a
trust, partnership or fiduciary duty, obligation, or liability on or with
respect to either Party. Neither Party is or shall act as or be the agent or
representative of the other Party.

         SECTION 13.12 Construction of Agreement. This Agreement and any
documents or instruments delivered pursuant hereto shall be construed without
regard to the identity of the Person who drafted the various provisions of the
same. Each and every provision of this Agreement and such other documents and
instruments shall be construed as though the Parties participated equally in the
drafting of the same. Consequently, the Parties acknowledge and agree that any
rule of construction that a document is to be construed against the drafting
party shall not be applicable either to this Agreement or such other documents
and instruments.

         SECTION 13.13 Closing Over Breaches or Unsatisfied Conditions. If
either Party elects to proceed with the Closing with Knowledge by such Party
(evidenced in writing) of any failure of any condition to be satisfied in its
favor or the breach of any



                                       69


representation, warranty or covenant by the other Party, then the condition that
is unsatisfied or the representation, warranty or covenant which is breached at
the Closing Date will be deemed waived by such Party, and such Party shall be
deemed to fully release and forever discharge the other Party on account of any
and all claims, demands or charges, known or unknown, with respect to the same.

         SECTION 13.14 Waiver of Compliance. Except as provided in Section
13.13, to the extent permitted by Applicable Laws, any failure of any of the
Parties to comply with any obligation, covenant, agreement or condition set
forth herein may be waived by the Party entitled to the benefit thereof only by
a written instrument signed by such Party, but any such waiver shall not operate
as a waiver of, or estoppel with respect to, any prior or subsequent failure to
comply therewith. The failure of a Party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.

         SECTION 13.15 Consents Not Unreasonably Withheld. Wherever the consent
or approval of any Party is required under this Agreement, such consent or
approval shall not be unreasonably withheld, delayed or conditioned unless such
consent or approval is to be given by such Party at the sole or absolute
discretion of such Party or is otherwise similarly qualified.

         SECTION 13.16 Survival.

                  (a) The representations and warranties given or made by any
Party in Articles 4, 5 or 6 hereof or in any certificate or other writing
furnished in connection herewith shall survive the Closing for a period of
twelve (12) months after the Closing Date and shall thereafter terminate and be
of no further force or effect; provided, however, that:

                       (i) all representations and warranties relating to Taxes
and Tax Returns shall survive the Closing (including for purposes of Section
7.5) for ninety (90) days after the date on which the applicable statutes of
limitation (plus any extensions or waivers thereof) expires with respect to the
matter covered thereby; and

                       (ii) any representation or warranty as to which a claim
(including a contingent claim) shall have been asserted during the survival
period shall continue in effect with respect to such claim until such claim
shall have been finally resolved or settled.

Subject to Sections 6.9, 6.10, 6.13 and 13.13, each Party shall be entitled to
rely upon the representations and warranties of the other Party set forth
herein, notwithstanding any investigation or audit conducted before or after the
Closing Date or the decision of any Party to complete the Closing.

                                       70


                  (b) The covenants and agreements of the Parties contained in
this Agreement, including those set forth in Article 9, shall survive the
Closing until performed, unless otherwise specified herein.

         SECTION 13.17 Time of Essence. Time is of the essence in the
performance by the Parties of their obligations under this Agreement. If any
date specified in this Agreement for giving any notice or taking any action is
not a Business Day (or if the period during which any notice is required to be
given or any action taken expires on a date which is not a Business Day), then
the date for giving such notice or taking such action (and the expiration date
of such period during which notice is required to be given or action taken)
shall be the next day which is a Business Day.

         SECTION 13.18 Purchaser's Parent Support. From the date hereof until
the effectiveness of the Closing, Purchaser's Parent agrees to provide Purchaser
any and all financial support necessary to permit Purchaser to perform its
obligations hereunder. After Closing, Purchaser's Parent shall have no
obligation or liability under this Agreement.

                            [SIGNATURE PAGE FOLLOWS]


                                       71





         IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.

                                      CONSTELLATION POWER, INC.



                                      By:  /s/ John T. Long
                                          -----------------------------------
                                          Name:  John T. Long
                                          Title: Senior Vice President


                                      COSI PUNA, INC.



                                      By:  /s/ John T. Long
                                          -----------------------------------
                                          Name:  John T. Long
                                          Title: President


                                      ORNI 8 LLC



                                      By: Ormat Nevada Inc., Its Manager
                                             By:  /s/ Rad Ravin
                                                 ----------------------------
                                             Name:  Rad Ravin
                                                   --------------------------
                                             Title:  V.P. Business Development
                                                    -------------------------


                                      ORMAT NEVADA INC.



                                      By:  /s/ Connie Stechman
                                          ------------------------------------
                                      Name: Connie Stechman
                                            ----------------------------------
                                      Title: Assistant Secretary






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



                                                                  Exhibit 10.2.2

                               PURCHASE AGREEMENT

This Asset Purchase Agreement (this "Agreement") is made and entered into on
July 15th, 2004, by and between Ormat Industries, Ltd., an Israeli Public
corporation ("Seller"), and Ormat Systems Ltd., an Israeli corporation
("Buyer").


WHEREAS,    Seller is engaged, directly and through its subsidiaries, among
            other things, in the development, manufacturing, construction,
            operation, management and acquisition of geothermal power plants and
            power units (the "BUSINESS"); and

WHEREAS,    Buyer is an indirect wholly owned subsidiary of the Seller; and

WHEREAS,    Both parties have resolved that it would be in their best interest
            to enter into a restructuring process whereby Buyer will purchase
            and assume from Seller, and Seller will sell and assign to Buyer,
            certain assets and liabilities related to the Business, pursuant to
            the terms and subject to the conditions set forth herein.

     NOW, THEREFORE, In consideration of the mutual representations, covenants
     and warranties contained herein, and for other good and valuable
     consideration, the receipt and sufficiency of which is hereby acknowledged,
     Seller and Buyer intending to legally bound hereby, mutually agree as
     follows:


1.   DEFINITIONS

     1.1    Defined Terms. As used herein, the terms below shall have the
            following meanings:

     1.2    "Assumed Contracts" shall mean all Contracts relating directly to
            the Purchased Business, unless included in the Excluded Contracts,
            to which Seller is a party and to which Buyer shall be a party in
            lieu of Seller after the Closing Date but as of the Effective Date,
            as defined below, and shall be assumed, performed and discharged by
            Buyer in place of Seller after the Closing Date as of the Effective
            Date, including all receivables derived from such Assumed Contracts.

     1.3    "Assumed Liabilities" shall mean all direct and/or indirect
            liabilities and obligations, including contingent liabilities, of
            Seller in connection with the Purchased Business,


                                      -2-

            and those under the Assumed Contracts, including, without
            limitation, (a) to furnish services, and other non-cash benefits to
            another party after the Closing Date and (b) to pay for goods,
            services, licenses, royalties and other non-cash benefits that
            another party will have furnished to it after the Effective Date;
            and (c) to repay debts, to pay taxes, fines, judgments, all of which
            Buyer shall be responsible after the Closing Date as of the
            Effective Date.

     1.4    "Books and Records" shall mean all records (or true and complete
            copies thereof), including computerized books and records, owned or
            used by Seller that are used by Seller for the operation of the
            Purchased Business and/or that are necessary for the continued
            operation of the Purchased Business and for the fulfillment of the
            Assumed Liabilities following the Closing, including engineering
            information (including written materials and machine-readable text
            subject to display and printout), including development
            documentation (i.e. documentation used in conjunction with source
            code in the development process) (collectively "DOCUMENTATION"),
            sales and promotional literature, manuals and data, all customer
            files (including tests data and other inputs and communications
            between Seller and its customers), all lists of customers, suppliers
            and vendors, copies of the Assumed Contracts, and any files relating
            to any action with respect to the Seller, but specifically excluding
            (i) corporate minute and stock books and financial information other
            than financial information relating specifically to the Purchased
            Business and/or Assumed Liabilities, and (ii) the foregoing books
            and records relating to the Excluded Assets, as defined below.

     1.5    "Business Day" shall mean a day that is not a Friday or a Saturday
            or a statutory or civil holiday in the State of Israel.

     1.6    "Contracts" shall mean any and all contracts, agreements,
            arrangements, leases, mortgages, bonds, notes and other instruments,
            commitments, undertakings and obligations, whether or not in
            writing, including all receivables and payables derived therefrom.

     1.7    "Effective Date" shall mean July 1st, 2004.

     1.8    "Assets" shall mean any tangible property, equipment, inventory,
            receivables, owned, used or held for use by Seller (including
            equipment, furniture, computers and computer supplies, servers,
            machinery, office materials and supplies and inventories


                                      -3-


            of any kind or nature), for the operation and/or the management of
            the Purchased Business but other than the Excluded Assets.

     1.9    "Excluded Assets" shall mean certain assets set forth in SCHEDULE
            1.9, which will not be transferred or conveyed to Buyer hereunder,
            but instead will be retained by Seller following the Closing Date.

     1.10   "Excluded Business" shall mean the Excluded Assets together with the
            Excluded Liabilities and the Excluded Contracts, all of which does
            not form part of the Purchased Business. For the avoidance of any
            doubt, the Excluded Business shall include all of the Business which
            is owned and operated by Ormat Technologies Inc., directly or
            through its subsidiaries..

     1.11   "Excluded Liabilities" and "Excluded Contracts" shall mean certain
            liabilities set forth in SCHEDULE 1.11 and certain contracts set
            forth in SCHEDULE 1.11A, respectively, which will not be transferred
            or conveyed to, nor assumed by, Buyer hereunder, but instead will be
            retained by Seller following the Closing Date.

     1.12   "Intangibles" shall mean all goodwill associated with the Purchased
            Business, together with the right to represent to third parties that
            Buyer is the successor to the Purchased Business.

     1.13   "Person" shall mean any person or entity, whether an individual,
            trustee, corporation, general partnership, limited partnership,
            trust, unincorporated organization, limited liability company,
            business association, firm, joint venture, governmental agency or
            authority or otherwise.

     1.14   "Purchased Business" shall mean all of the Business other than the
            Excluded Business, but including all of Seller's right, title and
            interest as of the Effective Date in the Assumed Contracts, the
            Assets, the Intangibles, the Assumed Liabilities, the Books and
            Records, Seller Intellectual Property, the accounts receivable and
            payable, transferred to Buyer upon Closing as of the Effective Date
            with respect to the Purchased Business and, to the extent
            transferable, (i) the rights under agreements with employees and
            consultants of Seller concerning confidentiality, and the assignment
            of inventions, (ii) all related claims, causes of action and similar
            rights against any Person arising out of, or related to, such rights
            and (iii) the solar pond assets and all related technology and
            knowhow owned by Solmat Systems Ltd., a



                                      -4-


            wholly owned subsidiary of the Seller, including contingent
            liabilities related to these assets.

     1.15   "Seller Intellectual Property" shall mean any intellectual property
            owned or licensed by Seller with respect to the Purchased Business,
            including without limitation, (i) all of Seller's patents, patent
            applications, trademark applications, registered trademarks, trade
            names, logos, trade dress, service marks and all applications and
            registrations therefore, and all goodwill associated therewith,
            excluding those listed on SCHEDULES 1.15; (ii) all copyright (and
            author's rights, whether published or unpublished, including rights
            to prepare, reproduce and distribute copies, compilations and
            derivative works) used for the operation and management of the
            Purchased Business, including any such rights in any translation of
            Seller's documentation or interfaces made by or on behalf of Seller;
            (iii) trade secret rights, know-how, inventions (whether patentable
            or not), inventor's notes, drawings and designs and Inventor's lists
            (all as embodied in the form of written documentation generally used
            by the engineering group of Seller), proprietary processes or
            formulae, franchises, licenses, technology, technical data and
            customer lists, and all documentation relating to any of the
            foregoing and used for the operation and management of the Purchased
            Business; (iv) all computer programming code (including source code
            and object code, algorithms, display screens, layouts, firmware,
            development tools, files, records and data, all media on which any
            of the foregoing is recorded, all Web addresses, sites and domain
            names), and other intellectual property rights owned by Seller in or
            related to the Purchased Business; (v) all continuations,
            continuations in part, reissues, divisions, renewals, reexaminations
            or extensions of any kind with respect to the intellectual property
            rights described in (i) and (ii); and (iv) all Documentation,
            databases and data collections and all rights therein related to any
            of the foregoing; (vi) all the knowhow and other rights in the
            technology and solar pond assets owned by Solmat Systems Ltd, a
            wholly owned subsidiary of the Seller. The Seller Intellectual
            Property Rights shall not include those rights which are not
            directly connected to the Purchased Business and those which are
            listed in SCHEDULES 1.15.


                                      -5-




2.   OTHER DEFINED TERMS.

     2.1    The following terms shall have the meanings defined for such terms
            in the Sections set forth below:

                   Term                                   Section
                   ----                                   -------
                   Assumed Employees                      5.1.1

                   Business                               Recitals

                   Assignment Period                      3.1.3

                   Closing                                4.1

                   Documentation                          1.4

                   License                                3.1.7


                   Required Services                      3.3

                   Closing and Closing Date               4.1

                   Unassigned Assets                      3.1.4

     2.2    For purposes of this Agreement, (a) "including" shall mean
            "including, but not limited to," "including, without limitation,"
            and other phrases of similar import and (b) "hereof," "herein," and
            "hereunder," and words of similar import, refer to this Agreement as


            a whole (including the Exhibits and Schedules to this Agreement) and
            not to any particular Section hereof.

3.   THE TRANSACTION

     3.1    PURCHASE AND SALE OF PURCHASED BUSINESS.

            3.1.1  Pursuant to the terms and subject to the conditions of this
                   Agreement and Section 3.1.3 below, in exchange for the
                   consideration set forth in Section 3.2 below, at the Closing
                   but as of the Effective Date: (i) Seller shall sell, convey,
                   transfer, assign and deliver to Buyer, and Buyer shall
                   purchase from Seller, the Purchased Business, and (ii) Buyer
                   shall assume all the Assumed Liabilities. Buyer and Seller

                   hereby agree that Buyer shall not have any rights to or


                   obligations under or with respect to the Excluded Assets or
                   the Excluded Liabilities.


                                      -6-


            3.1.2  It is hereby agreed that the transactions contemplated
                   herein, are executed on a "Going Concern" and "As-Is" basis
                   with respect to the Purchased Business, Assumed Liabilities
                   and the value of the Purchased Business.

            3.1.3  Notwithstanding anything to the contrary in this Agreement
                   and without any affect on the Effective Date, the parties
                   hereby undertake to cooperate and use their best efforts to
                   assign the Assumed Contracts and the Assumed Liabilities to
                   the Buyer within 12 months from the Closing Date (the
                   "Assignment Period").

            3.1.4  During the Assignment Period and in the event that the
                   Parties shall mutually determine in good faith that the
                   consents required for the assignment of certain Assumed
                   Contract(s) and/or certain Assumed Liabilities either (i)
                   cannot be obtained, or (ii) may have an adverse affect on the
                   business of the Parties, or (iii) taking into account the
                   nature of such contracts and/or liabilities, their
                   termination dates, their volumes and other relevant facts -
                   it is not practical to engage in their formal assignment,
                   then (a) such Contract(s) and/or Liabilities must not be
                   formally assigned and assumed under Section 3.1.1 above but
                   the provisions of Sections 3.1.5 and 3.1.6 will apply to them
                   (hereinafter "UNASSIGNED ASSETS"); and (b) if Seller obtains
                   such missing consents at any time in the future, Buyer shall
                   assume such Unassigned Assets as if originally included in
                   the assignment under Section 3.1.1, for no additional
                   consideration whatsoever.

            3.1.5  Any Unassigned Asset will be held in trust by Seller for the
                   benefit of the Buyer solely and absolutely as from the
                   Closing Date until such licenses and consents are obtained
                   for its assignment to the Buyer or until its termination or
                   its expiration, as the case may be, and Seller shall account
                   to Buyer on a quarterly basis, and shall deliver to Buyer
                   immediately upon receipt, any notice or other document
                   concerning or relating to such Unassigned Assets or copy
                   thereof, and Seller will permit Buyer to enforce its rights
                   in respect of such Unassigned Assets in the name of Seller.

                   Seller shall provide Buyer with an irrevocable power of


                   attorney to enable Buyer to take any action it finds fit with
                   respect to the Unassigned Assets.


                                      -7-


            3.1.6  As of the Effective Date, Buyer shall be solely responsible
                   and liable for any action and/or omission and/or loss and/or
                   expense arising out of or in connection with the Unassigned
                   Assets and shall indemnify Seller, immediately upon Seller's
                   written demand, for any such loss, expense or damage,
                   sustained by Seller after the Effective Date in connection
                   with the Unassigned Assets. Accordingly, all the business
                   results of the Unassigned Assets shall belong as of the
                   Effective Date to the Buyer.

            3.1.7  Upon Closing Seller shall grant Buyer a worldwide, perpetual,
                   exclusive, royalty free license for the use of the patents
                   and trademarks listed in SCHEDULE 3.1.7(A) and a worldwide,
                   perpetual, non-exclusive, royalty free license for the use of
                   the trademarks listed in Schedule 3.1.7(b) all in connection
                   with Purchased Business pursuant to a license agreement in
                   the form attached hereto as Schedule 3.1.7(c) (the "License")
                   . Buyer shall be entitled to sublicense the License to its
                   parent, which in turn shall be entitled to further sublicense
                   the License to any of its other subsidiaries at its
                   discretion. Notwithstanding anything to the contrary in this
                   Agreement, the parties hereby undertake to cooperate and use



                   their best efforts to convey and transfer to Buyer all of
                   Seller's Intellectual Property which is connected to the
                   Purchased Business.

     3.2    CONSIDERATION.

            3.2.1  In consideration of the (a) sale, transfer, assignment,
                   conveyance and delivery by Seller to Buyer of the Purchased
                   Business; and (b) the grant of the License; Buyer shall pay
                   Seller the amount of USD11,000,000 (Eleven Millions US
                   dollars) (the "PURCHASE PRICE") payable as provided for in
                   Section 3.2.2 hereunder.

            3.2.2  Payment of Purchase Price shall be made by (a) assigning to
                   the account of Buyer of (i) all Seller's liabilities to Bank
                   Continental Ltd. as of July 1st, 2004 with effect from that
                   date, at the total amount of approximately USD5,440,000 and
                   (ii) any amount due for retirement compensation which is in

                   excess of the amounts that were provided for; and (b) the


                   balance after the aforesaid assignments will be paid in cash
                   by wire transfer of immediate


                                      -8-


                   available funds to an account designated by Seller not later
                   than 30 days from the Closing Date.

            3.2.3  In further consideration of work and products orders from
                   customers which are binding upon such customers and currently
                   processed by the Seller and which are transferred under the
                   terms of this Agreement to Buyer (the "ORDERS"), Buyer shall
                   pay Seller a commission as follows:

                   3.2.3.1  A commission equal to 5% of all revenues derived
                            after the Effective Date from Orders described in
                            SCHEDULE 3.2.3.1;

                   3.2.3.2  A commission equal to 2.5% of all revenues derived
                            after the Effective Date from Orders described in
                            SCHEDULE 3.2.3.2.

                   Upon the recording of the aforesaid revenues in Buyer's
                   books, Seller shall charge Buyer for the respective
                   commission provided for above, which will be paid by Buyer
                   upon to Seller upon actual receipt of such revenues by Buyer.

            3.2.4  The Purchase Price assumes that the balance of the working
                   capital items reflected on Seller's financial statements for
                   the period ending June 30th,2004 equals zero (0). If the
                   balance of such working capital items is higher than, or
                   lower than zero, the Purchase Price shall be adjusted (the
                   "Purchase Price Adjustment") in such a way that it will be
                   increased if the balance is a positive number and decreased
                   if the balance is a negative number, in each case by an
                   amount equal to the difference between zero (0) and the
                   actual balance of such working capital items. For purposes of
                   this Section 3.2.4, the balance of the working capital items
                   shall be the difference between (x) the value of the
                   inventory plus the accounts receivable that form part of the
                   Purchased Business, and (y) the accounts payable that form
                   part of the Purchased Business, as reflected on the Seller's
                   financial statements for the period ended June 30, 2004. The
                   Parties shall agree on the Purchase Price Adjustment promptly
                   following and on the basis of, the Seller's financial
                   statements for the period ending June 30th, 2004, and any

                   resulting payment by the Buyer, or refund by the Seller,
                   shall be done no later than September 1st, 2004, by wire
                   transfer of immediately


                                      -9-


                   available funds to an account designated in writing by the
                   party entitled to receive funds.

     3.3    SERVICE AGREEMENT. Buyer hereby undertakes, following the closing of
            the transaction, to provide corporate, financial, secretarial and
            administrative services to the Seller as set forth in SCHEDULE 3.3
            attached hereto (the "REQUIRED SERVICES"), for a total cost of USD
            10,000 per month plus VAT at the applicable rate.

            In addition to the Required Services Buyer hereby undertakes to
            provide Seller, at Sellers' request, with manpower possessing the
            engineering knowledge of the OrCrude technology, in consideration
            for Buyer's cost plus 10%.

            Either party may, at its sole discretion, terminate the Required
            Services or the additional arrangements, or part thereof, at any
            time by delivering a six months prior written notice to the other
            party.

4.   CLOSING

     4.1    Closing. The closing of the transactions contemplated herein (the
            "CLOSING") shall be held on July 15th, 2004 at 10:00 a.m., Israel
            time, at the offices of M. Seligman & Co., or at such other place


            and time otherwise agree to by the Parties hereto (the "CLOSING
            DATE").

     4.2    Deliveries at Closing. At the Closing the following items shall be
            delivered by the parties:

            4.2.1  BY BUYER. Buyer shall deliver to Seller:

                   4.2.1.1  Board of Directors Resolution. Copies of a validly
                            executed resolution of the Board of Directors of
                            Buyer in the form attached hereto as SCHEDULE
                            4.2.1.1 approving the execution and delivery by
                            Buyer of this Agreement and the ancillary agreements
                            and the performance of Buyer's obligations hereunder
                            and thereunder;

                   4.2.1.2  A duly executed Service Agreement providing for,
                            inter alia, the matters set forth in Section 3.3
                            above.


                   4.2.1.3  All such other documents and instruments as Seller


                            may reasonably request or as may be otherwise
                            necessary or


                                      -10-


                            desirable to evidence and effect assumption by Buyer
                            of the Assumed Liabilities.

            4.2.2  BY SELLER. Seller shall deliver to Buyer:

                   4.2.2.1  Board Resolutions. A copy of validly executed
                            Seller's Board of Dirctors resolutions in the form
                            attached hereto as Schedule4.2.2.1, approving the
                            execution and delivery of this Agreement and the
                            ancillary agreements by Seller, and the performance
                            of Seller's obligations hereunder and thereunder;

                   4.2.2.2  Consents. Evidence of all the consents of third
                            parties and/or governmental authorities necessary to
                            effect the transfer and assignment to Buyer of the
                            Assumed Contracts;

                   4.2.2.3  The consents, waivers or approvals set forth in
                            SCHEDULE 4.2.2.3, that will have been obtained by
                            Seller with respect to the sale of the Purchased
                            Business or the consummation of the transactions
                            contemplated in this Agreement.

                   4.2.2.4  A duly executed license agreement in the form
                            attached hereto as SCHEDULE 3.1.7(c) with respect to
                            the License.

                   4.2.2.5  A duly executed Lease Agreement in the form attached
                            hereto as SCHEDULE 4.2.2.5.

                   4.2.2.6  A copy of validly executed Solmat Systems Ltd. Board
                            of Dirctors resolutions in the form attached hereto
                            as SCHEDULE 4.2.2.6, approving and undertaking the
                            sale by Solmat Systems Ltd. to Buyer of certain
                            rights and assets as provided for in Section 1.14
                            above, and expressly providing that such sale shall
                            be effected by OIL for and on behalf of Solmat
                            Systems Ltd. under and pursuant to this Agreement,
                            for no further consideration from Buyer to Seller or
                            to Solmat Systems Ltd.

                   4.2.2.7  All such other, assignments and other instruments of
                            assignment, transfer or conveyance as Buyer may

                            reasonably request or as may be otherwise necessary


                            to evidence and effect the sale, transfer,
                            assignment, conveyance and delivery of


                                      -11-


                            the Purchased Business and Assumed Liabilities to
                            Buyer that will enable Buyer actual possession
                            and/or control of the Purchased Business.

            4.2.3  All acts and deliveries prescribed by this Section 4.2,
                   regarding chronological sequence, will be deemed to occur

                   contemporaneously and simultaneously on the occurrence of the


                   last act or delivery, none of which shall be effective until
                   the last has occurred.


5.   CERTAIN COVENANTS

     5.1    Employment Matters.

            5.1.1  Employees. Buyer shall extend an offer to all of Seller's
                   employees to continue and be employed by Buyer effective from
                   the Effective Date and subject to Closing, with compensation,
                   benefits, and responsibilities identical to those under which
                   they were employed by Seller. The Employees who will be
                   employed by Buyer following Closing are collectively referred
                   to herein as the "ASSUMED EMPLOYEES".

            5.1.2  Obligations. The employment with Seller of all Assumed
                   Employees will be terminated immediately prior to the
                   Closing, in such a way that other than payments actually due
                   by Seller to such Assumed Employees in consideration for
                   their employment until the Effective Date, including but not
                   limited to, salaries, social security, provisions to pension
                   funds, insurance policies, provisions to tax, reimbursements
                   of expenses etc., Buyer shall assume all other liabilities
                   whatsoever with respect to such Assumed Employees in
                   connection with their employment period with Seller prior to
                   the Effective Date and thereafter.

            5.1.3  No Third Party Beneficiary Rights. Nothing contained in this
                   Agreement shall confer upon any Employee any right with
                   respect to continuance of employment by Buyer or Seller, nor
                   shall anything herein interfere with the right of Buyer or
                   Seller to terminate the employment of any of the Employees at

                   any time, with or without cause, in accordance with the
                   provisions of the respective employment agreement with any
                   such


                                      -12-


                   employee. No provision of this Agreement shall create any
                   third party beneficiary rights in any Employee, or any
                   beneficiary or dependents thereof, with respect to the
                   compensation, terms and conditions of employment and benefits
                   that may be provided to any Employee by Buyer or under any
                   benefit plan which Buyer may maintain.

     5.2    Consents.

            As soon as practicable following the date hereof, the Parties shall
            commence all reasonable actions required hereunder to obtain all
            applicable consents, approvals and agreements of, and to give all
            notices and make all filings with, any third parties and
            governmental authorities as may be necessary to authorize, approve
            or permit the consummation of the transactions contemplated
            hereunder. In addition, Seller undertakes to obtain all the
            necessary consents and approval by Solmat Systems Ltd. for the
            execution of the provisions concerning Solmat Systems Ltd.

     5.3    Non-Competition

            Seller undertakes that as long as it holds more than 50% of all
            controlling means in Buyer's parent, it shall not compete with
            Buyer's and/or Buyer's parent company's Business and accordingly
            shall not engage in any business which is in the same field of the
            Purchased Business and/or the Business. This undertaking shall be
            deemed as an undertaking for the benefit of Ormat Technologies, Inc.

6.   MISCELLANEOUS

     6.1    Assignment. Neither this Agreement nor any of the rights or
            obligations hereunder may be assigned by Buyer without the prior
            written consent of Seller or by Seller without the prior written
            consent of Buyer. Subject to the foregoing, this Agreement shall be
            binding upon and inure to the benefit of the parties hereto and
            their respective successors and permitted assignees with no other
            person having any right, benefit or obligation hereunder.

     6.2    Notices. Unless otherwise provided herein, any notice, request,
            instruction or other document to be given hereunder by either party
            to the other shall be in writing and delivered by telecopy or other
            facsimile (with acknowledged receipt), delivered personally or
            mailed by certified or registered mail, postage prepaid (and by
            airmail if sent internationally), return receipt requested or by
            internationally recognized courier


                                      -13-


            (such as Federal Express or DHL) (such mailed or couriered notice to
            be effective on the date such receipt is acknowledged or refused),
            as follows:

            If to Seller, addressed to:

                     Ormat industries Ltd.

                     Attn.:The CEO

                     Fax: +9728 9439901

            If to Buyer, addressed to:

                     Ormat Systems Ltd.

                     Fax: +9728 9439901

                     Attn: The President

     or to such other place and with such other copies as either party may
     designate as to itself by written notice to the other.

     6.3    Choice of Law; Venue. This agreement shall be construed, interpreted
            and the rights of the parties determined in accordance with the laws
            of the State of Israel. Each of the parties to this Agreement
            consents to the exclusive jurisdiction and venue of the competent
            courts of Tel-Aviv-Jaffa over all matters arising in connection with
            this Agreement.

     6.4    Entire Agreement; Amendments and Waivers. This Agreement, together
            with all exhibits and schedules hereto between Seller and Buyer,
            constitute the entire agreement between the parties hereto
            pertaining to the subject matter hereof, and supersede all prior
            agreements, understandings, negotiations and discussions, whether
            oral or written, between the parties hereto with respect to such
            subject matter. No supplement, modification or waiver of this
            Agreement shall be binding unless executed in writing by the party
            to be bound thereby. No waiver of any of the provisions of this
            Agreement shall be deemed or shall constitute a waiver of any other
            provision hereof (whether or not similar), nor shall such waiver
            constitute a continuing waiver unless otherwise expressly provided.

     6.5    Multiple Counterparts. This Agreement may be executed in one or more
            counterparts, each of which shall be deemed an original, but all of
            which together shall constitute one and the same instrument.

                                      -14-


     6.6    Invalidity. In the event that any one or more of the provisions
            contained in this Agreement or in any other instrument referred to
            herein shall, for any reason, be held to be invalid, illegal or
            unenforceable in any respect, then to the maximum extent permitted
            by law, such provision or provisions shall be judicially reformed
            consistent with the parties' intentions so as to be valid, legal and
            enforceable to the maximum extent possible and such invalidity,
            illegality or unenforceability shall not affect any other provision
            of this Agreement or any other such instrument.

     6.7    Titles. The titles, captions or headings of the Sections herein are
            inserted for convenience of reference only and are not intended to
            be a part of or to affect the meaning or interpretation of this
            Agreement.

                            [Signature Page Follows]



                                      -15-



IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on their respective behalf, by their respective duly authorized
officers, in multiple originals, all as of the day and year first above written.


ORMAT INDUSTRIES LTD.                             ORMAT SYSTEMS LTD.


By: /s/ Lucien Y. Bronicki                        By: /s/ Etty Rosner
    ------------------------                          -----------------------
    Lucien Y. Bronicki, Chairman of                   Etty Rosner, V.P. Contract
       the Board                                         Administrator




                                      -16-



                                  SCHEDULE 1.9

                                 EXCLUDED ASSETS




Shares and Shareholder loans in OPTI Technologies BV, a Dutch company

Shares of and receivable from Ormat Investments Ltd., an Israeli company

Shares of Solmat Systems Ltd., an Israeli company and its payable to its parent

Shares of Bet Shemesh Engines Ltd, an Israeli company

Shares of Bet Shemesh Holdings Ltd, an Israeli company

Shares of Ormat Industries Ltd, an Israeli company

Shares OrTaas Ltd., an Israeli company

Shares of Orbotech Ltd., an Israeli company

Shares of OrAd Hi Tech Systems Ltd., an Israeli company

Shares of Caspit Telecom (1984) Ltd., an Israeli company

Shares of Guardian On Board Ltd., an Israeli company

Shares of Orlake Inc., a Canadian Company

Shares of Ormat Technologies Inc., a Delaware corporation

Shareholders loans to Ormat Technologies Inc.

Capital Note from Ormat Technologies Inc.

All the Intellectual Property related to the upgrading of heavy fuel

Investment in Polaris Fund

Investment in SKF TUC Fund

Investment in Peace Fund

All Land and buildings

All cash and cash equivalent as of June 30, 2004

All short term cash investments

Deferred tax assets and any receivable from any tax authority


                                      -17-


                                  SCHEDULE 1.11

                    EXCLUDED LIABILITIES AS AT JUNE 30, 2004


LIABILITIES TO BE RETAINED BY ORMAT INDUSTRIES LTD:


Bank payable

Debentures (series no. 9) issued December 21st, 2003 - principle and interest

Convertible Debentures (series no. 7 & 8) issued on May 28th, 2002 and June 5th,

2003, respectively, - principle and interest

Dividend payable

Deferred tax liabilities

Income tax payables




                                      -18-



                                 SCHEDULE 1.11A

                               EXCLUDED CONTRACTS



Any and all contracts between Seller and any entity listed on schedule 1.9.




                                      -19-



                                 SCHEDULE 1.15A

                              EXCLUDED IP - PATENTS




                                      -20-






                                 SCHEDULE 1.15B

                        EXCLUDED IP - PATENT APPLICATIONS




                                      -21-


                                 SCHEDULE 1.15C

                            EXCLUDED IP - TRADEMARKS



-------------------------------------------------------------------------------------------------------------------------
    ORMAT
   FILE NO       OWNER       TITLE        CLASS      FILING NO.   FILING DATE     REG. DATE       REG. NO      COUNTRY
-------------------------------------------------------------------------------------------------------------------------

ORMT24 & 25     OPTI BV     ORCRUDE         4        75/669367     26/03/1999     23/03/2004     2824234          US
-------------------------------------------------------------------------------------------------------------------------
ORMT24          OPTI BV     ORCRUDE        16        821722182     10/06/1999     16/09/2003     821722182        BR
-------------------------------------------------------------------------------------------------------------------------
ORMT24          OPTI BV     ORCRUDE         7        821722190     10/06/1999     03/04/2004     821722190        BR
-------------------------------------------------------------------------------------------------------------------------
ORMT24          OPTI BV     ORCRUDE                  1018487       10/06/1999     19/11/2003     595183           CA
-------------------------------------------------------------------------------------------------------------------------
ORMT24          OPTI BV     ORCRUDE         7        124634        17/12/1998     06/09/2000     124634           IL
-------------------------------------------------------------------------------------------------------------------------
ORMT24          OPTI BV     ORCRUDE         4        10116-99      11/06/1999     28/09/2000     P224181          VE
-------------------------------------------------------------------------------------------------------------------------
ORMT24          OPTI BV     ORCRUDE         7        1011799       11/06/1999     22/11/2000     P229270          VE
-------------------------------------------------------------------------------------------------------------------------
ORMT25           OPTI       ORCRUDE         4        124633        17/12/1998     07/02/2000     124633           IL
=========================================================================================================================
ORMT26 & 27     OPTI BV     ORFUEL         4,7       75/740825     30/06/1999     23/03/2004     2824240          US
-------------------------------------------------------------------------------------------------------------------------
ORMT26           OPTI       ORFUEL         4,7       1020759       30/06/1999     30/07/2003     586229           CA
-------------------------------------------------------------------------------------------------------------------------
ORMT26           OPTI       ORFUEL          7        124907        30/12/1998     06/09/2002     124907           IL
-------------------------------------------------------------------------------------------------------------------------
ORMT27          OPTI BV     ORFUEL          4        124906        30/12/1998     07/02/2000     124906           IL
=========================================================================================================================
ORMT34           OIL        ORSWEET        4,7       1002724       21/12/2001     01/10/2003     731417           BX
-------------------------------------------------------------------------------------------------------------------------
ORMT28           OIL        ORSHIELD        9        140486        31/07/2000     04/12/2001     140486           IL
-------------------------------------------------------------------------------------------------------------------------




---------------------------------------------------------------------------------------------------------------
ORMAT FILE NO    OWNER      TITLE       FILING NO.    FILING DATE     REG. DATE     REG. NO        COUNTRY
---------------------------------------------------------------------------------------------------------------

OMTM01            OIL     ORMAT          359395       11/05/1970     31/08/1971      919284           US
---------------------------------------------------------------------------------------------------------------
OMTM02            OIL     DEVICE         361506       02/06/1970     22/08/1972      941316           US
---------------------------------------------------------------------------------------------------------------
ORMT11a           OIL     GREENERGY      76/496811    13/03/2003     18/05/2004      2842539          US
                          (actual use)
===============================================================================================================
ORMT19            OIL     ECO-LOGICAL    10-72036     24/08/1998     12/11/1999      4333806          JP
===============================================================================================================
ORMT20            OIL     ECO-LOGIC      75-439124    23/02/1998     25/03/2003      2700628          US
---------------------------------------------------------------------------------------------------------------

ORMT20            OIL     ECO-LOGIC      121796       19/08/1998     05/01/2000      121796           IL


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




                                      -22-



                                 SCHEDULE 1.15D

                      EXCLUDED IP - TRADEMARKS APPLICATIONS



---------------------------------------------------------------------------------------------------------------
 ORMAT
FILE NO         OWNER       TITLE       CLASS     FILING NO.   FILING DATE   REG. DATE   REG. NO     COUNTRY
---------------------------------------------------------------------------------------------------------------

ORMT25         OPTI BV    ORCRUDE         4       821724819    #########                                BR
---------------------------------------------------------------------------------------------------------------
ORMT34           OIL      ORSWEET        4,11     76/423732    #########                                US
---------------------------------------------------------------------------------------------------------------

ORMT34           OIL      ORSWEET                 1134688      #########                                CA


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





                                      -23-


                                SCHEDULE 3.2.2.1


WORK AND PRODUCT ORDERS


--------------------------------------------------------
WORK/PRODUCT ORDER                         TASK NO.
--------------------------------------------------------

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

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

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

--------------------------------------------------------
THE SUPPLY CONTRACT BETWEEN TPC AND          5479
OIL DATED 23-AUG-02
MOKAI II PROJECT
--------------------------------------------------------

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

THE SUPPLY CONTRACT BETWEEN CONTACT          5703


ENERGY LIMITED AND OIL DATED
09-OCT-03
WAIRAKEI PROJECT
--------------------------------------------------------






                                      -24-



                                SCHEDULE 3.2.2.2


WORK AND PRODUCT ORDERS

--------------------------------------------------------
WORK/PRODUCT ORDER                         TASK NO.
--------------------------------------------------------

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

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

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

--------------------------------------------------------
SUPPLY CONTRACT BETWEEN MEGE, TURKEY         5747
AND OIL DATED 14-AUG-03
AYDIN SALAVATLI PROJECT
--------------------------------------------------------

--------------------------------------------------------
P.O. DATED 30-APR-04 FOR SUPPLY OF           5909
OEC BETWEEN
OPTI CANADA INC AND OIL
--------------------------------------------------------

--------------------------------------------------------
GENERAL DYNAMICS - P.O. FOR SUPPLY           5887
OF 56 ALTERNATORS DATED 10-MAR-04
--------------------------------------------------------

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

NIMDA - P.O. FOR SUPPLY OF                   5895
ALTERNATORS+REGULATORS DATED
25-MAR-04
--------------------------------------------------------




                                      -25-



                                SCHEDULE 4.2.2.3

CONSENTS, WAIVERS OR APPROVALS OBTAINED BY ORMAT INDUSTRIES LTD:

1.   Office of the Chief Scientist

2.   Ministry of Industry and Trade's Investment Centre

3.   Banking Institutions holding a floating charge on the assets of Ormat
     Industries Ltd:

     (i)    Bank Hapoalim BM.

     (ii)   Bank Leumi BM.

     (iii)  Israel Discount Bank

     (iv)   United Mizrachi Bank Ltd.

     (v)    Industrial Development Bank of Israel




                                                                  Exhibit 10.3.1


                             POWER PURCHASE CONTRACT
                   BETWEEN SOUTHERN CALIFORNIA EDISON COMPANY
                                       AND
                            REPUBLIC GEOTHERMAL, INC.





                                TABLE OF CONTENTS

SECTION   TITLE                                                             PAGE
-------   -----                                                             ----
     1    PROJECT SUMMARY......................................................1
     2    DEFINITIONS..........................................................2
     3    TERM.................................................................8
     4    GENERATING FACILITY..................................................9
     5    OPERATING OPTIONS...................................................18
     6    INTERCONNECTION FACILITIES..........................................19
     7    METERING............................................................20
     8    POWER PURCHASE PROVISIONS...........................................21
     9    PAYMENT AND BILLING PROVISIONS......................................43
    10    TAXES...............................................................45
    11    TERMINATION.........................................................46
    12    SALE OF GENERATING FACILITY.........................................46
    13    ABANDONMENT OF PROJECT..............................................47
    14    LIABILITY...........................................................48
    15    INSURANCE ..........................................................50
    16    UNCONTROLLABLE FORCES...............................................52
    17    NONDEDICATION OF FACILITIES.........................................54
    18    PRIORITY OF DOCUMENTS...............................................54
    19    NOTICES AND CORRESPONDENCE..........................................55
    20    PREVIOUS COMMUNICATIONS.............................................55
    21    THIRD PARTY BENEFICIARIES...........................................55
    22    NONWAIVER...........................................................56
    23    DISPUTES............................................................56
    24    SUCCESSORS AND ASSIGNS..............................................58
    25    EFFECT OF SECTION HEADINGS..........................................58
    26    TRANSMISSION........................................................58
    27    GOVERNING LAW.......................................................60
    28    CONFIDENTIALITY.....................................................60
    29    MULTIPLE ORIGINALS..................................................61
          SIGNATURES..........................................................61
          APPENDIX A.........................................................A-1
          APPENDIX B.........................................................B-1
          APPENDIX C.........................................................C-1





1.   PROJECT SUMMARY

     This Contract is entered into between Southern California Edison Company
     ("Edison") and Republic Geothermal, Inc., a California Corporation
     ("Seller"). Seller is willing to construct, own, and operate a Qualifying
     Facility and sell electric power to Edison and Edison is willing to
     purchase electric power delivered by Seller to Edison at the Point of
     Interconnection pursuant to the terms and conditions set forth as follows:

     1.1  All Notices shall be sent to Seller at the following address:

          Republic Geothermal, Inc.
          11823 East Slauson Avenue
          Santa Fe Springs, CA 90670
          Attn:  President

     1.2  Seller's Generating Facility:

          a.   Nameplate Rating: 46,800 kW.

          b.   Location: East Mesa, Imperial County, California

          c.   Type (Check One):

               _____ Cogeneration Facility

               [ x ] Small Power Production Facility

     1.3  Contract Capacity: 24,000 kW

          1.3.1 Estimated as-available capacity: 0.

     1.4  Expected annual production: 168,192,000 kWh.

     1.5  Expected date of Firm Operation: April 1, 1986.

     1.6  Contract Term: 30 years.

     1.7  Operating Options pursuant to Section 5: (Check One)

            [ x ]    Operating Option I. Excess Generator output dedicated to
          Edison. No electric service or standby service required from Edison.



          ____ Operating Option II. Entire Generator output dedicated to Edison
          with separate electric service required from Edison.

     1.8  The Capacity Payment Option selected by Seller pursuant to section 8.1
          shall be: (Check One)

          ____ Option A -- As-available capacity based upon:

               ____ Standard Offer No. 1 Capacity Payment Schedule, or

               ____ Forecast of Annual As-Available Capacity Payment Schedule

          [ x ]Option B -- Firm Capacity

               [ x ]Standard Offer No. 2 Capacity Payment

               Schedule in effect at time of Contract execution

               ____ Standard Offer No. 2 Capacity Payment

               Schedule in effect at time of Firm Operation

               a.   The Contract Capacity Price: $158 kW-yr. (Firm Capacity)

     1.9  The Energy Payment Option selected by Seller pursuant to Section
          8.2 shall be: (Check One)

          [ x ] Option 1 -- Forecast of Annual Marginal Cost of Energy in
          effect, at date of execution of this Contract. (Appendix B)

          _____ Option 2 -- Levelized Forecast of Marginal Cost of Energy
          in effect at date of execution of this Contract. (Appendix C)

          For the energy payment refund pursuant to Section 8.5 under
          Option 2, Edison's Incremental Cost of Capital is 15%.

     Seller may change once between Options 1 and 2, provided Seller
     delivers written notice of such change at least 90 days prior to the
     date of Firm Operation.

     For Option 1 or 2, Seller elects to receive the following percentages
     in 20% increments, the total of which shall equal 100%:

     100 percent of Forecast of Annual Marginal Cost of Energy, and

     0 percent of Edison's published avoided cost of energy as updated
     periodically and accepted by the Commission.


                                       2


                          GENERAL TERMS AND CONDITIONS

2.   DEFINITIONS

     When used with initial capitalizations, whether in the singular or in the
     plural, the following terms shall have the following meanings:

     2.1 Adjusted Capacity Price: The $/kW-yr capacity purchase price based on
     the Capacity Payment Schedule in effect at the time of Contract execution
     for the time period beginning on the date of Firm Operation for the first
     generating unit and ending on the date of termination or reduction of
     Contract Capacity under Capacity Payment Option B.

     2.2 Appendix A: Capacity Payment Schedule -- Forecast of Annual
     As-Available Capacity

     2.3 Appendix B: Energy Payment Schedule -- Forecast of Annual Marginal Cost
     of Energy

     2.4 Appendix C: Energy Payment Schedule -- Levelized Forecast of Marginal
     Cost of Energy

     2.5 Capacity Payment Schedule(s): Published capacity payment schedule(s) as
     authorized by the Commission and in effect at the tine of execution of this
     Contract for as-available or firm capacity.

     2.6. Commission: The Public Utilities Commission of the State of
     California.

     2.7 Contract: This document and Appendices, as amended from time to time.

     2.8 Contract Capacity: The electric power producing capability of the
     Generating Facility which is committed to Edison.

     2.9 Contract Capacity Price: The capacity purchase price from the Capacity
     Payment Schedule approved by the Commission and in effect on the date of
     execution of this Contract for Capacity Payment Option B.

     2.10 Contract Term: Period in years commencing with date of Firm Operation
     during which Edison shall purchase electric power from Seller.

     2.11 Current Capacity Price: The $/kW-yr capacity price provided in the
     Capacity Payment Schedule determined by the year of termination or
     reduction of Contract


                                       3


     Capacity and the number of years from such termination or reduction to the
     expiration of the Contract Term for Capacity Payment Option B.

     2.12 Edison: The Southern Ca1iforna Edison Company.

     2.13 Edison Electric System Integrity: The state of operation of Edison's
     electric system in a manner which is deemed to minimize the risk of injury
     to persons and/or property and enables Edison to provide adequate and
     reliable electric service to its customers.

     2.14 Emergency: A condition or situation which in Edison's sole judgment
     affects Edison Electric System Integrity.

     2.15 Energy: Kilowatthours generated by the Generating Facility which are
     purchased by Edison at the Point of Interconnection.

     2.16 Firm Operation: The date agreed on by the Parties on which each
     generating unit of the Generating Facility is determined to be a reliable
     source of generation and on which such unit can be reasonably expected to
     operate continuously at its Contract Capacity.

     2.17  First Period:  The period of the Contract Term specified in
     Section 3.1.

     2.18 Forced Outage: Any outage other than a scheduled outage of the
     Generating Facility that fully or partially curtails its electrical output.

     2.19 Generating Facility: All of Seller's generators, together with all
     protective and other associated equipment and improvements, necessary to
     produce electrical power at Seller's Facility excluding associated land,
     land rights, and interests in land.

     2.20 Generator: The generator(s) and associated prime mover(s), which are a
     part of the Generating Facility.

     2.21 Interconnection Facilities: The electrical interconnection facilities
     furnished, at no cost to Edison, by Seller, or by the Interconnecting
     Utility on the Seller's behalf, which are appurtenant to, and/or incidental
     to, the Project. The Interconnection Facilities shall include, but are not
     limited to, transmission lines and/or distribution lines between the
     Project and transmission lines and/or distribution lines of the
     Interconnecting Utility, relays, power-circuit breakers, metering devices,
     telemetering devices, and other control and protective devices specified by
     the Interconnecting Utility as necessary for operation of the Project in
     parallel with the Interconnecting Utility's electric system.

                                       4


     2.22 Interconnecting Utility: Any utility which takes delivery of
     electrical energy generated by the Generating Facility and which transmits
     such electrical energy to the Point of Interconnection.

     2.23 Operate: To provide the engineering, purchasing, repair, supervision,
     training, inspection, testing, protection, operation, use, management,
     replacement, retirement, reconstruction, and maintenance of and for the
     Generating Facility in accordance with applicable California utility
     standards and good engineering practices.

     2.24 Operating Representatives: Individual(s) appointed by each Party for
     the purpose of securing effective cooperation and interchange of
     information between the Parties in connection with administration and
     technical matters related to this Contract.

     2.25 Parties: Edison and Seller.

     2.26 Party: Edison or Seller.

     2.27 Peak Months: Those months which the Edison annual system peak demand
     could occur. Currently, but subject to change with notice, the peak months
     for the Edison system are June, July, August, and September.

     2.28 Point of Interconnection: The point where the electrical energy
     generated by the Seller at the Project is delivered to the Edison electric
     system.

     2.29 Project: The Generating Facility and Interconnection Facilities
     required to permit the Generator to deliver electric energy and make
     capacity available to Interconnecting Utility.

     2.30 Qualifying Facility: Cogeneration or Small Power Production Facility
     which meets the criteria as defined in Title 18, Code of Federal
     Regulations, Section 292.201 through 292.207.

     2.31 Renewable Resources: Wind parks, small hydroelectric, solar, and
     geothermal resources which produce electric power.

     2.32 Second Period: The period of the Contract Term specified in Section
     3.2.

     2.33 Seller: The Party identified in Section 1.0.

     2.34 Seller's Facility: The premises and equipment of Seller located as
     specified in Section 1.2.

                                       5


     2.35 Small Power Production Facility: The facilities and equipment which
     use biomass, waste, or Renewable Resources, including wind, solar,
     geothermal, and water, to produce electrical energy as defined in Title 18,
     Code of Federal Regulations, Section 292.201 through 292.207.

     2.36 Summer Period: Defined in Edison's Tariff Schedule No. TOU-8 as now in
     effect or as may hereafter be authorized by the Commission.

     2.37 Tariff Schedule No. TOU-8: Edison's time-of-use energy tariff for
     electric service exceeding 500 kW, as now in effect or as may hereafter be
     authorized by the Commission.

     2.38 Uncontrollable Forces: Any occurrence beyond the control of a Party
     which causes that Party to be unable to perform its obligations hereunder
     and which a Party has been unable to overcome by the exercise of due
     diligence, including but not limited to flood, drought, earthquake, storm,
     fire, pestilence, lightning and other natural catastrophes, epidemic, war,
     riot, civil disturbance or disobedience, strike, labor dispute, action or
     inaction of government or other proper authority, which may conflict with
     the terms of this Contract, or failure, threat of failure or sabotage of
     facilities which have been maintained in accordance with good engineering
     and operating practices in California. The failure of the Interconnecting
     Utility to deliver electrical energy to the Point of Interconnection shall
     be an Uncontrollable Force only if such failure is beyond the control of
     the Interconnecting Utility.

     2.39 Winter Period: Defined in Edison's Tariff Schedule No. TOC-8 as now in
     effect or as may hereafter be authorized by the Commission.

3.   TERM

     This Contract shall be effective upon execution by the Parties and shall
     remain effective until either Party gives 90 days prior written notice of
     termination to the other Party, except that such notice of termination
     shall not be effective to terminate this Contract prior to expiration of
     the Contract Term specified in Section 1.6.

     3.1  The First Period of the Contract Term shall commence upon date of Firm
          Operation but not later than 5 years from the date of execution of
          this contract.

          a.   If the Contract Term specified in Section 1.6 is 15 years, the
               first Period of the Contract Term shall be for 5 years.

           b. If the Contract Term specified in Section 1.6 is 20, 25, or 30
              years, the First Period of the Contract Term shall be for 10
              years.

                                       6


     3.2  The Second Period of the Contract Term shall commence upon expiration
          of the First Period and shall continue for the remainder of the
          Contract Term.

4.   GENERATING FACILITY

     4.1  Ownership

     The Generating Facility shall be owned by Seller.

     4.2  Design

          4.2.1 Seller, at no cost to Edison, shall:

               a.   Design the Generating Facility.

               b.   Acquire all permits and other approvals necessary for the
                    construction, operation, and maintenance of the Generating
                    Facility.

               c.   Complete all environmental impact studies necessary for the
                    construction, operation, and maintenance of the Generating
                    Facility.

          4.2.2 Edison shall have the right to review the design of the
          Generating Facility's electrical system and the Seller's
          Interconnection Facilities. Edison shall have the right to request
          modifications to the design of the Generating Facility's electrical
          system and the Seller's Interconnection Facilities. Such modifications
          shall be required if necessary to maintain Edison Electric System
          Integrity. If Seller does not agree to such modifications, resolution
          of the difference between the Parties shall be made pursuant to
          Section 23.

     4.3  Construction

          Edison shall have the right to review, consult with, and make
          recommendations regarding Seller's construction schedule and to
          monitor the construction and start-up of the Project. Seller shall
          notify Edison, as far in advance of Firm Operation as reasonably
          possible, of changes in Seller's Construction Schedule which may
          affect the date of Firm Operation.

     4.4  Operation

          4.4.1. Edison shall have the right to monitor operation of the Project
                 and may require changes in Seller's method of operation if such


                 changes are necessary, in Edison's sole judgment, to maintain
                 Edison Electric System Integrity.

                                       7


          4.4.2  Seller shall notify, in writing, Edison's Operating
                 Representative at least 14 days prior to the initial delivery
                 of electrical energy from the Project to the Point of
                 Interconnection.

          4.4.3  Edison shall have the right to require Seller to curtail or
                 reduce the delivery of electrical energy from the Project to
                 the Edison electric system whenever Edison determines, in its
                 sole judgment, that such curtailment or reduction is necessary
                 to facilitate maintenance of Edison's facilities, or to
                 maintain Edison Electric System Integrity. If Edison requires
                 Seller to curtail or reduce the delivery of electrical energy
                 from the Project to the Edison electric system pursuant to this
                 Section 4.4.3, Seller shall have the right to continue to serve
                 its total electrical requirements. Each Party shall endeavor to
                 correct, within a reasonable period, the condition on its
                 system which necessitates the curtailment or the reduction of
                 delivery of electrical energy from the Project. The duration of
                 the curtailment or the reduction shall be limited to the period
                 of time such a condition exists.

          4.4.4  Each Party shall keep the other Party's Operating
                 Representative informed as to the operating schedule of their
                 respective facilities affecting each other's operation
                 hereunder, including any reduction in Contract Capacity
                 availability. In addition, Seller shall provide Edison with
                 reasonable advance notice regarding its scheduled outages
                 including any reduction in Contract Capacity availability.
                 Reasonable advance notice is as follows:

                    SCHEDULED OUTAGE                        ADVANTAGE NOTICE
                    EXPECTED DURATION                           TO EDISON
                    -----------------                       ----------------

                    Less than one day                           24 Hours

                    One day or more                              1 Week
                    (except major overhauls)

                    Major overhaul                               6 Months

          4.4.5  Notification by each Party's Operating Representative of outage
                 date and duration should be directed to the other Party's
                 Operating Representative by telephone.

          4.4.6  Seller shall not schedule major overhauls during Peak Months.

                                       8


          4.4.7  Seller shall maintain an operating log at Seller's Facility
                 with records of: real and reactive power production; changes in
                 operating status, outages, Protective Apparatus operations; and
                 any unusual conditions found during inspections. Changes in
                 setting shall also be logged for Generators which are
                 "block-loaded" to a specific kW capacity. In addition, Seller
                 shall maintain records applicable to the Generating Facility,
                 including the electrical characteristics of the Generator and
                 settings, adjustments of the Generator control equipment, and
                 well-field information. Information maintained pursuant to this
                 Section 4.4.7 shall, be provided to Edison, within 30 days of
                 Edison's request.

          4.4.8  At Edison's request, Seller shall make all reasonable effort to
                 deliver power at an average rate of delivery at least equal to
                 the Contract Capacity during periods of Emergency. In the event
                 that the Seller has previously scheduled an outage coincident
                 with an Emergency, Seller shall make all reasonable efforts to
                 reschedule the outage. The notification periods listed in
                 Section 4.4.4 shall be waived by Edison if Seller reschedules
                 the outage.

          4.4.9  Seller shall demonstrate the ability to provide Edison the
                 specified Contract Capacity within 30 days of the date of Firm
                 Operation. Thereafter, at least once per year at Edison's
                 request, Seller shall demonstrate the ability to provide
                 Contract Capacity for a reasonable period of time as required
                 by Edison. Seller's demonstration of Contract Capacity shall be
                 at Seller's expense and conducted at a time and pursuant to
                 procedures mutually agreed upon by the Parties. If Seller fails

                 to demonstrate the ability to provide the Contract Capacity,
                 the Contract Capacity shall be reduced by agreement of the
                 Parties pursuant to Section 8.1.2.5.

          4.4.10 Seller warrants that, at the date of first electrical energy
                 deliveries from the Project and during the term of this
                 Contract, the Generating Facility shall meet the requirements
                 established as of the effective date of this Contract by the
                 Federal Energy Regulatory Commission's rules (Title 18, Code of
                 Federal Regulations, Section 292.201 through 292.207)
                 implementing the Public Utility Regulatory Policies Act of 1978
                 (16 U.S.C.A. 79696 et seq.).

          4.4.11 The Seller warrants that the Generating Facility shall, at all
                 times, conform to all applicable laws and regulations. Seller
                 shall obtain and maintain any governmental authorizations and
                 permits for the continued operation of the Generating Facility.
                 If, at any time, Seller does not hold


                                       9


                 such authorizations and permits, Seller agrees to reimburse
                 Edison for any loss which Edison incurs as a result of the
                 Seller's failure to maintain governmental authorization and
                 permits.

          4.4.12 In the event electrical energy from the Project is curtailed or
                 reduced pursuant to Sections 4.4.3, 16 or 8.4, the Seller, in
                 its sole discretion, may elect to (i) sell said electrical
                 energy to a third party or (ii) deliver said electrical energy
                 to a third party for future delivery to Edison at times and at
                 amounts agreeable to Edison. The Seller shall be responsible
                 for making all such arrangements. The provisions in this
                 Section 4.4.12 shall only apply for the duration of the
                 curtailment or reduction.

          4.4.13 Seller shall maintain operating communications with the Edison
                 switching center designated by the Edison Operating
                 Representative. The operating communications shall include, but
                 not be limited to, system paralleling or separation, scheduled
                 and unscheduled shutdowns, equipment clearances, levels of


                 operating voltage, reactive power generation, and daily
                 capacity and generation reports.

     4.5  Maintenance

          4.5.1  Seller shall maintain the Generating Facility in accordance
                 with applicable California utility industry standards and good
                 engineering and operating practices. Edison shall have the
                 right to monitor such maintenance of the Generating Facility.
                 Seller shall maintain and deliver a maintenance record of the
                 Generating Facility to Edison's Operating Representatives upon
                 request.

          4.5.2  Seller shall make a reasonable effort to schedule routine
                 maintenance during Off-Peak Months. Outages for scheduled
                 maintenance shall not exceed a total of 30 peak hours for the
                 Peak Months.

          4.5.3  The allowance for scheduled maintenance is as follows:

                 a. Outage periods for scheduled maintenance shall not exceed
                 840 hours (35 days) in any l2-month period. This allowance may
                 be used in increments of an hour or longer on a consecutive or
                 nonconsecutive basis.

                 b. Seller may accumulate unused maintenance hours on a

                 year-to-year basis up to a maximum of 1,080 hours (45 days).
                 This accrued time must be used consecutively and only for major
                 overhauls.

                                       10


     4.6 Any review by Edison of the design, construction, operation, or
     maintenance of the Project is solely for the information of Edison. By
     making such review, Edison makes no representation as to the economic and
     technical feasibility, operational capability, or reliability of the
     Project. Seller shall in no way represent to any third party that any such
     review by Edison of the Project, including, but not limited to, any review
     of the design, construction, operation, or maintenance of the Project by
     Edison, is a representation by Edison as to the economic and technical
     feasibility, operational capability, or reliability of said facilities.
     Seller is solely responsible for economic and technical feasibility,
     operational capability, and reliability thereof.

     4.7 Edison shall have access to the Seller's geothermal field and
     power-generating facilities for the purpose of gathering technical
     information and records. The technical information and records shall
     include, but not be limited to, drilling data, well-testing data,
     well-production data and design, power plant performance data and design,
     environmental data, brine handling design, and operation and maintenance
     data. Edison agrees not to interfere with Seller's rules and operating
     regulations.

5.   OPERATING OPTIONS

     5.1 Seller shall elect in Section 1.7 to Operate its Generating Facility
     pursuant to one of the following options:

          a. Operating Option I: Seller dedicates the excess Generator output to
          Edison with no electrical service or standby service required from
          Edison.

          b. Operating Option II: Seller dedicates the entire Generator output
          to Edison with electrical service required from Edison.

     5.2 After expiration of the First Period of the Contract Term, Seller may
     change the Operating Option, but not more than once per year upon at least
     90 days prior written notice to Edison. A reduction in Contract Capacity as
     a result of a change in operating options shall be subject to Section
     8.1.2.5. Edison shall not be required to remove or reserve capacity of
     Interconnection Facilities made idle by a change in operating options.
     Edison may dedicate any such idle Interconnection Facilities at any time to
     serve other customers or to interconnect with other electric power sources.
     Edison shall process requests for changes of operating option in the
     chronological order received.

6.   INTERCONNECTION FACILITIES

     6.1 Seller shall design, engineer, procure, construct, and test the
     Interconnection Facilities in accordance with applicable California utility
     standards and good


                                       11


     engineering practices and the rules and regulations of the Interconnecting
     Utility or shall contract with the Interconnecting Utility or an
     independent contractor acceptable to Edison to furnish such design,
     engineering, procurement, construction and testing.

     6.2 The design, installation, operation, maintenance, and modifications of
     the Interconnection Facilities shall be at Seller's expense.

     6.3 Seller, at no cost to Edison, shall acquire all permits and approvals
     and complete all environmental impact studies necessary for the design,
     installation, operation, and maintenance of the Interconnection Facilities.

7.   METERING

     7.1. All meters and equipment used for the measurement of electrical power
     for determining Edison's payments to Seller pursuant to this Contract shall
     be provided, owned, and maintained by Edison and/or the Interconnecting
     Utility at Seller's expense.

     7.2 If Seller's Generating Facility is rated at a Capacity of 500 kW or
     greater, then Edison, at its option, may install at Seller's expense,
     generation metering and/or telemetering equipment.

     7.3 Edison's or the Interconnecting Utility's meters shall be sealed and
     the seals shall be broken only when the meters are to be inspected, tested,
     or adjusted by Edison or Interconnecting Utility. Seller shall be given
     reasonable notice of testing and have the right to have its Operating
     Representative present on such occasions.

     7.4 Edison's or Interconnecting Utility's meters installed pursuant to this
     Contract shall be tested by Edison or Interconnecting Utility, at Edison's
     or Interconnecting Utility's expense, at least once each year and at any
     reasonable time upon request by either Party, at the requesting Party's
     expense. If Seller makes such request, Seller shall reimburse said expense
     to Edison or Interconnecting Utility within thirty days after presentation
     of a bill therefor.

     7.5 Metering equipment found to be inaccurate shall be repaired, adjusted,
     or replaced by Edison or Interconnecting Utility such that the metering
     accuracy of said equipment shall be within plus or minus two percent. If
     metering equipment inaccuracy exceeds plus or sinus two percent, the
     correct amount of Energy and capacity delivered during the period of said
     inaccuracy shall be estimated by Edison and agreed upon by the Parties.

                                       12


8.   POWER PURCHASE PROVISIONS

     Prior to the date of Firm Operation, Seller shall be paid for Energy only
     pursuant to Edison's published avoided cost of energy based on Edison's
     full avoided operating cost as periodically updated and accepted by the
     Commission. If at any time electrical energy can be delivered to Edison and
     Seller is contesting the claimed jurisdiction of any entity which has not
     issued a license or other approval for the Project, Seller, in its sole
     discretion and risk, may deliver electrical energy to Edison and for any
     electrical energy purchased by Edison Seller shall receive payment from
     Edison for (i) Energy pursuant to this Section, and (ii) as-available
     capacity based on a capacity price from the Standard Offer No. 1 Capacity
     Payment Schedule as approved by the Commission. Unless and until all
     required licenses and approvals have been obtained, Seller may discontinue
     deliveries at any time.

8.1  Capacity Payments

     Seller shall sell to Edison and Edison shall purchase from Seller capacity
     pursuant to the Capacity Payment Option selected by Seller in Section 1.8.
     The Capacity Payment Schedules will be based on Edison's full avoided
     operating costs as approved by the Commission throughout the life of this
     Contract.

          8.1.1 Capacity Payment Option A -- As-Available Capacity.

          If Seller selects Capacity Payment Option A, Seller shall be paid a
          Monthly Capacity Payment calculated pursuant to the following formula:

Monthly Capacity Payment = (A x D)+(B x D)+(C x D)

          Where A = kWh purchased by Edison during on-peak periods defined
                    in Edison's Tariff Schedule No. TOU-8.

                B = kWh purchased by Edison during mid-peak periods defined in
                    Edison's Tariff Schedule No. TOU-8.

                C = kWh purchased by Edison during off-peak periods defined in
                    Edison's Tariff Schedule No. TOU-8

                D = The appropriate time differentiated capacity price from
                    either the Standard Offer No. 1 Capacity Payment Schedule or
                    Forecast of Annual As-Available Capacity Payment Schedule as
                    specified by Seller in Section 1.8.

                                       13


               8.1.1.1 If Seller specifies the Standard Offer No. 1 Capacity
               Payment Schedule in Section 1.8, then the formula set forth in
               Section 8.1.1 shall be computed with D equal to the appropriate
               time differentiated capacity price from the Standard Offer No. 1
               Capacity Payment Schedule for the Contract Term.

               8.1.1.2 If Seller specifies the Forecast of Annual As-Available
               Capacity Payment Schedule in Section 1.8, the formula set forth
               in section 8.1.1 shall be computed as follows:

                    a. During the First Period of the Contract Term, D shall
                    equal the appropriate time differentiated capacity price
                    from the Forecast of Annual As-Available Capacity Payment
                    Schedule.

                    b. During the Second Period of the Contract Term, the
                    formula shall be computed with D equal to the appropriate
                    time differentiated capacity price from Standard Offer No. 1
                    Capacity Payment Schedule, but not less than the greater of
                    (i) the appropriate time differentiated capacity price from
                    the forecast of Annual As-Available Capacity Payment
                    Schedule for the last year of the First Period, or (ii) the
                    appropriate time differentiated capacity price from the
                    Standard Offer No. 1. Capacity Payment Schedule for the
                    first year of the Second Period.

              8.1.2 Capacity Payment Option B--Firm Capacity Purchase

                    If Seller selects Capacity Payment Option B, Seller shall
                    provide to Edison for the Contract Term the Contract
                    Capacity specified in Section 1.3, or as adjusted pursuant
                    to Section 8.1.2.6, and Seller shall be paid as follows:

                        8.1.2.1 If Seller meets the performance requirements set
                        forth in Section 8.1.2.2, Seller shall be paid a Monthly
                        Capacity Payment, beginning from the date of Firm
                        Operation equal to the sum of the on-peak, mid-peak, and


                        off-peak Capacity Period Payments. Each capacity period
                        payment is calculated pursuant to the following formula:

Monthly Capacity Period = A x B x C x D

Payment


                Where A =  Contract Capacity Price specified in Section 1.8
                           based on the Standard Offer No. 2 Capacity Payment
                           Schedule as approved by


                                       14



                           the Commission and in effect on the date of the
                           execution of this Agreement.

                      B =  Conversion factors to convert annual capacity prices
                           to monthly payments by time of delivery as specified
                           in Standard Offer No. 2 Capacity Payment Schedule and
                           subject to periodic modifications as approved by the
                           Commission.

                      C =  Contract Capacity specified in Section 1.3.

                      D =  Period Performance Factor, not to exceed 1.0,
                           calculated as follows:

          Period Performance Factor = [Period kWh Purchased by Edison (Limited
          by the Level of Contract Capacity)]

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

          [0.8 x Contract Capacity x (Period Hours minus Maintenance Hours
          Allowed in Section 4.5.)]

               8.1.2.2 Performance Requirements

                       To receive the Monthly Capacity Payment in Section
                       8.1.2.1, Seller shall provide the Contract Capacity in
                       each Peak Month for all on-peak hours as such peak hours
                       are defined in Edison's Tariff Schedule No. TOU-8 on file
                       with the Commission, except that Seller is entitled to a
                       20% allowance for Forced Outages for each Peak Month.
                       Seller shall not be subject to such performance
                       requirements for the remaining hours of the year.

                       a. If Seller fails to meet the requirements specified in
                          Section 8.1.2.2, Seller, in Edison's sole discretion,
                          may be placed on probation for a period not to exceed
                          15 months. If Seller fails to meet the requirements
                          specified in Section 8.1.2.2 during the probationary
                          period, Edison may derate the Contract Capacity to the
                          greater of the capacity actually delivered during the
                          probationary period, or the capacity at which Seller
                          can reasonably meet such requirements. A reduction in
                          Contract Capacity as a result of this Section 8.1.2.2
                          shall be subject to Section 8.1.2.5.

                                       15


                       b. If Seller fails to meet the requirements set forth in
                          this Section 8.1.2.2 due to a forced outage on the
                          Edison system, or a request to reduce or curtail
                          delivery under Section 8.4, Edison shall continue
                          Monthly Capacity Payments pursuant to Capacity Payment
                          Option B. The Contract Capacity curtailed shall be
                          treated the same as scheduled maintenance outages in
                          the calculation of the Monthly Capacity Payment.

               8.1.2.3 If Seller is unable to provide Contract Capacity due to
                       Uncontrollable Forces, Edison shall continue Monthly
                       Capacity Payments pursuant to Capacity Payment Option B
                       for 90 days from the occurrence of the Uncontrollable
                       Force. Monthly Capacity Payments payable during a period
                       of interruption or reduction by reason of an
                       Uncontrollable Force shall be treated the same as
                       scheduled maintenance outages.

               8.1.2.4 Capacity Bonus Payment

                       For Capacity Payment Option B, Seller may receive a
                       Capacity Bonus Payment as follows:

                       a.  Bonus During Peak Months

                           For a Peak Month, Seller shall receive a Capacity
                           Bonus Payment if (i) the requirements set forth in
                           Section 8.1.2.2 have been met, and (ii) the on-peak
                           capacity factor exceeds 85%.

                       b.  Bonus During Non-Peak Months

                           For a non-peak month, Seller shall receive a Capacity
                           Bonus Payment if (i) the requirements set forth in
                           Section 8.1.2.2 have been met, (ii) the on-peak
                           capacity factor for each Peak Month during the year
                           was at least 85%, and (iii) the on-peak capacity
                           factor for the non-peak month exceeds 85%.

                       c.  For any eligible month, the Capacity Bonus Payment
                           shall be calculated as follows:

Capacity Bonus Payment = A x B x C x D

               Where A = (1.2 x On-Peak Capacity Factor)-1.02

Where the On-Peak Capacity Factor, not to exceed 1.0, is calculated as follows:



                                       16


                           (Period kWh Purchased by Edison (Limited by the Level
                           of Contract Capacity))

On-Peak Capacity Factor = [(Contract Capacity) x (Period Hours minus Maintenance
                          Hours Allowed in Section 4.5)]

                            B = Contract Capacity Price specified in Section 1.8
                                for Capacity Payment Option B

                            C = 1/12

                            D = Contract Capacity specified in Section 1.3

                              d. When Seller is entitled to receive a Capacity
                                 Bonus Payment, the Monthly Capacity Payment
                                 shall be the sum of the Monthly Capacity
                                 Payment pursuant to Section 8.1.2.1 and the
                                 Monthly Capacity Bonus Payment pursuant to this
                                 Section 8.1.2.4.

                  8.1.2.5  Capacity Reduction

                           a. Seller may reduce the Contract Capacity specified
                              in Section 1.3, provided that Seller gives Edison
                              prior written notice for a period determined by
                              the amount of Contract Capacity reduced as
                              follows:

Amount of Contract                                          Length of
 Capacity Reduced                                       Notice Required
 ----------------                                       ---------------

23,000 kW or under                                          12 months
25,001- 50,000 kW                                           36 months
50,001 - 100,000 kW                                         48 months
over 100,000 kW                                             60 months

                           b. Subject to Section 9.3, Seller shall refund to
                              Edison with interest at the current published
                              Federal Reserve Board three months prime
                              commercial paper rate, an amount equal to the
                              difference between (i) the accumulated Monthly
                              Capacity Payments paid by Edison pursuant to
                              Capacity Payment Option B up to the time the
                              reduction notice is received by Edison, and (ii)
                              the total capacity payments which Edison would
                              have paid if based on the Adjusted Capacity Price.

                                       17


                           c. From the date the reduction notice is received to
                              the date of actual capacity reduction, Edison
                              shall make capacity payments based on the Adjusted
                              Capacity Price for the amount of Contract Capacity
                              being reduced.

                           d. Seller may reduce Contract Capacity without the
                              notice prescribed in Section 8.1.2.5(a), provided
                              that Seller shall refund to Edison the amount
                              specified in Section 8.1.2.5(b) and an amount
                              equal to: (i) the amount of Contract Capacity
                              being reduced, times (ii) the difference between
                              the Current Capacity Price and the Contract
                              Capacity Price, times (iii) the number of years
                              and fractions thereof (not less than one year) by
                              which the Seller has been deficient in giving the
                              prescribed notice. If the Current Capacity Price
                              is less than the Contract Capacity Price, only
                              payment under Section 8.1.2.5(b) shall, be due to
                              Edison.

                  8.1.2.6  Adjustment to Contract Capacity

                           The Parties may agree in writing at any time to
                           adjust the Contract Capacity. Seller may reduce the
                           Contract Capacity pursuant to section 8.1.2.5. Seller
                           may increase the Contract Capacity with Edison's
                           approval and thereafter receive payment for the
                           increased capacity in accordance with the Contract
                           Capacity Price for the Capacity Payment Option
                           selected by Seller for the remaining Contract Term.

                  8.1.2.7  Excess Capacity

                           For Capacity Payment Option B, Seller shall be paid
                           for capacity in excess of Contract Capacity based on

                           the as-available capacity price in Standard Offer No.
                           1 Capacity Payment Schedule, as updated and approved
                           by the Commission.

     8.2   Energy Payments -- First Period

           During the First Period of the Contract Term, Seller shall be paid a
           Monthly Energy Payment for the electrical energy delivered by the


           Seller and purchased by Edison at the Point of Interconnection
           pursuant to the Energy Payment Option selected by the Seller in
           Section 1.9, as follows.

           8.2.1  Energy Payment Option 1 -- Forecast of Annual Marginal Cost of
                  Energy. If Seller selects Energy Payment Option 1, then during
                  the First Period of

                                       18


                  the Contract Term, Seller shall be paid a Monthly Energy
                  Payment for electrical energy delivered by Seller and

                  purchased by Edison at the Point of Interconnection during
                  each month in the First Period of the Contract Term pursuant
                  to the following formula:

Monthly Energy Payment = [(A x D) + (B x D) + (C x D)] x E

                  Where A = kWh purchased by Edison during on-peak periods
                            defined in Edison's Tariff Schedule No. TOU-8.

                        B = kWh purchased by Edison during mid-peak periods
                            defined in Edison's Tariff Schedule No. TOU-8.

                        C = kWh purchased by Edison during off-peak periods
                            defined in Edison's Tariff Schedule No. TOU-8.

                        D = The sum of: (i) the appropriate time
                            differentiated energy price from the Forecast of
                            Annual Marginal Cost of Energy, multiplied by the
                            decimal equivalent of the percentage of the forecast
                            specified in Section 1.9, and (ii) the appropriate
                            time differentiated energy price from Edison's
                            published avoided cost of energy multiplied by the


                            decimal equivalent of the percentage of the
                            published energy price specified in Section 1.9.

                        E = Energy Loss Adjustment Factor For Remote Generating
                            Sites*

*The Energy Loss Adjustment Factor For Remote Generating Sites shall be 1.0,
subject to adjustment by Commission orders and rulings.

           8.2.2  Energy Payment Option 2 -- Levelized Forecast of Marginal Cost
                  of Energy. If Seller selects Energy Payment Option 2, then
                  during the First Period of the Contract Term, Seller shall be

                  paid a Monthly Energy Payment for electrical energy delivered
                  by Seller and purchased by Edison each month during the First
                  Period of the Contract Term pursuant to the following formula:

Monthly Energy Payment = [(A x D) + (B x D) + (C x D)] x E

                  Where A = kWh purchased by Edison during on-peak periods
                            defined in Edison's tariff Schedule No. TOU-8.

                                       19


                        B = kWh purchased by Edison during mid-peak periods
                            defined in Edison's tariff Schedule No. TOU-8.

                        C = kWh purchased by Edison during off-peak periods
                            defined in Edison's Tariff Schedule No. TOU-8.

                        D = The sum of: (i) the appropriate time differentiated
                            energy price from the Levelized Forecast of Marginal
                            Cost of Energy, for the First Period of the Contract
                            Term multiplied by the decimal equivalent of the
                            percentage of the levelized forecast specified in
                            Section 1.9, and (ii) the appropriate time
                            differentiated energy price from Edison's published


                            avoided cost of energy multiplied by the decimal
                            equivalent of the percentage of the published energy
                            price specified in Section 1.9.

                        E = Energy Loss Adjustment Factor For Remote Generating
                            Sites*

*The Energy Loss Adjustment Factor For Remote Generating Sites shall be 1.0,
subject to adjustment by Commission orders or rulings.

                  8.2.2.1  Performance Recruitment for Energy Payment Option 2

                           During the First Period when the annual forecast
                           referred to in Section 8.2.1 is greater than the
                           levelized forecast referred to in Section 8.2.2,
                           Seller shall deliver to Edison at least 70 percent of
                           the average annual kWh delivered to Edison during
                           those previous periods when the levelized forecast
                           referred to in Section 8.2.2 is greater than the
                           annual forecast referred to in section 8.2.1. If

                           Seller does not meet the performance requirements of
                           this Section 8.2.2.1, Seller shall be subject to
                           Section 8.5.

     8.3   Energy Payments -- Second Period

           During the Second Period of the Contract Term, Seller shall be paid a
           Monthly Energy Payment for electrical energy delivered by Seller and
           purchased by Edison at the Point of Interconnection at a rate equal
           to 100% of Edison's published avoided cost of energy based on
           Edison's full avoided operating cost as updated periodically and
           accepted by the Commission, pursuant to the following formula:

                                       20


Monthly Energy Payment = kWh purchased by Edison for each on-peak, mid-peak, and
                         off-peak time period defined in Edison's Tariff
                         Schedule No. TOU-8

                         x  Edison's published avoided cost of energy by time of
                            delivery for each time period

                         x  Energy Loss Adjustment Factor for Remote Generating
                            Sites*

*The Energy Loss Adjustment Factor For Remote Generating Sites shall be 1.0,
subject to adjustment by Commission orders or ruling.

     8.4   Edison shall not be obligated to accept or pay for electrical energy
           generated by the Generating Facility, and may request Seller whose
           Generating Facility is one (1) MW or greater to discontinue or reduce
           delivery of electric energy, for not more than 300 hours annually
           during off-peak hours when (i) purchases would result in costs
           greater than those which Edison would incur if it did not purchase
           electrical energy from Seller but instead utilized an equivalent
           amount of electrical energy generated from another Edison source, or
           (ii) the Edison Electric System demand would require that Edison


           hydro-energy be spilled to reduce generation.

     8.5   Energy Payment Refund

           If Seller elects Energy Payment Option 2, Seller shall be subject to
           the following:

           8.5.1  If Seller fails to perform the Contract obligations for any
                  reason during the first Period of the Contract Term, or fails
                  to meet the performance requirements set forth in Section
                  8.2.2.1, and at the time of such failure to perform, the net
                  present value of the cumulative Energy payments received by
                  Seller pursuant to Energy Payment Option 2 exceeds the net
                  present value of what Seller would have been paid pursuant to
                  Energy Payment Option 1, Seller shall make an energy payment
                  refund equal to the difference in such net present values in
                  the year in which the refund is due. The present value
                  calculation shall be based upon the rate of Edison's
                  incremental cost of capital specified in Section 1.9.

           8.5.2  Not Less than 90 days prior to the date Energy is first
                  delivered to the Point of Interconnection, Seller shall
                  provide and maintain a performance bond, surety bond,
                  performance insurance, corporate guarantee, or bank

                                       21


                  letter of credit, satisfactory to Edison, which shall insure
                  payment to Edison of the Energy Payment Refund at any time
                  during the First Period. Edison may, in its sole discretion,
                  accept another form of security except that in such instance a
                  1-1/2 percent reduction shall then apply to the levelized
                  forecast referred to in Section 8.2.2 in computing payments
                  for Energy. Edison shall be provided with certificates
                  evidencing Seller's compliance with the security requirements
                  in this Section which shall also include the requirement that
                  Edison be given 90 days prior written notice of the expiration
                  of such security.

           8.5.3  If Seller fails to provide replacement security not less than
                  60 days prior to the date of expiration of existing security,
                  the Energy Payment Refund provided in Section 8.5 shall be
                  payable forthwith. Thereafter, payments for Energy shall be
                  100 percent of the Monthly Energy Payment provided in section
                  8.2.1.

           8.5.4  If Edison at any time determines the security to be otherwise
                  inadequate, and so notifies Seller, payments thereafter for
                  Energy shall be 100 percent of the Monthly Energy Payment
                  provided in Section 8.2.1. If within 30 days of the date
                  Edison gives notice of such inadequacies, Seller satisfies
                  Edison's security requirements, Energy Payment Option 2 shall
                  be reinstated. If Seller fails to satisfy Edison's security



                  requirements within the 30-day period, the Energy Payment
                  Refund provided in section 8.5 shall be payable forthwith.

9.   PAYMENT AND BILLING PROVISIONS
     ------------------------------

     9.1  For Energy and capacity purchased by Edison:

           9.1.1  Edison shall mail to Seller no later than thirty days after
                  the end of each monthly billing period (1) a statement showing
                  the Energy and capacity delivered to Edison during the
                  on-peak, mid-peak, and off-peak periods, as those periods are
                  specified in Edison's Tariff Schedule No. TOU-8 for that
                  monthly billing period, (2) Edison's computation of the amount
                  due Seller, and (3) Edison's check in payment of said amount.

           9.1.2  If the monthly payment period involves portions of two
                  different published Energy payment schedule periods, the
                  monthly Energy payment shall be prorated on the basis of the
                  percentage of days at each price.

                                       22


           9.1.3  If the payment period is less than 27 days or greater than 33
                  days, the capacity payment shall be prorated on the basis of
                  the average days per month per year.

           9.1.4  If, within thirty days of receipt of the statement, seller
                  does not make a report in writing to Edison of an error,

                  Seller shall be deemed to have waived any error in Edison's
                  statement, computation, and payment, and they shall be
                  considered correct and complete.

     9.2   Edison shall bill the Seller, on a monthly basis, for the costs
           Edison has incurred in the transmission of the electrical energy from


           the Project to the Point of Interconnection pursuant to the
           provisions of Section 26.

     9.3   Payments Due to Contract Capacity Reduction

           9.3.1  The Parties agree that the refund and payments provided in
                  Section 8.1.2.5 represent a fair compensation for the
                  reasonable losses that would result from such reduction of
                  Contract Capacity.

           9.3.2  In the event of a reduction in Contract Capacity, the
                  quantity, in kW, by which the Contract Capacity is reduced
                  shall be used to calculate the refunds and payments due Edison
                  in accordance with Section 8.1.2.5, as applicable.

           9.3.3  Edison shall provide invoices to Seller for all refunds and
                  payments due Edison under this Section 9 which shall be due
                  within 60 days.

           9.3.4  If Seller does not make payments as required in Section 9.2.3,
                  Edison shall have the right to offset any amounts due it

                  against any present or future payments due Seller and may
                  pursuit any other remedies available to Edison as a result of
                  seller's failure to perform.

     9.4   Energy Payment Refund

           Energy Payment Refund is immediately due and payable upon Seller's
           failure to perform the contract obligations as specified in Section
           8.5.

10.  TAXES

     10.1  Seller shall pay ad valorem taxes and other taxes properly
           attributable to the Project. If such taxes are assessed or levied
           against Edison, Seller shall pay Edison for such assessment or levy.

                                       23


     10.2  Seller shall pay ad valorem taxes and other taxes properly attributed
           to land, land rights, or interest in land for the Project. If such
           taxes are assessed or levied against Edison, Seller shall pay Edison
           for such assessment or levy.

     10.3  Edison shall refer any requests for information regarding the Project
           from any taxing authority to Seller, and Seller shall not withhold
           any properly requested information from any requesting taxing
           authority.

11.  TERMINATION

     This Contract shall terminate if Firm Operation does not occur within 5
     years of the date of contract execution.

12.  SALE OF GENERATING FACILITY

     12.1  If Seller desires to sell the Generating Facility, Seller shall
           promptly offer to Edison, or any entity designated by Edison in its
           sole discretion, the right to purchase the Generating Facility.
           Edison, or any such entity designated by Edison, shall have up to
           sixty days following the offer to accept Seller's offer or reach
           agreement with Seller.

     12.2  If the Parties are unable to reach a satisfactory agreement within
           sixty days following the offer pursuant to Section 12.1, and the
           Generating Facility is offered to any third party or parties, Edison,
           or any such entity designated by Edison, has the right for thirty
           days following each offer to agree to purchase the Generating
           Facility under the same terms and conditions, if such terms and
           conditions are better to Edison than those offered in Section 12.1.
           Any offers to sell made more than two years after Edison's failure to
           accept a previous offer to sell under Section 12.1, shall again be
           subject to the terms of Sections 12.1 and 12.2.

13.  ABANDONMENT OF PROJECT

     13.1  The Generating Facility shall be deemed to be abandoned if Seller
           discontinues operation of the Generating Facility with the intent
           that such discontinuation be permanent. Such intent shall be
           conclusively presumed by either (i) Seller's notice to Edison of such
           intent, or (ii) Seller's operation of the Generating Facility in such
           a manner that no Energy is generated therefrom for 200 consecutive
           days during any period after Firm Operation of the first generating
           unit, unless otherwise agreed to in writing by the Parties. If the
           Project is prevented from generating Energy due to an Uncontrollable
           Force, then such

                                       24


           period shall be extended for the duration of the Uncontrollable
           Force, not to exceed one year.

     13.2  If Seller abandons the Generating Facility during the term of this
           Agreement, Edison, or any entity designated by Edison in its sole
           discretion, shall have the right to purchase the Generating Facility
           pursuant to the provisions of Section 12.

14.  LIABILITY

     14.1  Each Party (First Party) releases the other Party (Second Party), its
           directors, officers, employees and agents from any loss, damage,
           claim, cost, charge, or expense of any kind or nature (including any
           direct, indirect or consequential loss, damage, claim, cost, charge,
           or expense), including attorney's fees and other costs of litigation
           incurred by the First Party, in connection with damage to property of
           the First Party caused by or arising out of the Second Party's
           construction, engineering, repair, supervision, inspection, testing,
           protection, operation, maintenance, replacement, reconstruction, use
           or ownership of its facilities, to the extent that such loss, damage,
           claim, cost, charge, or expense is caused by the negligence of Second
           Party, its directors, officers, employees, agents, or any person or
           entity whose negligence would be imputed to Second Party.

     14.2  Each Party shall indemnify and hold harmless the other Party, its
           directors, officers, and employees or agents from and against any
           loss, damage, claim, cost, charge, or expense of any kind or nature
           (including direct, indirect or consequential loss, damage, claim,
           cost, charge, or expense), including attorney's fees and other costs
           of litigation, incurred by the other Party in connection with the
           injury to or death of any person or damage to property of a third
           party arising out of the indemnifying Party's construction,
           engineering, repair, supervision, inspection, testing, protection,
           operation, maintenance, replacement, reconstruction, use, or
           ownership of its facilities, to the extent that such loss, damage,
           claim, cost, charge, or expense is caused by the negligence of the
           indemnifying Party, its directors, officers, employees, agents, or
           any person or entity whose negligence would be imputed to the
           indemnifying Party; provided, however, that each Party shall be
           solely responsible for and shall bear all cost of claims brought by
           its contractors or its own employees and shall indemnify and hold
           harmless the other Party for any such costs including costs arising
           out of any workers compensation law. Seller releases and shall defend
           and indemnify Edison from any claim, cost, loss, damage, or liability
           arising from any contrary representation concerning the effect of
           Edison's review of the design, construction, operation, or
           maintenance of the Project.

                                       25


     14.3  The provisions of this Section 14 shall not be construed so as to
           relieve any insurer of its obligations to pay any insurance claims in
           accordance with the provisions of any valid insurance policy.

     14.4  Neither Party shall be indemnified by the other Party under Section
           14.2 for its liability or loss resulting from its sole negligence or
           willful misconduct.

15.  INSURANCE

     15.1  Until Contract is terminated, Seller shall obtain and maintain in
           force as hereinafter provided comprehensive general liability
           insurance, including contractual liability coverage, with a combined
           single limit of not less than $l,000,000 each occurrence. The
           insurance carrier or carriers and form of policy shall be subject to
           review and approval by Edison.

     15.2  Prior to the date Seller's generating facility first delivers
           electrical energy to the Point of Interconnection, Seller shall (i)
           furnish certificate of insurance to Edison, which certificate shall
           provide that such insurance shall not be terminated nor expire except
           on thirty days prior written notice to Edison, (ii) maintain such
           insurance in effect for so long as Seller's Generating Facility is
           delivering electrical energy to the Point of Interconnection, and
           (iii) furnish to Edison an additional insured endorsement with
           respect to such insurance in substantially the following form: "In
           consideration of the premium charged, Southern California Edison
           Company (Edison) is named as additional insured with respect to all
           liabilities arising out of Seller's use and ownership of Seller's
           Generating Facility.

           "The inclusion of more than one insured under this policy shall not
           operate to impair the rights of one insured against another insured
           and the coverages afforded by this policy will apply as though
           separate policies had been issued to each insured. The inclusion of
           more than one insured will not, however, operate to increase the
           limit of the carrier's liability. Edison will not, by reason of its
           inclusion under this policy, incur liability to the insurance carrier
           for payment of premium for this policy.

           "Any other insurance carried by Edison which may be applicable shall
           be deemed excess insurance and Seller's insurance primary for all
           purposes despite any conflicting provisions in Seller's policy to be
           contrary."

     15.3  If Seller fails to comply with the provisions of this Section 15,
           Seller shall, at its own cost, defend, indemnify, and hold harmless
           Edison, its directors, officers, employees, agents, assigns, and
           successors in interest from and against any and

                                       26


           all loss, damage, claim, cost, charge, or expense of any kind or
           nature (including direct, indirect or consequential loss, damage,
           claim, cost, charge, or expense, including attorney's fees and other
           costs of litigation) resulting from the death or injury to any person
           or damage to any property, including the personnel and property of
           Edison, to the extent that Edison would have been protected had
           Seller complied with all of the provisions of this Section 15.

16.  UNCONTROLLABLE FORCES

     16.1  Neither Party shall be considered to be in default in the performance
           of any of the agreements contained in this Contract, except for
           obligations to pay money when and to the extent failure of
           performance shall be caused by an Uncontrollable Force.

     16.2  If either Party, because of an Uncontrollable Force, is rendered
           wholly or partly unable to perform its obligations under this
           Contract, the Party shall be excused from whatever performance is
           affected by the Uncontrollable Force to the extent so affected
           provided that:

           (1)  The non-performing Party, within two weeks after the occurrence
                of the Uncontrollable Force, gives the other Party written
                notice describing the particulars of the occurrence;

           (2)  The suspension of performance is of no greater scope and of no
                longer duration than is required by the Uncontrollable Force;

           (3)  The non-performing Party uses its best efforts to remedy its
                inability to perform (this subsection shall not require the
                settlement of any strike, walkout, lockout or other labor
                dispute on terms which, in the sole judgment of the party
                involved in the dispute, are contrary to its interest. It is
                understood and agreed that the settlement of strikes, walkouts,
                lockouts or other labor disputes shall be at the sole discretion
                of the Party having the difficulty);

           (4)  When the non-performing Party is able to resume performance of
                its obligations under this Contract, that Party shall give the
                other Party written notice to that effect; and

           (5)  Capacity payments during such periods of Uncontrollable Force on
                Seller's part shall be governed by Section 8.1.2.3.

                                       27


     16.3  In the event that either Party's ability to perform cannot be
           corrected when the Uncontrollable Force is caused by the actions or
           inactions of legislative, judicial or regulatory agencies or other
           proper authority, this Contract may be mended to comply with the
           legal or regulatory change which caused the nonperformance.

           If a loss of Qualifying Facility status occurs due to an
           Uncontrollable Force and Seller fails to make the changes necessary
           to maintain its Qualifying Facility status, the Seller shall
           compensate Edison for any economic detriment incurred by Edison as a
           result of such failure.

17.  NONDEDICATION OF FACILITIES

     Neither Party, by this Contract, dedicates any part of its facilities
     involved in this Project to the public or to the service provided under the
     Contract, and such service shall cease upon termination of the Contract.

18.  PRIORITY OF DOCUMENTS

     If there is a conflict between this document and any Appendix, the
     provisions of this document shall govern. Each Party shall notify the other
     immediately upon the determination of the existence of any such conflict.

19.  NOTICES AND CORRESPONDENCE

     All notices and correspondence pertaining to this Contract shall be in
     writing and shall be sufficient if delivered in person or seat by certified
     mail, postage prepaid, return receipt requested, to Seller as specified in
     Section 1.1, or to Edison as follows:

           Southern California Edison Company
           Post Office Box 800
           Rosemead, California  91770
           Attention:  Secretary

     All notices sent pursuant to this Section 19 shall be effective when
     received, and each Party shall be entitled to specify as its proper address
     any other address in the United States upon written notice to the other
     Party.

20. PREVIOUS COMMUNICATIONS

     This Contract contains the entire agreement and understanding between the
     Parties, their agents, and employees as to the subject matter of this
     contract, and merges and supersedes all prior agreements, commitments,
     representations, and discussions

                                       28


     between the Parties. No Party shall be bound to any other obligations,
     conditions, or representations with respect to the subject matter of this
     Contract.

21.  THIRD PARTY BENEFICIARIES

     This Contract is for the sole benefit of the Parties and shall not be
     construed as granting any rights to any person or entity other than the
     Parties or imposing obligations on either Party to any person or entity
     other than the Parties.

22.  NONWAIVER

     None of the provisions of the Contract shall be considered waived by either
     Party except when such waiver is given in writing. The failure of either
     Edison or Seller to insist in any one or more instances upon strict
     performance of any of the provisions of the Contract or to take advantage
     of any of its rights hereunder shall not be construed as a waiver of any
     such provisions or the relinquishment of any such rights for the future,
     but the same shall continue to remain in full force and effect.

23.  DISPUTES

     23.1  Any dispute arising between the Parties relating to interpretation of
           the provisions of this Contract or to performance of the Parties
           hereunder, other than matters which may not be settled without the
           consent of an involved insurance company, shall be reduced to
           writing, by the complaining Party, stating the complaint and proposed
           solution and submitted to the other Party's manager responsible for
           the administration of this Contract. Such manager's interpretation
           and decision thereon shall be incorporated into a written document
           outlining his interpretation and decision and specifying that it is
           the final decision of such manager. A copy of such document shall be
           furnished to complaining Party within ten days following the receipt
           of complaining Party's written complaint.

     23.2  The decision of such manager pursuant to Section 23.1 shall be final
           and conclusive from the date of receipt of such copy by the
           complaining Party, unless within thirty days complaining Party
           furnishes a written appeal to such manager. Following receipt of such
           appeal, a joint hearing shall be held within fifteen days of said
           appeal, at which time the Parties shall each be afforded an
           opportunity to present evidence in support of their respective
           positions. Such joint hearing shall be conducted by one authorized
           representative of Seller and one authorized representative of Edison
           and other necessary persons. Pending final decision of a dispute
           hereunder, the Parties shall proceed diligently with the performance
           of their obligations under this Contract.

                                       29


     23.3  The final decision by the Parties' authorized representatives shall
           be made within fifteen days after presentation of all evidence
           affecting the dispute, and shall be reduced to writing. The decision
           shall be final and conclusive.

     23.4  If the authorized representatives cannot reach a final decision
           within the fifteen-day period set forth in Section 23.3, any remedies
           which are provided by law may be pursued.

24.  SUCCESSORS AND ASSIGNS

     Neither Party shall voluntarily assign its rights nor delegate its duties
     under this Contract, or any part of such rights or duties, without the
     written consent of the other Party, except in connection with the sale or
     merger of a substantial portion of its properties. Any such assignment or
     delegation made without such written consent shall be null and void.
     Consent for assignment shall not be unreasonably withheld. Such assignment
     shall include, unless otherwise specified therein, all of Seller's rights
     to any refunds which might become due under the Contract.

25.  EFFECT OF SECTION READINGS

     Section headings appearing in this Agreement are inserted for convenience
     only, and shall not be construed as interpretations of text.

26.  TRANSMISSION

     26.1  Edison shall endeavor to make arrangements with Interconnecting
           Utilities for the necessary transmission of the electrical energy
           from the Project to the Point of Interconnection. Seller shall be
           responsible for all such costs associated with such transmission of
           electrical energy, including the cost of transmission losses from the
           Project to the Point of Interconnection as provided for in the
           transmission arrangements between Edison and the Interconnecting
           Utilities.

     26.2  If Edison is unable to secure firm transmission service or equivalent
           arrangements from Interconnecting Utilities which are required to
           transmit the electrical energy from the Project to the Point of
           Interconnection at terms and conditions satisfactory to Edison in its
           sole judgment, then Edison shall not be liable to the Seller for any
           damages arising from Edison's failure to secure said transmission
           service or arrangements nor will Edison be required to purchase
           Energy which is not delivered or capacity which is not made available
           at the Point of Interconnection.

                                       30


     26.3  If Edison is able to secure transmission service or equivalent
           arrangements from Interconnecting Utilities which are required to
           transmit the electrical energy from the Project to the Point of
           Interconnection, then Edison shall notify Seller of the costs, terms
           and conditions of such arrangements and Seller shall have 60 calendar
           days to accept or reject such service or arrangements. In the event
           Seller rejects such service or arrangements, then Edison shall not be
           obligated to seek other service or arrangements, nor will Edison be
           liable to the Seller for any damages arising from Seller's failure to
           accept such service or arrangements, nor will Edison be required to
           purchase Energy which is not delivered or capacity which is not made
           available at the Point of Interconnection.

21.  GOVERNING LAW

     This Contract shall be interpreted, governed, and construed under the laws
     of the State of California as if executed and to be performed wholly within
     the State of California.

28.  CONFIDENTIALITY

     28.1  Except as provided herein, the Parties shall hold all information in
           this Contract and all information related to or received pursuant to
           this Contract as confidential.

     28.2  Neither Party shall disclose any part nor the whole of this Contract
           to any third party without the express prior written consent of the
           other Party; such consent shall not be unreasonably withheld.

     28.3  From time to time governmental and/or regulatory agencies may request
           disclosure of the Contract or Contract-related information from
           either Party or both Parties and if such is the case either Party or
           both Parties may consent to such disclosure provided, that (i) the
           requestor(s) be notified by the disclosing Party that the information
           being released is confidential, and that (ii) the disclosing Party
           inform the other Party to the extent practicable, 10 days prior to
           delivery of the information, in writing, as to the nature of the
           information to be disclosed and to whom disclosed.

29.  MULTIPLE ORIGINALS

     This Contract is executed in two counterparts, each of which shall be
     deemed an original.


                                       31



SIGNATURES

IN WITNESS WHEREOF, the Parties hereto have executed this Contract this 18th of
July, 1984.

                              SOUTHERN CALIFORNIA EDISON COMPANY



                              By        /s/ Edward A. Myers, Jr.
                                ---------------------------------------------
                                            Edward A. Myers, Jr.
                                              Vice President



                              REPUBLIC GEOTHERMAL, INC.



                              By         /s/ Timothy M. Evans
                                ---------------------------------------------
                                             Timothy M. Evans
                                              Vice President


                                       32



                                                                  Exhibit 10.3.2


                                 AMENDMENT NO. 1
                     TO THE POWER PURCHASE CONTRACT BETWEEN
                       SOUTHERN CALIFORNIA EDISON COMPANY
                                       AND
                                ORMESA GEOTHERMAL
                                  QFID NO. 3010


This Amendment No. 1 to the Power Purchase Contract (Document No. 2044C)
originally entered into between Republic Geothermal, Inc. and Southern
California Edison Company ("Contract") is entered into by Ormesa Geothermal, a
California general partnership ("Seller"), and Southern California Edison
Company, a California corporation ("Edison") (individually "Party," collectively
"Parties").

                                    RECITALS

This Amendment No. 1 to the Contract is made with reference to the following
facts, among others:

2.1      Republic Geothermal, Inc. and Edison executed the Contract as of the
         18th day of July, 1984.

2.2      Republic Geothermal, Inc. assigned the Contract to Ormat Systems, Inc.
         on November 6, 1984, to which assignment Edison consented on December
         19, 1984.

2.3      Ormat Systems, Inc. assigned the Contract to Seller on February 27,
         1985, to which assignment Edison consented on July 22, 1985.



2.4      On June 17, 1988, Seller provided Edison with a new address for
         correspondence and the identity of the fiduciary to whom payments are
         to be mailed.

2.5      The Parties mutually desire to adjust the pattern of payments under the
         Contract in a manner that will give the Seller more certainty about its
         payment stream, but reduce the overall cost of energy to Edison. To
         that end, the Parties desire to increase the Contract Capacity from
         24,000 kW to 31,500 kW, limit Contract energy deliveries to Edison to
         38,000 kilowatthours per hour, and limit the Contract Capacity eligible
         for Capacity bonus Payment to 27,000 kW.

                                    AGREEMENT

         The Parties agree to amend the Contract as follows:

3.1      Delete Section 1.1 and replace it with the following:

         "1.1 All notices and correspondence, except payments for Energy and
         capacity, shall be sent to Seller at the following address:

                           Ormesa Geothermal
                           P.O. Box 819
                           El Centro, CA 92244

        All payments to Seller for Energy and capacity shall be sent to Seller's
        fiduciary at the following address:

                           First Interstate Bank
                           Corporate Trust Division
                           707 Wilshire Boulevard, W 10-2

                                        2


                           Los Angeles, CA  90017
                           Account:  SCE Payment
                           Account No. 8213132-000"

3.2      Delete Section 1.2.a and replace it with the following:

         "a.       Nameplate Rating:  38,000 kW"

3.3      Delete Section 1.3 and replace it with the following:



         "1.3      Contract Capacity:  31,500 kW"

3.4      Delete Lines 5 and 6, Page 31, Section 8.1.2.4.c and replace it with
         the following:

         "D.  27,000 kW"
3.5      Delete Section 9.1.1 and replace it with the following:

     "9.1.1    Not later than thirty (30) days after the end of each monthly
               billing period, Edison shall mail to Seller: (1) statement
               showing the Energy and Contract Capacity delivered to Edison
               during the on-peak, mid-peak, and off-peak periods, as those
               periods are specified in Edison's Tariff Schedule No. TOU-8 for
               that monthly billing period; and (2) Edison's computation of the
               amount due Seller. Within the same thirty (30) days, Edison shall
               mail to Seller's facility, at the address provided in Section
               1.1, Edison's check made payable to Seller, in payment of the
               amount due Seller."

3.6      Add the following subsection to Section 14:

     "14.5     Seller shall indemnify and hold harmless Edison, its directors,
               officers, and employees or agents from and against any loss,
               damage, claim, cost, charge or expense (including direct,
               indirect, or consequential loss, damage, claim, cost, charge or
               expense), including attorney's fees and other costs of

               litigation, incurred by Edison and resulting from the mailing of
               payment to Seller's fiduciary as provided in Section 9.1.1."

                                       3


                       OTHER CONTRACT TERMS AND CONDITIONS

         Except as expressly amended herein, the terms and conditions of the
original Contract shall remain in full force and effect.

                                 EFFECTIVE DATE

         This Amendment No. 1 shall become effective when it has been duly
executed by the Parties.

                                SIGNATURE CLAUSE

         The signatories hereto represent that they have been appropriately
authorized to enter into this Amendment No. 1 to the Contract on behalf of the
Party for whom they signed. This Agreement No. 1 to the Contract is hereby
executed as of this 23rd day of December, 1988.



                                        SOUTHERN CALIFORNIA EDISON COMPANY




                                        By:  /s/ Glenn Bjorklund
                                           ------------------------------------
                                        Name:           GLENN BJORKLUND
                                        Title:           Vice President


                                        ORMESA GEOTHERMAL



                                        By:  /s/ Indecipherable
                                           ------------------------------------
                                        Name:
                                        Title:

















                                       4






                                                                  Exhibit 10.3.3


                             POWER PURCHASE CONTRACT

                                     BETWEEN

                       SOUTHERN CALIFORNIA EDISON COMPANY

                                       AND

                               ORMAT SYSTEMS INC.







                                TABLE OF CONTENTS
SECTION                          TITLE                                      PAGE

1                PROJECT SUMMARY                                              1

2                DEFINITIONS                                                  2

3                TERM                                                         8

4                GENERATING FACILITY                                          9

5                OPERATING OPTIONS                                           18

6                INTERCONNECTION FACILITIES                                  19

7                METERING                                                    20

8                POWER PURCHASE PROVISIONS                                   21

9                PAYMENT AND BILLING PROVISIONS                              42

10               TAXES                                                       44

11               TERMINATION                                                 45

12               SALE OF GENERATING FACILITY                                 45

13               ABANDONMENT OF PROJECT                                      46

14               LIABILITY                                                   47

15               INSURANCE                                                   50

16               UNCONTROLLABLE FORCES                                       52

17               NONDEDICATION OF FACILITIES                                 54

18               PRIORITY OF DOCUMENTS                                       54



19               NOTICES AND CORRESPONDENCE                                  54

20               PREVIOUS COMMUNICATIONS                                     55


                                      - i -


21              THIRD PARTY BENEFICIARIES                                    55

22              NONWAIVER                                                    55

23              DISPUTES                                                     56

24              SUCCESSORS AND ASSIGNS                                       57

25              EFFECT OF SECTION HEADINGS                                   58

26              TRANSMISSION                                                 58

27              AMENDMENT                                                    59

28              GOVERNING LAW                                                59

29              CONFIDENTIALITY                                              59

30              MULTIPLE ORIGINALS                                           60

                 SIGNATURES                                                  60

                 APPENDIX                                                   A-1


                 APPENDIX B                                                 B-1

                 APPENDIX C                                                 C-1



                                     - ii -





I.  PROJECT SUMMARY
    ---------------

              This Contract is entered into between Southern California Edison
Company ("Edison") and Ormat Systems Inc., a Massachusetts Corporation
("Seller"). Seller is willing to construct, own, and operate a Qualifying
Facility and sell electric power to Edison and Edison is willing to purchase
electric power delivered by Seller to Edison at the Point of Interconnection
pursuant to the terms and conditions set forth as follows:

              1.1  All Notices shall be sent to Seller at the following address:

              Ormat Systems Inc.
              98 South Street
              Hopkinton, MA 01748
              Attn:  President

              1.2  Seller's Generating Facility:


              a.  Nameplate Rating:  18,500 kw.
              b.  Location:  East Mesa, Imperial County, California
              c.  Type (Check One):
                    Cogeneration Facility
                X   Small Power Production Facility

              1.3  Contract Capacity:  15,000 kW

              1.3.1  Estimated as-available capacity:  0 kW.

              1.4  Expected annual production:  120,000,000 kWh.


              1.5  Expected Date of Firm Operation:  September 1, 1985

              1.6  Contract Term:  30 years

              1.7  Operating Options pursuant to Section 5:  (Check One)



              X  Operating Option I. Excess Generator output dedicated to
Edison. No electric service or standby service required from Edison.

                 Operating Option II. Entire Generator output dedicated to
Edison with separate electric service required from Edison.

              1.8 The Capacity Payment option selected by Seller pursuant to
Section 8.1 shall be: (Check One)

                 Option A As-available capacity based upon:

                 Standard Offer No. 1 Capacity Payment Schedule, or

                 Forecast of Annual As-Available Capacity Payment Schedule

              X  Option B - Firm Capacity

              X  Standard Offer No. 2 Capacity Payment Schedule in effect at
time of Contract execution

                 Standard Offer No. 2 Capacity Payment Schedule in effect at
time of Firm Operation

              a. The Contract Capacity Price:  $147 kW-yr.  (Firm Capacity)

             1.9 The Energy Payment Option selected by Seller pursuant to
Section 8.2 shall be: (Check One)

              X  Option I - Forecast of Annual Marginal Cost of Energy in effect
at date of execution of this Contract.  (Appendix B)

                  Option 2 - Levelized Forecast of Marginal Cost of Energy in
effect at date of execution of this Contract.  (Appendix C)


                                       2



              For the energy payment refund pursuant to Section 8.5 under Option
2, Edison's Incremental Cost of Capital is 15 %.

              Seller may change once between Options 1 and 2, provided Seller
delivers written notice of such change at least 90 days prior to the date of
Firm Operation.

              For Option 1 or 2, Seller elects to receive the following
percentages in 20% increments, the total of which shall equal 100%:

              100 percent of Forecast of Annual Marginal Cost of Energy, and

              0 percent of Edison's published avoided cost of energy as updated
periodically and accepted by the Commission.

                          GENERAL TERMS AND CONDITIONS

              2.   DEFINITIONS

              When used with initial capitalizations, whether in the singular or
in the plural, the following terms shall have the following meanings:

              2.1 Adjusted capacity Price: The $/kW-yr capacity purchase price
based on the Capacity Payment Schedule in effect at the time of Contract
execution for the time period beginning on the date of Firm Operation for the
first generating unit and ending on the date of termination or reduction of
Contract Capacity under Capacity Payment Option B.

              2.2 Appendix A: Capacity Payment Schedule - Forecast of Annual As-
Available Capacity


                                       3



              2.3 Appendix B: Energy Payment Schedule - Forecast of Annual
Marginal Cost of Energy

              2.4 Appendix C: Energy Payment Schedule - Levelized Forecast of
Marginal Cost of Energy

              2.5 Capacity Payment Schedule(s): Published capacity payment
schedule(s) as authorized by the commission and in effect at the time of
execution of this Contract for as-available or firm capacity.

              2.6 Commission: The Public Utilities Commission of the State of
California.

              2.7 Contract: This document and Appendices, as amended from time
to time.

              2.8 Contract Capacity: The electric power producing capability of
the Generating Facility which is committed to Edison.

              2.9 Contract Capacity Price: The capacity purchase price from the
Capacity Payment Schedule approved by the commission and in effect on the date
of execution of this Contract for Capacity Payment Option B.

              2.10 Contract Term: Period in years commencing with date of Firm
Operation during which Edison shall purchase electric power from Seller.

              2.11 Current Capacity Price: The $/kw-yr capacity price provided
in the Capacity Payment Schedule determined by the year of termination or
reduction of Contract Capacity, and the number of years from such termination or
reduction to the expiration of the Contract Term for Capacity Payment Option B.


                                       4



              2.12 Edison:  The Southern California Edison Company.

              2.13 Edison Electric System Integrity: The state of operation of
Edison's electric system in a manner which is deemed to minimize the risk of
injury to persons and/or property and enables Edison to provide adequate and
reliable electric service to its customers.

              2.14 Emergency: A condition or situation which in Edison's sole
judgment affects Edison Electric System Integrity.

              2.15 Energy: Kilowatthours generated by the Generating Facility
which are purchased by Edison at the Point of Interconnection.

              2.16 Firm Operation: The date agreed on by the Parties on which
each generating unit of the Generating Facility is determined to be a reliable
source of generation and on which such unit can be reasonably expected to
operate continuously at its effective rating (expressed in kW).

              2.17 First Period: The period of the Contract Term specified in
Section 3.1.

              2.18 Forced Outage: Any outage other than a scheduled outage of
the Generating Facility that fully or partially curtails its electrical output.

              2.19 Generating Facility: All of Seller's generators, together
with all protective and other associated equipment and improvements, necessary
to produce electrical power at Seller's Facility excluding associated land, land
rights, and interests in land.


                                       5



              2.20 Generator: The generator(s) and associated prime mover(s),
which are a part of the Generating Facility.

              2.21 Interconnection Facilities: The electrical interconnection
facilities furnished, at no cost to Edison, by Seller, or by the Interconnecting
Utility on the Seller's behalf, which are appurtenant to, and/or incidental to,
the Project. The Interconnection Facilities shall include, but are not Limited
to, transmission lines and/or distribution lines between the Project and
transmission lines and/or distribution lines of the Interconnecting Utility,
relays, power-circuit breakers, metering devices, telemetering devices, and
other control and protective devices specified by the Interconnecting Utility as
necessary for operation of the Project in parallel with the Interconnecting
Utility's electric system.

              2.22 Interconnecting Utility: The electric utility, or any other
utility which takes delivery of electric energy generated by the Generating
Facility.

              2.23 Operate: To provide the engineering, purchasing, repair,
supervision, training, inspection, testing, protection, operation, use,
management, replacement, retirement, reconstruction, and maintenance of and for
the Generating Facility in accordance with applicable California utility
standards and good engineering practices.

              2.24 Operating Representatives: Individual(s) appointed by each
Party for the purpose of securing effective cooperation and interchange of
information between the Parties in connection with administration and technical
matters related to this Contract.

              2.25 Parties: Edison and Seller.

              2.26 Party: Edison or Seller.


                                       6



              2.27 Peak Months: Those months which the Edison annual system peak
demand could occur. Currently, but subject to change with notice, the peak
months for the Edison system are June, July, August, and September.

              2.28 Point of Interconnection: The point where the electrical
energy generated by the Seller, at the Project, is delivered to the Edison
electric system.

              2.29 Project: The Generating Facility and Interconnection
Facilities required to permit the Generator to deliver electric energy and make
capacity available to Interconnecting Utility.

              2.30 Qualifying Facility: Cogeneration or Small Power Production
Facility which meets the criteria as defined in Title 18, Code of Federal
Regulations, Section 292.201 through 292.207.

              2.31 Renewable Resources: Wind parks, small hydroelectric, solar,
and geothermal resources which produce electric power.

              2.32 Second Period: The period of the Contract Term specified in
Section 3.2.

              2.33 Seller. The Party identified in Section 1.0.

              2.34 Seller's Facility: The premises and equipment of Seller
located as specified in Section 1.2.

              2.35 Small Power Production Facility: The facilities and equipment
which use biomass, waste, or Renewable Resources, including wind, solar,
geothermal, and


                                       7



water, to produce electrical energy as defined in Title 18, Code of Federal
Regulations, Section 292.201 through 292.207.

              2.36 Summer Period: Defined in Edison's Tariff Schedule No. TOU-8
as now in effect or as may hereafter be authorized by the Commission.

              2.37 Tariff Schedule No. TOU-8: Edison's time-of-use energy tariff
for electric service exceeding 500 kW, as now in effect or as may hereafter be
authorized by the Commission.

              2.38 Uncontrollable Forces: Any occurrence beyond the control of a
Party which causes that Party to be unable to perform its obligations hereunder
and which a Party has been unable to overcome by the exercise of due diligence,
including but not limited to flood, drought, earthquake, storm, fire,
pestilence, lightning and other natural catastrophes, epidemic, war, riot, civil
disturbance or disobedience, strike, labor dispute, action or inaction of
government or other proper authority, which may conflict with the terms of this
Contract, or failure, threat of failure or sabotage of facilities which have
been maintained in accordance with good engineering and operating practices in
California. The failure of the Interconnecting Utility to deliver electrical
energy to the Point of Interconnection shall be an Uncontrollable Force only if
such failure is beyond the control of the Interconnecting Utility.

              2.39 Winter Period: Defined in Edison's Tariff Schedule No. TOU-8
as now in effect or as may hereafter be authorized by the commission.


                                       8



              3.  TERM

              This Contract shall be effective upon execution by the Parties and
shall remain effective until either Party gives 90 days prior written notice of
termination to the other Party, except that such notice of termination shall not
be effective to terminate this Contract prior to expiration of the Contract Term
specified in Section 1.6.

              3.1 The First Period of the Contract Term shall commence upon date
of Firm Operation but not later than 5 years from the date of execution of this
Contract.
              a. If the Contract Term specified in Section 1.6 is 15 years, the
First Period of the Contract Term shall be for 5 years.

              b. If the Contract Term specified in Section 1.6 is 20, 25, or 30
years, the First Period of the Contract term shall be for 10 years.

              3.2 The Second Period of the Contract Term shall commence upon
expiration of the First Period and shall continue for the remainder of the
Contract Term.

              4.  GENERATING FACILITY

              4.1 Ownership

              The Generating Facility shall be owned by Seller.

              4.2 Design

              4.2.1 Seller, at no cost to Edison, shall:

              a. Design the Generating Facility.

              b. Acquire all permits and other approvals necessary for the
construction, operation, and maintenance of the Generating Facility.

                                       9



              c. Complete all environmental impact studies necessary for the
construction, operation, and maintenance of the Generating Facility.

              4.2.2 Edison shall have the right to review the design of the
Generating Facility's electrical system and the Seller's Interconnection
Facilities. Edison shall have the right to request modifications to the design
of the Generating Facility's electrical system and the Seller's Interconnection
Facilities. Such modifications shall be required if necessary to maintain Edison
Electric System Integrity. If Seller does not agree to such modifications,
resolution of the difference between the Parties shall be made pursuant to
Section 23.

              4.3 Construction

              Edison shall have the right to review, consult with, and make
recommendations regarding Seller's construction schedule and to monitor the
construction and start-up of the Project. Seller shall notify Edison, as far in
advance of Firm Operation as reasonably possible, of changes in Seller's
Construction Schedule which may affect the date of Firm Operation.

              4.4 Operation

              4.4.1 Edison shall have the right to monitor operation of the
Project and may require changes in Seller's method of operation if such changes
are necessary, in Edison's sole judgment, to maintain Edison Electric System
Integrity.

                                       10



              4.4.2 Seller shall notify, in writing, Edison's Operating
Representative at least 14 days prior to the initial delivery of electrical
energy from the Project to the Point of Interconnection.

              4.4.3 Edison shall have the right to require Seller to curtail or
reduce the delivery of electrical energy from the Project to the Edison electric
system whenever Edison determines, in its sole judgement, that such curtailment
or reduction is necessary to facilitate maintenance of Edison's facilities, or
to maintain Edison Electric System Integrity. If Edison requires Seller to
curtail or reduce the delivery of electrical energy from the Project to the
Edison electric system pursuant to this Section 4.4.3, Seller shall have the
right to continue to serve its total electrical requirements. Each Party shall
endeavor to correct, within a reasonable period, the condition on its system
which necessitates the curtailment or the reduction of delivery of electrical
energy from the Project. The duration of the curtailment or the reduction shall
be limited to the period of time such a condition exists.

              4.4.4 Each Party shall keep the other Party's Operating
Representative informed as to the operating schedule of their respective
facilities affecting each other's operation hereunder, including any reduction
in Contract Capacity availability. In addition, Seller shall provide Edison with


reasonable advance notice regarding its scheduled outages including any
reduction in Contract Capacity availability. Reasonable advance notice is as
follows:

                                       11



               SCHEDULED OUTAGE                   ADVANCE NOTICE
              EXPECTED DURATION                     TO EDISON


       Less than one day                             24 Hours
       One day or more (except major overhauls)        1 Week
       Major overhaul                                6 Months

              4.4.5 Notification by each Party's Operating Representative of
outage date and duration should be directed to the other Party's operating
Representative by telephone.

              4.4.6   Seller shall not schedule major overhauls during Peak
Months.

              4.4.7 Seller shall maintain an operating log at Seller's Facility
with records of: real and reactive power production; changes in operating
status, outages, Protective Apparatus operations; and any unusual conditions
found during inspections. Changes in setting shall also be logged for Generators
which are "block loaded" to a specific kW capacity. In addition, Seller shall
maintain records applicable to the Generating Facility, including the electrical
characteristics of the Generator and settings, adjustments of the Generator
control equipment, and well-field information. Information maintained pursuant
to this Section 4.4.7 shall be provided to Edison, within 30 days of Edison's
request.

              4.4.8 At Edison's request, Seller shall make all reasonable effort
to deliver power at an average rate of delivery at least equal to the Contract
Capacity during periods of Emergency. In the event that the Seller has
previously scheduled an outage coincident

                                       12


with an Emergency, Seller shall make all reasonable efforts to reschedule the
outage. The notification periods listed in Section 4.4.4 shall be waived by
Edison if Seller reschedules the outage.

              4.4.9 Seller shall demonstrate the ability to provide Edison the
specified Contract Capacity within 30 days of the date of Firm Operation.
Thereafter, at least once per year at Edison's request, Seller shall demonstrate
the ability to provide Contract Capacity for a reasonable period of time as
required by Edison. Seller's demonstration of Contract Capacity shall be at
Seller's expense and conducted at a time and pursuant to procedures mutually
agreed upon by the Parties. If Seller fails to demonstrate the ability to
provide the Contract Capacity, the Contract Capacity shall be reduced by
agreement of the Parties pursuant to Section 8.1.2.5.

              4.4.10 The Seller warrants that the Generating Facility meets the
requirements of a Qualifying Facility as of the effective date of this Contract
and continuing through the Contract Term.

              4.4.11 The Seller warrants that the Generating Facility shall, at
all times, conform to all applicable laws and regulations. Seller shall obtain
and maintain any governmental authorizations and permits for the continued
operation of the Generating Facility. If, at any time, Seller does not hold such
authorizations and permits, Seller agrees to reimburse Edison for any loss which
Edison incurs as a result of the Seller's failure to maintain governmental
authorization and permits.


                                       13


              4.4.12 In the event electrical energy from the Project is
curtailed or reduced pursuant to Sections 4.4.3, 16 or 8.4, the Seller, in its
sole discretion, may elect to (i) sell said electrical energy to a third party
or (ii) deliver said electrical energy to a third party for future delivery to
Edison at times and at amounts agreeable to Edison. The Seller shall be
responsible for making all such arrangements. The provisions in this Section
4.4.12 shall only apply for the duration of the curtailment or reduction.

              4.4.13 Seller shall maintain operating communications with the
Edison switching center designated by the Edison Operating Representative. The
operating communications shall include, but not be limited to, system
paralleling or separation, scheduled and unscheduled shutdowns, equipment
clearances, levels of operating voltage or power factors, and daily capacity and
generation reports.

              4.5 Maintenance

              4.5.1 Seller shall maintain the Generating Facility in accordance
with applicable California utility industry standards and good engineering and
operating practices. Edison shall have the right to monitor such maintenance of
the Generating Facility. Seller shall maintain and deliver a maintenance record
of the Generating Facility to Edison's Operating Representatives upon request.

              4.5.2 Seller shall make a reasonable effort to schedule routine
maintenance during Off-Peak Months and expected minimal generation periods for
renewable resources. Outages for scheduled maintenance shall not exceed a total
of 30 peak hours for the Peak Months.


                                       14



              4.5.3   The allowance for scheduled maintenance is as follows:

              a. Outage periods for scheduled maintenance shall not exceed 840
hours (35 days) in any 12-month period. This allowance may be used in increments
of an hour or longer on a consecutive or nonconsecutive basis.

              b. Seller may accumulate unused maintenance hours on a
year-to-year basis up to a maximum of 1,080 hours (45 days). This accrued time
must be used consecutively and only for major overhauls.

              4.6 Any review by Edison of the design, construction, operation,
or maintenance of the Project is solely for the information of Edison. By making
such review, Edison makes no representation as to the economic and technical
feasibility, operational capability, or reliability of the Project. Seller shall
in no way represent to any third party that any such review by Edison of the
Project, including, but not limited to, any review of the design, construction,
operation, or maintenance of the Project by Edison, is a representation by
Edison as to the economic and technical feasibility, operational capability, or
reliability of said facilities. Seller is solely responsible for economic and
technical feasibility, operational capability, and reliability thereof.

              4.7 Edison shall have access to the Seller's geothermal field and
power-generating facilities for the purpose of gathering technical information
and records. The technical information and records shall include, but not be
limited to, drilling data, well-testing data, well-production data and design,
power plant performance data and design,


                                       15



environmental data, brine handling design, and operation and maintenance data.
Edison agrees not to interfere with Seller's rules and operating regulations.

              5. OPERATING OPTIONS

              5.1 Seller shall elect in Section 1.7 to Operate its Generating
Facility pursuant to one of the following options:

              a. Operating Option I: Seller dedicates the excess Generator
output to Edison with no electrical service or standby service required from
Edison.

              b. Operating Option II: Seller dedicates the entire Generator
output to Edison with electrical service required from Edison.

              5.2 After expiration of the First Period of the Contract Term,
Seller may change the Operating Option, but not more than once per year upon at
least 90 days prior written notice to Edison. A reduction in Contract Capacity
as a result of a change in operating options shall be subject to Section
8.1.2.5. Edison shall not be required to remove or reserve capacity of
Interconnection Facilities made idle by a change in operating options. Edison
may dedicate any such idle Interconnection Facilities at any time to serve other
customers or to interconnect with other electric power sources. Edison shall
process requests for changes of operating option in the chronological order
received.

                                       16



              6. INTERCONNECTION FACILITIES

              6.1 Seller shall design, engineer, procure, construct, and test
the Interconnection Facilities in accordance with applicable California utility
standards and good engineering practices and the rules and regulations of the
Interconnecting Utility.

              6.2 The design, installation, operation, maintenance, and
modifications of the Interconnection Facilities shall be at Seller's expense.

              6.3 Seller, at no cost to Edison, shall acquire all permits and
approvals and complete all environmental impact studies necessary for the
design, installation, operation, and maintenance of the Interconnection
Facilities.

              7. METERING

              7.1 All meters and equipment used for the measurement of
electrical power for determining Edison's payments to Seller pursuant to this
Contract shall be provided, owned, and maintained by Edison and/or the
Interconnecting Utility at Seller's expense.

              7.2 If Seller's Generating Facility is rated at a Capacity of 500
kW or greater, then Edison, at its option, may install at Seller's expense,
generation metering and/or telemetering equipment.

              7.3 Edison's or the Interconnecting Utility's meters shall be
sealed and the seals shall be broken only when the meters are to be inspected,
tested, or adjusted by Edison or Interconnecting Utility. Seller shall be given
reasonable notice of testing and have the right to have its Operating
Representative present on such occasions.


                                       17



              7.4 Edison's or Interconnecting Utility's meters installed
pursuant to this Contract shall be tested by Edison or Interconnecting Utility,
at Edison's or Interconnecting Utility's expense, at least once each year and at
any reasonable time upon request by either Party, at the requesting Party's
expense. If Seller makes such request, Seller shall reimburse said expense to
Edison or Interconnecting Utility within thirty days after presentation of a
bill therefor.

              7.5 Metering equipment found to be inaccurate shall be repaired,
adjusted, or replaced by Edison or Interconnecting Utility such that the
metering accuracy of said equipment shall be within plus or minus two percent.
If metering equipment inaccuracy exceeds plus or minus two percent, the correct
amount of Energy and capacity delivered during the period of said inaccuracy
shall be estimated by Edison and agreed upon by the Parties.

              8. POWER PURCHASE PROVISIONS

              Prior to the date of Firm operation, Seller shall be paid for
Energy only pursuant to Edison's published avoided cost of energy based on
Edison's full avoided operating cost as periodically updated and accepted by the
Commission. If at any time electrical energy can be delivered to Edison and
Seller is contesting the claimed jurisdiction of any entity which has not issued
a license or other approval for the Project, Seller, in its sole discretion and
risk, may deliver electrical energy to Edison and for any electrical energy
purchased by Edison Seller shall receive payment from Edison for (i) Energy
pursuant to this Section, and (ii) as-available capacity based on a capacity
price


                                       18



from the Standard Offer No. 1 Capacity Payment Schedule as approved by the
Commission. Unless and until all required licenses and approvals have been
obtained, Seller may discontinue deliveries at any time.

              8.1 Capacity Payments

              Seller shall sell to Edison and Edison shall purchase from Seller
capacity pursuant to the Capacity Payment option selected by Seller in Section
1.8. The Capacity Payment Schedules will be based on Edison's full avoided
operating costs as approved by the Commission throughout the life of this
Contract.

              8.1.1 Capacity Payment Option A -- As-Available Capacity.

              If Seller selects capacity Payment Option A, Seller shall be paid
a Monthly Capacity Payment calculated pursuant to the following formula:

              Monthly Capacity   Payment = (A x D)+(B x D)+(C x D)

              Where A = kWh purchased by Edison during on-peak periods defined
in Edison's Tariff Schedule No. TOU-8.

              B = kWh purchased by Edison during mid-peak periods defined in
Edison's Tariff Schedule No. TOU-8.

              C = kWh purchased by Edison during off-peak periods defined in
Edison's Tariff Schedule No. TOU-8.

              D = The appropriate time differentiated capacity price from either
the Standard Offer No. 1 Capacity Payment Schedule or Forecast of Annual
As-Available Capacity Payment Schedule as specified by Seller in Section 1.8.

                                       19



              8.1.1.1 If Seller specifies the Standard Offer No. 1 Capacity
Payment Schedule in Section 1.8, then the formula set forth in Section 8.1.1
shall be computed with D equal to the appropriate time differentiated capacity
price from the Standard Offer No. 1 Capacity Payment Schedule for the Contract
Term.

              8.1.1.2 If Seller specifies the Forecast of Annual As-Available
Capacity Payment Schedule in Section 1.8, the formula set forth in Section 8.1.1
shall be computed as follows:

              a. During the First Period of the Contract Term, D shall equal the
appropriate time differentiated capacity price from the Forecast of Annual
As-Available Capacity Payment Schedule.

              b. During the Second Period of the Contract Term, the formula
shall be computed with D equal to the appropriate time differentiated capacity
price from Standard Offer No. 1 Capacity Payment Schedule, but not less than the
greater of (i) the appropriate time differentiated capacity price from the
Forecast of Annual As-Available Capacity Payment Schedule for the last year of
the First Period, or (ii) the appropriate time differentiated capacity price
from the Standard Offer No. 1 Capacity Payment Schedule for the first year of
the Second Period.

              8.1.2 Capacity Payment Option B--Firm Capacity Purchase

              If Seller selects Capacity Payment Option B, Seller shall provide
to Edison for the Contract Term the Contract Capacity specified in Section 1.3,
or as adjusted pursuant to Section 8.1.2.6, and Seller shall be paid as follows;


                                       20



              8.1.2.1 If Seller meets the performance requirements set forth in
Section 8.1.2.2, Seller shall be paid a Monthly Capacity Payment, beginning from
the date of Firm Operation equal to the sum of the on-peak, mid-peak, and
off-peak Capacity Period Payments. Each capacity period payment is calculated
pursuant to the following formula:

              Monthly Capacity Period = A x B x C x D

              Payment

              Where A = Contract Capacity Price specified in Section 1.8 based
on the Standard Offer No. 2 Capacity Payment Schedule as approved by the
Commission and in effect on the date of the execution of this Agreement.

               B = Conversion factors to convert annual capacity prices to
monthly payments by time of delivery as specified in Standard Offer No. 2
Capacity Payment Schedule and subject to periodic modifications as approved by
the Commission.

               C = Contract Capacity specified in Section 1.3.

               D =   Period Performance Factor, not to exceed 1.0, calculated as
follows:

              Period Performance Factor = [Period kWh Purchased by Edison
(Limited by the Level of Contract Capacity)]

              [0.8 x Contract Capacity x (Period Hours minus Maintenance Hours
Allowed in Section 4.5.)]

              8.1.2.2   Performance Requirements

              To receive the Monthly Capacity Payment in Section 8.1.2.1, Seller
shall provide the Contract Capacity in each Peak Month for all on-peak hours as
such peak hours are defined in Edison's Tariff Schedule No. TOU-8 on file with
the Commission,


                                       21



except that Seller is entitled to a 20% allowance for Forced
Outages for each Peak Month. Seller shall not be subject to such performance
requirements for the remaining hours of the year.

              a. If Seller fails to meet the requirements specified in Section
8.1.2.2, Seller, in Edison's sole discretion, may be placed on probation for a
period not to exceed 15 months. If Seller fails to meet the requirements
specified in Section 8.1.2.2 during the probationary period, Edison may derate
the Contract Capacity to the greater of the capacity actually delivered during
the probationary period, or the capacity at which Seller can reasonably meet
such requirements. A reduction in Contract Capacity as a result of this Section
8.1.2.2 shall be subject to Section 8.1.2.5.

              b. If Seller fails to meet the requirements set forth in this
Section 8.1.2.2 due to a Forced Outage on the Edison system, or a request to
reduce or curtail delivery under Section 8.4, Edison shall continue Monthly
Capacity Payments pursuant to Capacity Payment Option B. The Contract Capacity
curtailed shall be treated the same as scheduled maintenance outages in the
calculation of the Monthly Capacity Payment.

              8.1.2.3 If Seller is unable to provide Contract Capacity due to
Uncontrollable Forces, Edison shall continue Monthly Capacity Payments pursuant
to Capacity Payment Option B for 90 days from the occurrence of the
Uncontrollable Force. Monthly Capacity Payments payable during a period of
interruption or reduction by reason of an Uncontrollable Force shall be treated
the same as scheduled maintenance outages.


                                       22



              8.1.2.4   Capacity Bonus Payment

              For Capacity Payment Option B, Seller may receive a Capacity Bonus
Payment as follows:

              a.   Bonus During Peak Months

              For a Peak Month, Seller shall receive a Capacity Bonus Payment if
(i) the requirements set forth in Section 8.1.2.2 have been met, and (ii) the
on-peak capacity factor exceeds 85%.

              b.   Bonus During Non-Peak Months

              For a non-peak month, Seller shall receive a Capacity Bonus
Payment if (i) the requirements set forth in Section 8.1.2.2 have been met, (ii)
the on-peak capacity factor for each Peak Month during the year was at least
85%, and (iii) the on-peak capacity factor for the non-peak month exceeds 85%.

              c. For any eligible month, the Capacity Bonus Payment shall be
              calculated as follows:

              Capacity Bonus Payment = A x B x C x D
              Where A = (1.2 x On-Peak Capacity Factor)-1.02


                                       23




              Where the On-Peak Capacity Factor, not to exceed 1.0, is
calculated as follows:

              [Period kWh Purchased by Edison (Limited by the Level of Contract
              Capacity)]

              On-Peak Capacity Factor  =  ((Contract Capacity) x (Period Hours
minus Maintenance Hours Allowed in Section 4.5))

              B = Contract Capacity Price specified in Section 1.8 for Capacity
              Payment Option B

              C = 1/12

              D = Contract Capacity specified in section 1.3

              d. When Seller is entitled to receive a Capacity Bonus Payment,
the Monthly Capacity Payment shall be the sum of the Monthly Capacity Payment
pursuant to Section 8.1.2.1 and the Monthly Capacity Bonus Payment pursuant to
this Section 8.1.2.4.

              8.1.2.5   Capacity Reduction



              a. Seller may reduce the Contract Capacity specified in Section
1.3, provided that Seller gives Edison prior written notice for a period
determined by the amount of Contract Capacity reduced as follows:

  Amount of Contract Capacity
            Reduced                  Length of Notice Required
------------------------------     ----------------------------
      25,000 kW or under                    12 months

      25,001 - 50,000 kW                    36 months
      50,001 - 100,000 kW                   48 months
        over 100,000 kW                     60 months


                                       24




              b. Seller shall refund to Edison with interest at the current
published Federal Reserve Board three months prime commercial paper rate, an
amount equal to the difference between (i) the accumulated Monthly Capacity
Payments paid by Edison pursuant to Capacity Payment Option B up to the time the
reduction notice is received by Edison, and (ii) the total capacity payments
which Edison would have paid if based on the Adjusted Capacity Price.

              c. From the date the reduction notice is received to the date of
actual capacity reduction, Edison shall make capacity payments based on the
Adjusted Capacity Price for the amount of Contract Capacity being reduced.

              d. Seller may reduce Contract Capacity without the notice
prescribed in Section 8.1.2.5(a), provided that Seller shall refund to Edison
the amount specified in Section 8.1.2.5(b) and an amount equal to: (i) the
amount of Contract Capacity being reduced, times (ii) the difference between the
Current Capacity Price and the Contract Capacity Price, times (iii) the number
of years and fractions thereof (not less than one year) by which the Seller has
been deficient in giving the prescribed notice. If the Current Capacity Price is
less than the Contract Capacity Price, only payment under Section 8.1.2.5(b)
shall be due to Edison.

              8.1.2.6 The Parties may agree in writing at any time to adjust the
Contract Capacity. Seller may reduce the Contract Capacity pursuant to Section
8.1.2.5. Seller may increase the Contract Capacity with Edison's approval and
thereafter receive


                                       25




payment for the increased capacity in accordance with the Contract capacity
Price for the Capacity Payment Option selected by Seller for the remaining
Contract Term.

              8.1.2.7 For Capacity Payment Option B, Seller shall be paid for
capacity in excess of Contract Capacity based on the as-available capacity price
in Standard Offer No. 1 Capacity Payment Schedule, as updated and approved by
the Commission.

              8.2   Energy Payments - First Period

              During the First Period of the Contract Term, Seller shall be paid
a Monthly Energy Payment for the electrical energy delivered by the Seller and
purchased by Edison at the Point of Interconnection pursuant to the Energy
Payment Option selected by the Seller in Section 1.9, as follows.

              8.2.1   Energy Payment Option 1 -- Forecast of Annual Marginal
Cost of Energy.

              If Seller selects Energy Payment Option 1, then during the First
Period of the Contract Term, Seller shall be paid a Monthly Energy Payment for
electrical energy delivered by Seller and purchased by Edison at the Point of
Interconnection during each month in the First Period of the Contract Term
pursuant to the following formula:

              Monthly Energy Payment = [(A x D) + (B x D) + (C x D)] x E

              Where A =  kWh purchased by Edison during on-peak periods defined
in Edison's Tariff Schedule No. TOU-8.

              B = kWh purchased by Edison during mid-peak periods defined in
              Edison's Tariff Schedule No. TOU-8.


                                       26



              C = kWh purchased by Edison during off-peak periods defined in
Edison's Tariff Schedule No. TOU-8.

              D =  The sum of:

              (i) the appropriate time differentiated energy price from the
Forecast of Annual Marginal Cost of Energy, multiplied by the decimal equivalent
of the percentage of the forecast specified in Section 1.9, and (ii) the
appropriate time differentiated energy price from Edison's published avoided
cost of energy multiplied by the decimal equivalent of the percentage of the
published energy price specified in Section 1.9.

              E   Energy Loss Adjustment Factor For Remote Generating Sites*

              8.2.2 Energy Payment Option 2 -- Levelized Forecast of Marginal
Cost of Energy. If Seller selects Energy Payment Option 2, then during the First
Period of the Contract Term, Seller shall be paid a Monthly Energy Payment for
electrical energy delivered by Seller and purchased by Edison each month during
the First Period of the Contract Term pursuant to the following formula:

              Monthly Energy Payment = [(A x D) + (B x D) + (C x D)) x E

              Where A = kWh purchased by Edison during on-peak periods defined
in Edison's Tariff schedule No. TOU-8.

----------------------
* The Energy Loss Adjustment Factor For Remote Generating Sites shall be 1.0,
  subject to adjustment by Commission orders and rulings.


                                       27




              B =   kWh purchased by Edison during mid-peak periods defined in
Edison's Tariff Schedule No. TOU-8.

              C =  kWh purchased by Edison during off-peak periods defined in
Edison's Tariff Schedule No. TOU-8.

              D =  The sum of:

              (i) the appropriate time differentiated energy price from the
Levelized Forecast of Marginal Cost of Energy, for the First Period of the
Contract Term multiplied by the decimal equivalent of the percentage of the
levelized forecast specified in Section 1.9, and (ii) the appropriate time
differentiated energy price from Edison's published avoided cost of energy
multiplied by the decimal equivalent of the percentage of the published energy
price specified in section 1.9.

              E =  Energy Loss Adjustment Factor For Remote Generating Sites*

              8.2.2.1   Performance Requirement for Energy Payment Option 2

              During the First Period when the annual forecast referred to in
Section 8.2.1 is greater than the levelized forecast referred to in Section
8.2.2, Seller shall deliver to Edison at least 70 percent of the average annual
kWh delivered to Edison during those previous periods when the levelized
forecast referred to in Section 8.2.2 is greater than


----------------------
* The Energy Loss Adjustment Factor For Remote Generating Sites shall be 1.0,
  subject to adjustment by Commission orders and rulings.

                                       28




the annual forecast referred to in Section 8.2.1. If Seller does not meet the
performance requirements of this Section 8.2.2.1, Seller shall be subject to
Section 8.5.

              8.3 Energy Payment - Second Period

              During the Second Period of the Contract Term, Seller shall be
paid a Monthly Energy Payment for electrical energy delivered by Seller and
purchased by Edison at the Point of Interconnection at a rate equal to 100% of
Edison's published avoided cost of energy as updated periodically and accepted
by the Commission, pursuant to the following formula:

              Monthly Energy Payment  =  kWh purchased by Edison for each
on-peak, mid-peak, and off-peak time period defined in Edison's Tariff Schedule
No. TOU-8
              x Edison's published avoided cost of energy by time of delivery
              for each time period

              x Energy Loss Adjustment Factor for Remote Generating Sites*

              8.4 Edison shall not be obligated to accept or pay for electrical
energy generated by the Generating Facility, and may request Seller whose
Generating Facility is one (1) MW or greater to discontinue or reduce delivery
of electric energy, for not more than 300 hours annually during off-peak hours
when (i) purchases would result in costs


----------------------
* The Energy Loss Adjustment Factor For Remote Generating Sites shall be 1.0,
  subject to adjustment by Commission orders and rulings.

                                       29




greater than those which Edison would incur if it did not purchase
electrical energy from Seller but instead utilized an equivalent amount of
electrical energy generated from another Edison source, or (ii) the Edison
Electric System demand would require that Edison hydro-energy be spilled to
reduce generation.

              8.5   Energy Payment Refund

              If Seller elects Energy Payment Option 2, Seller shall be subject
              to the following:

              8.5.1 If Seller fails to perform the Contract obligations for any
reason during the First Period of the Contract Term, or fails to meet the
performance requirements set forth in section 8.2.2.1, and at the time of such
failure to perform, the net present value of the cumulative Energy payments
received by Seller pursuant to Energy Payment Option 2 exceeds the net present
value of what Seller would have been paid pursuant to Energy Payment Option 1,
Seller shall make an energy payment refund equal to the difference in such net
present values in the year in which the refund is due. The present value
calculation shall be based upon the rate of Edison's incremental cost of capital
specified in Section 1.9.

              8.5.2 Not less than 90 days prior to the date Energy is first
delivered to the Point of Interconnection, Seller shall provide and maintain a
performance bond, surety bond, performance insurance, corporate guarantee, or
bank letter of credit, satisfactory to Edison, which shall insure payment to
Edison of the Energy Payment Refund at any time during the First Period. Edison
may, in its sole discretion, accept another form of


                                       30




security except that in such instance a 1-1/2 percent reduction shall then apply
to the levelized forecast referred to in Section 8.2.2 in computing payments for
Energy. Edison shall be provided with certificates evidencing Seller's
compliance with the security requirements in this Section which shall also
include the requirement that Edison be given 90 days prior written notice of the
expiration of such security.

              8.5.3 If Seller fails to provide replacement security not less
than 60 days prior to the date of expiration of existing security, the Energy
Payment Refund provided in Section 8.5 shall be payable forthwith. Thereafter,
payments for Energy shall be 100 percent of the Monthly Energy Payment provided
in Section 8.2.1.

              8.5.4 If Edison at any time determines the security to be
otherwise inadequate, and so notifies Seller, payments thereafter for Energy
shall be 100 percent of the Monthly Energy Payment provided in Section 8.2.1. If
within 30 days of the date Edison gives notice of such inadequacies, Seller
satisfies Edison's security requirements, Energy Payment Option 2 shall be
reinstated. If Seller fails to satisfy Edison's security requirements within the
30-day period, the Energy Payment Refund provided in Section 8.5 shall be
payable forthwith.

              9.   PAYMENT AND BILLING PROVISIONS

              9.1   For Energy and capacity purchased by Edison:

              9.1.1 Edison shall mail to Seller no later than thirty days after
the end of each monthly billing period (1) a statement showing the Energy and
capacity delivered to Edison during the on-peak, mid-peak, and off-peak periods,
as those periods are specified



                                       31


in Edison's Tariff Schedule No. TOU-8 for that monthly billing period, (2)
Edison's computation of the amount due Seller, and (3) Edison's check in payment
of said amount.

              9.1.2 If the monthly payment period involves portions of two
different published Energy payment schedule periods, the monthly Energy payment
shall be prorated on the basis of the percentage of days at each price.

              9.1.3 If the payment period is less than 27 days or greater than
33 days, the capacity payment shall be prorated on the basis of the average days
per month per year.

              9.1.4 If, within thirty days of receipt of the statement, Seller
does not make a report in writing to Edison of an error, Seller shall be deemed
to have waived any error in Edison's statement, computation, and payment, and
they shall be considered correct and complete.

              9.2 Edison shall bill the Seller, on a monthly basis, for the
costs Edison has incurred in the transmission of the electrical energy from the
Project to the Point of Interconnection pursuant to the provisions of Section
26.

              9.3   Payments Due to contract Capacity Reduction

              9.3.1 The Parties agree that the refund and payments provided in
Section 8.1.2.5 represent a fair compensation for the reasonable losses that
would result from such reduction of Contract Capacity.

              9.3.2 In the event of a reduction in Contract Capacity, the
quantity, in kW, by which the Contract Capacity is reduced shall be used to
calculate the refunds and payments due Edison in accordance with Section
8.1.2.5, as applicable.


                                       32




              9.3.3 Edison shall provide invoices to Seller for all refunds and
payments due Edison under this Section 9 which shall be due within 60 days.

              9.3.4 If Seller does not make payments as required in Section
9.2.3, Edison shall have the right to offset any amounts due it against any
present or future payments due Seller and may pursue any other remedies
available to Edison as a result of Seller's failure to perform.

              9.4   Energy Payment Refund

              Energy Payment Refund is immediately due and payable upon Seller's
failure to perform the contract obligations as specified in Section 8.5.

              10. TAXES

              10.1 Seller shall pay ad valorem taxes and other taxes properly
attributable to the Project. If such taxes are assessed or levied against
Edison, Seller shall pay Edison for such assessment or levy.

              10.2 Seller shall pay ad valorem taxes and other taxes properly
attributed to land, land rights, or interest in land for the Project. If such
taxes are assessed or levied against Edison, Seller shall pay Edison for such
assessment or levy.

              10.3 Seller or Edison shall provide information concerning the
Project to any requesting taxing authority.

              11.   TERMINATION

              This Contract shall terminate if Firm Operation does not occur
within 5 years of the date of Contract execution.


                                       33




              12.   SALE OF GENERATING FACILITY

              12.1 If Seller desires to sell the Generating Facility, Seller
shall promptly offer to Edison, or any entity designated by Edison in its sole
discretion, the right to purchase the Generating Facility. Edison, or any such
entity designated by Edison, shall have up to sixty days following the offer to
accept Seller's offer or reach agreement with Seller.

              12.2 If the Parties are unable to reach a satisfactory agreement
within sixty days following the offer pursuant to Section 12.1, and the
Generating Facility is offered to any third party or parties, Edison, or any
such entity designated by Edison, has the right for thirty days following each
offer to agree to purchase the Generating Facility under the same terms and
conditions, if such terms and conditions are better to Edison than those offered
in Section 12.1. Any offers to sell made more than two years after Edison's
failure to accept a previous offer to sell under Section 12.1, shall again be
subject to the terms of Sections 12.1 and 12.2

              12.3 Notwithstanding the foregoing, Seller shall have the right at
any time to sell or transfer the Generating Facility to an affiliate of Seller
and an affiliate of Seller may sell, transfer, or lease to Seller without giving
rise to any right of first refusal of Edison. An "affiliate" of Seller shall
mean a Party's parent, a Party's subsidiary, or any company of which a Party's
parent is a parent. An "affiliate" of Seller shall also mean a partnership or
joint venture from which the Seller leases and operates the Generating


                                       34




Facility. A "parent" shall mean a company which owns directly or indirectly not
less than 51% of the shares entitled to vote in an election of directors of
another company.

              13.   ABANDONMENT OF PROJECT

              13.1 The Generating Facility shall be deemed to be abandoned if
Seller discontinues operation of the Generating Facility with the intent that
such discontinuation be permanent. Such intent shall be conclusively presumed by
either (i) Seller's notice to Edison of such intent, or (ii) Seller's operation
of the Generating Facility in such a manner that no Energy is generated
therefrom for 200 consecutive days during any period after Firm Operation of the
first generating unit, unless otherwise agreed to in writing by the Parties. If
the Project is prevented from generating Energy due to an Uncontrollable Force,
then such period shall be extended for the duration of the Uncontrollable Force,
not to exceed one year.

              13.2 If Seller abandons the Generating Facility during the term of
this Agreement, Edison, or any entity designated by Edison in its sole
discretion, shall have the right to purchase the Generating Facility pursuant to
the provisions of Section 12.

              14.   LIABILITY

              14.1 Each Party (First Party) releases the other Party (Second
Party), its directors, officers, employees and agents from any loss, damage,
claim, cost, charge, or expense of any kind or nature (including any direct,
indirect or consequential loss, damage, claim, cost, charge, or expense),
including attorney's fees and other costs of litigation incurred by the First
Party, in connection with damage to property of the First


                                       35


Party caused by or arising out of the Second Party's construction, engineering,
repair, supervision, inspection, testing, protection, operation, maintenance,
replacement, reconstruction, use or ownership of its facilities, to the extent
that such loss, damage, claim, cost, charge, or expense is caused by the
negligence of Second Party, its directors, officers, employees, agents, or any
person or entity whose negligence would be imputed to Second Party.

              14.2 Each Party shall indemnify and hold harmless the other Party,
its directors, officers, and employees or agents from and against any loss,
damage, claim, cost, charge, or expense of any kind or nature (including direct,
indirect or consequential loss, damage, claim, cost, charge, or expense),
including attorney's fees and other costs of litigation, incurred by the other
Party in connection with the injury to or death of any person or damage to
property of a third party arising out of the indemnifying Party's construction,
engineering, repair, supervision, inspection, testing, protection, operation,
maintenance, replacement, reconstruction, use, or ownership of its facilities,
to the extent that such loss, damage, claim, cost, charge, or expense is caused
by the negligence of the indemnifying Party, its directors, officers, employees,
agents, or any person or entity whose negligence would be imputed to the
indemnifying Party; provided, however, that each Party shall be solely
responsible for and shall bear all cost of claims brought by its contractors or
its own employees and shall indemnify and hold harmless the other Party for any
such costs including costs arising out of any workers compensation law. Seller
releases and shall defend and indemnify Edison from any claim, cost, loss,
damage, or


                                       36




liability arising from any contrary representation concerning the effect of
Edison's review of the design, construction, operation, or maintenance of the
Project.

              14.3 The provisions of this Section 14 shall not be construed so
as to relieve any insurer of its obligations to pay any insurance claims in
accordance with the provisions of any valid insurance policy.

              14.4 Neither Party shall be indemnified by the other Party under
Section 14.2 for its liability or loss resulting from its sole negligence or
willful misconduct.

              15.   INSURANCE

              15.1 Until Contract is terminated, Seller shall obtain and
maintain in force as hereinafter provided comprehensive general liability
insurance, including contractual liability coverage, with a combined single
limit of not less than $1,000,000 each occurrence. The insurance carrier or
carriers and form of policy shall be subject to review and approval by Edison.

              15.2 Prior to the date Seller's generating facility first delivers
electrical energy to the Point of Interconnection, Seller shall (i) furnish
certificate of insurance to Edison, which certificate shall provide that such
insurance shall not be terminated nor expire except on thirty days prior written
notice to Edison, (ii) maintain such insurance in effect for so long as Seller's
Generating Facility is delivering electrical energy to the Point of
Interconnection, and (iii) furnish to Edison an additional insured endorsement
with respect to such insurance in substantially the following form:
"In consideration of the premium charged, Southern California Edison Company
(Edison)


                                       37




is named as additional insured with respect to all Liabilities arising
out of Seller's use and ownership of Seller's Generating Facility.

              "The inclusion of more than one insured under this policy shall
not operate to impair the rights of one insured against another insured and the
coverages afforded by this policy will apply as though separate policies had
been issued to each insured. The inclusion of more than one insured will not,
however, operate to increase the limit of the carrier's liability. Edison will
not, by reason of its inclusion under this policy, incur liability to the
insurance carrier for payment of premium for this policy.

              "Any other insurance carried by Edison which may be applicable
shall be deemed excess insurance and Seller's insurance primary for all purposes
despite any conflicting provisions in Seller's policy to the contrary."

              15.3 If Seller fails to comply with the provisions of this Section
15, Seller shall, at its own cost, defend, indemnify, and hold harmless Edison,
its directors, officers, employees, agents, assigns, and successors in interest
from and against any and all loss, damage, claim, cost, charge, or expense of
any kind or nature (including direct, indirect or consequential loss, damage,
claim, cost, charge, or expense, including attorney's fees and other costs of
litigation) resulting from the death or injury to any person or damage to any
property, including the personnel and property of Edison, to the extent that
Edison would have been protected had Seller complied with all of the provisions
of this Section 15.


                                       38




              16.   UNCONTROLLABLE FORCES

              16.1 Neither Party shall be considered to be in default in the
performance of any of the agreements contained in this Contract, except for
obligations to pay money, when and to the extent failure of performance shall be
caused by an Uncontrollable Force.

              16.2 If either Party, because of an Uncontrollable Force, is
rendered wholly or partly unable to perform its obligations under this Contract,
the Party shall be executed from whatever performance is affected by the
Uncontrollable Force to the extent so affected provided that:

              (1) The non-performing Party, within two weeks after the
occurrence of the Uncontrollable Force, gives the other Party written notice
describing the particulars of the occurrence;

              (2)   The suspension of performance is of no greater scope and of
no longer duration than is required by the Uncontrollable Force;

              (3) The non-performing Party uses its best efforts to remedy its
inability to perform (this subsection shall not require the settlement of any
strike, walkout, lockout or other labor dispute on terms which, in the sole
judgment of the party involved in the dispute, are contrary to its interest. It
is understood and agreed that the settlement of strikes, walkouts, lockouts or
other labor disputes shall be at the sole discretion of the Party having the
difficulty);


                                       39




              (4) When the non-performing Party is able to resume performance of
its obligations under this Contract, that Party shall give the other Party
written notice to that effect; and

              (5) Capacity payments during such periods of Uncontrollable Force
on Seller's part shall be governed by Section 8.1.2.3.

              16.3 In the event that either Party's ability to perform cannot be
corrected when the Uncontrollable Force is caused by the actions or inactions of
legislative, judicial or regulatory agencies or other proper authority, this
Contract may be amended to comply with the legal or regulatory change which
caused the nonperformance.

              If a Loss of Qualifying Facility status occurs due to an
Uncontrollable Force and Seller fails to make the changes necessary to maintain
its Qualifying Facility status, the Seller shall compensate Edison for any
economic detriment incurred by Edison as a result of such failure.

              17.   NONDEDICATION OF FACILITIES

              Neither Party, by this Contract, dedicates any part of its
facilities involved in this Project to the public or to the service provided
under the Contract, and such service shall cease upon termination of the
Contract.

              18.   PRIORITY OF DOCUMENTS

              If there is a conflict between this document and any Appendix, the
provisions of this document shall govern. Each Party shall notify the other
immediately upon the determination of the existence of any such conflict.


                                       40




              19.   NOTICES AND CORRESPONDENCE

              All notices and correspondence pertaining to this Contract shall
be in writing and shall be sufficient if delivered in person or sent by
certified mail, postage prepaid, return receipt requested, to Seller as
specified in Section 1.1, or to Edison as follows:

              Southern California Edison Company
              Post Office Box 800
              Rosemead, California 91770
              Attention:   Secretary

              All notices sent pursuant to this Section 19 shall be effective
when received, and each Party shall be entitled to specify as its proper address
any other address in the United States upon written notice to the other Party.

              20.   PREVIOUS COMMUNICATIONS

              This Contract contains the entire agreement and understanding
between the Parties, their agents, and employees as to the subject matter of
this contract, and merges and supersedes all prior agreements, commitments,
representations, and discussions between the Parties. No Party shall be bound to
any other obligations, conditions, or representations with respect to the
subject matter of this Contract.

              21.   THIRD PARTY BENEFICIARIES

              This Contract is for the sole benefit of the Parties and shall not
be construed as granting any rights to any person or entity other than the
Parties or imposing obligations on either Party to any person or entity other
than the Parties.


                                       41




              22.   NONWAIVER

              None of the provisions of the Contract shall be considered waived
by either Party except when such waiver is given in writing. The failure of
either Edison or Seller to insist in any one or more instances upon strict
performance of any of the provisions of the Contract or to take advantage of any
of its rights hereunder shall not be construed as a waiver of any such
provisions or the relinquishment of any such rights for the future, but the same
shall continue to remain in full force and effect.

              23.   DISPUTES

              23.1. Any dispute arising between the Parties relating to
interpretation of the provisions of this Contract or to performance of the
Parties hereunder, other than matters which may not be settled without the
consent of an involved insurance company, shall be reduced to writing stating
the complaint and proposed solution and submitted to the appropriate Edison
manager, whose interpretation and decision thereon shall be incorporated into a
written document which shall specify Edison's position and that it is the final
decision of such manager. A copy of such document shall be furnished to Seller
within ten days following the receipt of Seller's written complaint.

              23.2 The decision of such manager pursuant to Section 23.1 shall
be final and conclusive from the date of receipt of such copy by the complaining
Party, unless within thirty days Seller furnishes a written appeal to such
manager. Following receipt of such appeal, a joint hearing shall be held within
fifteen days of said appeal, at which time the Parties shall each be afforded an
opportunity to present evidence in support of their


                                       42





respective positions. Such joint hearing shall be conducted by one authorized
representative of Seller and one authorized representative of Edison and other
necessary persons. Pending final decision of a dispute hereunder, the Parties
shall proceed diligently with the performance of their obligations under this
Contract and in accordance with Edison's position pursuant to Section 23.1.

              23.3 The final decision by the Parties' authorized representatives
shall be made within fifteen days after presentation of all evidence affecting
the dispute, and shall be reduced to writing. The decision shall be final, and
conclusive.

              23.4 If the authorized representatives cannot reach a final
decision within the fifteen-day period, any remedies which are provided by law
may be pursued.

              24.   SUCCESSORS AND ASSIGNS

              Neither Party shall voluntarily assign its rights nor delegate its
duties under this Contract, or any part of such rights or duties, without the
written consent of the other Party, except in connection with the sale or merger
of a substantial portion of its properties. Any such assignment or delegation
made without such written consent shall be null and void. Consent for assignment
shall not be unreasonably withheld. Such assignment shall include, unless
otherwise specified therein, all of Seller's rights to any refunds which might
become due under the Contract. Seller may assign all or any part of its interest
under this Contract to a financing institution to facilitate financing for the
Project by the Seller.


                                       43




              25.   EFFECT OF SECTION HEADINGS

              Section headings appearing in this Agreement are inserted for
convenience only, and shall not be construed as interpretations of text.

              26.   TRANSMISSION

              26.1 Edison shall endeavor to make arrangements with third parties
for the necessary transmission of the electrical energy from the Project to the
Point of Interconnection. Seller shall be responsible for all costs associated
with such transmission of electrical energy, including the cost of transmission
losses from the Project to the Point of Interconnection as determined by Edison
in its sole judgement.

              26.2 If Edison is unable to secure firm transmission service or
equivalent arrangements from third parties which are required to transmit the
electrical energy from the Project to the Point of Interconnection at terms and
conditions satisfactory to Edison in its sole judgement, then Edison shall not
be liable to the Seller for any damages arising from Edison's failure to secure
said transmission service or arrangements nor will Edison be required to
purchase Energy which is not delivered or capacity which is not made available
at the Point of Interconnection.

              27.   AMENDMENT

              If at any time during the term of this Agreement a change in
circumstances not anticipated at the time this Agreement was executed
significantly alters the rights or obligations of either Party, the terms of the
Agreement which are directly affected by the change shall be amended by mutual
agreement of Parties.


                                       44




              28.   GOVERNING LAW

              This Contract shall be interpreted, governed, and construed under
the laws of the State of California as if executed and to be performed wholly
within the State of California.

              29.   CONFIDENTIALITY

              29.1. Except as provided herein, the Parties shall hold all
information in this Contract and all informatin related to or received pursuant
to this Contract as confidential.

              29.2 Neither Party shall disclose any part nor the whole of this
Contract to any third party without the express prior written consent of the
other Party; such consent shall not be unreasonably withheld.

              29.3 From time to time governmental and/or regulatory agencies may
request disclosure of the Contract or Contract-related information from either
Party or both Parties and if such is the case either Party or both Parties may
consent to such disclosure provided, that (i) the requestor(s) be notified by
the disclosing Party that the information being released is confidential, and
that (ii) the disclosing Party inform the other Party, in writing, as to the
nature of the information disclosed and to whom disclosed.

              30.   MULTIPLE ORIGINALS

              This Contract is executed in two counterparts, each of which shall
be deemed an original.


                                       45




                                   SIGNATURES

     IN WITNESS WHEREOF, the Parties hereto have executed this Contract this
13th of June, 1984.

                       SOUTHERN CALIFORNIA EDISON COMPANY

                       By  /s/ Edward A. Myers, Jr.
                          --------------------------------------
                          Name   Edward A. Myers, Jr.
                              ----------------------------------
                          Title  Vice President
                               ---------------------------------

                       ORMAT SYSTEMS INC.

                       By  /s/ Barbara M. Christopher
                          --------------------------------------
                          Name   Barbara M. Christopher
                              ----------------------------------
                          Title  Vice President
                               ---------------------------------



                                       46



                                                                  Exhibit 10.3.4


                       POWER PURCHASE AND SALES AGREEMENT



                                     BETWEEN



                               CHEVRON U.S.A. INC.



                                       AND



                       SOUTHERN CALIFORNIA EDISON COMPANY





                                TABLE OF CONTENTS
                                -----------------

 SECTION    TITLE                                                          PAGE
 -------    -----                                                          ----
 1          PARTIES                                                          1

 2          RECITALS                                                         1

 3          DEFINITIONS                                                      1

 4          TERM AND TERMINATION -- Modified by Amendment 1                  7

 5          CURTAILMENT                                                     11

 6          DESIGN AND CONSTRUCTION OF THE PROJECT                          11

 7          OPERATION OF THE PROJECT                                        13

 8          SALE OF THE PROJECT                                             17

 9          ABANDONMENT                                                     19

 10         DISCLAIMER                                                      20

 11         METERING                                                        21

 12         AVAILABILITY                                                    23

 13         POWER PURCHASE AND SALE                                         23

 14         PAYMENTS FOR ENERGY - Replaced by Amendment 1                   27

 15         PAYMENTS FOR CAPACITY - Replaced by Amendment 1                 33

 16         TAXES                                                           43

 17         LIABILITY                                                       44

 18         INSURANCE                                                       46

 19         REGULATORY AUTHORITY                                            48




 20         DISPUTES                                                        48

 21         NOTICES                                                         49

 22         NON-DEDICATION OF FACILITIES                                    50

 23         PREVIOUS COMMUNICATIONS                                         50

 24         NON-WAIVER                                                      50

 25         SUCCESSORS & ASSIGNS                                            51

 26         ASSIGNMENT                                                      51

 27         NO THIRD PARTY BENEFICIARIES                                    53

 28         EFFECT OF SECTION HEADINGS                                      53

 29         GOVERNING LAW                                                   53

 30         CONFIDENTIALITY                                                 53

 31         UNCONTROLLABLE FORCES                                           54

 32         PUBLICITY                                                       56

 33         WATER                                                           56

 34         TRANSMISSION COST - Replaced by Amendment 1                     57

 35         RECORDS AND AUDITS                                              59

 36         CONDITIONS PRECEDENT                                            61

 37         AGREEMENT AND SIGNATURES                                        62






     1. PARTIES

         The Parties to this Agreement are Chevron U.S.A., Inc. a Delaware
corporation, hereinafter referred to as "Seller", and Southern California Edison
Company, a California corporation, hereinafter referred to as "Edison;"
individually, "Party," and collectively, "Parties."

     2. RECITALS

         2.1 Seller is willing to construct and operate an electrical generating
facility with a nameplate capacity rating of 52,000 kW (47,000 kW Net) located
at Heber, California, and sell the capacity and associated net energy to Edison.

         2.2 Edison is willing to purchase from the Seller, the Capacity made
available and all Net Energy delivered to Edison at the Point of Interconnection
on the terms and conditions set forth herein.

     3. DEFINITIONS

         When used with initial capitalizations, whether in the singular on in
the plural, the following terms shall have the following meanings:

         3.1 Adjusted Capacity Price: The capacity purchase price, expressed in
$/kw/year, in the Capacity Payment Schedule for the period beginning on the Date
of Firm Operation and ending on the date of termination of this Agreement or
reduction in Capacity.

         3.2 Agreement: This Power Purchase and Sales Agreement as it may be
amended from time to time.


                                       1


         3.3 Avoided Operating Cost: Edison's incremental cost of electric
energy, that but for this Agreement, Edison would have generated from sources of
electric energy within the Edison electric system. In the event any federal or
state legislation, future Commission orders, rulings or guidelines are in
conflict with the definition contained in this Section 3.3, this definition
shall take precedence over such federal or state legislation, Commission orders,
rulings or guidelines.

         3.4 Capacity Payment Schedule: Edison's published Capacity Payment
Schedule as authorized by the Commission and in effect at the time of execution
of this Agreement.

         3.5 Commission: The Public Utilities Commission of the State of
California.

         3.6 Capacity: That portion of the Project's electric power producing
capability (initially 47,000 KW) which is dedicated to Edison and made available
to Edison at the Point of Interconnection.

         3.7 Capacity Price: The capacity purchase price, expressed in
$/kW/year, in the Capacity Payment Schedule for the Contract Term and Date of
Firm Operation.

         3.8 Contract Term: The term of this Agreement shall be thirty (30)
years beginning on the Date of Firm Operation.

         3.9 Control: To regulate the electrical output of the Project.

         3.10 Current Capacity Price: The capacity price, expressed in
$/kW/year, in the Capacity Payment Schedule in effect at the time Edison
receives a termination of this Agreement or reduction in Capacity notice for a
term equal to the number of years from

                                       2


the date of termination of this Agreement or reduction in Capacity to the end of
the Contract Term.

         3.11 Date of Firm Operation: The date established by the Operating
Representatives on which the Project is determined to be a reliable source of
generation as determined by a seventy-two (72) hour continuous demonstration
test at 80% of the capacity rating (47,000 KW).

         3.12 Edison Electric System Integrity: Operation of the Edison electric
system in a manner which minimizes unreasonable risk of injury to persons and/or
damage to property and enables Edison to provide safe, adequate and reliable
electric service.

         3.13 Emergency: A condition or situation which in Edison's sole
judgment affects Edison's ability to maintain Edison Electric System Integrity.

         3.14 Forced Outage: Any unscheduled outage on either the Edison
electric system or the Project which results in a complete or partial
curtailment in either the generation of Net Energy or the acceptance of Net
Energy from the Project.

         3.15 Generating Facilities: All of Seller's Generators and all
protective and other associated equipment and improvements necessary for the
Project to produce electrical energy, excluding associated land, land rights,
geothermal leases, or interests in land.

         3.16 Generator: The generator(s) and associated prime mover(s), which
are a part of the Generating Facilities.


                                       3



         3.17 Interconnecting Utility: The electric utility or any other utility
that is directly connected with the Project and which receives delivery of Net
Energy from the Project.

         3.18 Interconnection Facilities: The electrical interconnection
facilities furnished, at no cost to Edison, by Seller, or by the Interconnecting
Utility on Seller's behalf, which is appurtenant to, and/or incidental to, the
Project. The Interconnection Facilities shall include, but are not limited to,
transmission lines and/or distribution lines between the Project and
transmission lines and/or distribution lines of the Interconnecting Utility,
relays, power circuit breakers, metering devices, telemetering devices, and
other control and protective devices specified by the Interconnecting Utility as
necessary for operation of the Project in parallel with the Interconnecting
Utility's electric system.

         3.19 Net Energy: Kilowatthours generated by the Project which are
purchased by Edison at the Point of Interconnection pursuant to this Agreement.

         3.20 Operate: To provide the engineering, purchasing, repair,
supervision, training, inspection, testing, protection, operation, use,
management, replacement, retirement, reconstruction, and maintenance of, and for
the Generating Facility in accordance with applicable utility standards and good
engineering practices.

         3.21 Operating Representatives: Individual(s) appointed by each Party
to secure effective cooperation and interchange of information between the
Parties in connection with this Agreement.


                                       4



         3.22 Peak Months: Those months during which the annual system peak
demand of the Edison electric system may occur. Currently, those months are
June, July, August and September. Such designation is subject to change upon
written notice consistent with Commission guidelines.

         3.23 Point of Interconnection: The point where the transfer of Net
Energy from Seller to Edison occurs.

         3.24 Project: The Generating Facilities, Interconnection Facilities,
the site for the Generating Facilities, and metering equipment necessary to
permit the Generator to deliver Net Energy and make Capacity available to Edison
at the Point of Interconnection.

         3.25 Qualifying Facility: A Small Power Production Facility as defined
in Title 18, Code of Federal Regulations Section 292.201 through 292.207 or a
geothermal power producer under California Public Utilities Code Section 2801
and following.

         3.26 Renewable Resources: Wind parks, small hydroelectric, solar and
geothermal resources which produce electric power.

         3.27 Summer Period: The Summer Period as defined in Tariff Schedule No.
TOU-8 now in effect or as may hereafter be authorized by the Commission to be
revised.

         3.28 Tariff Schedule No. TOU-8: Edison's time-of-use energy tariff for
electric loads of 500 kW or more as now in effect or as may hereafter be revised
as authorized by the Commission.


                                       5



         3.29 Winter Period: The Winter Period as defined in Tariff Schedule No.
TOU-8 now in effect or as may hereafter be authorized by the Commission to be
revised.

     4. TERM AND TERMINATION

         4.1 This Agreement shall become effective upon execution and remain in
effect for the Contract Term (30 years from Date of Firm Operation) unless
sooner terminated as provided herein.

         4.2 This Agreement shall terminate if the Date of Firm Operation does
not occur by December 31, 1987. In the event the Date of Firm Operation is
delayed due to an uncontrollable force, such date shall be extended for the
period of such delay, not to exceed one (1) year.

         4.3 This Section 4.3 shall apply if this Agreement is terminated or
Capacity is reduced or terminated prior to the expiration of the Contract Term.
The Parties agree that the amount Edison pays Seller for Capacity is based on
the agreed value of Seller's performance of its obligations to provide Capacity
during the full Contract Term.

         4.3.1 The Parties agree that the refund and payments provided in
     Sections 4.4 and 4.5 represent a fair compensation for the reasonable
     losses that would result from termination of this Agreement or reduction in
     Capacity, and shall represent Edison's sole and exclusive remedy resulting
     from such termination of this Agreement or reduction in Capacity.


                                       6



         4.3.2 Edison shall provide Seller invoices for all amounts due Edison
     pursuant to this Section. Such amounts shall be due on presentation and
     paid within sixty (60) days of the invoice date.

         4.3.3 If Seller does not make payments as specified in Section 4.3.2,
     Edison shall have the right to offset any amounts Seller owes Edison
     against any amounts Edison owes Seller or declare that all sums then due
     Edison under this Agreement are immediately due and payable.

     4.4 Seller may terminate this Agreement or reduce Capacity, provided that
Seller gives Edison (i) 12 months prior written notice for the reduction of all
or part of the first 25,000 KW of Capacity and (ii) 36 months prior written
notice for the termination of this Agreement or any reduction to Capacity which
results in a total aggregate reduction in Capacity in excess of 25,000 KW. [See
Amendment 1, Page 3 of Exhibit 10.3.5]

         4.4.1 Upon termination of this Agreement or reduction in Capacity,
     Seller shall pay Edison, for the amount of Capacity reduction, an amount
     equal to the difference between (i) the total Capacity payments paid by
     Edison up to and including the date of receipt of notice and (ii) Capacity
     payments which Edison would have paid Seller for the period of Seller's
     actual performance at the Adjusted Capacity Price with interest compounded
     monthly at the current published Federal Reserve Board three (3) months
     prime commercial paper rate up to the date of the termination of this
     Agreement or reduction in Capacity.


                                       7


         4.4.2 From the date of receipt of a termination or reduction notice to
     the date of termination of the Agreement or reduction in Capacity, Edison
     shall pay Seller until the effective date of such termination or reduction
     at the Adjusted Capacity Price for the amount of Capacity reduced or
     terminated by said notice.

         4.4.3 Edison shall pay Seller for the amount of Capacity not
     terminated, if any, at the Capacity Price.

         4.5 If Seller terminates this Agreement or reduces the Capacity without
providing the notice specified in Section 4.4, the provisions of Section 4.4
shall apply, and additionally Seller shall pay Edison an amount equal to the
product of: (i) the amount of Capacity reduced or terminated times (ii) the
difference between the Current Capacity Price and the Capacity Price times (iii)
the period in years and fractions thereof (not less than one year) that the
Seller was deficient in providing notice pursuant to Section 4.4. If the Current
Capacity Price is less than the Capacity Price, no payment under this Section
4.5 shall be required.

         4.6 In the event this Agreement is terminated and Capacity is
immediately made available to Edison under the terms of a new agreement, the
Seller's payments due Edison, pursuant to Sections 4.4 and 4.5 herein, may be
repaid over the first eight (8) years of the new agreement term at the Seller's
option. The unpaid balance of the Seller's payments shall draw interest monthly
at an annual rate equal to the current published Bank of America prime
commercial rate plus 1%.


                                       8



     5. CURTAILMENT

         Edison may interrupt or reduce the acceptance of Net Energy from the
Project if such an interruption or reduction is required (i) to allow Edison to
perform scheduled maintenance, tests, or repairs on the Edison electric system
as required, in Edison's sole judgement, to maintain Edison Electric System
Integrity or (ii) during an Emergency or Forced Outage on the Edison electric
system when acceptance of Net Energy from the Project in Edison's sole judgment,
would jeopardize Edison Electric System Integrity. Upon such Interruptions or
reductions of the acceptance of Net Energy from the Project, Edison shall
continue to make capacity payments pursuant to Sections 15.7.2 and 15.7.3. Each
Party shall use its best efforts to correct, within a reasonable period, the
conditions on its system or in its facilities necessitating such interruption or
reduction of the acceptance of Net Energy from the Project. Such interruption or
reduction shall be limited to the period of time such a condition exists.

6. DESIGN AND CONSTRUCTION OF THE PROJECT

         6.1 Seller, at no cost to Edison, shall design, engineer, procure,
construct and test the Project in accordance with applicable utility standards
and good engineering practices

         6.2 Seller, at no cost to Edison, shall design, engineer, procure,
construct and test the Interconnection Facilities in accordance with applicable
utility standards and good engineering practices and the rules and regulations
of the Interconnecting Utility.


                                       9


         6.3 Except to the extent as previously obtained by Edison pursuant to
the agreement between Edison and Chevron in the Contract for the Engineering and
Construction of Heber Geothermal Generating Plant No. 1, executed on February 4,
1982 (E&C Contract), Seller, at no cost to Edison, shall acquire all permits and
approvals, and complete, or have completed, all environmental impact studies
necessary for the construction, operation, and maintenance of the Project.

         6.4 Edison shall have the right to review the construction schedule and
to monitor the construction, start-up, operation and maintenance of the Project.
Seller shall notify Edison as far in advance of the Date of Firm Operation as
reasonably possible, of changes in the construction schedule which may affect
the Date of Firm Operation. Edison shall have the right to review technical data
and technical records of the operation of the Project. Edison agrees not to
interfere with the Seller's operations, and agrees to adhere to Seller's work
rules and operating regulations. All information or data received by Edison
under this Section 6 shall be treated in accordance with Section 30.

         6.5 Seller, at no cost to Edison, shall make modifications to the
Interconnecting Facilities as required to maintain Edison Electric System
Integrity so that Edison can continue to accept Net Energy from the Project.

7. OPERATION OF THE PROJECT

         7.1 Seller shall Operate, Control and maintain the Project in
accordance with applicable utility standards and good engineering practices and
shall produce the maximum electrical output from the Project consistent with
such standards and practices.


                                       10


         7.2 Each Party shall keep the other Party's Operating Representative
informed regarding the operating schedule of their respective facilities which
affect the other Party's operations hereunder, including any reduction in
Capacity availability. Each Party shall use its best efforts to provide the


other Party with reasonable advance notice regarding scheduled outages of its
facilities, including any reduction in Capacity availability as follows, unless
otherwise agreed to by the Parties:

     Scheduled Outage                                        Advance Notice
     Expected Duration                                         Required
     -----------------                                       --------------

     Less than one day                                           24 Hours


     One day or more (except major overhaul)                     1 Week

     Major overhaul                                              6 Months

         7.3 The Operating Representatives shall notify each other by telephone
regarding outage dates and durations and shall use their best efforts to
coordinate the schedule of such outages as to facilitate the maximum output of
the Project.

         7.4 Neither Seller nor Edison shall schedule major overhauls during
Peak Months and shall make reasonable efforts to avoid scheduling routine
maintenance during the Peak Months. Seller's and Edison's outages for scheduled
maintenance shall not exceed an aggregate of 30 peak hours during the entire
period encompassed by the Peak Months per year.

         7.5 Seller shall maintain an operating log at Seller's Generating
Facility with records of real and reactive power production, changes in
operating status, outages,

                                       11


protective apparatus operations and any unusual conditions found during
inspections. Seller shall also maintain records applicable to the Generating
Facility, including records regarding the electrical characteristics of the
Generator and settings or adjustments of the Generator control equipment and
protective devices. Seller shall, under provisions of Section 30 herein, make
such information available to Edison upon request and provide copies of such
logs and records, if requested, to Edison within thirty (30) days of Edison's
request.

         7.6 Seller shall use reasonable efforts to notify Edison at least 14
calendar days prior to initial energizing of the Point of Interconnection and
initial parallel operation of the Project with the Edison electric system.
Edison shall have the right to have a representative present at such times.

         7.7 Seller shall use reasonable efforts to obtain Qualifying Facility
status for the Project prior to the Date of Firm Operation and maintain such
status during the term of this Agreement. If Seller fails to maintain Qualifying
Facility status, Seller, at its sole discretion, may elect to (i) suspend the
deliveries of Net Energy until such time the Qualified Facility status is
reestablished, subject to the provisions of Sections 9 and 15 or (ii) continue
the delivery of Net Energy and shall hold Edison harmless from any and all
liability, loss, damage, claim, action, cause of action, cost, charge or expense
resulting from such loss of Qualifying Facility status.

         7.8 Seller and Edison, as applicable, shall obtain and maintain
necessary government authorization(s) and permit(s). The Seller or Edison shall
hold the other

                                       12


party harmless from any and all liability, loss, damage, claim, action, cause of
action cost, charge or expense resulting from the failure to obtain or maintain
the necessary government authorization(s) and permit(s). Seller may elect to
suspend the delivery of Net Energy until all necessary government
authorization(s) and permit(s) are obtained or maintained by the Seller subject
to Sections 9 and 15.

         7.9 At Edison's request, Seller shall make all reasonable efforts to
deliver Net Energy at an average rate of delivery at least equal to the Capacity
during periods of Emergency. If the Seller has previously scheduled an outage
coincident with an Emergency, Seller shall make all reasonable efforts to
reschedule the outage. Edison shall waive the notification specified in Section
7.2 if Seller reschedules an outage.

8. SALE OF THE PROJECT

         8.1 If Seller offers to sell its interest in the Project or relinquish
its interest under any lease of the Project, Seller shall promptly offer to
Edison, or any Edison subsidiary, the right to be substituted for Seller under
the lease of the Project or the right to purchase Seller's interest in the
Project. Edison shall have up to 60 days following any such offer to accept
Seller's offer or otherwise reach agreement with Seller.

         8.2 If the Parties are unable to reach a satisfactory agreement as
specified in Section 8.1, and Seller offers to Sell its interest in the Project
to any third party, Edison, or any Edison subsidiary, shall have the right for
30 days following each offer to agree to purchase Seller's interest in the
Project under the same terms and conditions, if such terms and conditions are
better to Edison than those offered in Section 8.1 herein. Any

                                       13


offers to sell made more than two years after Edison's failure to accept a
previous offer to sell, under Section 8.1, shall again be subject to the terms
of Section 8.1 and 8.2.

         8.3 Seller shall have the right to require Edison to purchase the
Project if the average cost of electric energy and capacity to Edison based on
the purchase price for the Project, and a projected price for geothermal heat
would result in a cost to Edison of electric energy and capacity delivered to
Edison's electric system in the aggregate below avoided costs for a consecutive
three hundred sixty-five day period which is reasonably representative of a
longer term. Such a purchase of the Project by Edison shall be subject to prior
regulatory approval (e.g. Commission Certificate of Public Convenience and
Necessity and rate base treatment of the investment) as required in Edison's
sole judgment, and subject to prior negotiation and execution of contracts
between Edison and Seller for the purchase of the Project and geothermal heat
for the Project consistent with such objective.

         8.4 If the Project is sold to a third party and said third party does
not assume the obligations of this Agreement, as specified in Section 26, then
this Agreement shall be considered terminated and the provisions set forth in
Sections 4.4 and 4.5 shall apply.

         8.5 If the Seller offers to sell the Project to Edison, or any Edison
subsidiary, under the provisions of Section 8, then Edison, or any Edison
subsidiary, shall establish a value of the Project to Edison. When determining
the value of the Project, Edison shall take into consideration any and all
monies due Edison under the terms of this Agreement in event of a termination.

                                       14


9. ABANDONMENT

         9.1 The Project shall be deemed abandoned if Seller terminates
operation of the Project with the intent that such termination be permanent.
Such intent shall be presumed by either Seller's written notice to Edison of
such intent or operation of the Project so that no Energy is generated therefrom
for 730 consecutive days during any period after the Date of Firm Operation,
unless otherwise agreed to in writing by the Parties. If the Project is
prevented from generating energy due to an uncontrollable force, then such
period shall be extended for the duration of the uncontrollable force, not to
exceed one (1) year.

         9.2 If Seller abandons the Project during the term of this Agreement,
Edison, or any Edison subsidiary shall have the right to substitute itself for
Seller under the Seller's lease arrangement with its lender or in the event the
Project is to be sold subsequent to such abandonment, Edison shall have the
right to purchase the Seller's interest in the Project under the terms of
Section 8.1 and 8.2.

         9.3 If Seller abandons the Project, this Agreement may be terminated
and the provisions of Sections 4.4 and 4.5, as applicable, will control unless
otherwise provided herein.

10. DISCLAIMER

         Any review by Edison of the design, engineering, construction,
operation, control, or maintenance of the Project is solely for the information
of Edison. By making such review, Edison makes no representation as to the
economic or technical feasibility,

                                       15


operational capability, or reliability of the Project. Seller shall in no way
represent to any third party that any such review by Edison of the Project ,
including but not limited to, any review of the design, engineering,
construction, operation, or maintenance of the Project by Edison is a
representation by Edison as to the economic or technical feasibility,
operational capability, or reliability of the Project. Seller is solely
responsible for economic feasibility, technical feasibility, operational
capability or reliability of the Project. Edison shall not be liable to Seller
for, and Seller shall, at its cost, defend, indemnify and hold harmless Edison,
its directors, officers, employees, agents, assigns and successors from and
against any loss, damage, claim, action, cause of action, cost, charge or
expense arising from any contrary representation concerning the effect of
Edison's review of the design, engineering, construction, operation or
maintenance of the Project.

11. METERING

         11.1 Seller shall install or shall cause the Interconnecting Utility to
install and maintain metering equipment as specified and provided by the
Interconnecting Utility at the Point of Interconnection, pursuant to an
interconnection agreement to be entered into between Seller and the
Interconnecting Utility, to allow monitoring by the Parties and the
Interconnecting Utility and to record and measure kilowatthours and time. Edison
shall not be liable or responsible for any costs of acquisition, installation,
ownership or maintenance of such metering equipment, including costs incurred by
Seller for inspecting and calibrating such equipment. This metering equipment
shall be utilized for

                                       16


the measurement of Net Energy and Capacity in order to determine Edison's
payments to Seller pursuant to this Agreement.

         11.2 Edison shall install, as required by Edison Electric System
Integrity, at Seller's cost, generation telemetering equipment to monitor the
Project's net generation. Seller shall install as required by Edison Electric
System Integrity in order that Edison can accept Net Energy from the Project,
additional meters at the Project to enable Seller to make daily telephone
reports in the event telemetering equipment is inoperative. Seller shall bear
all costs of additional meter equipment, installation, ownership and
administration and all costs for inspecting and testing such equipment.

         11.3 The Parties shall seal all meters used to determine billings
hereunder. The seals shall be broken only when the meters are to be inspected,
calibrated or adjusted. Edison shall, at Seller's cost, inspect and calibrate,
or shall request that the Interconnecting Utility inspect and calibrate, all
meters upon their installation and annually thereafter. If requested to do so by
Seller, or if at any reading, the metering inaccuracy exceeds 2%, the meters
shall be calibrated promptly. Each Party shall give reasonable notice, both oral
and written, to the other Party, of at least five (5) working days of when any
inspection or calibration is to take place. The other Party may have
representatives present at the calibration or inspection. If metering equipment
inaccuracy exceeds 2%, the Operating Representatives shall estimate and agree
upon the correct amount of Net Energy delivered during the period of inaccuracy.

                                       17


         11.4 Each Party shall within ten (10) days after written notice to the
other Party have the right of access during regular business hours to all
metering and billing records relevant to the purchase of Net Energy under this
Agreement.

12. AVAILABILITY

         12.1 Seller shall make all reasonable efforts to limit Project outages.

         12.2 If Seller fails to meet the performance requirements specified in
Section 15, Edison shall have the right to require the Seller to demonstrate the
ability of the Project to generate Capacity once a year and to observe said
demonstration. The Seller shall, at its expense, conduct said demonstration at a
time and under procedures mutually agreed upon by the Parties.

     13. POWER PURCHASE AND SALE

         13.1 Seller hereby agrees to sell to Edison, and Edison hereby agrees
to accept and purchase from Seller, all Net Energy delivered by Seller to Edison
hereunder at the Point of Interconnection regardless of economic dispatch or
hydro-spill consideration. Edison may interrupt or reduce such deliveries due to
scheduled or Forced Outages, Emergencies, and uncontrollable forces only. During
any such interruption or reduction, Edison shall continue to make capacity
payments to the Seller pursuant to Sections 15.7.2 and 15.7.3.

         13.1.1 Seller shall begin delivery of Net Energy on or before the Date
     of Firm Operation.

                                       18


         13.1.2 If at any time, Seller can physically deliver Net Energy to
     Edison while it is contesting the claimed jurisdiction of any entity which
     has not issued a license or other approval for the Project, Seller, at its
     sole discretion and risk, shall have the right to deliver Net Energy to
     Edison. Edison shall pay Seller for Net Energy pursuant to Section 14.
     However, unless and until all required licenses and approvals have been
     obtained, Seller may discontinue deliveries at any time, at no cost or
     liability to Seller.

         13.1.3 In the event there has been an interruption or reduction in the
     deliveries of Net Energy pursuant to Section 5 and during such period
     Seller makes deliveries, with notice to Edison, of Net Energy to the
     Interconnecting Utility which are subsequently delivered to Edison pursuant
     to schedules agreed upon by Edison and the Interconnecting Utility, Edison
     shall notify Seller of such scheduled deliveries within thirty (30)
     business days of such scheduled deliveries, Edison shall pay Seller for
     such Net Energy at the price applicable at the time of scheduled delivery
     to Edison. In the event of an interruption or reduction in the deliveries
     of Net Energy pursuant to Section 5 and the Interconnecting Utility is
     either unable or unwilling to accept such Net Energy, the Seller may sell
     such Net Energy to a third party. During any such sale of Net Energy to a
     third party, Edison shall continue to make capacity payments to the Seller
     pursuant to Sections 15.7.2 and 15.7.3.


                                       19


         13.2 Seller shall sell to Edison, and Edison shall purchase from
Seller, Capacity as specified in Section 2.1 or Capacity as adjusted pursuant to
Section 13.3.

         13.3 Seller may, with Edison's approval, which shall not be
unreasonably withheld, increase the amount of Capacity. Edison shall pay for
such additional Capacity at a rate equal to current Capacity Price for the
remaining Contract Term. Seller may reduce the amount of Capacity at any time by
giving written notice thereof to Edison pursuant to Section 4.4. Edison may
reduce the amount of Capacity as a result of demonstration tests or prior
performance. The amount by which Capacity is reduced shall be deemed a reduction
in Capacity pursuant to Section 4. Either Party may request the other Party to
agree in writing to a revised Capacity whenever it appears that Capacity has
changed.

         13.4 Monthly Payment

         13.4.1 Edison shall determine from monthly meter readings Net Energy
     and Capacity purchased by Edison during the periods specified in Tariff
     Schedule No. TOU-8 for the preceding monthly billing period, and calculate
     the amount due Seller. Edison shall use its best efforts to read the meter
     on a regular, monthly interval

         13.4.2 If a monthly payment period involves portions of different
     published Energy payment schedule periods, Edison shall prorate the monthly
     Energy payment on the basis of the percentage of days at each price.


                                       20


         13.4.3 Within 20 business days of each monthly meter reading, Edison
     shall mail a statement to Seller indicating the amount of Net Energy and
     Capacity purchased during the billing period and the amount to be paid.
     Edison shall prepare and mail a check to Seller within ten (10) business
     days of mailing of the statement.

     14. PAYMENTS FOR ENERGY

         14.1 Seller shall receive a monthly payment for Net Energy received and
accepted by Edison at the Point of Interconnection. Seller shall have the
option, to be exercised by the Seller prior to Date of Firm Operation, to elect
to sell Net Energy at a price based on the payment provisions described in
Section 14.2, 14.3 or 14.4.

         14.2 Edison's Standard Offer No. 2 for Firm Power Purchases (effective
date February 14, 1983).

         14.2.1 Seller shall receive monthly payments for Net Energy, based on
     Edison's Avoided Operating Cost, received by Edison during the on-peak,
     mid-peak and off-peak periods. These periods are defined and published in
     Edison Tariff Schedule No. TOU-8.

         14.2.2 Monthly payment for Net Energy shall be calculated as follows:

         Monthly Payment for Net Energy = A + B + C

         where:

         A = on-peak energy payment

         B = mid-peak energy payment


                                       21


         C = off-peak energy payment

         where, for each period:

         Period Energy Payment = (Avoided Operating Cost/KwH) x (Period Net
     Energy, KwH) x energy loss adjustment factor.*

         14.3 Edison's Standard Offer No. 5 for Firm Power Purchases. This
option is valid only if Standard Offer No. 5 is approved and implemented by the
Commission prior to the Date of Firm Operation.

         14.4 Net Energy Payment Option No. 3.

         14.4.1 For the first 15 years of the Contract Term, Seller shall
     receive monthly payments for Net Energy based on the pricing provisions
     specified in Section 14.4.2. For the second 15 years of the contract term,
     Seller shall receive monthly payments for Net Energy equal to 98% of
     Edison's full Avoided Operating Costs as specified in Section 14.2.

         14.4.2 For the first 15 years of the Contract Term, Seller shall
     receive monthly payments for Net Energy based on the higher of (i) Edison's
     full Avoided Operating Cost as specified in Section 14.2 or (ii) the floor
     price. The floor price payments shall be calculated as follows:

--------
*    The energy loss adjustment factor shall be one (1), subject to adjustment
     by Commission orders or rulings.

                                       22




         Monthly Floor Payment (floor price/kwh) x (Net Energy, kwh) x energy
     loss adjustment factor*


         where, the floor price is:


         Year                         Floor Price
         ----                         -----------

         1985                         4.6(cent)/kwh

         1986                         5.1

         1987                         5.4

         1988                         5.4

         1989                         5.9

         1990                         5.9

         1991                         5.9

         1992                         7.0

         1993                         7.5


         1994                         7.5

         1995                         8.0

         1996                         8.0

         1997                         8.5

--------

*    The energy loss adjustment factor shall be one (1), subject to adjustment
     by Commission orders or rulings.

                                       23



         1998                         8.5

         1999                         8.5


         14.4.3 If Seller elects the payment provision specified in Section
     14.4, then Edison shall pay for the transmission service costs, as
     specified in Section 34, which are incurred in delivering the Net Energy to
     the Point of Interconnection, for the first 5 years of the Contract Term
     and simultaneously enter an identical amount as a debit in the Payment
     Tracking Account specified Section 14.4.4.

         14.4.4 Payment Tracking Account

         14.4.4.1 Edison shall establish a Payment Tracking Account (PTA) to
     account for (i) transmission service costs described in Section 14.4.3 and
     (ii) the amount by which Edison's monthly payment for Net Energy to Seller
     exceeds the payment which would have been paid the Seller under Section
     14.2. These entries shall be considered debits in the PTA. Sums in the PTA
     will draw interest monthly at an annual rate equal to the current published
     Bank of America prime commercial rate plus 1%.

         14.4.4.2 The balance in the PTA, including accrued interest, shall not
     exceed $5,000,000.

               14.4.4.3 Whenever a balance exists in the PTA, the Seller shall
         repay the balance using credits in the form of reductions to Edison's
         monthly

                                       24


     payment for Net Energy to Seller. PTA credits shall include, but not be
     limited to the following:

         a.    When Edison's full Avoided Operating Cost exceeds the floor
               price, Edison shall make a monthly payment for Net Energy equal
               to one-half (1/2) of the sum of monthly payments calculated using
               Edison's full Avoided Operating Cost and the floor price. The
               difference between the monthly payment made in accordance with
               this Section 14.4.4.3 and the monthly payment pursuant to Section
               14.2 shall be credited against the PTA balance.

         b.    Seller shall at any time have the option of paying to Edison part
               or all of the existing balance in the PTA without incurring any
               penalties. To implement this each month, Seller shall notify
               Edison in writing within 20 business days after the monthly meter
               reading of its election to receive a reduced monthly payment for
               Net Energy and credit that reduction against the PTA balance.

         c.    If the PTA balance reaches the $5,000,000 limit, Edison's monthly
               payment for Net Energy to Seller shall be reduced by an amount
               which ensures the PTA balance does not exceed $5,000,000. At no
               time shall the credits to the PTA exceed the current balance.
               When the PTA balance is zero, the monthly

                                       25


               payment for Net Energy to the Seller shall be made pursuant to
               Section 14.4.2.

         14.4.4. If at the end of the first fifteen years the Contract Term a
     PTA balance remains, the said PTA balance shall be due and payable and paid
     within 60 days, including interest up to the date of payment.

15. PAYMENTS FOR CAPACITY

         15.1 If the Seller selects the net energy payment provisions in Section
14.3, then the Seller shall be paid for Capacity delivered pursuant to he
provision of Edison's Standard Offer No. 5 for Firm Power Purchases. This option
is valid only if Standard Offer No. 5 is approved and implemented by the
Commission prior to the Date of Firm Operation.

         15.2 If the Seller selects the net energy payment provisions in either
Section 14.2 or 14.4, then the Seller shall receive monthly payments for
Capacity pursuant to Section 15.3.

         15.3 Seller shall receive monthly payments for Capacity made available
at the Point of Interconnection. Seller shall have the option, to be exercised
prior to the Date of Firm Operation, to elect to sell the Capacity pursuant to
the payment provisions specified in Section 15.4 or 15.5.

         15.4 Payment Option 1 -- Performance Based on
Availability/Dispatchability

         15.4.1 Minimum Performance Requirement in Option 1 to receive full
     capacity payments.

                                       26


         15.4.1.1 The Generating Facility must be dispatchable to Edison upon
     request, and meet the following conditions:

               (i) The Generating Facility must be available during all on-peak
         hours of each Peak Month except during hours of allowable Forced Outage
         as specified in Section 15.4.1.3.

               (ii) The Generating Facility must be available for all other
         hours of the year except during hours of allowable maintenance as
         specified in Section 15.6 and during hours of allowable maintenance as
         specified in Section 15.4.1.3.

         15.4.1.2 The measure of availability shall be the performance during
     the hours that the Generating Facility is dispatched, ignoring energy
     produced in any hour in excess of the Capacity of the Generating Facility.
     Dispatching requests can only increase power production, and only up to
     Capacity.

         15.4.1.3 The Seller is allowed a 20% Forced Outage rate for the on-peak
     hours of each Peak Month, a 20% Forced 20% Outage rate for the mid- and
     off-peak hours of each Peak Month, and 20% Forced Outage rate for the hours
     of each non-Peak Month. Except during the Peak Months, Seller may
     accumulate and apply the 20% allowance for Forced Outage for any
     consecutive three month period.

         15.4.2 Payment Provision in Option 1

                                       27


         15.4.2.1 When the requirements of Section 15.4.1 are met, the monthly
     payment is:

         Monthly Capacity Payment =

         (Capacity Price) x (1/12) x (Capacity)


         15.4.2.2 When the requirements of Section 15.4.1 are not met, the
     monthly payment is:

         Monthly Capacity Payment*

         (Capacity Price) x (1/12)  x (Capacity)  x (Availability/.8)*

         15.4.3 Payments in excess of 100% of Capacity Price.

              15.4.3.1. Bonus During Peak Months

                    For a Peak Month, the Seller will receive a bonus if

                    1)  The performance requirements of Section 15.4.1 have
                        been met; and,

                    2)  The on-peak availability exceeds 85%.


              15.4.3.2  Bonus During Non-Peak Months

                    In a non-Peak Month, the Seller will receive a bonus if

--------
* (Availability/.8) cannot be greater than 1.0.

                                       28


                  1)  The performance requirements of Section 15.4.1 have been
                      met;

                  2)  The on-peak availability for each of the year's Peak Month
                      was at least 85%; and

                  3)  The on-peak availability exceeds 85%.

         15.4.3.3 Bonus Payment

                  For any eligible month, the bonus payment will be calculated
                    according to the fol1owing formula.

                  Monthly Bonus Payment = [(1.2 x on-peak availability) - 1.02]
                    x (1/12) Capacity Price x Capacity

                  Where:

                  Availability =

                  kWh Purchased by Edison
                  --------------------------------------------------------------
                  (Capacity) x (Hours dispatched - Allowable Maintenance Hours)

         15.4.3.4 Total monthly Capacity payment when a bonus is earned shall be
     the sum of the monthly Capacity payments specified in Section 15.4.2.1 and
     15.4.3.3.

         15.4.4 Only by mutual agreement can the kilowatthours used in the
     calculation of capacity payments specified in Section 15.4 be greater than
     a delivery rate equal to Capacity.

         15.5 Payment Option 2 -- Performance Based on Capacity Factor


                                       29



         15.5.1 Minimum performance Requirement in Option 2 to receive full
capacity payments.

         15.5.1.1 The Capacity shall be available for all of the on-peak hours
     as defined in Tariff Schedule No. TOU-8 in each of the Peak Months subject
     to a 20% allowance for Forced Outages for each month.

         15.5.1.2 There is no minimum performance requirement for the rest of
     the year.

         15.5.2 Payment Provision in Option 2.

               The monthly capacity payment shall be calculated as the sum of
         the on-peak, mid-peak, and off-peak capacity payments. Each capacity
         period payment is calculated as follows:

               Monthly Capacity Period Payment =

               (Capacity Price) x (Conversion to Monthly Payment) x (Capacity)
         x (Period Performance Factor)

               Where:

               Period Performance Factor =

               kWh Purchased by Edison
          -------------------------------------------------------------
          0.8 x (Capacity) x (Period Hrs. - Allowable Maintenance Hrs.)

               The Period Performance Factor cannot exceed

               1. When the allowable maintenance hours equals the period hours,
         the period performance factor shall equal 1.0.

                                       30




     Conversion to Monthly Payments: The following factors convert Capacity
Price to monthly payments by time period of delivery. These conversion factors
will be subject to periodic change as approved by the Commission.

                                         Summer Period     Winter Period
                                         -------------     -------------

                  On-peak                 .13125                 .02094

                  Mid-peak                .00267                 .01054

                  Off-peak                .00000                 .00127


                  15.5.3  Payments in Excess of 100% of Capacity Price

                        15.5.3.1  Bonus During Peak Months


                        For a Peak Month, the Seller will receive a bonus if

                        1)  The Performance Requirements of Section 15.5.1 have
                            been met;

                            and

                        2)  The on-peak capacity factor exceeds 85%.

                        15.5.3.2  Bonus During Non-Peak Months


                        1)  The performance requirements of Section 15.5.1 have
                            been met;

                        2)  The on-peak capacity factor for each of the year's
                            Peak Months was at least 85%;


                            and

                        3)  The on-peak capacity factor exceeds 85%.

                        15.5.3.3  Bonus Payment

                  For any eligible month, the bonus payment is the following:

                  Bonus Payment =

                                       31


                  [(1.2 x on-peak capacity factor) - 1.02]

                  x Capacity Price

                  x (1/12)

                  x Capacity

     Where:


                  On-peak Capacity Factor =

                  kWh Purchased by Edison
         -------------------------------------------------------
         (Capacity) x (Period Hrs. - Allowable Maintenance Hrs.)

                        15.5.3.4 The monthly capacity payment when a bonus is
               earned shall be the sum of the monthly capacity payment (Section
               15.5.2) and the monthly bonus payment (Section 15.5.3.3).

                  15.5.4 Only by mutual agreement can the kilowatthours used in
         the calculation of capacity payments specified in Section 15.5 be
         greater than a delivery rate equal to Capacity.

         15.6  Scheduled Maintenance Allowances

         The a1lowance for scheduled maintenance is as follows:

                  15.6.1 Outage periods for scheduled maintenance shall not
         exceed 840 hours (35 days) in any 12-month period. This allowance may
         be used in increments of an hour or longer on a consecutive or
         non-consecutive basis.

                  15.6.2 Seller may accumulate unused maintenance hours on a
         year-to-year basis up to a maximum of 1,080 hours (45 days). This
         accrued time must be


                                       32


         used only for major overhauls, as such major overhauls are reasonably
         defined by the Seller.

         15.7   Failure to Meet Minimum Performance Requirements

                  15.7.1 Except when caused by uncontrollable forces, if Seller
         fails to meet the minimum performance requirements as set forth in
         Sections 15.4.1 and 15.5.1. The following shall apply:

                        15.7.1.1 Seller may be placed on probation for a period
               not to exceed 15 months or as otherwise agreed to by the Parties.
               During this period, the monthly capacity payment will be based on
               the level of Capacity actually made available as calculated in
               Sections 15.4.2.2 and 15.5.2, as app1icable.

                        15.7.1.2 If Seller meets or demonstrates to Edison
               pursuant to Section 12.2 that it can meet its minimum requirement
               during the probationary period, Edison shall reinstate regular
               capacity payments.

                        15.7.1.3 If Seller fails to meet its minimum
               requirements during the probationary period, Edison may derate
               the Capacity to the greater of the Capacity actually made
               available when the minimum requirements stated in Sections 15.4.1
               and 15.5.1 were not met, or the Capacity at which Seller is
               reasonably likely to meet the minimum requirements. In either
               case, the quantity by which the Capacity is reduced shall be
               considered terminated without prescribed notice as provided in
               Section 4.4.


                                       33


                  15.7.2 If Seller is prevented from meeting the minimum
         performance requirement because of a schedule outage, a Forced Outage
         or an Emergency on the Edison electric system, Edison shall continue to
         make capacity payments to Seller. Under Option 2, the calculations of
         capacity payments will treat hours of Forced Outage and Emergency on
         the Edison system the same as scheduled maintenance outages.

                  15.7.3 If deliveries are interrupted or reduced because of
         uncontrollable forces, Edison shall continue to make capacity payments
         to Seller for 90 days from the occurrence of the uncontrolled force
         event. Under Option 2, the calculation of capacity payments will treat
         hours of interruption or reduction by reason of an uncontrollable
         force, the same as scheduled maintenance outages with reductions in
         Capacity treated on a pro rata basis.

16. TAXES: Seller shall pay ad valorem taxes and other taxes properly attributed
to the Project. If such taxes are assessed or levied against Edison, Seller
shall pay Edison the amount of such assessment or levy within thirty (30) days
of presentation of documentation thereof. The Parties shall provide information
concerning the Project to any requesting taxing authority.

17. LIABILITY

         17.1 As used in this Section 17, the word "liability"shall mean "all
liability, damages, costs, losses, claims, demands, actions, causes of action,
attorneys' fees and expenses, or any of them."


                                       34


         17.2 Seller shall defend at its own cost and indemnify and hold
harmless Edison, its officers, directors, employees, agents, contractors and
subcontractors from and against any and all liability resulting directly or
indirectly from or connected with the development and/or furnishing of Net
Energy by Seller as provided herein (including but not limited to such liability
arising from the death of or injury to an officer, director, agent or employee
of Seller or Edison or damage to property of Seller or Edison or of any officer,
director, agent or employee of Seller or Edison) to the extent caused by the
negligent acts of Seller.

         17.3 Edison shall defend at its own cost and indemnify and hold
harmless Seller, its officers, directors, employees, agents, contractors and
subcontractors from and against any and all liability resulting directly or
indirectly from or connected with the utilization of Net Energy by Edison as
provided herein (including but not limited to such liability arising from the
death or injury to an officer, director, agent or employee of Seller or Edison
or damage to property of Seller or Edison or of any officer, director, agent or
employee of Seller or Edison) to the extent caused by the negligent acts of
Edison.

         17.4 Seller shall defend at its own cost and indemnify and hold
harmless Edison, its officers, directors, employees, agents, contractors and
subcontractors from or connected with an infringement of a patent by Seller in
the performance or non-performance of this Agreement.


                                       35


         17.5 Edison shall defend at its own cost and indemnify and hold
harmless Seller, its officers, directors, employees, agents, contractors and
subcontractors from and against any and all liability resulting directly or
indirectly from or connnected with an infringement of a patent by Edison in the
performance or non-performance of this Agreement.

         17.6 Notwithstanding anything in this Agreement to the contrary, under
no circumstances, whether arising in contract, equity, tort (including
negligence) or otherwise, shall either Party hereto be responsible or liable to
the other for loss of profit, loss of operating time or loss of use or reduction
in the use of any equipment or facilities or any portion thereof, increased
expense of operation or maintenance, cost of replacement power, claims of
customers, third parties or for any special, indirect, incidental or
consequential damages.

18. INSURANCE

         18.1 During the term of this Agreement, Seller shall obtain and
maintain in force as hereinafter provided comprehensive general liability
insurance, including contractual liability coverage, with a combined single
limit of not less than $5,000,000 each occurrence. The insurance carrier or
carriers and form of policy shall be subject to review and approval by Edison.

         18.2 Prior to the date the Project is first operated in parallel with
the Edison electric system, Seller shall furnish to Edison: (i) a certificate of
insurance providing that such insurance shall not be terminated nor expire
except on thirty (30) days prior written


                                       36


notice to Edison, and (ii) an additional insured endorsement with respect to
such insurance in substantially the following form:

         "In consideration of the premium charged, Southern California Edison
         Company ("Edison") is named as additional insured with respect to all
         liabilities arising out of Seller's use and ownership of Seller's
         Generating Facility.

         "The inclusion of more than one insured under this policy shall not
         operate to impair the rights of one insured against another insured and
         the coverages afforded by this policy will apply as though separate
         policies had been issued to each insured. The inclusion of more than
         one insured will not, however, operate to increase the limit of the
         carrier's liability. Edison will not, by reason of its inclusion under
         this policy, incur liability to the insurance carrier for payment of
         premium for this policy.

         "Any other insurance carried by Edison which may be applicable shall be
         deemed excess insurance and Seller's insurance primary for all purposes
         despite any conflicting provisions in Seller's policy to the contrary."

         18.3 Seller shall maintain such insurance in effect for so long as
Seller's Generating Facility is operated in parallel with Edison's electric
system. If Seller fails to comply with the provisions of this Section 18, Seller
shall, at its own cost, defend, indemnify, and hold harmless Edison, its
directors, officers, employees, agents, assigns, and successors from and against
any and all liability, loss, damage, claim, action, cause of action, cost,
charge, or expense of any kind of nature including attorneys' fees and other
costs of litigation, resulting from death of, or injury to, any person or damage
to any property, including the personnel and property of Edison, to the extent
that Edison would have been protected had Seller complied with all of the
provisions of this Section 18.

                                       37


19. REGULATORY AUTHORITY

         Seller and Edison shall at all times conform to all applicable laws and
regulations.

20. DISPUTES

         20.1 Any dispute arising between the Parties relating to interpretation
of the provisions of this Agreement or to performance of the Parties hereunder,
other than matters which may not be settled without the consent of an involved
insurance company, shall be reduced to writing by the complaining party stating
the complaint and proposed solution and submitted to the other party's manager
responsible for the administration of this Agreement. Such manager's
interpretation and decision shall be incorporated into a written document
outlining his interpretation and decision and specifying that it is the final
decision of such manager. A copy of such document shall be furnished to the
complaining party within ten (10) days following the receipt of the complaining
party's written complaint.

         20.2 The decision of such manager pursuant to Section 20.1 shall be
final and conclusive from the date of receipt of such copy by the complaining
Party, unless, within a thirty (30) day period the complaining party furnishes a
written appeal to such manager delivered pursuant to Section 21. The Parties
shall hold a joint hearing within 15 days of receipt of such appeal. The Parties
shall each be afforded an opportunity to present evidence in support of their
respective positions at the hearing. One authorized representative of Seller and
one authorized representative of Edison and other necessary

                                       38


persons shall conduct such hearing. Pending final decision of a dispute
hereunder, the Parties shall proceed diligently with the performance of their
obligations under this Agreement

         20.3 The authorized representatives shall make their final decision
within 15 days of presentation of all evidence affecting the dispute and shall
reduce their decision to writing. The decision shall be final and conclusive.

         20.4 If the authorized representatives cannot reach a final decision
within the 15 day period, any remedies which are provided by law may be pursued.

21. NOTICES

         Except as otherwise specifically provided herein, any notice from one
Party to the other, shall be given in writing and shall be deemed to be given as
of the date the same is enclosed in a sealed envelope, addressed to the other by
certified first class mail, postage prepaid, and deposited in the United States
Mail. For the purposes of this Section 21, such notices shall be mailed to the
following respective addresses or to such others as may be hereafter designated
by either Party:




         Southern California Edison Company
         Post Office Box 800
         Rosemead, California  9177O
         Attention:  Secretary


                           Seller:     Chevron U.S.A. Inc.
                                       c/o Chevron Geothermal Company


                           Address:    P.O. Box 7147
                                       San Francisco, California 94119

                           Attention:  Manager, Geothermal Operations



                                       39


22. NON-DEDICATION OF FACILITIES

         Neither Party by this Agreement dedicates any part of its facilities
involved in this Project to the public or to the service provided under this
Agreement, and such service shall cease upon termination of this Agreement.

23. PREVIOUS COMMUNICATIONS

         This Agreement contains the entire agreement and understanding between
the Parties, their agents and employees as to the subject matter of this
Agreement, and merges and supersedes all prior agreements, commitments,
representations and discussions between the Parties. No Party shall be bound to
any other obligations, conditions, or representations with respect to the
subject matter of this Agreement.

24. NON-WAIVER

         None of the provisions of this Agreement shall be considered waived by
either Party except when such waiver is given in writing. The failure of either
Party to insist in any one or more instances upon strict performance of any of
the provisions of this Agreement or to take advantage of any of its rights
hereunder shall not be construed as a waiver of any such provisions or the
relinquishment of any such rights for the future, but the same shall continue
and remain in full force and effect.

25. SUCCESSORS & ASSIGNS

         This Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the Parties subject to the limitations on
assignments set forth in Section 26.


                                       40


26. ASSIGNMENT

         26.1 A Party may assign all or part of its interests under this
Agreement to an affiliate. An "Affiliate" shall mean a Party's parent, a Party's
subsidiary, or any company of which a Party's parent is a parent. A "parent"
shall mean a company which owns directly or indirectly more than 50% of the
shares entitled to vote in an election of directors of another company.

         26.2 Any assignment to a third party of all or any part of its interest
under this Agreement shall be subject to the prior written consent of the
non-assigning party. Consent shall not be unreasonably withheld. Any such
assignment shall be to an assignee that (a) is a financially responsible entity,
(b) is an experienced and prudent operating entity, and (c) has the rights,
title and interest necessary to perform the assigned obligations. In this regard
Seller intends to assign this Agreement to the Heber Geothermal Company (HGC)
and by execution of this Agreement, Edison hereby consents to this assignment
pursuant to this Section 26.2.

         26.3 Any assignment by Chevron of its interest in this Agreement shall
not relieve Chevron as the assigning Party from liability for the duties and
obligations of Seller under this Agreement, except to the extent such duties and
obligations are expressly assumed by HGC, a general partnership of Centennial
Geothermal, a wholly owned subsidiary of Centennial Energy, Inc. and Dravo
Energy, Inc., a wholly owned subsidiary of Dravo Corporation under the
assignment agreement between Chevron and HGC.


                                       41



         26.4 Whenever an assignment of a Party's interest in this Agreement is
made, the assigning Party's assignee shall expressly assume in writing the
duties and obligations of the assigning Party pursuant to this Agreement and,
within 30 days after any such assignment and assumption of duties and
obligations, the assigning Party shall furnish, or cause to be furnished, to the
other Party a true and correct copy of such assignment and assumption of duties
and obligations. Seller, or its assignee, may assign all or any part of its
interest under this Agreement to a financing institution to facilitate financing
for the project by Seller or its assignee.

27. NO THIRD PARTY BENEFICIARIES

         Except as otherwise specifically provided in this Agreement or under
separate agreements creating such rights, the Parties do not intend to create
rights in, or grant remedies to, any third party as a beneficiary of this
Agreement or of any duty, covenant, obligation or understanding established
under this Agreement.

28. EFFECT OF SECTION HEADINGS

         Section headings appearing in this Agreement are inserted for
convenience only, and shall not be construed as interpretations of text.

29. GOVERNING LAW

         This Agreement shall be interpreted, governed and construed under the
laws of the State of California or the United States as applicable as if
executed and to be performed wholly within the State of California.

                                       42


30. CONFIDENTIALITY

         30.1 Except as provided herein, the Parties shall hold all information
in this Agreement and all information related to or received pursuant to this
Agreement as proprietary and confidential.

         30.2 Neither Party shall disclose any part nor the whole of this
Agreement to any third party without the express prior written consent of the
other Party, such consent shall not be unreasonably withheld.

         30.3 From time to time governmental and/or regulatory agencies may
request disclosure of the Agreement or Agreement-related information from either
Party or both Parties and if such is the case either Party or both Parties may
consent to such disclosure provided, that (i) the requestor(s) be notified by
the disclosing Party that the information being released is confidential, and
that (ii) the disclosing Party inform the other Party, in writing, as to the
nature of the information disclosed and to whom disclosed.

31. UNCONTROLLABLE FORCES

         31.1 Neither Party shall be considered to be in default in the
performance of any of its obligations under this Agreement, other than an
existing obligation to pay money, when, and to the extent, failure of
performance shall be due to an uncontrollable force. The term "uncontrollable
force" means any cause beyond the control of the Party failing to perform,
including, but not limited to, flood, earthquake, storm, lightning, fire,
epidemic, war, riot, civil disturbance or disobedience, labor dispute, labor or
material shortage, sabotage, restraint by court order or public authority, and
action or nonaction

                                       43


by, or inability to obtain and maintain the necessary authorizations or
approvals from, any governmental agency or authority, which by the exercise of
due diligence such Party could not reasonably have been expected to avoid and
which, by exercise of due diligence it has not overcome. Either Party rendered
unable to fulfill any of its obligations under this Agreement by reason of an
uncontrollable force shall give prompt written notice of such facts to the other
Party and shall exercise due diligence to remove such inability. Nothing
contained herein shall be construed so as to require a Party to settle any
strike or labor dispute in which it may be involved.

         31.2 The failure of the Commission to approve the pass through to
Edison's ratepayers of monies paid to Seller for Net Energy and Capacity under
this Agreement, subject to the limitations of Sections 7.7 and 7.8, shall not be
deemed to be an uncontrollable force.

         31.3 In the event the applicable provisions of this Section 31 are
invoked by Seller, Seller shall not be obligated to deliver Net Energy and Net
Capacity and may interrupt or reduce deliveries to Edison, and Edison shall not
be obligated to make any payments hereunder. In the event the applicable
provisions of this Section 31 are invoked by Edison, except as provided in
Section 15.7.3, Edison shall not be obligated to accept or pay for, and may
require Seller to interrupt or reduce, deliveries of Net Energy.

32. PUBLICITY

         Except as required for compliance with Commission rules and
regulations, Edison shall not make any press releases, statements or other
disclosures to the public

                                       44


regarding the construction, construction schedule, start-up, operation and
maintenance of the Project without the prior written consent of Seller.

33. WATER

         Edison has entered into a Water Supply Agreement with Imperial
Irrigation District (IID) dated December 22, 1981 which provides that IID will
permit Edison to take from the Daffodil Canal, Delivery No. 1, water sufficient
to satisfy the reasonable requirements of the Project. Pursuant to the E&C
Contract referred to in Section 6.3 herein, Edison is required to assign the
Water Supply Agreement to Seller. If for any reason whatsoever, Edison is unable
to assign such Water Supply Agreement to Seller, then Edison shall maintain such
Water Supply Agreement in effect and provide water to the Project in accordance
with its terms. In such event, the cost of water for the Project paid by Edison
shall be a credit against payments due Seller as calculated in accordance with
Section 13.4

34. TRANSMISSION COST

         34.1 Seller shall select the method for determining transmission
service costs specified in Sections 34.2 or 34.3. Seller shall make this
selection prior to the Date of Firm Operation.

         34.2 Edison, with Seller's assistance, shall seek to contract with
third parties in order to secure the most economic transmission path and service
costs for the delivery of Net Energy from the Project to the Point of
Interconnection at terms and conditions


                                       45


acceptable to Seller. Seller shall be responsible for all costs incurred in the
delivery of the Net Energy from the Project to the Point of Interconnection.

         34.3 For the first 5 years of the Contract Term, the Seller shall pay
for the transmission of the Net Energy from the Project to the Path of
Interconnection at a transmission service cost based on a method comparable to
the method which is in effect or will be negotiated for Edison's geothermal
facilities at Brawley and Salton Sea. The exact, mutually agreed upon
transmission service cost shall be established prior to the Date of Firm
Operation and may be adjusted periodically as necessary. The transmission
service cost shall consist of (i) a flat monthly service cost expressed in $ per
kilowatt per month and (ii) transmission losses expressed in % of Net Energy or
delivery to the Point of Interconnection. The Seller may elect this Section 34.3
subject to the following conditions:

         34.3.1 The date of initial delivery of Net Energy shall occur on or
     before August 1, 1985.

         34.3.2 Seller shall upgrade Edison's 115/92 kV interconnnection
     substation with the Interconnecting Utility by increasing its capacity by
     25,000 kW. Seller shall pay the capital cost of the upgrade and pay the
     monthly charges related to the upgrade facilities under the terms and
     conditions of Edison's Rule No. 2 H for added facilities. If the Seller is
     unable to use the upgraded facilities, at any time, then Edison shall have
     the option to use such facilities and reduce the Seller's monthly charges
     accordingly. The upgrade must be complete prior

                                       46


     to Date of Firm Operation. At the end of 5 years, the transmission service
     costs shall be handled under the provisions of Section 34.2, unless the
     Seller elects to continue to use the provisions specified in is Section
     34.3 after the first 5 years of the Contract Term absent the transmission
     service cost methodology contained in this Section 34.3. In the event of
     such election Section 34.4 shall not apply.

         34.4 If the Seller exercises the provisions specified in Section 34.3
then for said five (5) year period, the applicable portion of the
Interconnecting Utility electric system shall be considered part of the Edison
electric system but only to the extent that the capacity payment provisions
specified in Sections 15.7.2 and 15.7.3 apply.

35. RECORDS AND AUDITS

         35.1 Edison and Seller shall maintain true and correct records in
connection with this Agreement and all transactions related thereto and shall
retain all such records for at least 24 months after termination of this
Agreement.

         35.2 No director, employee or agent of either Party shall give or
receive any commission, fee, rebate, gift or entertainment of significant cost
or value in connection with this Agreement, on enter into any business
arrangement with any director, employee or agent of the other Party, except as a
representative of one of the Parties, without prior written notification thereof
to both Parties. Any representative(s) authorized by either Party may audit any
and all records of the other Party pertaining to the administration of this
Agreement for the sole purpose of determining whether there has been compliance
with this Section 35.2

                                       47


         35.3 Any representative(s) authorized by either party may from time to
time and at any time after the date of this Agreement until 24 months after its
termination make an audit of all records of the other Party in connection with
payments made on a cost reimbursement basis under this Agreement. Audit may also
cover procedures and controls with respect to such reimbursable costs. Upon
completion of the audit, the Parties shall pay each other any amounts shown due
by the audit. If the audited Party disagrees with the results of the audit, it
may have an independent audit conducted, at its expense, by a third party
acceptable to both Parties and pursuant to auditing instructions acceptable to
both Parties. The findings of the audit shall be binding upon both Parties.

36. CONDITIONS PRECEDENT

         This Agreement shall be effective upon execution of all the following
documents:

     36.1 1983 Geothermal Energy Contract between Chevron Geothermal Company of
California and Southern California Edison.

     36.2 Corporate Guarantee from Dravo Constructors, Inc. to Southern
California Edison for the repayment of the Payment Tracking Account pursuant to
Section 14.4.4.

     36.3 Geothermal Sales Agreement between Chevron Geothermal Company of
California and Heber Geothermal Company.

     36.4 Geothermal Energy Agreement between Chevron Geothermal Company of
California and Dravo Energy, Inc.


                                       48


     36.5 Assignment and Assumption Agreement between Chevron U.S.A., Inc. and
Heber Geothermal Company.

     36.6 The acceptance and execution of the final commitment letter from
General Electric Credit Corporation to Heber Geothermal Company.

     36.7 The approval of this Agreement by the Board of Directors or Management
Committee, as appropriate, of the following entities:

          36.7.1 Centennial Energy, Inc.

          36.7.2 Dravo Corporation

          36.7.3 General Electric Credit Corporation

37. AGREEMENT AND SIGNATURE

     This Agreement is executed in multiple counterparts, each of which shall be
deemed an original. The signatories hereto represent that they have been
appropriately authorized to enter into this Agreement on behalf of the Party for
whom they sign. This Agreement is hereby executed as of this 26th day of August,
1983.


                                       SOUTHERN CALIFORNIA EDISON COMPANY


                                       By /s/ Indecipherable
                                         ---------------------------------------
                                                  Vice President



                                       CHEVRON U.S.A., INC., represented by
                                       its agent, Chevron Resources Company



                                       49


                                       By /s/ Indecipherable
                                         ---------------------------------------

                                       Title       Vice President
                                            ------------------------------------













                                       50




                                                                  Exhibit 10.3.5

                                 AMENDMENT NO. 1

                                       TO

                       POWER PURCHASE AND SALES AGREEMENT

                                     BETWEEN

                               CHEVRON U.S.A. INC.

                                       AND

                           SOUTHERN CALIFORNIA EDISON











                                TABLE OF CONTENTS



Section    Title                                                  Page
-------    -----                                                  ----

 1         PARTIES                                                  1

 2         RECITALS                                                 1

 3         AGREEMENT                                                3

 4         EFFECTIVE DATE                                           3

 5         AMENDMENT TO SECTION 4                                   3

 6         AMENDMENT TO SECTION 14                                  3

 7         AMENDMENT TO SECTION 15                                  7

 8         AMENDMENT TO SECTION 34                                 18

 9         EFFECT OF THIS AMENDMENT NO. 1                          21

10         SIGNATURE CLAUSE                                        21






                               AMENDMENT NO. 1 TO
                   POWER PURCHASE AND SALES AGREEMENT BETWEEN
                          HEBER GEOTHERMAL COMPANY AND
                       SOUTHERN CALIFORNIA EDISON COMPANY


         1. PARTIES

         The Parties to this Amendment No. 1 to the Power Purchase and Sales
Agreement, hereinafter referred to as Amendment No. l, are Heber Geothermal
Company, a California partnership, hereinafter referred to as "HGC" and Southern
California Edison Company, a California corporation, hereinafter referred to as
"Edison," hereinafter sometimes referred to individually as "Party" and
collectively as "Parties."

         2. RECITALS

         This Amendment No. 1 is made with reference to the following facts,
among others:

         2.1 On August 26, 1983, Edison and Chevron U.S.A Inc. executed the
Power Purchase and Sales Agreement to provide the terms and conditions for the
sale by Chevron and purchase by Edison of capacity and energy delivered to the
Point of Interconnection from a 47 MW (net) electrical generating facility
located at Heber, California utilizing geothermal steam as the prime mover
energy source.

         2.2 On August 26, 1983, Chevron assigned and HGC assumed Chevron's
right, title and interest in the Power Purchase and Sales Agreement between
Chevron and Edison, dated August 26, 1983.



         2.3 On March 16, 1984, Chevron and HGC issued a Notice of Intention to
Proceed to Edison. The Notice of Intention to Proceed stated Chevron and HGC's
desire to construct the facilities necessary to proceed with the Power Purchase
and Sales Agreement, dated August 26, 1983.

         2.4 The Public Utilities Commission of the State of California has
issued Decision No. 83-09-054, which authorized the long-term power-purchase
contract, to be known as Standard Offer No. 4, which established the terms and
conditions of the sale of power produced by Qualifying Facilities and the
purchase by Edison of electrical energy therefrom.

         2.5 The Parties wish to provide definitive terms for the exercise of
Seller's option to deliver Net Energy to the Point of Interconnection pursuant
to the terms of Section 34.3 of the Power-Purchase and Sales Agreement by
electing to pay for the upgrade of Edison's 115/92 kV substation facility and
agreeing to pay the flat monthly transmission service cost, as specified in
Section 34.3 of the Power-Purchase and Sales Agreement, commencing on August 1,
1985.

         2.6 The Parties, therefore, desire to amend the Agreement to modify the
provisions covering (i) payments by Edison for energy, (ii) payments by Edison
for capacity and (iii) transmission cost to be paid by HGC as Seller.

         3. Agreement: The Parties agree to amend the Power Purchase and Sales
Agreement as follows:

                                       2


         4. Effective Date: This Amendment No. 1 shall become effective upon
execution by the Parties and consent by Chevron U.S.A., Inc., represented by its
agent Chevron Resources Company.

         5. Amendment to Section 4:

         The last sentence in Section 4.4 is deleted in its entirety and
replaced with the following:

         The prior written notice requirement in this Section 4.4 will apply in
the event Edison reduces Seller's capacity as outlined in Sections 12.2, 13.3
and 15.4.1.3.

         6. Amendment to Section 14:

         Section 14 is deleted in its entirety and replaced with the following:

         Seller shall receive a monthly payment for Net Energy received and
accepted by Edison at the Point of Interconnection pursuant to the provisions of
this Section 14.

         14.1  Net Energy Payments - First Period

         14.1.1 During the First Period of the Contract Term, which shall be
defined as the first 10 years of the Contract Term commencing upon date of
Firm Operation but not later than five years from the date of execution of this
Contract, Seller shall be paid a Monthly Energy Payment for Net Energy received
and accepted by Edison at the Point of Interconnection. The Monthly Energy
Payment shall be based on the Energy Payment Option selected by the Seller prior


to the date of Firm Operation. The Energy Payment Options shall be selected by
the Seller prior to the date of Firm Operation in increments of 10% with a total
equal to 100%.

                                       3


              [100]  %     Energy Payment Option No. 1 -- Forecast of Annual
                           Marginal Cost of Energy in effect at the date of

                           execution of this Amendment No. 1. (Appendix B)

                [0]  %     Energy Payment Option No. 2 -- Edison's Avoided
                           Operating Cost.

         14.1.2 Seller shall be paid a Monthly Energy Payment for Net Energy


received and accepted by Edison at the Point of Interconnection during each
month in the First Period of the Contract Term pursuant to the following
formula:

Monthly Energy Payment = [(A x D) + (B x D) + (C x D)] x E

Where A  =  kWh purchased by Edison during on-peak periods defined in
            Edison's Tariff Schedule No. TOU-8.

      B  =  kwh purchased by Edison during mid-peak periods defined in
            Edison's Tariff Schedule No. TOU-8.

      C  =  kWh purchased by Edison during off-peak periods defined in

            Edison's Tariff Schedule No. TOU-8.

      D  =  The sum of:

               (i) the appropriate time-differentiated energy price from the
Forecast of Annual Marginal Cost of Energy, multiplied by the decimal
equivalent of the percentage of the forecast specified in Section 14.1.1, and
(ii) the appropriate time-differentiated energy price from Edison's Avoided
Operating Cost multiplied by the decimal equivalent of the percentage of
Edison's Avoided Operating Cost specified in Section 14.1.1.

                                       4


      E = Energy Loss Adjustment Factor For Remote Generating Sites*

         14.2 Net Energy Payments - Second Period

         During the Second Period of the Contract Term, which shall be defined
as the period commencing upon expiration of the First Period and continuing for
the remainder of the Contract Term, Seller shall be paid a Monthly Energy
Payment for Net Energy received and accepted by Edison at the Point of
Interconnection based on Edison's Avoided Operating Cost. The Monthly Energy
Payment shall be calculated by the following formula:

Monthly Energy Payment = kWh purchased by Edison for each on-peak, mid-peak, and
off-peak time period defined in Edison's Tariff Schedule No. TOU-8

         x Edison's Avoided Operating Cost by time of delivery for each time
           period

         x Energy Loss Adjustment Factor For Remote Generating Sites*

         7. Amendment to Section 15:

         Section 15 is deleted in its entirety and replaced with the following:

         Seller shall sell to Edison and Edison shall purchase from Seller
Capacity pursuant to the Capacity Payment Option selected by the Seller in
Section 15.1.


--------
*    The Energy Loss Adjustment Factor For Remote Generating Sites shall be 1.0,
     subject to adjustment by Commission orders and rulings.


                                       5



         15.1 The Seller hereby elects Option B from the following Capacity
Payment Options:

         [ ]  Option A - As-Available capacity based upon Forecast of Annual
As-Available Capacity Payment Schedule (Appendix A).

         [X]  Option B - Firm Capacity

         Capacity Payment Schedule contained in Edison's Standard Offer No. 2
for Firm Power Purchases in effect at the time of Amendment No. 1 execution.
Capacity Price (Firm Capacity): $147/kW--Year.

         15.2.1 Capacity Payment Option A -- As Available Capacity.

         If Seller selects Capacity Payment Option A, Seller shall be paid a
Monthly Capacity Payment calculated pursuant to the following formula:

Monthly Capacity Payment = (A x D) + (B x D) + (C x D)

Where A = kWh purchased by Edison during on-peak periods defined in Edison's
          Tariff Schedule No. TOU-8.

      B = kWh purchased by Edison during mid-peak periods defined in Edison's
          Tariff Schedule No. TOU-8.

      C = kWh purchased by Edison during off-peak periods defined in Edison's
          Tariff Schedule No. TOU-8.

      D = The appropriate time differentiated capacity price from the Forecast
          of Annual As-Available Capacity Payment Schedule (Appendix A) or the
          Capacity Payment Schedule contained in Edison's Standard Offer No. 1
          for As-

                                       6


         Available Power Purchases, as updated periodically and accepted by the
         Commission.

         15.2.1.1 During the First Period of the Contract Term, the formula
shall be computed with D equal to the appropriate time-differentiated capacity
price from the Forecast of Annual As-Available Capacity Payment Schedule
(Appendix A).

         15.2.1.2 During the Second Period of the Contract Term, the formula
shall be computed with D equal to the appropriate time-differentiated capacity
price from the Capacity Payment Schedule contained in Edison's Standard Offer
No. 1 for As-Available Power Purchase as updated periodically and accepted by
the Commission, but not less than the greater of (i) the appropriate
time-differentiated capacity price from the Forecast of Annual As-Available
Capacity Payment Schedule (Appendix A) in effect at the end of the First Period,
or (ii) the appropriate time-differentiated capacity price from the Capacity
Payment Schedule contained in Edison's Standard Offer No. 1 for As-Available
Power Purchases for the beginning of the Second Period.

         15.2.2 Capacity Payment Option B - Firm Capacity Purchase

         If Seller selects Capacity Payment Option B, Seller shall provide to
Edison for the Contract Term the Capacity specified in Section 3.6, or as
adjusted pursuant to Section 13.3, and Seller shall be paid as follows:

         15.2.2.1 If Seller meets the performance requirements set forth in
Section 15.2.2.2, Seller shall be paid a Monthly Capacity Payment, beginning
from the date of

                                       7


Firm Operation equal to the sum of the on-peak, mid-peak, and off-peak Capacity
Period Payments. Each capacity period payment is calculated pursuant to the
following formula:

Monthly Capacity Period = A x B x C x D Payment



         Where A = Capacity Price specified in Section 15.1 based on the
                   Capacity Payment Schedule contained in Edison's Standard
                   Offer No. 2 for Firm Power Purchases in effect at the time of
                   Amendment No. 1 execution.

               B = Conversion factors to convert annual capacity prices to
                   monthly payments by time of delivery as specified in Appendix
                   C and subject to periodic modifications as approved by the
                   Commission.



               C = Capacity specified in Section 3.6 or as adjusted pursuant to
                   Section 13.3.

               D = Period Performance Factor: (Period kWh Purchased by Edison
                   (Limited by the Level of

       Period
       Performance
       Factor           = Capacity))

                          ------------------------------------------------------
                          (0.9 x Capacity x (Period Hours minus Allowable
                          Maintenance Hours )

         The Period Performance Factor cannot exceed 1.0. When the allowable
maintenance hours equal the period hours, the Period Performance Factor shall
equal 1.0.

                                       8


         15.2.2.2 Minimum Performance Requirement in Capacity Payment Option B
to Receive Full Capacity Payment:

         a. The Capacity shall be available for all of the on-peak hours as
defined in Tariff Schedule No. TOU-8 in each of the Peak Months subject to a 20%
allowance for Forced Outages for each month.

         b. There is no minimum performance requirement for the rest of the
year.

         15.2.2.3 Capacity Bonus Payment. For Capacity Payment Option B, Seller
may receive a Capacity Bonus Payment as follows:

         a. Bonus During Peak Months. For a Peak Month, Seller shall receive a
Capacity Bonus Payment if (i) the requirements set forth in Section 15.2.2.2
have been met, and (ii) the on-peak capacity factor exceeds 85%.

         b. Bonus During Non-Peak Months

         For a non-peak month, Seller shall receive a Capacity Bonus Payment if
(i) the requirements set forth in section 15.2.2.2 have been met, (ii) the
on-peak capacity factor for each Peak Month during the year was at least 85%,


and (iii) the on-peak capacity factor for the non-peak month exceeds 85%.

         c. For any eligible month, the Capacity Bonus Payment shall be
calculated as follows:

Capacity Bonus Payment = A x B x C x D

         Where A = (1.2 x On-Peak Capacity Factor) - 1.02

                                       9


                   Where the On-Peak Capacity Factor, not to exceed 1.0, is
                   calculated as follows:



On-Peak Capacity Factor  = (Period kWh Purchased by Edison (Limited by the Level
                           of Capacity))
                           -----------------------------------------------------
                           [(Capacity) x (Period Hours minus Allowable
                           Maintenance Hours)]

                      B  =  Capacity Price specified in Section 15.1 for

                            Capacity Payment Option B

                      C  =  1/12

                      D  = Capacity specified in Section 3.6

         d. When Seller is entitled to receive a Capacity Bonus Payment, the
Monthly Capacity Payment shall be the sum of the Monthly Capacity Payment
pursuant to Section 15.2.2.3 and the Monthly Capacity Bonus Payment pursuant to
this Section 15.2.2.3.

         15.2.2.4 For Capacity Payment Option B, Seller shall be paid for
capacity in excess of Capacity as specified in Section 3.6, or as adjusted
pursuant to Section 13.3, based on as-available capacity price contained in
Edison's Standard Offer No. 1 for As-Available Power Purchases Capacity Payment
Schedule, as updated and approved by the Commission.

         15.3 Scheduled Maintenance Allowances

         The allowance for scheduled maintenance is as follows:

                                       10


         15.3.1 Outage periods for scheduled maintenance shall not exceed 840
hours (35 days) in any 12-month period. This allowance may be used in increments
of an hour or longer on a consecutive or nonconsecutive basis.

         15.3.2 Seller may accumulate unused maintenance hours on a year-to-year
basis up to a maximum of 1,080 hours (45 days). This accrued time must be used
only for major overhauls, as such major overhauls are reasonably defined by the
Seller.

         15.4 Failure to Meet Minimum Performance Requirements

         15.4.1 Except when caused by uncontrollable forces, if Seller fails to
meet the minimum performance requirements as set forth in Section 15.2.2.2. The
following shall apply:

         15.4.1.1 Seller may be placed on probation for a period not to exceed
15 months or as otherwise agreed to by the Parties. During this period, the
monthly capacity payment will be based on the level of Capacity actually made
available as calculated in Section 15.2.2.1.

         15.4.1.2 If Seller meets or demonstrates to Edison pursuant to Section
12.2 that it can meet its minimum requirement during the probationary period,
Edison shall reinstate regular capacity payments.

         15.4.1.3 If Seller fails to meet its minimum requirements during the
probationary period Edison may derate the Capacity to the greater of the
Capacity actually made available when the minimum requirements stated in Section
15.2.2.2 were not met, or the Capacity at which Seller is reasonably likely to
meet the minimum

                                       11


requirements. In either case, the quantity by which the Capacity is reduced
shall be Considered terminated without prescribed notice as provided in Section
4.4.

         15.4.2 If Seller is prevented from meeting the minimum performance
requirement because of a schedule outage, a Forced Outage or an Emergency on the
Edison electric system, Edison shall continue to make capacity payments to
Seller. Under Option B, the calculations of capacity payments will treat hours
of Forced Outage and Emergency on the Edison system the same as scheduled
maintenance outages.

         15.4.3 If deliveries are interrupted or reduced because of
uncontrollable forces, Edison shall continue to make capacity payments to Seller
for 90 days from the occurrence of the uncontrolled force event. Under Option B,
the calculation of capacity payments will treat hours of interruption or
reduction by reason of an uncontrollable force, the same as scheduled
maintenance outages with reductions in Capacity treated on a pro rata basis.

         8. Amendment to Section 34:

         Section 34 is deleted in its entirety and replaced with the following:

         34.1 Edison, with Seller's assistance, shall seek to contract with
Interconnecting Utility and/or third parties in order to secure the most
economic transmission path and service costs for the delivery of Net Energy from
the Project to the Point of Interconnection during the Contract Term at terms
and conditions acceptable to Seller. Seller shall be responsible for all costs
including transmission losses, incurred in the delivery of the Net Energy from
the Project to the Point of Interconnection.

                                       12


The exact, mutually agreed-upon transmission service cost shall be established
prior to the Date of Firm Operation and may be adjusted periodically as
necessary. The transmission service payments shall consist of (i) a flat monthly
service charge expressed in dollars per kilowatt per month and (ii) transmission
losses expressed in percentage of Net Energy lost in the transmission of Net
Energy from the Project to the Point of Interconnection.

         34.2 Notwithstanding Section 34.1, for the first five years of the
Contract Term, the Seller shall pay for the transmission of the Net Energy from
the Project to the Point of Interconnection at a transmission service cost based
on a method of transmission comparable to the method which is then in use or
would be negotiated for Edison's geothermal facilities at Brawley and Salton Sea
utilizing transmission facilities in existence at that point in time.
Power-exchange arrangements which are in effect or might be in effect for the
transmission of the energy generated at Edison's geothermal facilities at
Brawley and Salton Sea will apply to the provisions of this Section 34.2 only to
the extent there is uncommitted capacity available in such exchange arrangements
at the date of Firm Operation. The provisions of this Section 34.2 are subject
to the following conditions:

         34.2.1 The date of initial delivery of Net Energy shall occur on or
before August 1, 1985. If Seller does not deliver Net Energy to the Point of
Interconnection by August __, 1985, Seller shall commence making the flat
monthly transmission service payments on August 1, 1985 to retain the benefit of
this Section 34.2.1.

                                       13


         34.2.2 Seller shall upgrade Edison's 115/92 kV interconnection
substation with the Interconnecting Utility by increasing its capacity by 25,000
kVA prior to Date of Firm Operation. Seller shall pay the capital cost of the
upgrade and pay the monthly charges related to the upgrade facilities under the
terms and condition of Edison's Rule No. 2 H for added facilities. If the Seller
is unable to use the upgraded facilities, at any time, then Edison shall have
the right to use such facilities.

         34.3 For the first five years of the Contract Term, the applicable
portion of the Interconnecting Utility electric system shall be considered part
of the Edison electric system for the application of Sections 15.4.2. and
15.4.3.

         34.4 Edison shall prepare and mail a bill to Seller for the
transmission service payments provided for in Sections 34.1 and 34.2 within 30
days of the end of each month. Seller shall pay such bills within 20 calendar
days of the receipt of said bill. The provisions contained within Section 35
shall apply to the records generated in the preparation and mailing of such
bill.

         9. Effect of this Amendment No. 1

         Except as amended herein, all terms, covenants and conditions contained
in the Power Purchase and Sales Agreement shall remain in full force and effect.

                                       14


         10. Signature Clause

         The signatories hereto represent that they have been appropriately
authorized to enter into this Amendment No. 1 on behalf of the Party for whom
they sign. This Amendment No. 1 is hereby executed as of this 11th day of
December, 1984.

                           SOUTHERN CALIFORNIA EDISON COMPANY




                           By /s/ Edward A. Myers
                              ---------------------------------------
                           Name  Edward A. Myers
                           Title Vice President




                           HEBER GEOTHERMAL COMPANY, A
                           PARTNERSHIP DRAVO ENERGY, INC.,
                           PARTNER



                           By /s/ W. H. Balke
                              ---------------------------------------
                           Name W. H. Balke
                                -------------------------------------
                           Title
                                 ------------------------------------




                           CENTENNIAL GEOTHERMAL, INC., PARTNER




                           By /s/ Robert O'Leary
                              ---------------------------------------
                           Name   Robert O'Leary
                                -------------------------------------
                           Title
                                 ------------------------------------



                                       15






                           CHEVRON U.S.A., INC., REPRESENTED BY
                           ITS AGENT, CHEVRON RESOURCES
                           COMPANY HEREBY CONSENTS TO
                           AMENDMENT NO. 1




                           By /s/ C. Dohletron
                              ---------------------------------------
                           Name  C. Dohletron



                           Title Vice-President


                                                                  Exhibit 10.3.6

                            SETTLEMENT AGREEMENT AND
                            AMENDMENT NO. 2 TO POWER
                            PURCHASE CONTRACT BETWEEN
                          HEBER GEOTHERMAL COMPANY AND
                       SOUTHERN CALIFORNIA EDISON COMPANY

         1. PARTIES

         The Parties to this Settlement Agreement and Amendment No. 2
("Amendment") to the Power Purchase and Sales Agreement ("Agreement"); are Heber
Geothermal Company, a California partnership, hereinafter referred to as "HGC"
or "Seller", and Southern California Edison Company, a California corporation,
hereinafter referred to as "Edison," hereinafter sometimes referred to
individually as "Party" and collectively as "Parties."

         2. RECITALS

         This Amendment No. 2 is made with reference to the following facts,
among others:

         2.1 On August 26, 1983, Edison and Chevron U.S.A., Inc. executed the
Agreement to provide the terms and conditions for the sale by Chevron and
purchase by Edison of Capacity and Energy delivered to the Point of
Interconnection from a 47 MW (net) electrical generating facility located at
Heber, California utilizing geothermal steam as the prime mover energy source.

         2.2 On August 26, 1983, Chevron assigned and HGC assumed Chevron's
right, title and interest in the Agreement between Chevron and Edison, dated
August 26, 1983.



         2.3 On December 11, 1984, the Parties executed Amendment No. 1 to the
Agreement.

         2.4 In June 1993, a dispute arose between the Parties regarding
Seller's ability to deliver Capacity in accordance with the terms and conditions
of the Agreement. On September 10, 1992, HGC performed a Capacity demonstration
in accordance with Edison's procedures. HGC performed the demonstration under
protest, as HGC contested Edison's right to request such demonstration. In a
letter dated June 10, 1993, Edison informed HGC that, based on the results of
the September 1992 demonstration, HGC's Capacity was reduced from 47 MW to 40
MW. Beginning in June 1993, and continuing to the present, Edison has calculated
HGC's capacity payment based on a capacity of 40 MW. Edison also requested HGC
to repay $2,967,037.37 in capacity payments resulting from the capacity
deration. On July 14, 1993, HGC performed a second capacity demonstration, which
showed that the plant could generate 45 MW.

         2.5 In March 1995, the Parties reached agreement on principles to
resolve the dispute. These principles include the obligation of Seller to repay
any capacity overpayments and Edison to adjust Statements of Energy Purchased
pursuant to this Amendment.

         2.6 The Parties desire to amend the Power Purchase and Sales Agreement
to (i) reduce the Capacity from 47 MW to 45 MW, (ii) clarify the circumstances
leading to performance of a Capacity demonstration, (iii) set forth the protocol
for and


                                       2


consequences of such demonstration, and (iv) modify certain aspects of the
probation and deration provisions of this Agreement.

         3. AGREEMENT

         Therefore, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, receipt of which is
hereby acknowledged, the Parties agree as follows:

         3.1 Edison hereby relinquishes its claims that (i) HGC's Capacity
should be derated from 47,000 kW to 40,000 kW, and (ii) HGC must repay to Edison
$2,967,037.37 in unearned capacity payments plus interest.

         3.2 The Parties agree that HGC's Capacity shall be 45,000 kW, effective
as of May 1, 1993.

         3.3 HGC agrees that it owes Edison $926,310.86 in unearned Capacity
Payments and interest resulting from the Capacity reduction set forth in Section
3.2, above. Edison agrees that it owes HGC $764,856.96, representing the
Capacity payments which HGC would have earned based on a Capacity of 45,000 kW
effective as of May 1, 1993. The net difference of these amounts owed is
$161,453.90 which Edison shall offset against HGC's power purchase payment for
the first full payment and billing cycle following execution of this Amendment
in full satisfaction of all amounts owed as described in this Section.

         3.4 Mutual Releases



                                       3


         3.4.1 Edison, on behalf of itself and each of its successors and
assigns by operation of law or otherwise hereby releases and discharges HGC, its
proprietors, parents, subsidiaries, partners, partnerships, limited
partnerships, limited partners, affiliates, related entities, agents, attorneys,
employees, successors and assigns by operation of law or otherwise, and each of
them from any and all rights, claims, causes of action, damages, liabilities,
losses, and costs, whether known or unknown, Edison may ever have had, may now
have, or may hereafter acquire against HGC arising out of, relating to or in
connection with the dispute described in Recital 2.4.

         3.4.2 HGC, on behalf of itself and each of its successors and assigns
by operation of law or otherwise hereby releases and discharges Edison, its
proprietors, parents, subsidiaries, partners, partnerships, limited
partnerships, limited partners, affiliates, related entities, agents, attorneys,
employees, successors and assigns by operation of law, or otherwise, and each of
them from any and all rights, claims, causes of action, damages, liabilities,
losses, and costs, whether known or unknown, HGC may ever have had, may now
have, or may hereafter acquire against Edison arising out of, relating to or in
connection with the dispute described in Recital 2.4.

         3.5 The Agreement is hereby amended as follows:

         3.5.1 Replace Section 3.6 to read in its entirety as follows:

         "3.6 Capacity: 45,000 kW, which is dedicated to Edison and shall be
made available to Edison at the Point of Interconnection."

         3.5.2 Replace Section 12.2 to read in its entirety as follows:



                                       4


         "12.2 If Seller fails to meet the performance requirements specified in
Section 15 and is placed on probation, Edison shall have the right, at its sole
discretion, to require the Seller to demonstrate the ability of the Project to
generate Capacity during each peak hour of one peak day during the probationary
period. The Seller shall, at its expense, conduct such demonstration at a time
mutually agreed upon by the Parties. Such agreement shall not be unreasonably
withheld. The demonstration shall be conducted in accordance with the annual
firm capacity demonstration test procedures attached hereto as Exhibit I."

         3.5.3 Replace Section 13.2 to read in its entirety as follows:

         "13.2 Seller shall sell to Edison, and Edison shall purchase from
Seller, Capacity as specified in Sections 3.6 or as adjusted pursuant to Section
13.3."

         3.5.4 Replace Section 13.3 to read in its entirety as follows:

         "13.3 Seller may reduce the amount of Capacity at any time by giving
written notice thereof to Edison pursuant to Section 4.4. Edison may reduce the
amount of Capacity as a result of a demonstration test pursuant to Section 12.2.
The amount by which Capacity is reduced shall be deemed a reduction in Capacity
pursuant to Section 4. Either Party may request the other Party to agree in
writing to a new Capacity whenever it appears that Capacity has changed.

         3.5.5 Replace Section 15.4.1.2 to read in its entirety as follows:



                                       5


         "15.4.1.2 If Seller is placed on probation, Edison shall remove Seller
from probation and reinstate Seller's Capacity and regular capacity payments in
the following events:

         (a) Edison requires Seller to perform a capacity demonstration pursuant
to Section 12.2 and Seller demonstrates that it can generate Capacity; or

         (b) Edison does not require Seller to perform a capacity demonstration
and Seller meets the minimum performance requirements as set forth in Section
15.2.2.2 during the probationary period."

         3.5.6 Replace Section 15.4.1.3 to read in its entirety as follows:

         "15.4.1.3 If Seller is placed on probation, Edison shall derate
Seller's Capacity in the following events:

         (a) Edison requires Seller to perform a capacity demonstration pursuant
to Section 12.2 and Seller fails to demonstrate that it can generate Capacity,
then Edison shall derate the Capacity to the lowest level generated by Seller
and recorded by IID during any hour over the test period; or (b) Edison does not
require Seller to perform a capacity demonstration and Seller fails to meet the
minimum performance requirements as set forth in Section 15.2.2.2 during the
probationary period, then Edison shall derate the Capacity to the greater of the
Capacity actually made available when the minimum requirements stated in Section
15.2.2.2 were not met, or the Capacity at which Seller is reasonably likely to
meet the minimum requirements. In either case, the quantity by


                                       6


which the Capacity is reduced shall be considered terminated without prescribed
notice as provided in Section 4.4.

         4. SUCCESSORS AND ASSIGNS

         Each Party agrees that this Agreement shall be binding on its
respective successors and assigns. The Parties further agree that the Agreement
shall remain fully effective even if the facts and assumptions upon which the
parties are currently acting turn out to be different from what they now believe
them to be.

         5. PRIOR CORRESPONDENCE

         The parties agree that this Amendment sets forth the entire agreement
and understanding of the Parties concerning the subject matter of this
Amendment, and that in entering into this Amendment, the Parties have not relied
on any promises or representations that are not specifically described in this
Amendment.

         6. ACCEPTANCE OF TERMS

         By the signatures below, both Parties confirm the acceptance of and the
effectiveness of the terms and conditions set forth above.

         7. OTHER PROVISIONS

         Except as specifically set forth in this Amendment all other provisions
of the Agreement are unchanged and unaffected.


                                       7


         8. EFFECTIVE DATE

         This Amendment No. 2 shall be effective as of May 1, 1993, with regard
to the change in Contract Capacity from 47 MW to 45 MW. All other provisions of
this Amendment No. 2 shall be effective as of April 30, 1995.

         9. SIGNATURE CLAUSE

         This Amendment No. 2 is executed in two originals. The signatories
hereto represent that they have been duly authorized to enter into this
Amendment No. 2 on behalf of the Party for whom they sign.

                                    SOUTHERN CALIFORNIA EDISON COMPANY



                                    By: /s/ Harold B. Ray
                                       -----------------------------------------
                                    Name: Harold B. Ray
                                         ---------------------------------------
                                    Title: Executive Vice President
                                          --------------------------------------
                                    Date:  August 7, 1995
                                           --------------


                                    HEBER GEOTHERMAL COMPANY, A PARTNERSHIP
                                    ERC ENERGY, INC.
                                    PARTNER


                                    By: /s/ John F. Walter
                                       -----------------------------------------
                                    Name: Dr. John F. Walter
                                         ---------------------------------------
                                    Title: Vice President
                                          --------------------------------------



                                       8


                                    Date:
                                         ---------------------------------------


                                    CENTENNIAL GEOTHERMAL, INC., PARTNER



                                    By: /s/ F. Neil Smith
                                       -----------------------------------------
                                    Name: F. Neil Smith
                                         ---------------------------------------
                                    Title: President
                                          --------------------------------------
                                    Date:
                                         ---------------------------------------















                                       9




                                                                  Exhibit 10.3.7






                             POWER PURCHASE CONTRACT

                                     BETWEEN

                       SOUTHERN CALIFORNIA EDISON COMPANY

                                       AND

                       SECOND IMPERIAL GEOTHERMAL COMPANY






         I, Glenn S. Burns, Secretary of Second Dravo Geothermal, Inc. do hereby
certify that the foregoing Special Power of Attorney is an exact duplicate of
that executed on the 15th of April 1985.

         In Witness Whereof, I hereby set my hand this 7th day of May 1985.



                                            /s/ Glenn S. Burns
                                            ----------------------------
                                            Secretary

         Subscribed and sworn to before me this 7th day of May 1985.




                                            /s/ Audrey J. Janosco
                                            ----------------------------
                                            Notary Public





         I, William C. Rickards, Secretary of Dravo Constructors, Inc. do hereby
certify that the foregoing Power Purchase Contract between Southern California
Edison Company and Second Imperial Geothermal Company is an exact duplicate of
the original which is maintained by Dravo Constructors, Inc.

         In Witness Whereof, I have hereunto set my hand and seal of said
corporation this 7th day of May, 1985.



                                            /s/ William C. Rickards
                                            ----------------------------
                                            William C. Rickards, Secretary
                                            Secretary

         Sworn and subscribed to before me this 7th day of May, 1985.




                                            /s/ Glenn S. Burns
                                            ----------------------------
                                            Notary Public













                                TABLE OF CONTENTS
                                -----------------

SECTION        TITLE                                PAGE
-------        -----                                ----
    1          PROJECT SUMMARY                         1

               GENERAL TERMS AND CONDITIONS


    2          DEFINITIONS                             2

    3          TERM                                    8

    4          GENERATING FACILITY                     9

    5          OPERATING OPTIONS                      18

    6          ELECTRIC LINES AND ASSOCIATED
               EASEMENTS                              18

    7          METERING                               19

    8          POWER PURCHASE PROVISIONS              21

    9          PAYMENT AND BILLING PROVISIONS         47

   10          TAXES                                  49

   11          TERMINATION                            49

   12          LIABILITY                              49

   13          INSURANCE                              52

   14          UNCONTROLLABLE FORCES                  55

   15          NONDEDICATION OF FACILITIES            57

   16          PRIORITY OF DOCUMENTS                  57

   17          NOTICES OF CORRESPONDENCE              57




   18          PREVIOUS COMMUNICATIONS                58

   19          NONWAIVER                              58

   20          SUCCESSORS AND ASSIGNS                 58

   21          EFFECT OF SECTION HEADINGS             59

   22          GOVERNING LAW                          59

   23          MULTIPLE ORIGINALS                     59

   24          TRANSMISSION AND INTERCONNECTION       59

               SIGNATURES                             62

               APPENDIX A

               APPENDIX B

               APPENDIX C



                                       ii




1.  PROJECT SUMMARY

              This Contract is entered into between Southern California Edison
Company ("Edison") and Second Imperial Geothermal Company ("Seller"). Seller is
willing to construct, own, or lease, and operate a Qualifying Facility and sell
electric power to Edison and Edison is willing to purchase electric power
delivered by Seller to Edison at the Point of Interconnection pursuant to the
terms and conditions set forth as follows:

             1.1  All Notices shall be sent to Seller at the following address:
                  Second Imperial Geothermal Company
                  c/o Dravo Constructors, Inc.
                  226 West Brokaw Road
                  San Jose, California  95110
                  Attn:  S.D. Hayward

             1.2  Seller's Generating Facility:

                  a.  Nameplate Rating:  44,000 kW.

                  b.  Location:  Heber, California

                  c.  Type (check one):

                                 Cogeneration Facility
                         ---
                          x     Small Power Production Facility
                         ---
                  d.  Delivery of power to Edison at a nominal 230,000 volts.

                  e.  Seller shall commence construction of the Generating
                      Facility by February, 1998.

                  f.  Generating Facility Designation:  Imperial Geothermal
                      Unit 2.

             1.3  Edison Customer Service District:



                  Eastern Division
                  Palm Springs District
                  Palm Springs, California

             1.4  Location of Edison Operating Switching Center:
                  Devers Substation

             1.5  Contract Capacity:  40,000 kW
           1.5.1.  Estimated as-available capacity:  OkW.
             1.6  Expected annual production:  280,000,000 kW
             1.7  Expected Firm Operation:  May, 1989.
             1.8  Contract term:  30 years.
             1.9  Operating Options pursuant to Section 5:  (Check One)

                  x   Operating Option I.  Excess Generator output dedicated to
                 ---  Edison.  No electric service or standby service required
                      from Edison.

             1.10  The Capacity Payment Option selected by Seller pursuant to
                   Section 8.1 shall be:  (Check One)

                      Option A - As-available capacity based upon:
                 ---
                      Standard Offer No. 1 Capacity Payment Schedule, or
                 ---
                          Forecast of Annual As-Available Capacity Payment
                      --- Schedule.

                          The as-available capacity price (first year):

                $            kw-yr.  (Appendix A)
                 -----------
                  x   Option B - Firm Capacity (Check One)
                 ---


                                       2


                  x   Standard Offer No. 2 Capacity Payment
                 ---
                 Schedule in effect at time of Contract execution.
                 ____Standard Offer No. 2 Capacity Payment Schedule in effect at
                       time of Firm Operation of first generating unit.

              1.11 The Energy Payment Option selected by Seller pursuant to
                   Section 8.2 shall be: (Check One)

                  x  Option 1 - a Forecast of Annual Marginal Cost of Energy in
                 --- effect at date of execution of this Contract. (Appendix B)

                     Option 2 - Levelized Forecast of Marginal Cost of Energy
                 --- in effect at date of execution of this Contract.
                     Levelized Forecast for expected date of Firm
                     Operation is      (cent)/kWh. If Seller's Generating
                     Facility is an oil/natural gas fueled cogenerator,
                     Seller may not select Option 2.

                     For the energy payment refund pursuant to Section 8.5 under
                     Option 2, Edison's Incremental Cost of Capital is 15%.
                     Seller may change once between Options 1 and 2, provided
                     Seller delivers written notice of such change at least 90
                     days prior to the date of First operation:

                     For Option 1 or 2, Seller elects to receive the following
                     percentages in 20% increments, the total of which shall
                     equal 100%:


                                       3


                     100 Percent of Forecast of Marginal Cost of Energy (Annual
                     --- or Levelized), not to exceed 20% of the annual forecast
                         for oil/ natural gas fueled cogenerators, and

                      0  Percent of Edison's published avoided cost of energy
                     --- based on Edison's full avoided operating costs as
                         updated periodically and accepted by the Commission.

                     Option 3 - Incremental Energy Rate. Seller may select:
                 ---
                         Forecast of Incremental Energy Rate in effect at date
                     --- of execution of this Contract (Appendix C),
                                              or
                         A range in increments of 100 Btu/kWh above and below


                     ---   the forecast of incremental energy rates for each
                           year during the First Period of the Contract Term as
                           follows:



Year                 Range              Year               Range              Year                 Range


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

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


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

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


              1.12 Metering Location (Check one)


                                       4


                   Seller elects metering location pursuant to Section 7 as
                   follows:
                       x      Edison's side of the Point of Interconnection
                   ---------
                              Seller's side of the Point of Interconnection.
                              Loss compensation factor is equal to ______
                              pursuant to Section 7.2.

              GENERAL TERMS & CONDITIONS

              2. DEFINITIONS

         When used with initial capitalizations, whether in the singular or in
the plural, the following terms shall have the. following meanings:

              2.1       Adjusted Capacity Price: The $/kW-yr capacity purchase
                        price based on the Capacity Payment Schedule in effect
                        at time of Contract execution for the time period
                        beginning on the date of Firm Operation for the first
                        generating unit and ending on the date of termination or
                        reduction of Contract Capacity under Capacity Payment
                        Option B.

              2.2       Appendix A: Forecast of Annual As Available Capacity
                        Payment Schedule.

              2.3       Appendix B: Forecast of Annual Marginal Cost of Energy

              2.4       Appendix C: Forecast of Incremental Energy Rates.

              2.5       Capacity Payment Schedule(s): Published capacity payment
                        schedule(s) as authorized by the Commission for
                        as-available or firm capacity.


                                       5


              2.6       Cogeneration Facility: The facility and equipment which
                        sequentially generate thermal and electrical energy as
                        defined in Title 18, Code of Federal Regulations,
                        Section 292.202.

              2.7       Commissions: The Public Utilities Commission of the
                        State of California.

              2.8       Contracts: This document and Appendices, as amended from
                        time to time.

              2.9       Contract Capacity: The electric power producing
                        capability of the Generating Facility which is committed
                        to Edison.

              2.10      Contract Capacity Price: The capacity purchase price
                        from the Capacity Payment Schedule approved by the
                        Commission for Capacity Payment Option B.

              2.11      Contract Term: Period in years commencing with date of
                        Firm Operation for the first generating unit(s) during
                        which Edison shall purchase electric power from Seller.

              2.12      Current Capacity Price: The $/kw-yr capacity price
                        provided in the Capacity Payment Schedule determined by
                        the year of termination or reduction of Contract
                        Capacity and the number of years from such termination
                        or reduction to the expiration of the Contract Term for
                        Capacity Payment Option B.

              2.13      Edison: The Southern California Edison Company.


                                       6


              2.14      Edison Electric System Integrity: The state of operation
                        of Edison's electric system in a manner which is deemed
                        to minimize the risk of injury to persons and/or
                        property and enables Edison to provide adequate and
                        reliable electric service to its customers.

              2.15      Emergency: A condition or situation which in Edison's
                        sole judgment affects Edison Electric System Integrity.

              2.16      Energy: Kilowatthours generated by the Generating
                        Facility which are purchased by Edison at the Point of
                        Interconnection.

              2.17      Firm Operation: The date agreed on by the parties to the
                        PPA on which each Facility is determined to be a
                        reliable source of generation and on which such unit can
                        be reasonably expected to operate continuously at its
                        effective rating (expressed in kW). Firm Operation shall
                        be demonstrated by a seventy-two (72) hour continuous
                        demonstration test at 85% of the Contract Capacity.

              2.18      First Period: The period of the Contract Term specified
                        in Section 3.1.

              2.19      Forced Outages: Any outage other than a scheduled outage
                        of the Generating Facility that fully or partially
                        curtails its electrical output.


                                       7



              2.20      Generating Facility: All of Seller's generators,
                        together with all metering, protective and other
                        associated equipment and improvements, necessary to
                        produce electrical energy at Seller's Facility and
                        deliver such power to the Interconnecting Utility's
                        electric system, excluding associated land, land rights,
                        and interests in land.

              2.21      Generator: The generator(s) and associated prime
                        mover(s), which are a part of the Generating Facility.

              2.22      Incremental Heat Rate(s): Those Edison system values
                        expressed in Btu/kWh by time of delivery for the Summer
                        and Winter Periods which are authorized and adopted by
                        the Commission to be used in the calculation of Edison's
                        published avoided cost of energy.

              2.23      Interconnecting Utility: The electric utility, or any
                        other utility which takes delivery of electrical energy
                        generated by the Generating Facility.

              2.24      KVAR: Reactive kilovolt-ampere, a unit of measure of
                        reactive power.

              2.25      Operate: To provide the engineering, purchasing, repair,
                        supervision, training, inspection, testing, protection,
                        operation, use, management, replacement, retirement,
                        reconstruction, and


                                       8



                        maintenance of and for the Generating Facility in
                        accordance with applicable California utility standards
                        and good engineering practices.

              2.26      Operating Representatives: Individual(s) appointed by
                        each Party for the purpose of securing effective
                        cooperation and interchange of information between the
                        Parties in connection with administration and technical
                        matters related to this Contract.

              2.27      Parties: Edison and Seller.

              2.28      Party: Edison or Seller.

              2.29      Peak Months: Those months which the Edison annual system
                        peak demand could occur.

         Currently, but subject to change with notice, the peak months for the
Edison system are June, July, August, and September.

              2.30      Point of Interconnection: The point where the electrical
                        energy generated by the Seller, at the Generating
                        Facility, is delivered to the Edison electric system.

              2.31      Protective Apparatus: That equipment and apparatus
                        installed by Seller and/or Interconnecting Utility
                        necessary for proper and safe operation of the
                        Generating Facility in parallel with the Interconnecting
                        Utility's electric system.


                                       9


              2.32      Qualifying Facility: Cogeneration or Small Power
                        Production Facility which meets the criteria as defined
                        in Title 18, Code of Federal Regulations, Section
                        292.201 through 293.207.

              2.33      Second Period: The period of the Contract Term specified
                        in Section 3.2.

              2.34      Seller: The Party identified in Section 1.0.

              2.35      Seller's Facility: The premises and equipment of Seller
                        located as specified in Section 1.2.

              2.36      Small Power Production Facility: The facilities and
                        equipment which use biomass, waste, or Renewable
                        Resources, including wind, solar, geothermal, and water,
                        to produce electrical energy as defined in Title 18,
                        Code of Federal Regulations, Section 292.201 through
                        292.207.

              2.37      Summer Period: Defined in Edison's Tariff Schedule No.
                        Tou-8 as now in effect or as may hereafter be authorized
                        by the Commission.

              2.38      Tariff Schedule No. TOU-8: Edison's time-of-use energy
                        tariff for electric service exceeding 500 kW, as now in
                        effect or as may hereafter be authorized by the
                        Commission.

              2.39      Uncontrollable Forces: Any occurrence beyond the control
                        of a Party which causes that Party to be unable to
                        perform its

                                       10


                        obligations hereunder and which a Party has been unable
                        to overcome by the exercise of due diligence, including
                        but not limited to flood, drought, earthquake, storm,
                        fire, pestilence, lightning and other natural
                        catastrophes, epidemic, war, riot, civil disturbance or
                        disobedience, strike, labor dispute, action or inaction
                        of legislative, judicial, or regulatory agencies, or
                        other proper authority, which may conflict with the
                        terms of this Contract, or failure, threat of failure or
                        sabotage of facilities which have been maintained in
                        accordance with good engineering and operating practices
                        in California.

              2.40      Winter Period: Defined in Edison's Tariff Schedule No.
                        TOU-8 as now in effect or as may hereafter he authorized
                        by the Commission.

3. TERM

         This Contract shall be effective upon execution by the Parties and
shall remain effective until either Party gives 90 days prior written notice of
termination to the other Party, except that such notice of termination shall not
be effective to terminate this Contract prior to expiration of the Contract Term
specified in Section 1.8.


                                       11


              3.1       The First Period of the Contract Term shall commence
                        upon date of Firm Operation but not later than five
                        years from the date of execution of this Contract.

                        a.  If the Contract Term specified in Section 1.8 is 15
                            years, the First Period of the Contract Term shall
                            be for five years.

                        b.  If the Contract Term specified in Section 1.8 is 20,
                            25, or 30 years, the First Period of the Contract
                            Term shall be for 10 years.

                        c.  For Energy Payment Option 3 only, the First Period
                            of the Contract Term shall be 15 years, but shall
                            not extend beyond 1998.

              3.2       The Second Period of the Contract Term shall commence
                        upon expiration of the First Period and shall continue


                        for the remainder of the Contract Term.

4. GENERATING FACILITY

              4.1       Ownership

         The Generating Facility shall be owned or leased by Seller.


              4.2       Design



              4.2.1     Seller, at no cost to Edison, shall:

                        a.  Design the Generating Facility.


                                       12



                        b.  Acquire all permits and other approvals necessary
                            for the construction, operation, and maintenance of
                            the Generating Facility.

                        c.  Complete all environmental impact studies necessary
                            for the construction, operation, and maintenance of
                            the Generating Facility.

              4.2.2     Edison shall have the right to:

                        a.  Review the design of the Generating Facility's
                            electrical system. Such review shall be required if
                            necessary to maintain Edison Electric System
                            Integrity when in parallel with the Edison electric
                            system. Such review may include, but not be limited
                            to the Generator, governor, excitation system,
                            synchronizing equipment, protective relays, and
                            neutral grounding. The Seller shall be notified in
                            writing of the outcome of the Edison review within
                            30 days of the receipt of all specifications for the
                            Generating Facility's electrical system. Any flaws
                            perceived by Edison in the design shall be described
                            in Edison's written notice.

                        b.  Edison shall have the right to request modifications

                            to the design of the Generating Facility's
                            electrical system. Such modifications shall be
                            required if necessary to maintain


                                       13


                        Edison Electric System Integrity when in parallel with
                        the Edison electric system.

              4.3       Construction

              Edison shall have the right to review, consult with, and make
              recommendations regarding Seller's construction schedule and to
              monitor the construction and start-up of the Project. Seller shall


              notify Edison, at least one year prior to Firm Operation, of
              changes in Seller's Construction Schedule which may affect the
              date of Firm Operation.

              4.4       Operation

              4.4.1     The Generating Facility and Seller's Protective
                        Apparatus shall be operated and maintained in accordance
                        with applicable California utility industry standards
                        and good engineering practices with respect to
                        synchronizing, voltage and reactive power control.
                        Edison shall have the right to monitor operation of the
                        Project and may require changes in Seller's method of
                        operation if such changes are necessary, in Edison's
                        sole judgment, to maintain Edison Electric System
                        Integrity.


              4.4.2     Seller shall notify in writing Edison's Operating


                        Representative at least 14 days prior to the initial
                        delivery of electrical energy


                                       14



                        from the Generating Facility to the Point of
                        Interconnection. Edison shall have the right to have a
                        representative present.

              4.4.3     Edison shall have the right to require Seller to curtail
                        or reduce the delivery of electrical energy from the
                        Generating Facility to the Point of Interconnection,
                        whenever Edison determines, in its sole judgment, that
                        such curtailment or reduction is necessary to facilitate
                        maintenance of Edison's facilities, or to maintain
                        Edison Electric System Integrity. Each Party shall
                        endeavor to correct, within a reasonable period, the
                        condition on its system which necessitates the
                        curtailment or reduction delivery of electrical energy
                        from the Generating Facility. The duration of the
                        curtailment or reduction of delivery of electrical
                        energy from the Generating Facility shall be limited to
                        the period of time such a condition exists.

              4.4.4     Each Party shall keep the other Party's Operating
                        Representative informed as to the operating schedule of
                        their respective facilities affecting each other's
                        operation hereunder, including any reduction in Contract

                        Capacity availability. In addition, Seller shall provide
                        Edison with reasonable advance notice regarding its
                        scheduled outages including any reduction




                                       15


                        Contract Capacity availability. Reasonable advance
                        notice is as follows:

    SCHEDULED OUTAGE                                        ADVANCE NOTICE
   EXPECTIVE DURATION                                         TO EDISON
   Less than one day                                           24 Hours
    One day or more
 (except major overhauls)                                        1 Week
     Major overhaul                                            6 Months


              4.4.5     Notification by each Party's Operating Representative of
                        outage date and duration should be directed to the other
                        Party's operating Representative by telephone.

              4.4.6     Seller shall not schedule major overhauls during Peak
                        Months.

              4.4.7     Seller shall maintain an operating log at Seller's
                        Facility with records of: real and reactive power
                        production; changes in operating status, outages; and
                        any unusual conditions found during inspections. Changes
                        in setting shall also be logged for Generators which are
                        "block-loaded" to a specific kW capacity. In addition,
                        Seller shall maintain records applicable to the
                        Generating Facility, including the electrical
                        characteristics of the Generator and settings or
                        adjustments of the Generator control equipment.

                        Information maintained pursuant to this Section 4.4.7


                        shall be provided to Edison, within 30 days of Edison's
                        request.


                                       16


              4.4.8     The Seller warrants that the Generating Facility meets
                        the requirements of a Qualifying Facility as of the date
                        of initial delivery of electrical energy from the
                        Generating Facility to the Point of Interconnection and
                        continuing through the Contract Term.

              4.4.9     The Seller warrants that the Generating Facility shall
                        at all times conform to all applicable laws and
                        regulations. Seller shall obtain and maintain any
                        governmental authorizations and permits for the
                        continued operation of the Generating Facility. If at
                        any time Seller does not hold such authorizations and
                        permits, Seller agrees to reimburse Edison for any lots
                        which Edison incurs as a result of the Seller's failure
                        to maintain governmental authorization and permits.

              4.4.10    At Edison's request, Seller shall make all reasonable
                        effort to deliver power at an average rate of delivery
                        at least equal to the Contract Capacity during periods
                        of Emergency. In the event that the Seller has
                        previously scheduled an outage coincident with an
                        Emergency, Seller shall make all reasonable efforts to

                        reschedule the outage. The notification periods listed


                        in Section 4.4.4 shall be waived by Edison if Seller
                        reschedules the Outage.


                                       17


              4.4.11    Seller shall demonstrate the ability to provide Edison
                        the specified Contract Capacity during the seventy-two
                        (72) hour continuous demonstration test prior to the
                        date of Firm Operation. Thereafter, at least once per
                        year at Edison's request, Seller shall demonstrate the
                        ability to provide Contract Capacity for a reasonable
                        period of time as required by Edison. Seller's
                        demonstration of Contract Capacity shall be at Seller's
                        expense and conducted at a time and pursuant to
                        procedures mutually agreed upon by the Parties. If
                        Seller fails to demonstrate the ability to provide the
                        Contract Capacity, the Contract Capacity shall be
                        reduced by agreement of the Parties pursuant to Section
                        8.1.2.6.

              4.4.12    Seller shall maintain operating communications with the
                        Edison switching center designated by the Edison
                        Operating Representative. The operating communications
                        shall include, but not be limited to, system paralleling
                        or separation, scheduled and unscheduled shutdowns,

                        equipment clearances, levels of operating voltage or


                        power factors, and daily capacity and generation
                        reports.

              4.5       Maintenance


                                       18


              4.5.1     Seller shall maintain the Generating Facility in
                        accordance with applicable California utility industry
                        standards and good engineering and operating practices.
                        Edison shall have the right to monitor such maintenance
                        of the Generating Facility. Seller shall maintain and
                        deliver a maintenance record of the Generating Facility
                        to Edison's Operating Representatives upon request.

              4.5.2     Seller shall make a reasonable effort to schedule
                        routine maintenance during Off-Peak Months. Outages for
                        scheduled maintenance shall not exceed a total of 30
                        peak hours for the Peak Months.

              4.5.3     The allowance for scheduled maintenance is as follows:

                        a.   Outage periods for scheduled maintenance ( shall
                             not exceed 840 hours (35 days) in any l2-month
                             period. This allowance may be used in increments of
                             an hour or longer on a consecutive or
                             nonconsecutive basis.

                        b.   Seller may accumulate unused maintenance hours on a

                             year-to-year basis up to a maximum of 1,080 hours
                             (45 days). This accrued time must be used
                             consecutively and only for major overhauls.


                                       19


              4.6       Any review by Edison, under the terms of this Contract,
                        of the design, construction, operation, or maintenance
                        of the Generating Facility is solely for the information
                        of Edison. By making such review, Edison makes no
                        representation as to the economic and technical
                        feasibility, operational capability, or reliability of
                        the Generating Facility. Seller shall in no way
                        represent to any third party that any such review by
                        Edison of the Generating Facility, including, but not
                        limited to, any review of the design, construction,
                        operation, or maintenance of the Generating Facility by
                        Edison, is a representation by Edison as to the economic
                        and technical feasibility, operational capability, or
                        reliability of said facilities. Seller is solely
                        responsible for economic and technical feasibility,
                        operational capability, and reliability thereof.

              4.7       Edison shall have access to Seller's power-generating
                        facilities for the purpose of gathering technical
                        information and records. The technical information and
                        records shall include, but not be limited to, power
                        plant performance data an design, and operation and
                        maintenance data. Edison agrees not to interfere with
                        Seller's rules and regulations.


5. OPERATING OPTIONS


                                       20



              5.1       Seller shall Operate its Generating Facility pursuant to
                        the following options

                        a.   Operating Option I: Seller dedicates the excess
                             Generator output to Edison with no electrical
                             service required from Edison.

6.  ELECTRIC LINES AND ASSOCIATED EASEMENTS

              6.1       Edison shall, as it deems necessary or desirable, build
                        electric lines, facilities and other equipment, both
                        overhead and underground, on and off Seller's Facility,
                        for the purpose of effecting the agreements contained in
                        this Contract. The physical location such electric
                        lines, facilities and other equipment on Seller's
                        Facility shall be determined by agreement of the
                        Parties.

              6.2       Seller shall reimburse Edison for the cost of acquiring
                        property rights off Seller's Facility required by Edison
                        to meet its obligations under this Contract.

              6.3       Seller shall grant to Edison, without cost to Edison,
                        and by an instrument of conveyance, acceptable to
                        Edison, rights of way, easements and other property
                        interests necessary to construct, reconstruct, use,
                        maintain, alter, add to, enlarge, repair, replace,
                        inspect and remove, at any time, the electric lines,
                        facilities or


                                       21


                             other equipment, both overhead and underground,
                             which are required by Edison to effect the
                             agreements contained in the Contract. The rights of
                             ingress and egress at all reasonable times
                             necessary for Edison to perform the activities
                             contemplated in the Contract.

              6.4       The electric lines, facilities, or other equipment
                        referred to in this Section 6 installed by Edison on or
                        off Seller's Facility shall be and remain the property
                        of Edison.

              6.5       Edison shall have no obligation to seller for any delay
                        or cancellation due to inability to acquire a
                        satisfactory right of way, easements, or other property
                        interests.

7. METERING

              7.1       All meters and equipment used for the measurement of
                        electric power for determining Edison's payments to
                        Seller pursuant to this Contract shall be provided,
                        owned, and maintained by Edison at Seller's expense in
                        accordance, with Edison's Tariff Rule No. 21.

              7.2       The meters and equipment used for measuring the Energy
                        sold to Edison shall be located on the side of the Point
                        of Interconnection as specified by Seller in Section
                        1.12. If the


                                       22


                        metering equipment is located on Seller's side of the
                        Point of Interconnection, then a loss compensation
                        factor agreed upon by the Parties shall be applied. At
                        the written request of the Seller, and at Seller's sole
                        expense, Edison shall measure actual transformer losses.
                        If the actual measured value differs from the agreed
                        upon loss compensation factor, the actual value shall be
                        applied prospectively.

              7.3       For purposes of monitoring the Generator operation,
                        Edison shall have the right to require, at Seller's
                        expense, the installation of generation metering. Edison
                        may also require the installation of telemetering
                        equipment at Seller's expense for Generating Facilities
                        equal to or greater than 10 MW. Edison may require the
                        installation of telemetering equipment at Edison's
                        expense for Generating Facilities less than 10 MW.

              7.4       Edison's meters shall be sealed and the seals shall be
                        broken only when the meters are to be inspected, tested,
                        or adjusted by Edison; Seller shall be given reasonable
                        notice of testing and have the right to have its
                        Operating Representative present on such occasions.

              7.5       Edison's meters installed pursuant to this Contract
                        shall be tested by Edison, at Edison's expense, at least
                        once each year and at any


                                       23



                        reasonable time upon request by either Party, at the
                        requesting Party's expense. If Seller makes such
                        request, Seller shall reimburse said expense to Edison
                        within thirty days after presentation of a bill
                        therefor.

              7.6       Metering equipment found to be inaccurate shall be
                        repaired, adjusted, or replaced by Edison such that the
                        metering accuracy of said equipment shall be within two
                        percent. If metering equipment inaccuracy exceeds two
                        percent, the correct amount of Energy and Contract
                        Capacity delivered during the period of said inaccuracy,
                        and the appropriate compensation adjustments, shall be
                        estimated by Edison and agreed upon by the Parties.

8. POWER PURCHASE PROVISIONS

         Prior to the date of Firm Operation, Seller shall be paid for
Energy only pursuant to Edison's published avoided cost of energy based on
Edison's full avoided operating cost as periodically updated and accepted by the
Commission. If at any time Energy can be delivered to Edison and Seller is
contesting the claimed jurisdiction of any entity which not issued a license or
other approval for the Project, Seller, in its sole discretion and risk, may
deliver Energy to Edison and for any Energy purchased by Edison Seller shall
receive payment from Edison for (i) Energy pursuant to this Section, and (ii)
as-available capacity based on capacity price from the Standard Offer No. 1


                                       24




Capacity Payment Schedule as approved by the Commission. Unless and until all
required licenses and approvals have been obtained, Seller may discontinue
deliveries at any time.


              8.1       Capacity Payments

                        Seller shall sell to Edison and Edison shall purchase
                        from Seller capacity pursuant to the Capacity Payment
                        Option selected by Seller in Section 1.10. The Capacity
                        Payment Schedules will be based on Edison's full avoided
                        operating costs as approved by the Commission throughout
                        the life of this Contract.

              8.1.1     Capacity Payment Option A -- As Available Capacity. If

                        Seller selects Capacity Payment Option A, Seller shall
                        be paid a monthly capacity payment calculated pursuant
                        to the following formula:

              MONTHLY CAPACITY PAYMENTS = (A x D)+(B x D)+(C x D)

              Where A = kWh purchased by Edison at the Point of
                        Interconnection during on-peak periods defined in
                        Edison's Tariff Schedule No. TOU-8

                    B = kWh purchased by Edison at the Point of Interconnection
                        during mid-peak periods defined in Edison's Tariff
                        Schedule No. TOU-8.


                                       25


                    C = kWh purchased by Edison at the Point of Interconnection


                        during off-peak periods defined in Edison's Tariff
                        Schedule No. TOU-8.

                    D = The appropriate time differentiated capacity price from
                        either the Standard Capacity Payment Schedule or
                        Forecast of Annual As-Available Capacity Payment
                        Schedule as specified by Seller in Section 1.10.

              8.1.1.1   If Seller specifies the Standard Offer No. 1 Capacity
                        Payment Schedule in Section 1.10, then the formula set
                        forth in Section 8.1.1 shall be computed with D equal to
                        the appropriate time differentiated capacity price from
                        the Standard Offer No. 1 Capacity Payment Schedule for
                        the Contract Term.

              8.1.1.2   If Seller specifies the Forecast of Annual As-Available
                        Capacity Payment Schedule in Section 1.10, the formula
                        set forth in Section 8.1.1 shall be computed as follows:

                        a.   During the First Period of the Contract Term D
                             shall equal the appropriate time differentiated
                             capacity price from the Forecast of Annual
                             As-Available Capacity Payment Schedule.


                        b.   During the Second Period of the Contract Term, the


                             formula shall be computed with D equal to the
                             appropriate time


                                       26


                             differentiated capacity price from Standard Offer
                             No. 1 Capacity Payment Schedule, but not less than
                             the greater of (i) the appropriate time
                             differentiated capacity price from the Forecast of
                             Annual As-Available Capacity Payment Schedule for
                             the last year of the First Period, or (ii) the
                             appropriate time differentiated capacity price from
                             the Standard Offer No. 1 Capacity Payment Schedule
                             for the first year of the Second Period.

              8.1.2     Capacity Payment Option B -- Firm Capacity Purchase

                        If Seller selects Capacity Payment Option B, Seller
                        shall provide to Edison for the Contract Term the
                        Contract Capacity specified in Section 1.5, or as
                        adjusted pursuant to Section 8.1.2.7, and Seller shall
                        be paid as follows:

              8.1.2.1   If Seller meets the performance requirements set forth
                        in Section 8.1.2.2, Seller shall be paid a Monthly
                        Capacity Payment, beginning from the date of Firm
                        Operation equal to the sum of the on-peak, mid-peak, and



                        off-peak Capacity Period Payments. Each capacity period
                        payment is calculated pursuant to the following,
                        formula:

                MONTHLY PERIOD CAPACITY PAYMENT = A x B x C x D


                                       27



                   Where  A = Contract Capacity Price specified in Section
                              1.10 based on the Standard Offer No. 2 Capacity
                              Payment Schedule as approved by the Commission and
                              in effect on the date of the execution of this
                              Contract.

                          B = Conversion factors to convert annual capacity
                              prices to monthly payments by time of delivery as
                              specified in Standard Offer No. 2 Capacity Payment
                              Schedule and subject to periodic modifications as
                              approved by the Commission.

                          C = Contract Capacity specified in Section 1.5.

                          D = Period Performance Factor, not to exceed 1.0,
                              calculated as follows:

                               (Period kWh purchased by Edison at the
                               Point of Interconnection limited by the
  Period Performance Factor =  level of Contract Capacity)
                               ---------------------------
                               (0.8 x Contract Capacity x (Period Hours minus
                               Maintenance Hours Allowed in Section 4.5.))

              8.1.2.2   Performance Requirements

                        To receive the Monthly Capacity Payment in Section
                        8.1.2.1, Seller shall provide the Contract Capacity in
                        each Peak Month for all on-peak hours as such peak hours

                        are defined in Edisons Tariff Schedule No. TOU-8 on file
                        with the Commission, except that Seller is entitled to a
                        20% allowance for Forced Outages for


                                       28


                        each Peak Month. Seller shall not be subject to such
                        performance requirements for the remaining hours of the
                        year.

                        a.   If Seller fails to meet the requirements specified
                             in Section 8.1.2.2, Seller, in Edison's sole
                             discretion, may be placed on probation for a period
                             not to exceed 15 months. If Seller fails to meet
                             the requirements specified in Section 8.1.2.2
                             during the probationary period, Edison may derate
                             the Contract Capacity to the greater of the
                             capacity actually delivered during the probationary
                             period, or the capacity at which Seller can
                             reasonably meet such requirements. A reduction in
                             Contract Capacity as a result of this Section


                             8.1.2.2 shall be subject to Section 8.1.2.6.

                        b.   If Seller fails to meet the requirements set forth
                             in Section 8.1.2.2 due to a Forced Outage on the
                             Edison system or a request to reduce or curtail
                             delivery under Section 8.4, Edison shall continue
                             Monthly Capacity Payments pursuant to Capacity
                             Payment Option B. The Contract Capacity curtailed
                             shall be treated the same as scheduled maintenance
                             outages in the Calculation of the Monthly Capacity
                             Payment.


              8.1.2.3   If Seller is unable to provide Contract Capacity due to


                        Uncontrollable Forces, Edison shall continue Monthly
                        Capacity


                                       29



                        Payments for 90 days from the occurrence of the
                        Uncontrollable Force. Monthly Capacity Payments payable
                        during a period of interruption or reduction by reason
                        of an Uncontrollable Force shall be treated the same as
                        scheduled maintenance outages. An Uncontrollable Force
                        on the Interconnecting Utility's electrical system which
                        results in an interruption or a reduction in the
                        delivery of electrical energy generated by the
                        Generating Facility to the Point of Interconnection
                        shall be specifically excluded from the provisions of
                        this Section 8.1.2.3.

              8.1.2.4   Hydroelectric facilities which have their Contract
                        Capacity based on five dry-year average, shall not have
                        their Contract Capacity derated when failure to meet the
                        requirements set forth in Section 8.1.2.2 is due solely

                        to the occurrence of a dry year which is drier than the
                        five dry-year average.

              8.1.2.5   Capacity Bonus Payment

         For Capacity Payment Option B, Seller may receive a Capacity Bonus
Payment as follows:

                        a.   Bonus During Peak Months -- For a Peak Month,
                             Seller shall receive a Capacity Bonus Payment if
                             (i) the requirements set forth in Section 8.1.2.2
                             have been met, and (ii) the on-peak capacity factor
                             exceeds 85%.


                                       30



                        b.   Bonus During Non-Peak Months - For a non-peak
                             month, Seller shall receive a Capacity Bonus
                             Payment if (i) the requirements set forth in
                             Section 8.1.2.2 have been met, (ii) the on-Peak
                             capacity factor for each Peak Month during the year
                             was at least 85%, and (iii) the on-peak capacity


                             factor for the non-peak month exceeds 85%.

                        c.   For any eligible month, the Capacity Bonus Payment
                             shall be calculated as follows:

                      CAPACITY BONUS PAYMENT= A x B x C x D

                   Where  A = (1.2 x On-Peak Capacity Factor) - 1.02

                   Where the On-Peak Capacity Factor, not to exceed 1.0, is
                   calculated as follows:

                              (Period kWh purchased by Edison at the Point of
                              Interconnection limited by the level of Contract
                              Capacity)
                              --------------------------------------------------
  On-Peak Capacity Factor =   ((Contract Capacity) x (Period Hours minus

                              Maintenance Hours Allowed in Section 4.5))

                          B = Contract Capacity Price specified in Section 1.10
                              for Capacity Payment Option B

                          C = 1/12

                          D = Contract Capacity specified in Section 1.5


                                       31



                        d.   When Seller is entitled to receive a Capacity Bonus
                             Payment, the Monthly Capacity Payment shall be the
                             sum of the Monthly Capacity Payment pursuant to


                             Section 8.1.2.1 and the Monthly Capacity Bonus
                             Payment pursuant to this Section.

              8.1.2.6   Capacity Reduction

                        a.   Seller may reduce the Contract Capacity specified
                             in Section 1.5, provided that Seller gives Edison
                             prior written notice for a period determined by the
                             amount of Contract Capacity reduced as follows:

   Amount of Contract                                      Length of Capacity
    Capacity Reduced                                         Notice Required
   --------------------                                    ------------------
   25,000 kW or under                                          l2 months
   25,001 - 50,000 kW                                          36 months
   50,001 - 100,000 kW                                         48 months
       over 100,000 kW                                         60 months

                        b.   Subject to Section 9.2, Seller shall refund to
                             Edison with interest at the current published
                             Federal Reserve Board three months prime commercial
                             paper rate an amount equal to the difference
                             between (i) the accumulated Monthly Capacity

                             Payments paid by Edison pursuant to Capacity
                             Payment Option B up to the time the reduction
                             notice is received by


                                       32


                             Edison, and (ii) the total capacity payments which
                             Edison would have paid if based on the Adjusted
                             Capacity Price.

                        c.   From the date the reduction notice is received to
                             the date of actual capacity reduction, Edison shall
                             make capacity payments based on the Adjusted


                             Capacity Price for the amount of Contract Capacity
                             being reduced.

                        d.   Seller may reduce Contract Capacity without the
                             notice prescribed in Section 8.1.2.6(a), provided
                             that Seller shall refund to Edison the amount
                             specified in section 8.1.2.6(b) and an amount equal
                             to: (i) the amount of Contract Capacity being
                             reduced, times (ii) the difference between the
                             Current Capacity Price and the Contract Capacity
                             Price, times (iii) the number of years and
                             fractions thereof (not less than one year) by which
                             the Seller has been deficient in giving prescribed
                             notice. If the Current Capacity Price is less than
                             the Contract Capacity Price only payment under
                             Section 8.1.2.6(b) shall be due to Edison.

              8.1.2.7   Adjustment to Contract Capacity The Parties may agree in
                        writing at any time to adjust the Contract Capacity.

                        Seller may reduce the Contract Capacity pursuant to


                        Section 8.1.2.6. Seller may increase the Contract
                        Capacity with Edison's approval and


                                       33


                        thereafter receive payment for the increased capacity in
                        accordance with the Contract Capacity Price for the
                        Capacity Payment Option selected by Seller for the
                        remaining Contract Term.

              8.1.2.8   For Capacity Payment Option B, Seller shall be paid for
                        capacity in excess of Contract Capacity based of the
                        as-available capacity price in Standard Offer No. 1
                        Capacity Payment Schedule, as updated and approved by
                        the Commission.

              8.2       Energy Payments - First Period

                        During the First Period of the Contract Term, Seller
                        shall be paid a Monthly Energy Payment for the Energy
                        delivered by the Seller to Edison at the Point of
                        Interconnection pursuant to the Energy Payment Option
                        selected by Seller in Section 1.11, as follows.

              8.2.1     Energy Payment Option 1 -- Forecast of Annual Marginal
                        Cost of Energy.

                        If Seller selects Energy Payment Option 1, then during
                        the First Period of the Contract Term, Seller shall be

                        paid a Monthly Energy Payment for Energy delivered by
                        Seller and purchased by Edison at the Point of
                        Interconnection during each month in




                                       34



                        the First Period of the Contract Term pursuant to the
                        following formula:

              MONTHLY ENERGY PAYMENT = (A x D) + (B x D) + (C x D)

                    Where A  =  kWh purchased by Edison at the Point of
                                Interconnection during on-peak periods defined
                                in Edison's Tariff Schedule No. TOU-8.

                          B  =  kWh purchased by Edison at the Point of
                                Interconnection during mid-peak periods defined
                                in Edison's Tariff Schedule No. TOU-8.

                          C  =  kWh purchased by Edison at the Point of
                                Interconnection during off-peak periods defined
                                in Edison's Tariff Schedule No. TOU-8.

                          D  =  The sum of:

                                (i) the appropriate time differentiated energy
                                price from the Forecast of Annual Marginal Cost
                                of Energy, multiplied by the decimal equivalent
                                of the percentage of the forecast specified in
                                Section 1.11, and (ii) the appropriate time
                                differentiated energy price from Edison's
                                published avoided cost of energy multiplied by

                                the decimal equivalent of the percentage of the


                                published energy price specified in Section
                                1.11.


                                       35


              8.2.2     Energy Payment Option 2 -- Levelized Forecast of
                        Marginal Cost of Energy. If Seller selects Energy
                        Payment Option 2, then during the First Period of the
                        Contract Term, Seller shall be paid a Monthly Energy
                        Payment for Energy delivered by Seller and purchased by

                        Edison at the Point of Interconnection each month during
                        the First Period of the Contract Term pursuant to the
                        following formula:

              MONTHLY ENERGY PAYMENT = (A x D) + (B x D) + (C x D)

                    Where A = kWh purchased by Edison at the Point of
                              Interconnection during on-peak periods
                              defined in Edison's Tariff Schedule No. TOU-8.

                          B = kWh purchased by Edison at the Point of
                              Interconnection during mid-peak periods defined in
                              Edison's Tariff Schedule No. TOU-8.

                          C = kWh purchased by Edison at the Point of
                              Interconnection during off-peak periods defined in
                              Edison's Tariff Schedule No. TOU-8.

                          D = The sum of:

                              (i) the appropriate time differentiated energy
                              price from the Levelized Forecast of Marginal Cost


                              of Energy, for the First Period of the Contract
                              Term multiplied by the decimal


                                       36


                              equivalent of the percentage of the levelized
                              forecast specified in Section 1.11, and (ii) the
                              appropriate time differentiated energy price from
                              Edison's published avoided cost of energy
                              multiplied by the decimal equivalent of the
                              percentage of the published energy price specified
                              in Section 1.11.

              8.2.2.1   Performance Requirement for Energy Payment Option 2
                        During the First Period when the annual forecast
                        referred to in Section 8.2.1 is greater than the
                        levelized forecast referred to in Section 8.2.2, Seller
                        shall deliver to Edison at least 70 percent of the
                        average annual kWh delivered to Edison during those
                        previous periods when the levelized forecast referred to
                        in Section 8.2.2 is greater than the annual forecast
                        referred to in Section 8.2.1 as resource conditions
                        permit for solar, wind, and hydro Generating Facilities
                        and excluding uncontrollable forces. If Seller does not
                        meet the performance requirements of this Section
                        8.2.2.1, Seller shall be subject to Section 8.5.

              8.2.3     Energy Payment Option 3 - Forecast of Incremental Energy
                        Rate (IER)


                        If Seller selects Energy Payment Option 3, Seller shall
                        be paid a Monthly Energy Payment for Energy delivered by
                        Seller and


                                       37


                        purchased by Edison at the Point of Interconnection each
                        month during the First Period of the Contract Term based
                        on the Forecast of Incremental Energy Rates authorized
                        by the Commission as specified in Section 1.11. The
                        Monthly Energy Payment for Energy delivered by Seller
                        and purchased by Edison at the Point of Interconnection
                        shall be calculated pursuant to the following formula:

              MONTHLY ENERGY PAYMENT = (A x D) + (B x D) + (C x D)

                   Where A = kWh purchased by Edison at the Point of
                             Interconnection during on-peak periods defined in
                             Edison's Tariff Schedule No. TOU-8.

                         B = kWh purchased by Edison at the Point of
                             Interconnection during mid-peak periods defined in
                             Edison's Tariff Schedule No. TOU-8.

                         C = kWh purchased by Edison at the Point of
                             Interconnection during off-peak periods defined in
                             Edison's Tariff Schedule No, T0U-8.

                         D = appropriate time differentiated energy price equal
                             to:

                             D = (i + ii + iii) x iv

                 Where (i) = the proportion of time express in hours oil is
                             expected to be the avoided fuel.


                                       38


                         x = IER, converted to the appropriate time of delivery
                             for Winter/Summer Periods, expressed in Btu/kWh

                             x  Price of boiler oil fuel, expressed in $/million
                                Btu used in Edison's published avoided cost of
                                energy

                      (ii) = The proportion of time expressed in hours gas is
                             expected to be the avoided fuel

                           = IER, converted to the appropriate time of delivery
                             for Winter/Summer Periods, expressed in Btu/kWh

                             x  Gas IER conversion factor of 1.035

                             x  Price of gas pursuant to Southern California Gas
                                Co. Tariff Schedule No. GN-5, expressed in $/
                                million Btu used in Edison's published avoided
                                cost of energy

                     (iii) = Variable Operating and Maintenance expense
                             expressed in(cent)/kWh as accepted by the


                             Commission

                      (iv) = Energy Loss Adjustment Factor as authorized by the
                             Commission


              8.2.3.1   Seller may elect during the First Period to specify a
                        range in increments of 100 Btu/kwh above and below
                        Edison's Forecast of Incremental Energy Rates in effect

                        at the time of execution of this Contract as specified
                        in Section 1.11 for the basis of calculation of Seller's
                        Monthly Energy Payment.


                                       39



                        a.   If the Incremental Heat Rates for the Edison system
                             fall within the range of the forecast IER and
                             increments specified in Section 1.11, Seller's
                             Monthly Energy Payment shall be equal 100% of
                             Edison's published avoided cost of energy as
                             updated and authorized by the Commission pursuant
                             to the formula set forth in Section 8.3.

                        b.   If the Incremental Heat Rates for the Edison system
                             fall outside the range of the forecast IER and
                             increments specified in Section 1.11, Seller's
                             Monthly Energy Payment shall be calculated pursuant
                             to the formula used in Section 8.2.3 using as the
                             IER the following value:

        IER = Forecast IER + IER increments as specified in Section 1.11.

              8.3       Energy Payments - Second Period

                        During the Second Period of the Contract Term, Seller
                        shall be paid a Monthly Energy Payment for Energy
                        delivered by Seller and purchased by Edison at the Point
                        of Interconnection at a rate equal to 100% of Edison's
                        published avoided cost of energy based on Edison's full
                        avoided operating cost as updated periodically and
                        accepted by the Commission, pursuant to the following
                        formula:

MONTHLY ENERGY PAYMENT = kWh purchased by Edison at the Point of Interconnection
                         for each on-peak, mid-peak, and


                                       40


                         off-peak time period defined in Edison's Tariff
                         Schedule No. TOU-8

                       x Edison's published avoided cost of energy by time of
                         delivery for each time period.

              8.4       Edison shall not be obligated to accept or pay for
                        Energy, and may request Seller whose Generating Facility
                        is one (1) MW or greater to discontinue or reduce
                        delivery of Energy, for not more than 300 hours annually
                        during off-peak hours when (i) purchases would result in
                        costs greater than those which Edison would incur if it
                        did not purchase Energy from Seller but instead utilized
                        an equivalent amount of Energy generated from another
                        Edison source, or (ii) the Edison Electric System demand
                        would require that Edison hydro-energy be spilled to
                        reduce generation.



             8.5       Energy Payment Refund

                        If Seller elects Energy Payment Option 2, Seller shall
                        be subject to the following:

                        8.5.1     If Seller fails to perform the Contract
                                  obligations for any reason during the First
                                  Period of the Contract Term, or fails to meet
                                  the performance requirements set forth in
                                  Section 1.2.2.1, and at the time of such

                                  failure to perform, the net present value of


                                  the cumulative Energy payments received by
                                  Seller pursuant


                                       41



                                  to Energy Payment Option 2 exceeds the net
                                  present value of what Seller would have been
                                  paid pursuant to Energy payment refund equal
                                  to the difference in such net present values
                                  in the year in which the refund is due. The
                                  present value calculation shall be based upon
                                  the rate of Edison's incremental cost of
                                  capital specified in Section 1.11.

                        8.5.2     Not less than 90 days prior to the date Energy
                                  is first delivered to the Point of
                                  Interconnection, Seller shall provide and
                                  maintain a performance bond, surety bond,
                                  performance insurance, corporate guarantee, or
                                  bank letter of credit, satisfactory to Edison,
                                  which shall insure payment to Edison of the
                                  Energy Payment Refund at any time during the
                                  First Period. Edison may, in its sole
                                  discretion accept another form of security
                                  except that in such instance a 1-1/2 percent
                                  reduction shall then apply to the levelized
                                  forecast referred to in Section 8.2.2 in
                                  computing payments for Energy. Edison shall be
                                  provided with certificates evidencing Seller's
                                  compliance with the security requirements in
                                  this Section which shall also include the

                                  requirement that Edison be given 90 days prior


                                  written notice of the expiration of such
                                  security.


                                       42


                        8.5.3     If Seller fails to provide replacement
                                  security not less than 60 days prior to the
                                  date of expiration of existing security, the
                                  Energy Payment Refund provided in Section 8.5
                                  shall be payable forthwith. Thereafter,
                                  payments for Energy shall be 100 percent of
                                  the Monthly Energy Payment provided in Section
                                  8.2.1.

                        8.5.4     If Edison at any time determines the security
                                  to be otherwise inadequate, and so notifies
                                  Seller, payments thereafter for Energy shall
                                  be 100 percent of the Monthly Energy Payment
                                  provided in Section 8.2.1. If within 30 days
                                  of the date Edison gives notice of such
                                  inadequacies, Seller satisfies Edison's
                                  security requirements, Energy Payment Option 2
                                  shall be reinstated. If Seller fails to
                                  satisfy Edison's security requirements within



                                  the 30-day period, the Energy Payment Refund
                                  provided in Section 8 shall be payable
                                  forthwith.

             9.         PAYMENT AND BILLING PROVISIONS

                        9.1       For Energy and capacity purchased by Edison:

                        9.1.1     Edison shall mail to Seller not later than
                                  thirty days after the end of each monthly
                                  billing period (1) a statement showing the

                                  Energy and Contract Capacity delivered to


                                  Edison during the on-peak, mid-peak, and
                                  off-peak


                                       43



                                  periods, as those periods are specified in
                                  Edison's Tariff Schedule No. TOU-8 for that
                                  monthly billing period, (2) Edison's
                                  computation of the amount due Seller, and (3)
                                  Edison's check in payment of said amount.

                        9.1.2     If the monthly payment period involves
                                  portions of two different published Energy
                                  payment schedule periods, the monthly Energy
                                  payment shall be prorated on the basis of the
                                  percentage of days at each price.

                        9.1.3     If the payment period is less than 27 days or
                                  greater than 33 days, the capacity payment
                                  shall be prorated on the basis of the average
                                  days per month per year.

                        9.1.4     If within thirty days of receipt of the
                                  statement Seller does not make a report in
                                  writing to Edison of an error, Seller shall be
                                  deemed to have waived any error in Edison's
                                  statement, computation, and payment, and they
                                  shall be considered correct and complete.

                        9.2   Payments due to Contract Capacity Reduction

                        9.2.1     The Parties agree that the refund and payments
                                  provided in Section 8.1.2.6 represent a fair

                                  compensation for the reasonable losses that


                                  would result from such reduction of Contract
                                  Capacity.


                                       44


                        9.2.2     In the event of a reduction in Contract
                                  Capacity, the quantity, in kW, by which the
                                  Contract Capacity is reduced shall be used to
                                  calculate the refunds and payments due Edison
                                  in accordance with Section 8.1.2.6, as
                                  applicable.

                        9.2.3     Edison shall provide invoices to Seller for
                                  all refunds and payments due Edison under this
                                  section which shall be due within 60 days.

                        9.2.4     If Seller does not make payments as required
                                  in Section 9.2.3, Edison shall have the right
                                  to offset any amounts due it against any
                                  present or future payments due Seller and may
                                  pursue any other remedies available to Edison
                                  as a result of Seller's failure to perform.

                        9.3       Energy Payment Refund

                                  Energy Payment Refund is immediately due and
                                  payable upon Seller's failure to perform the
                                  contract obligations as specified in Section
                                  8.5.

              10.       TAXES


                        10.1      Seller shall pay ad valorem taxes and other
                                  taxes properly attributable to the Generating
                                  Facility. If such taxes are assessed


                                       45


                                  or levied against Edison, Seller shall pay
                                  Edison for such assessment or levy.

                        10.2      Seller shall pay ad valorem taxes and other
                                  taxes properly attributed to land, land
                                  rights, or interest in Land for the Generating
                                  Facility. If such taxes are assessed or levied
                                  against Edison, seller shall pay Edison for
                                  such assessment or levy.

                        10.3      Seller or Edison shall provide information
                                  concerning the Generating Facility to any
                                  requesting taxing authority.

              11.       TERMINATION

                        11.1      This Contract shall terminate if Firm
                                  Operation does not occur within 5 years of the
                                  date of Contract execution.

              12.       LIABILITY

                        12.1      Each Party (First Party) releases the other
                                  Party (Second Party), its directors, officers,
                                  employees and agents from any loss, damage,
                                  claim, cost, charge, or/expense of any kind or
                                  nature (including any direct, indirect or
                                  consequential loss, damage, claim, cost,
                                  charge, or expense), including attorneys' fees
                                  and other costs of litigation, incurred by the
                                  First Party in connection with damage to
                                  property of the First Party caused by or
                                  arising out of the Second Party's
                                  construction, engineering, repair,
                                  supervision, inspection, testing, protection,
                                  operation,


                                       46


                                  maintenance, replacement, reconstruction, use
                                  or ownership of its facilities, to the extent
                                  that such loss, damage, claim, cost, charge,
                                  or expense is caused by the negligence of
                                  Second Party, its directors, officers,
                                  employees, agents, or any person or entity
                                  whose negligence would be imputed to Second
                                  Party.

                        12.2      Each Party shall indemnify and hold harmless
                                  the other Party, its directors, officers, and
                                  employees or agents from and against any loss,
                                  damage, claim, cost, charge, or expense of any
                                  kind or nature (including direct, indirect or
                                  consequential loss, damage, claim, cost,
                                  charge, or expense), including attorney's fees
                                  and other costs of litigation, incurred by the
                                  other Party in connection with the injury to
                                  or death of any person or damage to property
                                  of a third party arising out of the
                                  indemnifying Party's construction,
                                  engineering, repair, supervision, inspection,
                                  testing, protection, operation, maintenance,
                                  replacement, reconstruction, use, or ownership
                                  of its facilities, to the extent that such
                                  loss, damage, claim, cost, charge, or expense
                                  is caused by the negligence of the
                                  indemnifying Party, its directors, officers,
                                  employees, agents, or any person or entity
                                  whose negligence would be imputed to the
                                  indemnifying Party; provided, however, that
                                  each Party shall be solely responsible


                                       47


                                  for and shall bear all cost of claims brought
                                  by its contractors or its own employees and
                                  shall indemnify and hold harmless the other
                                  Party for any such costs including costs
                                  arising out of any workers compensation law.
                                  Seller releases and shall defend and indemnify
                                  Edison from any claim, cost, loss, damage, or
                                  liability arising from any contrary
                                  representation concerning the effect of
                                  Edison's review of the design, construction,
                                  operation, or maintenance of the Generating
                                  Facility.

                        12.3      The provisions of this Section 12 shall not be
                                  construed so as to relieve any insurer of its
                                  obligations to pay any insurance claims in
                                  accordance with the provisions of any valid
                                  insurance policy.

                        12.4      Neither Party shall be indemnified under this
                                  Section 12 for its liability or loss resulting
                                  from its sole negligence or willful
                                  misconduct.

              13.       INSURANCE

                        13.1      Until Contract is terminated, Seller shall
                                  obtain and maintain in force as hereinafter
                                  provided comprehensive general liability
                                  insurance, including contractual liability
                                  coverage, with a combined single limit of (i)
                                  not less than $1,000,000 each occurrence for
                                  Generating Facilities 100 kW or greater; (ii)
                                  not less than $500,000 for each occurrence for
                                  Generating Facilities


                                       48


                                  between 20 kW and 100 kW; and (iii) not less
                                  than $100,000 for each occurrence for
                                  Generating Facilities less than 20 kW. The
                                  insurance carrier or carriers and form of
                                  policy shall be subject to review and approval
                                  Edison.

                        13.2      Prior to the date Seller's Generating Facility
                                  is first operated in parallel with Edison's
                                  electric system, Seller shall (i) furnish
                                  certificate of insurance to Edison, which
                                  certificate shall provide that such insurance
                                  shall not be terminated nor expire except on
                                  thirty days prior written notice Edison, (ii)
                                  maintain such insurance in effect for so long
                                  as Seller's Generating Facility is operated in
                                  parallel with Edison's electric system, and
                                  (iii) furnish to Edison an additional insured
                                  endorsement with respect to such insurance in
                                  substantially the following form:

                                  "In consideration of the premium charged,
                                  Southern California Edison Company (Edison) is
                                  named as additional insured with respect to
                                  all liabilities arising out of Seller's use
                                  and ownership of Seller's Generating
                                  Facility." "The inclusion of more than one
                                  insured under this policy shall not operate to
                                  impair the rights of one insured against
                                  another insured and the coverages afforded by
                                  this policy will apply as though separate


                                       49


                                  policies had been issued to each insured. The
                                  inclusion of more than one insured will not,
                                  however, operate to increase the limit of the
                                  carrier's liability. Edison will not, by
                                  reason of its inclusion under this policy,
                                  incur liability to the insurance carrier for
                                  payment of premium for this policy."

                                  "Any other insurance carried by Edison which
                                  may be applicable shall be deemed excess
                                  insurance and Seller's insurance primary for
                                  all purposes despite any conflicting
                                  provisions in Seller's policy to the
                                  contrary."

                                  If the requirement of Section 13.2(iii)
                                  prevents Seller from obtaining the insurance
                                  required in Section 13.1, then upon written
                                  notification by Seller to Edison Section
                                  13.2(iii) shall be waived.

                        13.3      The requirements of this Section 13 shall not
                                  apply to Seller who is a self-insured
                                  governmental agency with established record of
                                  self-insurance. Edison agrees to review
                                  requests by Seller to waive the requirements
                                  of this Section 13 for Seller, who is a
                                  self-insured non-governmental agency with an
                                  established record of self-insurance. Edison's
                                  consent to such waiver shall not be
                                  unreasonably withheld.


                                       50


                        13.4      If Seller fails to comply with the provisions
                                  of this Section 13, Seller shall, at its own
                                  cost, defend, indemnify, and hold harmless
                                  Edison, its directors, officers, employees,
                                  agents, assigns, and successors in interest
                                  from and against any and all loss, damage,
                                  claim, cost, charge, or expense of any kind or
                                  nature (including direct, indirect or
                                  consequential loss, damage, claim, cost,
                                  charge, or expense, including attorneys' fees
                                  and other costs of litigation) resulting from
                                  the death or injury to any person or damage to
                                  any property, including the personnel and
                                  property of Edison, to the extent that Edison
                                  would have been protected had Seller complied
                                  with all of the provisions of this Section 13.

              14.       UNCONTROLLABLE FORCES

                        14.1      Neither Party shall be considered to be in
                                  default in the performance of any of the
                                  agreements contained in this Contract, except
                                  for obligations to pay money, when and to the
                                  extent failure of performance shall be caused
                                  by an Uncontrollable Force.

                        14.2      If either Party because of an Uncontrollable
                                  Force is rendered wholly or partly unable to
                                  perform its obligations under this Contract,
                                  the Party shall be excused from whatever
                                  performance


                                       51


                                  is affected by the Uncontrollable Force to the
                                  extent so affected provided that:

                                  (1)  the nonperforming Party, within two weeks
                                       after the occurrence of the
                                       Uncontrollable Force, gives the other
                                       Party written notice describing the
                                       particulars of the occurrence,

                                  (2)  the suspension of performance is of no
                                       greater scope and of no longer duration
                                       than is required by the Uncontrollable
                                       Force,

                                  (3)  the nonperforming Party uses its best
                                       efforts to remedy its inability to
                                       perform (this subsection shall not
                                       require the settlement of any strike,
                                       walkout, lockout or other labor dispute
                                       on terms which, in the sole judgment of
                                       the Party involved in the dispute, are
                                       contrary to its interest. It is
                                       understood and agreed that the settlement
                                       of strikes, walkouts, lockouts or other
                                       `labor disputes shall be at the sole
                                       discretion of the Party having the
                                       difficulty),

                                  (4)  when the nonperforming Party is able to
                                       resume performance of its obligations
                                       under this Contract, that Party shall
                                       give the other Party written notice to
                                       that effect, and


                                       52


                                  (5)  capacity payments during such periods of
                                       Uncontrollable Force on Seller's part
                                       shall be governed by Section 8.1.2.3.

                        14.3      In the event that either Party's ability to
                                  perform cannot be corrected when the
                                  Uncontrollable Force caused by the actions or
                                  inactions of legislative, judicial or
                                  regulatory agencies or other proper authority,
                                  this Contract may be amended to comply with
                                  the legal or regulatory change which caused
                                  the nonperformance.


                                  If a loss of Qualifying Facility status occurs
                                  due to an Uncontrollable Force and Seller
                                  fails to make the changes necessary to
                                  maintain its Qualifying Facility status, the
                                  Seller shall compensate Edison for any
                                  economic detriment incurred by Edison as a
                                  result of such failure.

              15.       NONDEDICATION OF FACILITIES

                        Neither Party, by this Contract, dedicates any part of
                        its facilities involved in this Generating Facility to
                        the public or to the service provided under the
                        Contract, and such service shall cease upon termination
                        of the Contract.


              16.       PRIORITY OF DOCUMENTS

                        If there is a conflict between this document and any
                        Appendix, the provisions of this document shall govern.
                        Each Party shall notify the


                                       53


                        other immediately upon the determination of the
                        existence of any such conflict.

              17.       NOTICES AND CORRESPONDENCE

                        All notices and correspondence pertaining to this
                        Contract shall be in writing and shall be sufficient if
                        delivered in person or sent by certified mail, postage
                        prepaid, return receipt requested, to Seller as
                        specified in Section 1.1, or to Edison as follows;

                            Southern California Edison Company
                            Post Office Box 500
                            Rosemead, California 91770
                            Attention: Secretary

                        All notices sent pursuant to this Section 17 shall be
                        effective when received, and each Party shall be
                        entitled to specify as its proper address any other
                        address in the United States upon written notice to the
                        other Party.

              18.       PREVIOUS COMMUNICATIONS

                        This Contract contains the entire agreement and
                        understanding between the Parties, their agents, and
                        employees as to the subject matter of this Contract, and
                        merges and supersedes all prior agreements, commitments,
                        representations, and discussions between the Parties. No
                        Party shall be bound to any prior obligations,


                                       54


                        conditions or representations with respect to the
                        subject matter of this Contract.

              19.       NONWAIVER

                        None of the provisions of the Contract shall be
                        considered waived by either Party except when such
                        waiver is given in writing. The failure of either Edison
                        or Seller to insist in any one or more instances upon
                        strict performance of any of the provisions of the
                        Contract or to take advantage of any of its rights
                        hereunder shall not be construed as a waiver of any such
                        provisions or the relinquishment of any such rights for
                        the future, but the same shall continue to remain in
                        full force and effect.

              20.       SUCCESSORS AND ASSIGNS

                        Neither Party shall voluntarily assign its rights nor
                        delegate its duties under this Contract, or any part of
                        such rights or duties, without the written consent of
                        the other Party, except in connection with the sale or
                        merger of a substantial portion of its properties or
                        except an assignment to an Affiliate. "Affiliate" shall
                        mean a Party's parent, a Party's subsidiary or any
                        company of which a Party's parent is a parent. "Parent"
                        shall mean a company which owns directly or indirectly
                        more than 50% of the shares entitled to vote in an
                        election of directors of another company. Any such


                                       55


                        assignment or delegation made without such written
                        consent shall be null and void. Consent for assignment
                        shall not be withheld unreasonably. Such assignment
                        shall include, unless otherwise specified therein, all
                        of Seller's rights to any refunds which might become due
                        under this Contract.

              21.       EFFECT OF SECTION READINGS

                        Section headings appearing in this Contract are inserted
                        for convenience only, and shall not be construed as
                        interpretations of text.

              22.       GOVERNING LAW

                        This Contract shall be interpreted, governed, and
                        construed under the laws of the State of California as
                        if executed and to be performed wholly within the State
                        of California.

              23.       MULTIPLE ORIGINALS

                        This Contract is executed in two counterparts, each of
                        which shall be deemed an original.

              24.       TRANSMISSION AND INTERCONNECTION

                        24.1      Seller shall be solely responsible, using all
                                  reasonable efforts, to negotiate and conclude
                                  all required transmission and interconnection
                                  agreements with the Interconnecting Utility.


                                  Such agreements shall provide for the
                                  transmission of electrical


                                       56


                                  energy generated by the Generating Facility to
                                  the Point of Interconnection.

                        24.2      It is contemplated that these agreements shall
                                  include:

                        24.2.1    An agreement between Seller and/or syndicate
                                  (which includes Seller), and the
                                  Interconnecting Utility to develop those
                                  facilities, as determined by the
                                  Interconnecting Utility, which are necessary
                                  to transmit electrical energy generated by the
                                  Generating Facility to the Point of
                                  Interconnection. Such agreement shall be
                                  executed no later than 36 months prior to the
                                  expected date of Firm Operation as specified
                                  in Section 1.7. Such agreement should include
                                  the following terms:

                                a)  Financial responsibility

                                b) Default/Remedies;

                                c) Facilities and scope of work associated
                                thereto; and

                                d) Scheduling provisions reflecting the
                                development of the facilities.

                        24.2.2    An agreement between Seller and the
                                  Interconnecting Utility for the transmission
                                  services necessary to transmit the electrical

                                  energy generated by the Generating Facility to


                                  the Point of Interconnection. Such an
                                  agreement shall be executed no later


                                       57


                                  than three months prior to the expected date
                                  of Firm Operation as specified in Section 1.7.

                        24.2.3    An agreement between Seller and the
                                  Interconnecting Utility for the
                                  interconnection of the Generating Facility and
                                  the Interconnecting Utility. Such agreement
                                  shall be executed no later than three months
                                  prior to the expected date of Firm Operation
                                  as specified in Section 1.7.

                        24.2.4    Edison shall, in its reasonable judgement,
                                  determine if the proposed arrangements
                                  described in this Section 24.2 satisfies the
                                  requirement of transmitting the electrical
                                  energy generated by the Generating Facility to
                                  the Point of Interconnection pursuant to the
                                  dates and terms contained in this Contract.

                        24.3      Notwithstanding the provisions contained in
                                  Section 24.2, Seller may pursue and/or develop
                                  alternate means, routes or agreements for the
                                  transmission of electrical energy generated by
                                  the Generating Facility to the Point of
                                  Interconnection. Should Seller obtain such
                                  alternative means, routes or agreements,
                                  Seller shall submit such alternative method to
                                  Edison for review and approval at least six
                                  months prior to the expected date of Firm

                                  Operation as specified in Section 1.7. Edison
                                  shall, in its reasonable judgement, determine
                                  if the


                                       58


                                  proposed alternative method satisfies the
                                  requirement of transmitting the electrical
                                  energy generated by the Generating Facility to
                                  the Point of Interconnection pursuant to the
                                  dates and terms contained in this Contract.

                        24.4      Should Seller be unable to comply with the
                                  provisions contained in Section 24.2 and 24.3,
                                  Seller shall have the option to either
                                  terminate this Contract without penalty of any
                                  type or abrogate its selection of Capacity
                                  Payment Option in Section 1.10 and select in
                                  its place Capacity Payment Option A, Forecast
                                  of Annual As-Available Capacity Payment
                                  Schedule. Further, should Seller select the
                                  later alternative, Section 8.1.1.2 shall be
                                  deleted in its entirety and replaced with the
                                  following:


                                  "If Seller specifies the Forecast of Annual
                                  As-Available Capacity Payment Schedule
                                  pursuant to Section 24.4, then the formula set
                                  forth in Section 8.1.1 shall be computed as
                                  follows:

                                  a. During the First Period of the Contract
                                  Term, D shall equal 70% of the appropriate
                                  time differentiated capacity price from the
                                  Forecast of Annual As-Available Capacity
                                  Payment Schedule.

                                  b. During the first five years of the Second
                                  Period of the Contract Term, D shall equal 95%
                                  of the appropriate time


                                       59


                                  differentiated capacity price from the
                                  Forecast of Annual As-Available Capacity
                                  Payment Schedule for the last year of the
                                  First Period of the Contract Term.

                                  c. For the remainder of the Contract Term, D
                                  shall equal 70% of the appropriate time
                                  differentiated capacity price from the
                                  Forecast of Annual As-Available Capacity
                                  Payment Schedule for the last year of the
                                  First Period of the Contract Term."

                        24.5      Nothing in Section 24 shall be construed to
                                  obligate Seller to enter into any transmission
                                  or interconnection agreements, or to
                                  participate in the financing and/or the
                                  construction of any electrical power
                                  transmission facility, except on terms and
                                  conditions satisfactory to Seller, in its
                                  reasonable judgement, nor to render Seller
                                  subject to any penalty for failure to do so.

                        SIGNATURES

                           IN WITNESS WHEREOF, the Parties hereto have executed
                  this Contract this 16th of April, 1985.

                                  SOUTHERN CALIFORNIA EDISON COMPANY,

                                  By /s/ Edward A. Myers, Jr.
                                     -------------------------------------------
                                                EDWARD A. MYERS, JR.
                                                   Vice President


                                       60


                                   SECOND IMPERIAL GEOTHERMAL COMPANY,
                                   A PARTNERSHIP

                                   SECOND IMPERIAL CONTINENTAL INC., PARTNER

                                   By /s/ Robert O'Leary
                                      ------------------------------------------
                                      Name Robert O' Leary
                                           ------------------------------------
                                      Title
                                            ------------------------------------


                                   SECOND DRAVO GEOTHERMAL, INC., PARTNER

                                   By /s/ John E. Jacobsen
                                      ------------------------------------------
                                      Name John E. Jacobsen
                                           ------------------------------------
                                      Title Attorney-in-Fact
                                            ------------------------------------




                                      61



                                                                  Exhibit 10.3.8


                                 AMENDMENT NO. 1

                                     TO THE

                             POWER PURCHASE CONTRACT

                                     BETWEEN

                       SOUTHERN CALIFORNIA EDISON COMPANY

                                       AND

                       SECOND IMPERIAL GEOTHERMAL COMPANY

                                  QFID NO. 3021





                             AMENDMENT NO. 1 TO THE
                         POWER PURCHASE CONTRACT BETWEEN
                     SOUTHERN CALIFORNIA EDISON COMPANY AND
                       SECOND IMPERIAL GEOTHERMAL COMPANY
                       ----------------------------------

1.  PARTIES

              The Parties to this Amendment No. 1 to the Power Purchase Contract
between Southern California Edison Company and Second Imperial Geothermal
Company, executed on April 16, 1985 ("Contract"), are Southern California Edison
Company, a California corporation, ("Edison") and Second Imperial Geothermal
Company, a California general partnership, ("Seller") referred to individually
as "Party" and collectively as "Parties".

2.  RECITALS

              This Amendment No. 1 is made with reference to the following
facts, among others:

              2.1 On April 16, 1985, Edison and Seller executed the Contract to
provide the terms and conditions for the sale by Seller and the purchase by
Edison of electrical power delivered by Seller to Edison at the Point of
Interconnection from the 40.000 kW Contract Capacity electrical Generating
Facility located at Heber, California.

              2.2 The Parties wish to extend the expected date of Firm Operation
and Termination Date.

              2.3 Edison desires that Seller's Forecast of Annual Marginal Cost
of Energy be shifted one year forward and that each year's price remain valid
for 12 months after it first becomes effective.

              2.4 The Parties wish to amend the Contract to provide for the
changes listed above.

3.  AGREEMENT

              The Parties agree to amend the Contract as follows:

              3.1 Section l.2e is amended to change the data when construction
shall start and shall now read as follows:

       "a. Seller shall commence construction of the Generating Facility by
       September 1, 1989."



              3.2 Section 1.7 is amended to change the date of Seller's Firm
Operation and shall now read as follows:

       "1.7 Firm Operation: December 31, 1990."

              3.3 Section 2 is amended to add a new Section 2.11.1 which shall
read as follows:

       "2.11.1 Contract Year: Except for the first Contract Year, a Contract
       Year shall consist of twelve (12) monthly billing periods beginning on
       the first day of the billing period following the anniversary date of
       Firm Operation. At Edison's option, the first Contract Year may consist
       of either twelve or thirteen billing periods commencing on the date of
       Firm Operation. If the first billing period of the contract term is less
       than a normal billing month, then the Contract year may consist of
       thirteen billing periods. If the first billing period is greater than a
       normal billing month, then the first contract year shall consist of
       twelve billing periods.

              3.4 Section 3.1 is amended to provide for a delayed development
schedule and shall now read, in part, as follows:

       "3.1 The First Period of the Contract Term shall commence upon date of
       Firm Operation but not later than December 31, 1990."

              3.4 Section 11 is amended to provide for the extended date of Firm
Operation and shall now read as follows:

       "This Contract shall terminate if Firm Operation does not occur on or
       before April 16, 1991."



              3.5 Appendix B is amended to reflect the Annual Marginal Cost of
Energy that Seller shall be paid for the First Period and shall now read as
follows:

                                       3


                       SOUTHERN CALIFORNIA EDISON COMPANY
                       ----------------------------------

                            LONG-TERM STANDARD OFFER
                            ------------------------

                            ENERGY PAYMENT SCHEDULE -
                            -------------------------

                   FORECAST OF ANNUAL MARGINAL COST OF ENERGY(1)
                   ---------------------------------------------

                     Year                                     Annual Margina(l)
Line               Payments               Contract            Cost of Energy(2)
No.                  Start                  Year                  (c/kWh)
------------------------------------------------------------------------------
1                    1991                     1                      8.1
2                    1992                     2                      8.6
3                    1993                     3                      9.3
4                    1994                     4                     10.1
5                    1995                     5                     10.9
6                    1996                     6                     11.8
7                    1997                     7                     12.6

8                    1998                     8                     13.6
9                    1999                     9                     14.6
10                   2000                    10                     15.6


1   This forecast to be used in conjunction with Energy Payment Option 1.

2   The annual energy payments in the table will be converted to seasonal
    time-of-delivery energy payment rates that are consistent with the
    time-of-delivery rates currently authorized by the Commission for Avoided
    Energy Cost Payments.

4.  OTHER CONTRACT TERMS AND CONDITIONS

              Except as amended herein, all turns, covenants, and conditions
contained in the Contract shall remain in full force and effect.

                                       4


5.  SIGNATURE CLAUSE

              The signatories hereto represent that they have been appropriately
authorized to enter into this Amendment No. 1 on behalf of the Party for whom
they sign. This Amendment No. 1 is hereby executed as of this 23rd day of
October 1987.

                                                 SOUTHERN CALIFORNIA EDISON
                                                     COMPANY



                                                 By /s/ Glenn J. Bjorklund
                                                   -----------------------------
                                                         GLENN J. BJORKLUND
                                                           Vice President



                                                 SECOND IMPERIAL GEOTHERMAL
                                                      COMPANY, A PARTNERSHIP



                                                 SECOND IMPERIAL CONTINENTAL,
                                                      INC., PARTNER



                                                 By /s/ F. Neil Smith
                                                   -----------------------------
                                                 Name F. Neil Smith
                                                      --------------------------
                                                 Title President
                                                      --------------------------



                                                 SECOND DRAVO GEOTHERMAL, INC.,
                                                       PARTNER



                                                 By /s/ J.J. Burke
                                                   -----------------------------
                                                 Name J.J. Burke
                                                      --------------------------
                                                 Title General Manager,
                                                       Geothermal Projects &
                                                       Operations
                                                      --------------------------




                                       5



                                                                  Exhibit 10.3.9


                                 AMENDMENT NO. 2
                                     TO THE
                             POWER PURCHASE CONTRACT
                                     BETWEEN
                       SOUTHERN CALIFORNIA EDISON COMPANY
                                       AND
                       SECOND IMPERIAL GEOTHERMAL COMPANY
                                  QFID NO. 3021

1.            PARTIES

              The Parties to this Amendment No. 2 to the Power Purchase Contract
between Southern California Edison Company and Second Imperial Geothermal
Company, executed on April 16, 1985 ("Contract"), are Southern California Edison
Company, a California Corporation ("Edison"). and Second Imperial Geothermal
Company, a California General Partnership ("Seller") referred to individually as
"Party" and effectively as "Parties."

2.            RECITALS

              This Amendment No. 2 is made with reference to the following
facts, among others:

              2.1 On April 16, 1985, Edison and Seller executed the Contract to
provide the terms and conditions for the sale by Seller and the purchase by
Edison of electrical power delivered by Seller to Edison at the Point of
Interconnection from Seller's e1ectrical Generating Facility located at Heber,
California.

              2.2 On October 23, 1987, Edison and Seller executed Amendment No.
1 to the Contract. This Amendment No. 1 provides for the extension of the date
of Firm Operation and the Termination Date, as well as amendment of the Forecast
of Annual Marginal Cost of Energy.

              2.3 The Parties desire to amend the Contract to:

                  a. Divide the project into two phases to achieve initial
operation approximately one year apart.

                  b. Extend the project schedule by one year.

                  c. Reduce the Contract and Nameplate capacity values each to
37 MW.



                  d. Revise the forecast of energy payments to begin at a
specified value and following achievement of Firm Operation, increase by a fixed
percentage over a period of ten (10) years, followed by fixed values to be paid
in addition to published avoided cost for an additional period of five (5)
years. Thereafter, energy payments will be based on Edison's published avoided
cost of energy.

                  e. Seller will provide testimony and/or documentation as may
reasonably be required by Edison to support this Amendment in regulatory
proceedings.

              2.4 The Parties wish to amend the Contract to provide for the
changes listed above.

3.            AGREEMENT

              The Parties agree to amend the Contract as follows:

              3.1 Section 1.1 is amended to read as follows:

                  "1.1 All notices shall be sent to Seller at the address:

                           Second Imperial Geothermal Company
                           c/o Ormat Energy Systems, Inc.
                           610 East Glendale Ave.
                           Sparks, NV 89831-5811"

              3.2 Section l.2a is amended to read as follows:

                  "a. Nameplate Rating: 37,000 kW"

              3.3 Section l.2e is amended to read as follows:

                  "e. Seller shall commence construction, as defined in the
Qualifying Facilities Milestone Procedure of the Generating Facility by January
1, 1992."

              3.4 Section 1.2f is amended to read as follows:

                  "f. Generating Facility Designation: Second Imperial
Geothermal."

              3.5 Section 1.5 is amended to read as follows:

                  "1.5 Contract Capacity: 37.000 kW"

              3.6 Section 1.6 is amended to read as follows:

                                       2


                  "1.6 Expected annual production: 259,000,000 kWh."

              3.7 Section 1.7 is amended to read as follows:

                  "1.7 Firm Operation: April 16, 1993."

              3.8 Add Section l.2g to read as follows:

                  "g. The Generating Facility may deliver up to 20 MW of
electric power during the period commencing on April 16, 1992, and ending on the
date of Firm Operation. Such electric power shall be purchased on an energy only
basis (no capacity payment) as further set forth in Section 8."

              3.9 Section 1.10 is amended to read as follows:

                  "1.10 The Contract Capacity Price shall be $187/kW-yr."

              3.10 Add the following sentence to Section 2.17:

                  "Firm Operation shall not occur prior to April 16, 1993, nor
later than December 31, 1993."

              3.11 Section 3.1 is amended to read as follow:

                  "3.1 The first period of the Contract Term shall commence upon
the date of Firm Operation but not later than December 31, 1993. The first
period of the Contract Term shall be 15 years."

              3.12 The first sentence of Section 8 is deleted and replaced with
the following:

                  "Prior to April 26, 1992, Seller shall be paid for energy
pursuant to Edison's published avoided cost of energy based on Edison's full
avoided operating cost as periodically updated and accepted by the Commission;
from April 16, 1992 to the date of Firm Operation. Seller shall be paid for
energy at the rate of 8.1(cent)/kWh. Prior to the date of Firm Operation.
Capacity shall not be purchased."

              3.13 Section 8.1.2.1 is amended to read as follows:

                  "8.1.2.1 If Seller meets the performance requirements set
forth in Section 8.1.2.2, Seller shall be paid a Monthly Capacity Payment,
beginning from the date of Firm Operation equal to the sum of the on-peak,
mid-peak, and off-peak Capacity

                                       3


Period Payments. Each capacity period payment is calculated pursuant to the
following formula:

MONTHLY PERIOD CAPACITY PAYMENT = A x B x C x D

              Where A = Contract Capacity Price specified in Section 1.10 for
Capacity Payment Option B.

                    B = Conversion factors to convert annual capacity prices to
monthly payments by time of delivery as specified in Standard Offer No. 2
Capacity Payment Schedule and subject to periodic modifications as approved by
the Commission.

                    C = Contract Capacity specified in Section 1.5.

                    D = Period Performance Factor, not to exceed 1.0, calculated
as follows:

                          (Period kWh purchased by Edison at the Point of
                          Interconnection limited by the level of Contract
                          Capacity)
                          -------------------------------------------------
Period Performance Factor = (0.8 x Contract Capacity x (Period Hours minus
                              Maintenance Hours Allowed in Section 4.5.))"

              3.14 Section 8.2.1 is amended to read as follows:

                  "8.2.1 Energy Payment Option 1 -- Forecast of Annual Marginal
Cost of Energy.

                  8.2.1.1 If Seller selects Energy Payment Option 1, then during
the first ten (10) Contract Years of the First Period of the Contract Term,
Seller shall be paid a Monthly Energy Payment for Energy delivered by Seller and
purchased by Edison at the Point of Interconnection during each month in the
first ten (10) Contract Years of the First Period of the Contract Term pursuant
to the following formula:

MONTHLY ENERGY PAYMENT = (A x D) + (B x D) + (C x D)

              Where A = kWh purchased by Edison at the Point of Interconnection
                        during on-peak periods defined in Edison's Tariff
                        Schedule No. TOU-8.

                    B = kWh purchased by Edison at the Point of Interconnection
                        during mid-peak periods defined in Edison's Tariff
                        Schedule No. TOU-8.

                                       4


                    C = kWh purchased by Edison at the Point of Interconnection
                        during off-peak periods defined in Edison's Tariff
                        Schedule No. TOU-8.

                    D = The sum of:

                        (i) The appropriate time differentiated energy price
from the Contract Annual Price of Energy as set forth in Appendix B, multiplied
by the decimal equivalent of the percentage of the forecast specified in Section
1.11, and (ii) the appropriate time differentiated energy price from Edison's
published avoided cost of energy multiplied by the decimal equivalent of the
percentage of the published energy price specified in Section 1.11.

                    8.2.1.2 During the following five Contract Years of the
First Period of the Contract Term, Seller shall be paid a Monthly Energy Payment
for Energy delivered by Seller and purchased by Edison at the Point of
Interconnection during each month in the following five Contract Years of the
First Period of the Contract Term pursuant to the following formula:

MONTHLY ENERGY PAYMENT = (A x D) + (B x D) + (C x D)

              Where A = kWh purchased by Edison at the Point of Interconnection
                        during on-peak periods defined in Edison's Tariff
                        Schedule No. TOU-8.

                    B = kWh purchased by Edison at the Point of Interconnection
                        during mid-peak periods defined in Edison's Tariff
                        Schedule No. TOU-8.

                    C = kWh purchased by Edison at the Point of Interconnection
                        during off-peak periods defined in Edison's Tariff
                        Schedule No. TOU-8.

                    D = The sum of:

                        (i) The appropriate time differentiated energy price
from Edison's published avoided cost of energy plus the appropriate time
differentiated energy price from the Contract Annual Price of Energy as set
forth in Appendix B, multiplied by the decimal equivalent of the percentage of
the forecast specified in Section 1.11, and (ii) the appropriate time
differentiated energy price from Edison's published avoided cost of energy
multiplied by the decimal equivalent of the percentage of the published energy
price specified in Section 1.11."

              3.14 Section 11 is amended to read as follows:

                   "11.  TERMINATION

                                       5


                   11.1 This Contract shall terminate if Firm Operation does not
occur on or before December 31, 1993."

              3.15 Add a new Section 25 to read as follows:

                   "25. Seller agrees that, to the extent reasonably required by
Edison pursuant to regulatory activities, Seller shall provide evidence by
testimony and/or documentation in support of the reasonableness of this
Amendment. In particular, Seller agrees to provide evidence by testimony and/or
documentation in support of the viability of the second Imperial Geothermal
project in the absence of this Amendment."

              3.16 Appendix B. FORECAST OF ANNUAL MARGINAL COST OF ENERGY is
deleted and replaced with the attached new Appendix B.







                                       6




                                   APPENDIX B

                             ENERGY PAYMENT SCHEDULE














                                       7


                       SOUTHERN CALIFORNIA EDISON COMPANY
                            LONG-TERM STANDARD OFFER
                           ENERGY PAYMENT SCHEDULE(1)
                           --------------------------

Line                   Calendar                          Contract Annual
No.                      Year                            Price of Energy

  1                      1992                            8.10(cent)/kWh(2)
  2                      1993                            8.10(cent)/kWh(2)
  3                      1994                            8.44(cent)/kWh(2)
  4                      1995                            8.80(cent)/kWh(2)
  5                      1996                            9.18(cent)/kWh(2)
  6                      1997                            9.57(cent)/kWh(2)
  7                      1998                            9.97(cent)/kWh(2)
  8                      1999                            10.40(cent)/kWh(2)
  9                      2000                            10.84(cent)/kWh(2)
 10                      2001                            11.30(cent)/kWh(2)
 11                      2002                            11.78(cent)/kWh(2)
 12                      2003                                   (4)
 13                      2004                            4.42(cent)/kWh(3)
 14                      2005                            4.12(cent)/kWh(3)

 15                      2006                            3.90(cent)/kWh(3)
 16                      2007                            3.75(cent)/kWh(3)
 17                      2008                            3.41(cent)/kWh(3)


(1) The annual energy payments in the table will be converted to seasonal
time-of-delivery energy payment rates that are consistent with the
time-of-delivery rates currently authorized by the Commission for Avoided Energy
Cost Payments.

(2) These values are to be used in conjunction with Contract Section 8.2.1.1
during the first 10 Contract Years of the First Period of the Contract Term.

(3) These values to be used in conjunction with Contract Section 8.2.1.2 during
the following 10 Contract Years of the First Period of he Contract Term and are
added to Published Avoided Cost as set forth therein.

(4) During that portion of Calendar Year 2003 prior to the anniversary date of
Firm Operation, the Contract Annual Price of Energy shall be 12.28(cent)/kWh.
During that portion of Calendar Year 2003 subsequent to the anniversary date of
First Operation, the Contract Annual Price of Energy shall be 4.60(cent)/kWh and
applied in accordance with Footnote 3.

                                       8


4.            OTHER CONTRACT TERMS AND CONDITIONS

              Except as amended in Amendment No. 1 and this Amendment No. 2, all
terms, covenants and conditions contained in the Contract shall remain in full
force and effect.

5.            SIGNATURE CLAUSE

              The signatories hereto represent that they have been appropriately
authorized to enter into this Amendment No. 2 on behalf of the Party for whom
they sign. This Amendment No. 2 is hereby executed as of this 27th day of July,
1990.

SOUTHERN CALIFORNIA EDISON COMPANY

By /s/ Robert Dietch
   ---------------------------------------
             Robert Dietch
            Vice President

                                   SECOND IMPERIAL GEOTHERMAL COMPANY

                                   By Second Imperial Continental, Inc., Partner

                                   By /s/ F. Neil Smith
                                      ----------------------------------
                                   Name  F. Neil Smith
                                         -------------------------------
                                   Title President
                                         -------------------------------

                                   By Geothermal, Inc., Partner

                                   By /s/ John F. Walter
                                      ----------------------------------
                                   Name  John F. Walter
                                         -------------------------------
                                   Title Vice President
                                         -------------------------------

                                   By AMOR 14 Corporation

                                   By /s/ Hezy Ram
                                      ----------------------------------
                                   Name  Hezy Ram
                                         -------------------------------
                                   Title Vice President
                                         -------------------------------






                                       9



                                                                 Exhibit 10.3.10


                                 AMENDMENT NO. 3
                                     TO THE
                             POWER PURCHASE CONTRACT
                                     BETWEEN
                       SOUTHERN CALIFORNIA EDISON COMPANY
                                       AND
                       SECOND IMPERIAL GEOTHERMAL COMPANY
                                  QFID NO. 3021

1.  PARTIES:
    -------

              The Parties to this Amendment No. 3 to the Power Purchase Contract
between Southern California Edison Company and Second Imperial Geothermal
Company, executed on April 16, 1985 ("Contract"), are Southern California Edison
Company, a California Corporation ("Edison"), and Second Imperial Geothermal
Company, a California General Partnership ("Seller"), referred to individually
as "Party" and collectively as "Parties."

2.  RECITALS:
    --------

              This Amendment No. 3 is made with reference to the following
facts, among others:

              2.1 On April 16, 1985, Edison and Seller executed the Contract to
provide the terms and conditions for the sale by Seller and the purchase by
Edison of electrical power delivered by Seller to Edison at the Point of
Interconnection from Seller's electrical Generating Facility located at Heber,
California.

              2.2 On October 23, 1987, Edison and Seller executed Amendment No.
1 to the Contract. Amendment No. 1 provided, among other things, for the
extension of the Firm Operation date to December 31, 1990 and extension of the
Termination Date to April 16, 1991, as well as reducing the prices paid under
the Forecast of Annual Marginal Cost of Energy.

              2.3 On July 27, 1990, Edison and Seller executed Amendment No. 2
to the Contract. Amendment No. 2 provided, among other things, for the Project
to achieve operation in two phases, extended the date of Firm Operation to April
16, 1993 and extended the Contract Termination Date to December 31, 1993,
reduced Contract Capacity value from 40,000 kW to 37,000 kW and Nameplate
Capacity value from 44,000 kW to 37,000 kW, and reduced the Forecast of Annual
Marginal Cost of Energy payment.



              2.4 Seller wishes to reduce the Contract Capacity from 37,000 kW
to 32,000 kW to match Seller's project development plans.

3.  AGREEMENT:
    ---------

              The Parties agree to amend the Contract as follows:

              3.1  Section 1.5 is amended to read as follows:

       "1.5 Contract Capacity: 32,000 kW."

4.  OTHER CONTRACT TERMS AND CONDITIONS:
    -----------------------------------

              Except as amended in Amendment No. 1, Amendment No. 2, and this
Amendment No. 3, all terms, covenants, and conditions contained in the Contract
shall remain in full force and effect.

5.  SIGNATURE CLAUSE:
    ----------------

              The signatories hereto represent that they have been duly
authorized to enter into this Amendment No. 3 on behalf of the Party for whom
they sign. This Amendment No. 3 is hereby executed as of this 24th day of
November, 1992.


                                            SOUTHERN CALIFORNIA EDISON COMPANY


                                            By: /s/ Vikram S. Budhraja
                                                --------------------------------
                                               Name: VIKRAM S. BUDHRAJA
                                               Title Vice President
                                               Date: Nov. 24, 1992
                                                     ---------------------------

                                            SECOND IMPERIAL GEOTHERMAL COMPANY


                                            By: /s/ indecipherable
                                                --------------------------------
                                               Name:
                                               Title Treasurer
                                               Date: 11/24/92
                                                     ---------------------------




                                       2



                                                                 Exhibit 10.3.11




                              AMENDED AND RESTATED

                       POWER PURCHASE AND SALES AGREEMENT

                                     BETWEEN

                                 MAMMOTH-PACIFIC

                                       AND

                       SOUTHERN CALIFORNIA EDISON COMPANY

                              EXISTING FACILITY G1




12/01/86







                                TABLE OF CONTENTS

SECTION                               TITLE                                 PAGE

1.  PARTIES................................................................    1

2.  RECITALS...............................................................    1

3.  AGREEMENT..............................................................    2

4.  DEFINITIONS............................................................    3

5.  TERM AND TERMINATION...................................................    7

6.  POWER SALES............................................................    8

7.  PROJECT LAND...........................................................   10

8.  OWNERSHIP AND CONTROL OF PROJECT.......................................   11

9.  DESIGN AND CONSTRUCTION OF PROJECT.....................................   12

10. OPERATION OF PROJECT...................................................   13

11. INTERCONNECTION FACILITIES.............................................   16

12. DELIVERY AND MEASUREMENT OF NET ENERGY.................................   16

13. SALE OF PROJECT........................................................   17

14. ABANDONMENT............................................................   19

15. AGREEMENT PRICE, MEGAWATTHOUR ("MWH")
    CREDIT ACCUMULATION AND REPAYMENT, AND
    BASE CAPACITY PRICE ADJUSTMENTS........................................   21

16. TAXES..................................................................   28

17. BILLING AND PAYMENT....................................................   29

18. OPERATING REPRESENTATIVES..............................................   30

19. LIABILITY..............................................................   30




20. INSURANCE..............................................................   32

21. WAIVERS................................................................   33

22. SECURITY...............................................................   33

23. UNCONTROLLABLE FORCES..................................................   34

24. ASSIGNMENT OF RIGHTS...................................................   35

25. DISPUTES...............................................................   36

26. LIENS AND ENCUMBRANCES.................................................   36

27. DISCLAIMER.............................................................   37

28. CONFIDENTIAL AND PROPRIETARY INFORMATION...............................   38

29. NO THIRD PARTY BENEFICIARIES...........................................   39

30. NONDEDICATION OF FACILITIES............................................   39

31. NOTICES................................................................   40

32. GOVERNING LAW..........................................................   40

33. GENERAL PROVISION......................................................   40

34. SIGNATURE CLAUSE.......................................................   41

    EXHIBIT A -   METERING ARRANGEMENT.....................................  A-1

    EXHIBIT B -   DEED OF TRUST, ASSIGNMENT OF RENTS,
                  AND SECURITY AGREEMENT...................................  B-1

    EXHIBIT C -   FINANCING STATEMENT......................................  C-1

    EXHIBIT D -   MAGMA LEASE..............................................  D-1

    EXHIBIT E -   POWER PURCHASE AND SALES
                  TERMINATION AGREEMENT....................................  E-1

    EXHIBIT F -   EFFECTIVE NET CAPACITY AND NET
                  CAPACITY.................................................  F-1

    EXHIBIT G -   GUARANTY AGREEMENT.......................................  G-1





                              AMENDED AND RESTATED
                       POWER PURCHASE AND SALES AGREEMENT


1. PARTIES:

     1.1 The Parties to this Amended and Restated Power Purchase and Sales
Agreement are: Mammoth-Pacific ("Seller"), a California general partnership, and
Southern California Edison Company ("Edison"), a California corporation,
individually "Party", and collectively, "Parties."

2. RECITALS: This Agreement is made with reference to the following facts, among
others:

     2.1 This is an Amended and Restated Power Purchase and Sales Agreement
which supercedes and replaces, in all terms and conditions, the original Mammoth
Power Purchase and Sales Agreement between Mammoth Binary Power Company and
Southern California Edison Company, executed on October 20, 1983, and assigned
to Mammoth Pacific on October 20, 1983, and Amendment No. 1 thereto, executed
on December 30, 1983;

     2.2 This Amended and Restated Power Purchase and Sales Agreement provides
for the following revisions, among others; restructuring of payment provisions
for energy and capacity purchased by Edison, redefining the "Megawatt Hour
Credit Accummulation," providing additional financial security to Edison and
outlining Seller's option to supply power from the Generating Facility for
operation of the Geothermal Facility and the Generating Facility;




     2.3 This Amended a Restated Power Purchase and Sales Agreement is made and
entered into with reference to the concurrent execution of that certain Power
Purchase and Sales Termination Agreement, which is set forth as Exhibit E,
attached hereto and made part hereof by this reference, by which Pacific
Lighting Energy Systems, a California Corporation, the owner of all the capital
stock of Pacific Geothermal Company, a California Corporation, (successor in
interest to Pacific Energy Resources, Inc. a wholly owned subsidiary of Pacific
Lighting Energy Systems), and general partner of Seller, will terminate those
certain landfill project Power Purchase and Sales Agreements identified therein;

     2.4. Seller desires to construct, own, operate and control a 10 MW (gross)
generating facility to be located near Casa Diablo Hot Springs, California
beginning in 1984 for a term of thirty years;

     2.5 The Generating Facility is presently in operation, with a Date of
Initial Delivery of November 26, 1984, and a date of Firm Operation of February
26, 1985;

     2.6 Edison desires to purchase Net Energy and capacity to be made available
by Seller to Edison from the Project;

     2.7 The Parties desire that the Project be operated and maintained as a
base load generating resource for the Edison electric system;

     2.8 The Parties desire, by this Agreement, to establish the terms,
conditions and obligations pursuant to which they can accomplish the above
desires and needs.

3.   AGREEMENT: The Parties agree as follows:


                                        2


4. DEFINITIONS: When used with initial capitalization, whether in the singular
or in the plural, the following terms shall have the following meanings:

     4.1 Agreement: This "Amended and Restated Power Purchase and Sales
Agreement Between Mammoth-Pacific and Southern California Edison Company," and
Exhibits thereto, as may be amended from time to time.

     4.2 Agreement Price: The price, expressed in cents per kilowatthour, paid
by Edison to Seller for Net Energy delivered and Net Capacity made available
under the terms of this Agreement. The Agreement Price includes the Base
Capacity Price.

     4.3 Auxiliary Components: All equipment necessary for the operation and
maintenance of the Project except the Geothermal Facilities.

     4.4 Auxiliary Load: That energy necessary to meet the electrical
requirements of the Auxiliary Components. Such requirements shall approximate
3,000 kilowatts (kW) as delivered over a period of time.

     4.5 Avoided Cost: For the purposes of this Agreement, "Avoided Cost" shall
be equal to the time period weighted average cost of energy as reflected in
Edison's Published avoided cost plus the Base Capacity Price converted to d/kWh.
If no applicable Published avoided cost of energy or Base Capacity Price is
available, an avoided cost of energy and Base Capacity Price shall be determined
in a manner consistent with the methodology used for the most current avoided
cost of energy and Base Capacity Price.



                                       3


     4.6 Base Capacity Price: For the purposes of this Agreement, the Base
Capacity Price shall be 1.94(cent) per kWh. The Base Capacity Price is the
capacity price currently Published in the Annual Capacity-Payment Schedule for
Standard Offer No: 2 Firm Power Purchases, effective February 14, 1983 for
30-year power purchase contracts with an initial date of operation in 1984. The
Published capacity price ($137 per kW per year) has been adjusted by a factor of
1.24 to conform with the change in capacity price methodology ordered by the
Commission in Decision No. 82-12-120. The Base Capacity Price may change if the
Date of Initial Delivery does not occur in 1984.

     4.7 Commission: The Public Utilities Commission of the State of California.

     4.8 Control: To establish the electrical output of the Project through
dispatching procedures including shutdown and startup procedures.

     4.9 Date of Initial Delivery: The date when Seller initially delivers Net
Energy to the Point of Interconnection.

     4.10 Date or Firm Operation: The applicable date mutually agreed upon by
the Operating Representatives on which one or both generating units of the
Project are determined to be a reliable source of generation and when such unit
or units can reasonably be expected to operate continuously and reliably at the
applicable Net Capacity.

     4.11 Edison Electric System Integrity: A state of being which contemplates
the normal operation of the Edison electric system in a manner which minimizes
risks of



                                       4


injury to persons and/or damage to, or loss of, property and enables Edison to
provide reliable electric service.

     4.12 Effective Net Capacity: A nominal value of Net Capacity, expressed in
megawatts (MW), selected by the Operating Representatives for use in determining
the Monthly Capacity Factor. The Effective Net Capacity shall be established and
agreed upon by the Operating Representatives as set forth in Exhibit F, attached
hereto and made part hereof by this reference.

     4.13 Emergency: A condition or situation which, in Edison's sole judgment,
affects Edison's ability to provide reliable electric service.

     4.11 Generating Facility: All of Seller's generators, together with all
protective and other associated equipment and improvements, necessary to produce
electrical power at Seller's Facility excluding associated land, land rights,
and interests in land.

     4.15 Geothermal Facilities: The geothermal fluid gathering and disposal
system, including all pipes, valves, pumps, meters and electrical equipment,
which are utilized in conjunction with the Project.

     4.16 Interconnection Facilities: Those protection, metering, electric
line(s) and other Facilities required, in Edison's sole judgment, to permit
connection of the Edison electric system and the Project at the Point of
Interconnection.

     4.17 Magma: Magma Energy, Incorporated, a Nevada corporation.


                                       5


     4.18 Magma Lease: The lease agreement between Holt Geothermal Company and
Magma which has been, or is to be, assigned to Seller and is attached hereto as
Exhibit D.

     4.19 Magma Resource: The geothermal reservoir underlying the land owned in
fee by Magma as described in the Magma Lease.

     4.20 Monthly Capacity Factor: For each month, the Net Energy delivered to
Edison, expressed in megawatthour (Kwh), divided by the product of Effective Net
Capacity, expressed in megawatts (MW), and the sum representing the total hours
in the month less the number of hours of curtailment in the month resulting from
requests by Edison pursuant to Section 8.2, Uncontrollable Forces and Project
scheduled outages. For the purpose of determining the Monthly Capacity Factor,
scheduled outage hours shall be limited to a maximum of 480 hours per unit per
year.

     4.21 Net Capacity: Gross generating capacity of the Project less the
capacity requirements of the Auxiliary Components, expressed in megawatts (MW).
Net Capacity available to Edison will vary with ambient temperature, as set
forth in Exhibit F, with one and two generting units in operation.

     4.22 Net Energy: Total electrical energy, expressed in kilowatthours (kWh)
or megawatthours (MWh), generated by the Project less all Auxiliary Load energy
requirements provided by the Project.

     4.23 Operating Representatives: Representatives of the Parties appointed
pursuant to Section 18.



                                       6


     4.24 Point of Interconnection: The point at the Seller's 33 kilovolt (kV)
dead end structure in the Project switchyard where Edison's electrical
conductors connect with Seller's electrical conductors and where Net Energy is
transferred from the Project to Edison.

     4.25 Project: Seller's electric generating facility which shall consist of
two (2) independent 5 MW (gross) binary cycle generating units with a total
design rating of 10 MW (gross), including facilities appurtenant to, or
incidental to, said units. The Project shall not include, among other things,
the Interconnection Facilities or the Geothermal Facilities or any land, land
rights or interests in land associated with such facilities.

     4.26 Published: For the purposes of this Agreement, "Published" is defined
as publication by, or for, Edison in accordance with any order or decision by
the Commission.

     4.27 Quarter: A calendar quarter of three months ending on the last day of
March, June, September or December.

5. TERM AND TERMINATION:

     5.1 This Agreement shall become effective when executed by the Parties and
shall remain in effect until terminated pursuant to any of the following:

          5.1.1 Upon not less than five (5) years prior written notification by
either Party to the other Party, which notification shall not be given prior to
the expiration of twenty-five years from the Date of Firm Operation; or


                                       7


          5.1.2 If the Date of Initial Delivery does not occur prior to January
1, 1985, or if the Date of Firm Operation does not occur prior to March 1, 1985,
unless otherwise agreed to, in writing, by the Parties; or

          5.1.3 Should Edison, or any Edison subsidiary or affiliate designated
by Edison in its sole judgment, exercise Edison's rights pursuant to Section 13
or Section 14.2.

6. POWER SALES:

     6.1 Subject to the terms and conditions of this Agreement, Seller hereby
agrees to deliver and sell to Edison, and Edison hereby agrees to accept and
purchase from Seller, all Net Energy delivered and all Net Capacity made
available by Seller to Edison at the Point of Interconnection.

     6.2 Upon request by Seller, Edison shall supply, and Seller shall purchase,
capacity and energy in amounts necessary to meet the Project's start-up and
Auxiliary Load requirements. Seller shall pay Edison for such capacity and
energy in accordance with Edison's time-of-use energy tariff for electric
service exceeding 500 kW, as now in effect or as may hereafter be authorized by
the Commission to be revised ("Tariff Schedule TOU-8").

     6.3 Seller shall use its best efforts to design, construct; operate and
maintain the Project so as generate the maximum amount of Net Energy and
associated Net Capacity.


                                       8


     6.4 Seller shall operate the Project as a base load facility with a planned
long-term annual capacity factor of 75% in accordance with generally accepted
practices in the electric utility industry in the State of California.

     6.5 If Seller desires to develop any additional capacity from the Magma
Resource, Edison shall have the right to Purchase such additional capacity and
associated energy therefrom. If the Parties are unable to reach a satisfactory
agreement and such additional capacity and associated energy is offered to any
other party or parties, Edison shall have the right to purchase such capacity
and energy under the same terms and conditions as those under which Seller is
willing to sell, and another party or parties are willing to purchase, the
additional capacity and associated energy.

     6.6 Seller shall have an option to elect to provide power for the operation
of the Geothermal Facilities from its own Generating Facility or to purchase
such power from Edison. If Seller elects to exercise such option, Seller shall
give Edison prior written notice thereof. If Seller elects to exercise such
option, this Agreement shall be amended to provide appropriate reimbursement to
Edison for interconnection facilities. If metering changes are required to
implement the exercise of such option, such changes shall be at the expense of
Seller. If such option is exercised by Seller, then Seller shall repay unearned
capacity payments in accordance with the following formula calculated for each
year of delivery until the date Seller begins serving the Geothermal Facilities
from its own generating facility:

                                       9


                 Reduction in annual average contract capacity x
                        annual average contract capacity

              ($0.0194/kWh - annual as-available"
                             capacity price $/kWh) x
                             (annual kWh purchased
                             by Edison)

             "     From Edison's Standard Offer No. 1 capacity table.

7. PROJECT LAND:

     7.1 Seller, at no cost to Edison, shall acquire and own all land, land
rights and interests in land necessary for Seller to construct, operate and
maintain the Project.

     7.2 Edison shall, as it deems necessary or desirable, build electric lines
and facilities, both overhead and underground, and install metering and any
other equipment, for the purpose of effecting the arrangements contemplated in
this Agreement. The aforementioned shall be done after satisfaction of the
requirements of Sections 7.3 and 7.4. The physical location of such electrical
lines, facilities, metering and any other equipment shall be determined by
agreement of the Parties.

     7.3 Seller shall reimburse Edison for the cost of any property rights or
interests which are required by Edison to meet its obligations under this
Agreement.

     7.4 Seller shall grant to Edison, without cost to Edison, and by a mutually
acceptable instrument(s) the following:

          7.4.1 Rights-of-way, licenses, easements and all other rights and
interests necessary to construct, reconstruct, use, maintain, alter, add to,
enlarge, repair, replace, inspect or remove, at any time, the electric lines and
facilities, both overhead and



                                       10


underground, or any other equipment installations required by Edison to effect
the arrangements contemplated in this Agreement. The contemplated arrangements
include those necessary to install, operate and maintain the meters for the
Geothermal Facilities (Meters 1-A, 2-A and 1-B, 2-B) and the 33 kV meters, both
as depicted in Exhibit A, and the arrangements necessary to supply capacity and
energy to the Geothermal Facilities;

          7.4.2 Rights of ingress and egress at all reasonable times necessary
for Edison to perform any one or more of the activities contemplated in this
Agreement;

     7.5 The electric lines, facilities, metering and/or any other equipment
referred to in this Section 7 installed by Edison, shall be, and shall remain,
the property of Edison; and

     7.6 All rights or interests granted by Seller to Edison pursuant to this
Section 7 shall be coterminous with this Agreement.

8. OWNERSHIP AND CONTROL OF PROJECT:

     8.1 Seller, at no cost to Edison, shall own the Project and shall design,
construct, operate and maintain the Project in accordance with good engineering
and operating practices in California.

     8.2 Seller shall Control the Project. However, to facilitate maintenance of
Edison facilities, or during periods of Emergency, or to maintain Edison
Electric System Integrity, Seller shall, if requested by Edison, and at no cost
or obligation to Edison: (i) disconnect the Project from the Edison electric
system or (ii) reduce the electrical output of the Project to the level of the
Project's total electrical requirement, as appropriate.

                                       11


Each Party shall endeavor to correct within a reasonable period the conditions
on its facilities and/or system which necessitate such disconnection or
reduction of output. Such disconnection or reduction of electrical output shall
be limited to the period of time such condition exists.

9. DESIGN AND CONSTRUCTION OF PROJECT:

     9.1 Seller, at no cost to Edison, shall acquire all permits and approvals,
and complete, or have completed, all environmental impact studies required for
the construction, operation and maintenance of the Project.

     9.2 Edison shall have the right to review the electrical drawings
pertaining to the design of the Project and the Point of Interconnection. Such
review shall be done in a timely manner and may include, but not be limited to,
the generator, governor, excitation system, sychronizing equipment, protective
relays and neutral grounding.

     9.3 Edison shall have the right to require modifications to the design of
the Project and/or the Point of Interconnection as it deems necessary for proper
and safe operation of the Project when in parallel with the Edison electric
system. If Seller does not agree to such modifications, the differences between
the Parties shall be resolved pursuant to Section 25 prior to design approval.

     9.4 Seller shall furnish, install, operate and maintain in good order and
repair and without cost to Edison, the relays, meters, power circuit breakers,
synchronizer and other control and protective apparatus as shall be agreed to by
the Parties pursuant to Section 9.3.



                                       12


     9.5 Future changes on the Edison electric system and/or to the Project may
require modification of the design of the Project or the Point of
Interconnection. Any such modification, whether proposed by Edison or Seller,
shall be subject to the provisions of this Section 9.

     9.6 Edison shall have the right to monitor the construction, start-up,
operation and maintenance of the Project and have the right to consult with, and
make recommendations, to Seller's Operating Representative.

     9.7 Seller shall furnish to Edison the Project construction schedule and
shall notify Edison, at last one (1) year prior to the Date of Firm Operation,
of any changes in such schedule which affect the Date of Firm Operation.

     9.8 Edison shall have full access to all Project operations a have the
right to use, solely for itself, free of royalty payments, any technological
innovations developed by Seller in producing Net Energy from the Magma Resource.
Edison shall have full access to all operating data and input regarding
operation of the Project and the Geothermal Facilities. Except as otherwise
legally required, Edison shall not disclose such information to others without
first obtaining written permission from Seller.

10. OPERATION OF PROJECT:

     10.1 Seller shall operate and maintain the Project and the Project's
protective apparatus in accordance with applicable electric utility industry
standards and good engineering practices with respect to synchronizing, voltage
and reactive power control. Seller shall operate the Project with all protective
apparatus in service whenever the


                                       13


Project is connected to, or is operated in parallel with, the Edison electric
system. Any deviation for brief periods of emergency or maintenance shall only
be by agreement of the Parties.

     10.2 Each Party shall keep the other Party's Operating Representative
informed as to the operating schedule of its respective facilities affecting the
other Party's operation hereunder, including any reduction in Net Capacity. In


addition, Seller shall provide Edison with reasonable advance notice regarding
its scheduled outages, including any reduction in Net Capacity availability in
accordance with the following:

         SCHEDULED OUTAGE                            ADVANCE NOTICE
         EXPECTED DURATION                           TO EDISON
         -----------------                           -----------------------

         Less than one day                           24 Hours
         One day or more (except major overhaul)      1 Week
         Major Overhaul                               6 Months

     10.3 Notification by a Party's Operating Representative of outage date and
duration should be provided to the other Party's Operating Representative by
telephone.

     10.4 Seller shall use its best efforts to schedule outages during the
off-peak hours as specified in Edison's Tariff Schedule TOU-8 and during
expected minimal generation periods as agreed upon by the Operating.
Representatives.

     10.5 Seller shall maintain an operating log at the Project with records of:
real and reactive power production, changes in operating status, outages,
protective apparatus operations and any unusual conditions found during
inspections. In addition, Seller shall maintain records applicable to the
Project, including the electrical characteristics of the generator and settings
or adjustments of the generator control equipment and protective


                                       14


devices. Seller shall make such information available to Edison upon request and
shall provide copies of such operating log and records, if requested, to Edison
within thirty days of Edison's request.

     10.6 If, at any time, Edison has reason to doubt the integrity of any of
the Project's protective apparatus and believes that such loss of integrity
would be hazardous to the Edison Electric System Integrity, Seller shall
demonstrate, to Edison's satisfaction, the correct calibration and operation of
the equipment in question.

     10.7 Seller shall test all protective devices with qualified personnel at
intervals not to exceed four (4) years.

     10.8 Seller shall notify Edison at least fourteen calendar days prior to:
(i) initial energizing of the Point of Interconnection; (ii) initial parallel
operation of each of the Project's generators; and (iii) initial testing of the
Project's protective apparatus. Edison shall have the right to have a
representative present at such times.

     10.9 Seller shall, to the extent possible, provide reactive power for its
own requirements and, where applicable, the reactive power losses of interfacing
transformers. Seller shall not deliver excess reactive power to Edison unless
otherwise agreed upon by the Parties.

     10.10 Edison shall install, at Seller's cost, telemetering equipment for
the purpose of monitoring the operation of the Project generators. Seller shall,
as required by Edison, install additional meters, at a location within the
Project, as agreed upon by both Parties, to enable Seller to make daily
telephone reports in the event telemetering


                                       15


equipment is inoperative. All costs of additional meter equipment, installation,
ownership and administration shall be borne by Seller, including costs incurred
by Seller for inspecting and testing such equipment.

11. INTERCONNECTION FACILITIES:

     11.1 Edison,, at no cost to Seller shall own the Interconnection Facilities
and shall design, construct, operate and maintain said facilities in accordance
with good engineering and operating practices in the State of California.

     11.2 Edison shall use its best efforts to schedule maintenance of the
Interconnection Facilities during the off-peak hours as specified in Edison's
Tariff Schedule TOU-8, and during expected minimal generation periods as agreed
upon by the Operating Representatives. The anticipated duration of any scheduled
or unscheduled outages of said facilities shall be communicated promptly to
Seller in a manner as directed in writing by Seller's Operating Representative.

     11.3 This Section 11 shall be subject to Seller's option regarding
provision of power for the operation of the Generating Facility and Geothermal
Facilities as set forth in Section 6.6 of this Agreement.

12. DELIVERY AND MEASUREMENT OF NET ENERGY:

     12.1 Seller shall make, and Edison shall accept, Net Energy deliveries at
the Point of Interconnection. Such deliveries shall be measured at the Edison 33
kV metering arrangement as shown in Exhibit A. The 33 kV measurement meters
shall be provided, owned and maintained at Edison's expense. Readings from such
meters shall


                                       16


be the basis for determining Edison's Net Energy payments to Seller. For billing
purposes, Edison shall read and record the 33 kV meter measurements on a monthly
basis.

     12.2 Edison's meters shall be sealed, and the seals shall be broken only
when the meters are to be inspected, tested or adjusted by Edison. Seller shall
be given reasonable notice of testing and have the right to have its
representative present on such occasions.

     12.3 Edison shall test, at its expense, the Edison Meters installed
pursuant to this Agreement at least once each year. Edison shall test the meters
at any reasonable time upon the request of Seller at Seller's expense. If Seller
requests such a test, Seller shall reimburse said expense to Edison within
thirty days after presentation of a bill therefor.

     12.4 Metering equipment found to be inaccurate shall be repaired, adjusted
or replaced by Edison so that the metering accuracy of said equipment shall be
within two percent (2%). If metering equipment inaccuracy exceeds two percent
(2%), the correct amount of Net Energy delivered during the period of said
inaccuracy shall be estimated by Edison and agreed upon by the Parties.

13. SALE OF PROJECT:

     13.1 If Seller desires to sell the Project and/or Geothermal Facilities,
Seller shall promptly first offer to Edison, or any Edison subsidiary or
affiliate designated by Edison in its sole judgment, the right to purchase the
Project and/or Geothermal Facilities


                                       17


and to purchase brine pursuant to the Magma Lease. Edison, or any Edison
subsidiary or affiliate designated by Edison in its sole judgment, shall have up
to ninety days from receipt to accept Seller's offer or to negotiate with Seller
to reach mutual agreement.

     13.2 In the event the Parties are unable to reach a satisfactory agreement
pursuant to Section 13.1 and the Project and/or Geothermal Facilities are
offered to any other party or parties, Edison or any Edison subsidiary or
affiliate designated by Edison in its sole judgment, shall have up to thirty
days from receipt of written notice of such terms to purchase the Project under
the same terms and conditions as those under which Seller is willing to sell,
and another party or parties are willing to purchase, the Project and/or
Geothermal Facilities.

     13.3 Seller represents and warrants that it: (i) presently has, and shall
maintain at all times during the term of this Agreement, interests and rights
necessary for the engineering, design, ownership, construction, operation,
maintenance and testing of the Project and the Geothermal Facilities, (ii) shall
not assign any such rights or interests without the prior written consent of
Edison during the term or this Agreement as provided in Section 24, (iii) shall
not permit to be enforced against such rights or interests any liens or
encumbrances, and (iv) shall provide Edison all of those interests and rights,
including, but not limited to the Geothermal Facilities, necessary for the
ownership, operation and maintenance of the Project and Geothermal Facilities
for a term equal to that agreed upon pursuant to Section 13.1 in the event that
Edison purchases the Project and Geothermal Facilities.

                                       18


     13.4 If Seller sells or otherwise conveys any interest in the Project
and/or Geothermal Facilities, Seller shall pay immediately to Edison the accrued
MWh Credit balance (converted to kWh) converted to dollars by multiplying said
amount by the then current Avoided Cost for energy and capacity (converted to
(cent)/kWh) together with any other sums then due Edison hereunder.

14. ABANDONMENT:

     14.1 The Project and Geothermal Facilities shall be deemed abandoned if
Seller terminates operation of the Project and Geothermal Facilities with the
intent that such termination is permanent. Such intent shall be conclusively
presumed by either (i) Seller's notice to Edison of such intent or (ii) Seller's
operation or nonoperation of the Project and Geothermal Facilities such that no
Net Energy is generated for two hundred consecutive days during any period after
the Date of Firm Operation, unless otherwise agreed upon in writing by the
Parties.

     14.2 If Seller abandons the Project and Geothermal Facilities during the
term of this Agreement, Edison, or any Edison subsidiary or affiliate designated
by Edison in its sole discretion, shall have the first right to Purchase the
Project and Geothermal Facilities at their fair market value or by assuming the
construction/permanent loan from an institutional lender for the construction of
the Project and Geothermal Facilities ("Project Loan"), existing at the time of
purchase. Until the accrued MWh Credit, as provided for in Section 15.2.2 has
been reduced to zero, the amount of the Project Loan shall not exceed eleven
million dollars ($11,000,000) unless otherwise agreed upon by


                                       19


the Parties. The proceeds of the Project loan shall only be used in connection
with the Project and Geothermal Facilities. Seller shall not extend or otherwise
modify any term of the Project Loan without the prior written consent of Edison.

     14.3 If Edison purchases the Project and Geothermal Facilities pursuant to
Section 14.2, Seller shall, at the time of such purchase, provide Edison with
those interests and rights necessary for the ownership, operation and
maintenance of the Project and Geothermal Facilities, including, but not limited
to those rights provided to Seller under the Magma Lease, necessary to produce
and utilize geothermal energy in sufficient quantities to operate the Project
and Geothermal Facilities at a level necessary to obtain and sustain the
agreed-upon Net Capacity for the remaining term of this Agreement.

     14.4 If Seller abandons the Project, Seller shall immediately repay to
Edison the accrued MWh Credit balance (converted to kWh) converted to dollars by
multiplying said amount by the then current Avoided Cost for energy and capacity
(converted to (cent)/kWh) together with any other sums then due Edison
hereunder.

     14.5 If Seller abandons the Project pursuant to this Section 14, or fails
to maintain this Agreement in effect for the term set forth in Section 5.1.1,
Seller shall reimburse Edison for the Base Capacity Price payments which Seller
did not earn because of early termination. Such reimbursement for Base Capacity
Price payments received by Seller under this Agreement shall be in accordance
with the following formula: R = (1. - x/30) times the total value of Base
Capacity Price payments paid for deliveries from the Project, where "x" equals
the number of completed years of Project


                                       20


Operation. If Edison does not exercise its option pursuant to Section 14.2,
Seller shall make such reimbursement to Edison within thirty (30) days after
presentation of a bill therefor.

15.  AGREEMENT PRICE, MEGAWATTHOUR ("MWH") CREDIT
     ACCUMULATION AND REPAYMENT, AND BASE
     CAPACITY PRICE ADJUSTMENTS:

     15.1 Agreement Price.

          15.1.1 Edison shall pay for any Net Energy delivered by Seller to
Edison at the Point of. Interconnection prior to the Date of Firm Operation.
Such payment shall be Edison's Published Avoided Cost of energy with no payment
for capacity.

          15.1.2 Except as provided in Section 15.1.1 and upon operation
commencing with the Date of Firm Operation ("Project Operation"), Edison shall
pay Seller an Agreement Price for all Net Energy delivered and for all Net
Capacity made available to Edison at the Point of Interconnection as follows:

               15.1.2.1 Commencing on the Date of Firm Operation and continuing
to September 12, 1986, the Agreement Price shall be 12.5(cent)/kWh.

               15.1.2.2 Commencing on September 12, 1986, and continuing through
December 31, 1995, the Agreement Price shall be 8.94(cent)/kWh (the sum of
7(cent)/kWh energy payment plus 1.94(cent)/kWh capacity payment).

               15.1.2.3 Commencing on January 1, 1996, and continuing through
the remaining term of this Agreement, the Agreement Price shall be equal to the
sum of 100% of Edison's Published Avoided Cost of energy plus 1.94(cent)/kWh
capacity payment.



                                       21


          15.1.3 During the period from January 1, 1989, through December 31,
1995, Seller shall deliver to Edison at least 70% of the total Net Energy
delivered to Edison during the period from September 12, 1986, through December
31, 1988. If the total Net Energy deliveries during the period from January 1,
1989, through December 31, 1995, are not at least 70% of the total Net Energy
deliveries during the period from September 12, 1986, through December 31, 1988,
then Seller shall be subject to Section 15.1.4 of this Agreement.

               15.1.4 If Seller fails to meet the performance requirements set
forth in Section 15.1.3, Seller shall, at Edison's request, make an energy
payment refund equal to the greater of zero or the difference in the net present
value, calculated at a discount rate of eight percent per annum, between:

                    A.   The present value of the net energy delivered to and
                         purchased by Edison from September 12, 1986, to
                         December 31, 1995, at the energy price specified
                         herein, less;

                    B.   The present value of the net energy delivered to and
                         purchased by Edison from September 12, 1986, to
                         December 31, 1995, at an energy price appropriate for


                         the year in which any energy payment refund is made,
                         equal to the energy prices shown below:

                                       22



                        Year                         Energy Price
                        ----                         (cents/kWh)
                                                     ------------
                        1986                           6.0
                        1987                           6.4
                        1988                           6.9
                        1989                           7.6
                        1990                           8.1
                        1991                           8.6
                        1992                           9.3

                        1993                           10.1
                        1994                           10.9
                        1995                           11.8

               The energy payment refund, if required, will be based on present
values calculated to the date of the refund or January 1, 1996, whichever occurs
earlier.

          15.1.5 Seller shall reimburse Edison for any energy and capacity
payments made after September 12, 1986, that are in excess of the monthly energy
and capacity payments to be paid to Seller under this Section 15 by means of a
reduction in each monthly energy and capacity payment, commencing upon the
effective date of this Agreement, up to the full amount of each monthly Payment,
until all such excess payments are recovered by Edison.

     15.2 MWh Credit Accumulation

          15.2.1 If payments Pursuant to Section 15.1.2.1 exceed Edison's
avoided cost for energy and capacity, such excess shall be treated as payment


incentives to be repaid by Seller to Edison. The accumulation of the Monthly MWh
Credit shall be calculated in accordance with the following formula:


                                              12.5 (cent)/kWh - 8.94(cent)/kWh
 Monthly MWh Credit = Net energy Delivered  x --------------------------------
                                                     8.94(cent)/kWh




                                       23


Wherein 12.5 cents equals (cent)/kWh paid for total kWh delivered from February
26, 1985, to September 12, 1986, and 8.94(cent)/kWh equals 7(cent)/kWh for
energy plus 1.94c/kWh for capacity. If the Monthly MWh Credit is negative, it
shall not be included in the calculation of the accumulation of Monthly MWh
Credit.

          15.2.2 As of September 12, 1986, the accrued MWh credit shall be fixed
and recalculated from the Date of Firm Operation through September 12, 1986,
which shall be deemed to be to 34,642 MWh.

     15.3 Security for Energy and Capacity Payments

          15.3.1 Coincident with the effective date of this Amended and Restated
Power Purchase and Sales Agreement, Seller shall provide and maintain security
in the amount of $1.3 million in the form of a letter of credit or corporate
guarantee reasonably satisfactory to Edison, which shall insure payment to
Edison of the energy payment refund and/or the accrued MWh credit as set forth
herein. Seller shall provide Edison with certificates evidencing Seller's
compliance with the security requirements in this section.

          15.3.2 If Seller provides security in the form of a letter of credit,
the following criteria must be met:

          A. The letter of' credit must be issued by a financial institution
which La registered with the California banking commissioner and doing business
in California.

          B. The bank issuing, the letter of credit must have assets in excess
of $250 million and maintain a rating of "BC" or better from Keefe, Bryette &
Woods.

                                       24


          C. The issuing institution shall provide Edison with annual
certification that it meets these criteria.

          15.3.3 If Seller provides security in the form of a corporate
guarantee as set forth in Exhibit G attached hereto and made part hereof by this
reference, the following criteria must be met:

          A. The corporate guarantee shall be supported by an audited financial
statement and a Dun and Bradstreet credit report, acceptable to Edison in its
sole judgment, for each year in which the security is required.

          B. If a corporate guarantee is provided and accepted, Seller shall
cause the party issuing such corporate guarantee to provide annual audited
financial statements and Dun and Bradstreet reports for the period of time that
the security is required. In addition to the foregoing, Edison shall have the
right to utilize any other relevant information it may possess or obtain in
order to evaluate the acceptability of the security.

          C. If the Dun and Bradstreet credit rating, the annual audited
financial statement or other relevant information change materially according to
accepted business practices during the period the security is in effect, Edison
shall have the right to require replacement security.

          15.3.4 The security contemplated herein shall remain in full force and
effect until the obligations of Seller as sat forth in Sections 15.1 and 15.2
have been satisfied, at which time the requirement for security shall terminate.


                                       25


          15.3.5 The security contemplated herein may be reduced at Seller's
option in accordance with the following criteria:

          A. Security for the energy payment refund may be reduced by the amount
of energy payment refund paid to Edison under the terms of this Agreement.

          B. Security C or the accrued MWh credit may be reduced by $37.53 for
each MWh repaid to Edison from the accrued MWh bank.

          15.3.6 Notwithstanding the foregoing Sections 15.3.1 through 15.3.4,
the security provisions set forth in Section 22 or this Agreement shall remain
in full force and effect.

     15.4 MWh Credit Repayment

          15.4.1 Seller, at its option, may prepay any MWh amount of the accrued
MWh credit at any time. Notwithstanding the foregoing, commencing on January 1,
1996, and through the end of the term of the Agreement, all accrued MWh credit
shall be repaid to Edison in the form of equal monthly deliveries to Edison of
the remaining accrued MWh credit being repaid, prorated over the remaining term
of this Agreement. If there is no prepayment of accrued MWh, then the accrued
MWh credit of 34,642 MWh shall be repaid from 1996 to 2015 at the rate of 1732.1
MWh each year to Edison with no cash Payment for such energy. The accrued MWh
Credit of 34,642 MWh shall be reduced by the amount of MWh credits repaid prior
to January 1, 1996.

          15.4.2 In the event that any accrued MWh credit residue exists as of
December 31, 2015, such residue shall be paid in full pursuant to the Guaranty


                                       26


Agreement, attached hereto as Exhibit G and made part hereof by this reference,
but shall in no event be paid by further deliveries of power to Edison. The
value of one (1) MWh of accrued MWh credit shall be deemed to be $37.53.

     15.5 Monthly Capacity Payment

     The monthly capacity payment shall be calculated as follows:

     Monthly Capacity Payment = 1.94(cent)/kWh

                                x  (Effective Net Capacity, kW)

                                x  (Total hours in month, Hour)

                                x  (Monthly Capacity Factor)

                                x  (Hurdle Factor)

                                x  (Availability Factor)

          15.5.1 Hurdle Factor

              The Hurdle Factor shall be either 1.0 if the Monthly Capacity
Factor is equal to or greater than 51% or 0.5 if the Monthly Capacity Factor is
less than 51%.

          15.5.2 Availability Factor The Availability Factor shall equal 1.0
unless Seller fails to provide Net Capacity pursuant to Section 15.5.2.1 in
which case the Availability Factor shall be 0.5.

               15.5.2.1 At Edison's request., Seller shall, within 30 minutes of
such request, make all reasonable effort to make available the Net Capacity
according to the Table set forth in Exhibit F, attached hereto and made part
hereof by this reference, during periods of Emergency. If Seller has previously
scheduled an outage coincident with an


                                       27


Emergency, Seller shall make all, reasonable efforts to reschedule the outage.
Failure of Seller to provide Net Capacity during an Emergency when first
requested by Edison following the Date of Firm Operation shall not result in a
reduction of Monthly Capacity Payments. However, after said initial request by
Edison, whether or not Seller has complied with such request, any subsequent
failure by Seller to comply with a request for Net Capacity by Edison shall
result in the Availability Factor becoming 0.5 for the month in which the
request occurred. The Availability Factor shall continue to be 0.5 until Seller
can demonstrate that the Project can comply with a request for Net Capacity by
Edison.

16. TAXES:

     16.1 Ad valorem taxes and other taxes properly attributed to the Project
and Geothermal Facilities shall be paid by Seller. If such taxes are assessed or
levied against Edison, Seller shall pay Edison the amount of such assessment or
levy within thirty days of presentation of a bill therefor.

     16.2 Ad valorem taxes and other taxes properly attributed to land, land
rights or interests in land for the Interconnection Facilities shall be paid by
Edison. If such taxes are levied against Seller, Edison shall pay Seller the
amount of such assessment or levy within thirty days of presentation of a bill
therefor.

17. BILLING AND PAYMENT

     17.1 Billing for Net Energy shall be determined for each calendar month by
application of the Agreement Price pursuant to Section 15, to monthly meter
readings


                                       28


taken on, or about, the last day of each month. Within fifteen days after such
readings, Edison shall mail a monthly statement of Net Energy and the dollar
amount, if any, to be paid by Edison to Seller for Net Energy for that month.
Payment to Seller shall follow within fifteen days of the statement.

     17.2 Seller shall pay Edison for energy delivered and capacity made
available to the Project within thirty days of the mailing of the monthly
billing statement from Edison. Seller-shall ply for such energy and capacity in
accordance with the provisions of Section 6.2.

     17.3 Edison shall bill Seller for taxes pursuant to Section 16.1, excluding
any penalties or interest, no later than three (3) months following the date of
payment of such taxes by Edison, as Seller shall pay to Edison therefor within
forty-five days of the mailing date of the bill to Seller.

     17.4 Seller shall bill Edison for taxes pursuant to Section 16.2, excluding
any penalties or interest, no later than three (3) months following the date of
payment of such taxes by Seller, and Edison shall pay Seller therefor within
forty-five days of the mailing date of the bill to Edison.

     17.5 If any amount of money owed hereunder by either Party has not been
paid when due, an interest charge computed at the rate of the then-current Bank
of America prime rate plus 1% per annum, compounded daily, or the maximum legal
rate, whichever is less, from the due date until paid shall be added thereto.

                                       29


18. OPERATING REPRESENTATIVES:

     18.1 Within thirty days after execution of this Agreement, each Party shall
appoint an Operating Representative for the purpose of securing effective
cooperation and interchange of information and providing consultation and
coordination on a prompt and orderly basis between the Parties in connection
with various administrative, technical and operating matters which may arise
from time to time under this Agreement, including the performance of the
functions and duties of said representative under this Agreement.

     18.2 Each Party shall bear the cost of its designated Representative.

     18.3 Each Party shall notify the other Party promptly of any change in the
designation of its Operating Representative.

     18.4 The Operating Representative shall have no authority to modify any of
the terms, covenants or conditions of this Agreement.

19. LIABILITY:

     19.1 Each Party (First Party) hereby releases the other Party (Second
Party), its directors, officers, employees, and agents from any liability for
any loss, damage, claim, cost, charge or expense (including direct, indirect or
consequential loss, damage, claim, cost, charge or expense, including attorney's
fees and other costs of litigation) incurred by the First Party in connection
with damage to the property of the First Party arising out of the Second Party's
construction, engineering, repair, supervision, inspection, testing, protection,
operation, maintenance, replacement, reconstruction, use or ownership of its
facilities, to the extent such loss, damage, claim, cost, charge or expense is
caused by the negligence of the Second Party, its directors, officers,


                                       30


employees, agents or any person or entity whose negligence would be imputed to
the Second Party.

     19.2 Each Party shall indemnify and hold harmless the other Party, its
directors, officers, employees and agents from and against any loss, damage,
claim, cost, charge or expense (including direct, indirect or consequential
loss, damage, claim, cost, charge or expense, including attorney's fees and
other costs of litigation) incurred by the other Party in connection with injury
to, or death of, any person or damage to property of third parties arising cut
of arising out of the indemnifying Party's construction, engineering, repair,
supervision, inspection, testing, protection, operation, maintenance,
replacement, reconstruction, use or ownership or its facilities, to the extent
that such loss, damage, claim, cost, charge or expense is caused by the
negligence of the indemnifying Party, its directors, officers, employees, agents
or any person or entity whose negligence would be imputed to the indemnifying
Party; provided, however, that each Party shall be solely responsible for, and
shall bear all costs of, claims brought by its contractors or its own employees
and shall indemnify and hold harmless the other Party for any such costs
including costs arising out of any worker's compensation law.

     19.3 The provisions of this Section 19 shall not be construed so as to
relieve any insurer of its obligations to pay any insurance claims in accordance
with the provisions of any valid insurance policy.



                                       31


20. INSURANCE:

     20.1 Seller shall procure and maintain, and shall require each of its
contractors and subcontractors to maintain, the following insurance during the
term of this Agreement.

          20.1.1 Workers' Compensation and Employer's Liability Insurance in
compliance with statutory requirements of the State of California. Named
insureds shall require their insurers to waive all rights of subrogation against
Edison.

          20.1.2 Comprehensive Bodily Injury and Property Damage Liability
Insurance, including owner's and contractor's protective, products/completed
operations, blanket contractual and automobile liability coverages, with
combined single limits of not less than $5,000,000 per occurrence. Such
insurance shall (i) acknowledge Edison as an additional insured but only for
Seller's or Seller's contractor's acts or omissions, (ii) be primary for all
purposes and (iii) contain standard cross-liability provisions.

          20.1.3 Seller will use its best efforts to secure business
interruption insurance in the amount of $1,500,000 per year for the period
commencing with the second year of Project Operation.

     20.2 Prior to the commencement of work on the Project and during the term
of this Agreement, Seller shall furnish a certificate of insurance to Edison
evidencing the above coverage. Such certificate shall provide that such
insurance shall not be terminated nor expire except on thirty days' prior
written notice to Edison. Payments of premiums and deductible losses for the
above insurance shall be at Seller's sole expense.



                                       32


     20.3 If Seller fails to comply with any of the provisions of this Section
20, Seller shall, at its own cost, defend, indemnify, and hold harmless Edison,
its directors, officers, agents, employees, assigns and successors in interest
from and against any and all liability, damages, losses, claims, demands,
actions, causes of action, costs, including attorney's fees and expenses, and
other costs and expenses of litigation, or any of them, resulting from death of,
or injury to, any person or damage to, or loss of, any property, including
personnel and property of Edison, to the extent Edison would have been protected
had Seller complied with all of the provisions of this Section 20.

21. WAIVERS:

     21.1 Any waiver at any time by either Party of its rights with respect to a
default or any other matter arising in connection with this Agreement shall be
in writing and shall not be deemed to be a waiver with respect to any subsequent
default or matter.

22. SECURITY:

     22.1 As security for any amounts payable by Seller to Edison pursuant to
Section 15, Seller hereby grants Edison, a continuing lien and security interest
in the Project and Geothermal Facilities subject and subordinate only to the
lien and security Interest of the lender providing construction of permanent
financing for the Project contained in the Construction and Term Loan Agreement
between Mammoth-Pacific and Pacific Lighting Leasing Company, dated September 7,
1983. The lien and security interest of Edison shall be evidenced by a Deed of
Trust, Assignment of Rents, and


                                       33


Security Agreement, and Financing Statement in the form attached hereto as
Exhibit B and Exhibit C respectively, and by this reference made a part hereof.

     22.2 As additional security for any amounts payable by Seller to Edison
pursuant to Section 15, Seller hereby agrees that its leasehold interest
covering the Project and Seller's right to produce geothermal fluid shall be
subject to a lien in favor of Edison until the Total MWh Credit is repaid. Such
lien shall be evidenced by a Deed of Trust, Assignment of Rents, and Security
Agreement in the form attached hereto as Exhibit B and by this reference made a
part hereof.

23. UNCONTROLLABLE FORCES:

     23.1 Neither Party shall be considered to be in default in the performance
of any of its obligations under this Agreement, other than the obligation to pay
money for energy and capacity previously delivered and received, when, and to
the extent, failure of performance shall be due to an uncontrollable force. The
term "uncontrollable force" means any cause beyond the control of the party
failing to perform including, but not limited to, failure of facilities
maintained in accordance with good engineering and operating practices in
California, flood, earthquake, storm, lightning, fire, epidemic, war, riot,
civil disturbance or disobedience, labor dispute, labor or material shortage,
sabotage, restraint by court order or public authority, art action or nonaction
by, or inability to obtain the necessary authorizations or approvals from, any
governmental agency or authority, which by the exercise of due diligence such
Party could not reasonably have been expected to avoid and which by exercise of
due diligence it has not overcome.


                                       34


Either Party rendered unable to fulfill any of its obligations under this
Agreement by reason of an uncontrollable force shall give prompt written notice
of such facts to the other Party and shall exercise due diligence to remove such
inability. Nothing contained herein shall be construed so as to require a Party
to settle any strike or labor dispute in which it may be involved.

24. ASSIGNMENT OF RIGHTS

     24.1 Neither Party shall assign any interest in the Agreement, the Project
or in the Geothermal Facilities, other than to a subsidiary or affiliate or in
connection with the merger or sale of substantially all of its assets, without
the express written consent of the other Party. Any assignment without the
consent of the other Party, which consent shall not be unreasonably withheld,
shall be void.

     24.2 Seller may not sell, transfer, assign, convey or further encumber any
interest in the Agreement or in the Project or in the Geothermal Facilities or
leasehold interest or any interest in the Magma Lease unless it promptly repays
Edison the accrued MWh Credit balance (converted to kWh) converted to dollars by
multiplying said amount by the then current Avoided Cost for energy and capacity
(converted to (cent)/kWh) together with any other sums then due Edison.

     24.3 Any assignment by a Party of its interest in this Agreement shall not
relieve the assigned Party of primary liability for any of its duties and
obligations under this Agreement, and in the event of such assignment, the
assigning Party shall continue to remain primarily liable for payment of any and
all money due the other Party as provided


                                       35


under this Agreement, and for the performance and observance of all other
covenants, duties and obligations to be performed and observed under this
Agreement by the Party to the same extent as though an assignment had not been
made.

25. DISPUTES:

     25.1 Any dispute arising between the Parties or their Operating
Representatives relating to interpretation of the provisions of this Agreement
or to the performance of the Parties hereunder, on which the Operating
Representatives cannot reach final agreement within thirty days of written
notice from the disputing Party to the other Party of such a dispute, shall be
referred to the signatories to this Agreement, or any successors thereto, for
resolution.

     25.2 The final decision by the signatories to this Agreement, or any
successors thereto, shall be made within thirty days after presentation by the
Operating Representatives of all evidence affecting the dispute, and shall be
reduced to writing. The decision shall be final and conclusive; provided, that
if said signatories or successors cannot reach a final agreement regarding the
dispute within the thirty day period, any remedies which are provided by law may
be pursued.

26. LIENS AND ENCUMBRANCES:

     26.1 Seller shall not suffer or permit to be enforced against the Project
or Project land, land rights, or interests in land, or in the Geothermal
Facilities or in the Magma Lease or any part thereof, any mechanic's,
materialman's, contractor's or subcontractor's liens arising from, or any claim
for damage growing out of, the work of


                                       36


any construction, repair, restoration, replacement, or improvement, or any other
claim or demand howsoever the same may arise; provided, if the aforesaid should
occur, Seller shall take any and all action necessary to cause any such lien to
be released or discharged or the enforcement thereof against the Project or
Project land, land rights or interests in land or the Geothermal Facilities or
in the Magma Lease to be terminated; and Seller agrees to indemnify and hold
Edison and said premises free and harmless from all liability for any and all
such liens, claims and demands, together with reasonable attorney's fees and all
costs and expenses in connection therewith.

27. DISCLAIMER:

     27.1 Any review by Edison of the design, construction, operation or
maintenance of the Project is solely for the information of Edison. By making
such review, Edison makes no representation as to, and in no way shall be
responsible for, the economic feasibility, technical feasibility, operational
capability or reliability, technical feasibility, operational capability or
reliability of the Project. Seller shall in no way represent to any third party
that any such review or the Project by Edison, including but not limited to, any
review of the design, construction, operation or maintenance of the Project by
Edison is a representation by Edison as to the economic feasibility, technical
feasibility, operational capability or reliability of said facilities. Seller is
solely responsible for economic feasibility, technical feasibility, operational
capability or reliability thereof. Edison shall not be liable to Seller or third
parties for, and Seller shall defend and indemnify Edison from, any cost, loss,
damage or liability arising from any


                                       37


contrary representation regarding the design, construction, operation or
maintenance of the Project.

28. CONFIDENTIAL AND PROPRIETARY INFORMATION

     28.1 The Parties agree that the terms and conditions set forth in this
Agreement are to be maintained in confidence, and neither Party shall disclose
any such information to any third party without the prior consent of the other.

     28.2 Edison shall maintain in confidence, and shall use only for the
purposes of this Agreement, information it may receive from Seller concerning
the production and treatment of geothermal energy; the extent, productivity and
properties of the Magma Resource; the compositions and properties of the
geothermal substances produced from said Magma Resource; and other geothermal
operations conducted by Seller in the Magma Resource.

     28.3 The obligations of confidentiality set forth in Section 28.2 shall not
apply to (i) information already known to the receiving Party when received from
the other Party; (ii) information which is known or becomes known to the general
public through acts of others than the Party hereto charged with the obligation
to maintain it in confidence; and (iii) information received from a third party
without restriction who did not acquire it directly or indirectly from the other
Party.

     28.4 Any Party required by any law, rule, regulation or order to disclose
information which is otherwise required to be maintained in confidence pursuant
to this Section 28 or where such disclosure is required in connection with the
assertion of any


                                       38


claim or defense in judicial or administrative proceedings involving a Party,
may make such disclosure, notwithstanding the provisions of this Section 28;
provided, however, that the Party otherwise required to make such disclosure
shall inform the other Party thereof and shall cooperate to the maximum extent
practicable to minimize the disclosure of any such information. The Party so
disclosing such information shall use its best efforts to obtain proprietary or
confidential treatment of such information by the third party to whom such
information is so disclosed, and will, to the extent such remedies are
available, seek protective orders limiting the dissemination and use of such
information. This Agreement does not alter the rights of either Party to object
to any such disclosure to any third party, to the extent such rights are
permitted by law, rule, regulation or order.

29. NO THIRD PARTY BENEFICIARIES:

     29.1 This Agreement is for the sole benefit of the Parties and shall not be
construed as granting rights to any person or entity other than the Parties or
imposing obligations on either Party to any person or entity other than the
Parties.

30. NONDEDICATION OF FACILITIES:

     30.1 Nothing in this Agreement, and no undertaking under this Agreement
shall be construed as constituting, a dedication by either Party or any of its
properties or facilities, or any part thereof, to the other Party or to the
customers of a Party, or to the public.



                                       39


31. NOTICES:

     31.1 Except as otherwise specifically provided herein, any demand, notice,
or request from one Party to the other, shall be given in writing and shall be
deemed properly given, if delivered in person or sent by registered or certified
mail to the persons specified below:

              Southern California Edison Company
              2244 Walnut Grove Avenue
              Post Office Box 800
              Rosemead, CA 91770
              Attention:  Secretary

              Mammoth-Pacific
              c/o Pacific Geothermal Company
              6055 E. Washington Blvd.
              Commerce, CA 90040
              Attention:  President

32. GOVERNING LAW

     32.1 This Agreement shall be interpreted, governed by, and construed under
the laws of the State of California or the laws of the United States, as
applicable, as if executed and to be performed wholly within the State of
California.

33. GENERAL PROVISION:

     33.1 This Agreement constitutes the entire agreement and understanding
between the Parties as to the subject matter of this Agreement. Prior
agreements, commitments or representations express or implied, and discussions
between the Parties shall not be construed to be a part of this Agreement unless
contained in this Agreement.



                                       40



                                      SOUTHERN CALIFORNIA EDISON COMPANY

                                      By /s/ Glenn J. Bjorklund
                                         ---------------------------------------
                                         Glenn J. Bjorklund
                                         Vice President

                                      MAMMOTH-PACIFIC
                                      A California General Partnership

                                      By /s/ Daniel A. Seigel
                                         ---------------------------------------
                                         Daniel A. Seigel
                                         President of Pacific Geotherman Company



                                       41



                                                                 Exhibit 10.3.12


                             AMENDMENT NO. 1 TO THE
                              AMENDED AND RESTATED
                       POWER PURCHASE AND SALES AGREEMENT
                                     BETWEEN
                                 MAMMOTH PACIFIC
                                       AND
                       SOUTHERN CALIFORNIA EDISON COMPANY

              1.  PARTIES

              The Parties to this Amendment No. 1 to the Amended and Restated
Power Purchase and Sales Agreement between Mammoth Pacific and Southern
California Edison Company, executed on December 2, 1986 ("Contract") are Mammoth
Pacific, L.P., a California limited partnership ("Seller") and Southern
California Edison Company ("Edison") referred to individually as "Party" and
collectively as "Parties."

              2.  RECITALS

              This Amendment No. 1 is made with reference to the following
facts, among others:

              2.1 On December 2, 1986, Mammoth-Pacific and Edison executed the
Contract which supersedes and replaces, in all terms and conditions, the
original Mammoth Binary Power Purchase and Sales Agreement executed on October
20, 1983, assigned to Mammoth Pacific on October 20, 1983, and Amendment No. 1
thereto, executed on December 30, 1983.

              2.2 On January 29, 1990, Mammoth Pacific assigned its right,
title, and interest in the Contract to Seller. Edison consented to this
assignment on January 26, 1990. As a condition of this assignment, Mammoth
Pacific repaid to Edison the dollar equivalent of the accrued MWh Credit
balance, pursuant to the terms and conditions of the Contract, on January 30,
1990.

              2.3 The Parties desire to amend the Contract to delete references
to the MWh Credit balance since this obligation has been discharged.

              3.  AGREEMENT

              The Parties agree to amend the Contract as follows:

              3.1  Section 1.1 is amended to read as follows:




              "1.1 The Parties to this Amended and Restated Power Purchase and
Sales Agreement are: Mammoth Pacific, L.P. ("Seller"), a California limited
partnership, and Southern California Edison Company ("Edison"), a California
corporation, individually "Party", and collectively, "Parties.""

              3.2 Section 2.2 is amended to read as follows:

              "2.2 This Amended and Restated Power Purchase and Sales Agreement
provides for the following revisions, among others; restructuring of payment
provisions for energy and capacity purchased by Edison, providing additional
financial security to Edison and outlining Seller's option to supply power from
the Generating Facility for operation of the Geothermal Facility and the
Generating Facility;"

              3.3  Section 13.4 is amended to read as follows:

              "13.4 If Seller sells or otherwise conveys any interest in the
project and/or Geothermal Facilities, Seller shall pay immediately to Edison any
monies then due Edison hereunder."

              3.4  Section 14.2 is amended to read as follows:

              "14.2 If Seller abandons the Project and Geothermal Facilities
during the term of this Agreement, Edison, or any Edison subsidiary or affiliate
designated by Edison in its sole discretion, shall have the first right to
purchase the Project and Geothermal Facilities at their fair market value."

              3.5  Section 14.4 is amended to read as follows:

              "14.4 If Seller abandons the Project, Seller shall immediately
repay to Edison any monies then due Edison hereunder."

              3.6  Section 15 is amended to read as follows:

              "15.  AGREEMENT PRICE AND BASE CAPACITY PRICE ADJUSTMENTS:"

              3.7  Section 15.2 is amended to read as follows:

              "15.2  MWh Credit Accumulation

              As of September 12, 1986, the accrued MWh Credit shall be fixed
and recalculated from the Date of Firm Operation through September 12, 1986,
which shall be deemed to be 34,642 MWh. In conjunction with the assignment of
the Contract on


                                       2



January 29, 1990, the accrued MWh Credit balance shall be converted to dollars
which shall be deemed to be $1,157,894.99 and shall be repaid to Edison on
January 30, l990, thus discharging all obligation of the Seller with regard to
the accrued MWh Credit."

              3.8  Section 15.3.1 is amended to read as follows:

              "15.3.1 Coincident with the effective date of this Amended and
Restated Power Purchase and Sales Agreement, Seller shall provide and maintain
security in the amount of $1.3 million in the form of a letter of credit or
corporate guarantee from Pacific Energy, reasonably satisfactory to Edison,
which shall insure payment to Edison of the energy payment refund and/or other
monies as set forth herein. Seller shall provide Edison with certificates
evidencing Seller's compliance with the security requirements in this section."

              3.9  Section 15.3.5 is amended to read as follows:

              "15.3.5 The security contemplated herein may be reduced at
Seller's option in accordance with the following criteria:

              A. Security for the energy payment refund may be reduced by the
amount of energy payment refund paid to Edison under the terms of this
Agreement."

              3.10  Section 15.4 is amended to read as follows:

              "15.4  MWh Credit Repayment

              The accrued MWh Credit shall be deemed to be repaid to Edison
effective as of January 30, 1990."

              3.11  Section 22 is amended to read as follows:

              "22.  Security:

              22.1 Pursuant to the repayment of the accrued MWh Credit, as set
forth herein, Edison's lien and security interest in the Project and Geothermal
Facilities shall be reconveyed to Seller effective as of January 30, 1990.

              22.2 Pursuant to the repayment of the accrued MWh Credit, as set
forth herein, Edison's lien evidenced by a Deed of Trust, Assignment of Rents,
and Security Agreement shall be reconveyed to Seller effective as of January 30,
1990."

              3.12  Section 24.2 is amended to read as follows:


                                       3



              "24.2 Seller may not sell, transfer, assign, convey, or further
encumber any interest in the Agreement or in the Project or in the Geothermal
Facilities or leasehold interest or any interest in the Magma Lease unless it
promptly repays Edison any monies then due Edison."

              3.13  Section 31.1 is amended to read as follows:

              "31.1 Except as otherwise specifically provided herein, any
demand, notice, or request from one Party to the other, shall be given in
writing and shall be deemed properly given, if delivered in person or sent by
registered or certified mail to the persons specified below:

              Southern California Edison Company
              2244 Walnut Grove Avenue
              Post Office Box 800
              Rosemead, CA  91770
              Attention:  Secretary

              Mammoth Pacific, L.P.
              6055 E. Washington Blvd.
              Commerce, CA  90040
              Attention:  President, Pacific Geothermal Company."

              3.14 Exhibit B; "Deed of trust, Assignment of Rents and Security
Agreement" is deleted in its entirety.

              3.15  Exhibit C; "Financing Statement" is deleted in its entirety.

              3.16 Exhibit G; "Guaranty Agreement" is deleted and replaced with
the attached "Guaranty Agreement" dated January 23, 1990.

              4.  OTHER CONTRACT TERMS AND CONDITIONS

              Except as amended herein, all terms, covenants, and conditions
contained in the Contract shall train in full force and effect.

                                       4




              5.  SIGNATURE CLAUSE

              The signatories hereto represent that they have been appropriately
authorized to enter into this Amendment No. 1 on behalf of the Party for whom
they sign. This Amendment No. 1 is hereby executed as of this 18th day of May,
1990.

                                            SOUTHERN CALIFORNIA EDISON COMPANY

                                            By /s/ Robert Dietch
                                               ---------------------------------
                                               Robert Dietch
                                               Vice President



                                            MAMMOTH PACIFIC, L. P.

                                            By /s/ Claude Harvey
                                               ---------------------------------
                                            Name  Claude Harvey
                                            Title Sr. Vice President


                                       5



                                                                 Exhibit 10.3.13

                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE








                              SCE STANDARD CONTRACT

                            LONG TERM POWER PURCHASE







                             POWER PURCHASE CONTRACT

                                     BETWEEN

                       SOUTHERN CALIFORNIA EDISON COMPANY

                                       AND

                                 MAMMOTH PACIFIC

                           (CASA DIABLO GEOTHERMAL II)

                                12 MW NAME PLATE
                                NEW FACILITY GII


                                               DOCUMENT NO.: 2433H
                                               EFFECTIVE DATE: SEPTEMBER 7, 1983
                                               REVISED: MAY 4, 1984







                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                                Table of Contents
                                -----------------

SECTION          TITLE                                                PAGE
-------          -----                                                ----
1                PROJECT SUMMARY                                        1

                     GENERAL TERMS & CONDITIONS

2                DEFINITIONS                                            6

3                TERM                                                  11

4                GENERATING FACILITY                                   12

5                OPERATING OPTIONS                                     20

6                INTERCONNECTION FACILITIES                            22

7                ELECTRICAL LINES AND ASSOCIATED EASEMENTS             23

8                METERING                                              24

9                POWER PURCHASE PROVISIONS                             26

10               PAYMENT AND BILLING PROVISIONS                        42

11               TAXES                                                 46

12               TERMINATION                                           47

13               LIABILITY                                             47

14               INSURANCE                                             49

15               UNCONTROLLABLE FORCES                                 51

16               NONDEDICATION OF FACILITIES                           53



17               PRIORITY OF DOCUMENTS                                 53

18               NOTICES AND CORRESPONDENCE                            53




                                       ii





                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


19               PREVIOUS COMMUNICATIONS                                   54

20               NONWAIVER

54               SUCCESSORS AND ASSIGNS                                    55

22               EFFECT OF SECTION READINGS                                55


23               GOVERNING LAW                                             55

24               MULTIPLE ORIGINALS                                        56
                 SIGNATURES






















                                      iii





                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


1.    PROJECT SUMMARY
      ---------------

      This Contract is entered into between Southern California Edison Company
      ("Edison") and Mammoth Pacific ("Seller"). Seller is willing to construct,
      own, and operate a Qualifying Facility and sell electric power to Edison
      and Edison is willing to purchase electric power delivered by Seller to
      Edison at the Point of Interconnection pursuant to the terms and
      conditions set forth as follows:



      1.1     All notices shall be sent to Seller at the following address:

              Mammoth Pacific
              6055 East Washington Boulevard
              Commerce, CA 90040

      1.2     Seller's Generating Facility:

              a.     Nameplate Rating:  12,000 kW.

              b.     Location:  Casa Diablo (Mammoth Lakes), California

              c.     Type (Check One):

              _____  Cogeneration Facility

              [X]    Small Power Production Facility


              d.     Delivery of power to Edison at a nominal 33,000 volts.

              e.     Seller shall commence construction of the Generating
                     Facility by April l986.

      1.3     Edison Customer Service District:

                  Bishop District









                                       1




                              SCE STANDARD CONTRACT


                            LONG-TERM POWER PURCHASE


                  374 Lagoon Street
                  Bishop, CA 93514

      1.4     Location of Edison Operating Switching Center:

                  Bishop Hydro Division
                  Control Substation, Route 1
                  Bishop, CA 93514

      1.5     Contract Capacity:  0 kW

              1.5.1     Estimated as-available capacity:  9,100 kW.

      1.6     Expected annual production:  48,000,000 kWh.

      1.7     Expected Firm Operation for each generating unit(s): February 1987

      1.8     Contract Term:  30 years

      1.9     Operating Options pursuant to Section 5:  (Check One)

              [N/A]  Operating Option I. Entire Generator output dedicated to
                     Edison. No electric service or standby service required.

              [N/A]  Operating Option II. Entire Generator output dedicated to
                     Edison with separate electric service required.

              a.     Electric service Tariff Schedule No. ____ pursuant to
                     Section 10.2.

              b.     Contract demand:  ____ kW.

              [X]    Operating Option III.  Excess generator output dedicated

                     to Edison with Seller serving own load.

              a.     Electric service Tariff Schedule No. TOU--8 pursuant to
                     Section 10.2.



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                              SCE STANDARD CONTRACT
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            b.     Contract demand:  1,900 kW.

            c.     Standby Demand:  1,900 kW pursuant to Section 10.2.

            d.     Maximum electrical requirements expected: 1,900 kW.

            e.     Standby electric service Tariff Schedule No. SCG-1 pursuant
                   to section 10.2.

            f.     Minimum monthly charge for standby services:   [N/A].



    1.10   Interconnection Facilities Agreement pursuant to Section 6 shall be:
            (Check One)


              [N/A]   - Added Facilities Basis (Appendix A.l)

              [N/A]   - Capital Contribution Basis (Appendix A.2)

              [X]     - Seller Owned and Operated Basis (Appendix A.3)

    1.11   The Capacity Payment Option selected by Seller pursuant to Section
           9.1 shall be:  (Check One)

               [X]     Option A - As-available capacity based upon:

                   [N/A] Standard Offer No. 1 Capacity Payment

                           Schedule, or

                      [X]  Forecast of Annual As-Available Capacity Payment
                           Schedule.  The as-available capacity price (first


                           year):  194/kW--yr.  (Appendix B)

               [X]     Option B - Firm Capacity (check one)


                                       3




                              SCE STANDARD CONTRACT
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                  [N/A]  Standard Offer No. 2 Capacity Payment Schedule in
                         effect at time of Contract execution.


                  [N/A]  Standard Offer No. 2 Capacity Payment Schedule in
                         effect at time of Firm Operation of first generating
                         unit.



                    Contract Capacity Price:  $__/kW-yr. (Firm Capacity).

    1.12    The Energy Payment Option selected by Seller pursuant to Section
            9.2 shall be: (Check One)

             [X]    Option 1 - Forecast of Annual Marginal Cost of Energy in
                    effect at date of execution of this Contract. (Appendix C)

            [N/A]   Option 2 - Levelized Forecast of Marginal Cost of Energy
                    in effect at date of execution of this Contract. Levelized
                    Forecast for the expected date of Firm Operation is
                    ___(cent)/kWh. If Seller's Generating Facility is an
                    oil/natural gas fueled cogenerator, Seller may not select
                    Option 2.

                    For the energy payment refund pursuant to Section 9.5
                    under Option 2. Edison's Incremental Cost of Capital is
                    ____%. Seller may change once between Options 1 and 2,
                    provided Seller delivers written notice of such change at

                    least 90 days prior to the date of Firm Operation. For
                    Option 1 or 2, Seller elects to receive the following


                    percentages in 20% increments, the total of which shall
                    equal 100%:



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                              SCE STANDARD CONTRACT
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                    [100]  Percent of Forecast of Marginal Cost of Energy
                           (Annual or Levelized), not to exceed 20% of the
                           annual forecast for oil/natural gas fueled
                           cogenerators, and

                    [0]    Percent of Edison's published avoided cost of

                           energy based on Edison's full avoided operating


                           costs as updated periodically and accepted by the
                           Commission.

              [N/A] Option 3 - Incremental Energy Rate.  Seller may select:

                    [N/A]  Forecast of Incremental Energy Rate in effect at
                           date of execution of this Contract (Appendix D),
                                                          or
                    [NA]   A range in increments of 100 Btu/kWh above and
                           below the forecast of incremental energy rates for
                           each year during the First Period of the Contract
                           Term as follows:

Year            Range             Year       Range            Year       Range

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

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


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

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


            1.13  Metering Location (Check one)

                      Seller elects metering location pursuant to Section 8 as
                      follows:

                        [X]  Edison's side of the Interconnection Facilities



                                       5



                              SCE STANDARD CONTRACT
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                     [N/A] Seller's aide of the Interconnection Facilities. Loss
                     compensation factor is equal to _____, pursuant to Section
                     8.3.



                           CENTRAL TERMS & CONDITIONS

2.    DEFINITIONS

      When used with initial capitalizations, whether in the singular or in the
      plural, the following terms shall have the following meanings:

      2.1     Adjusted Capacity Price: The $/kW-yr capacity purchase price based
              on the Capacity Payment Schedule in effect at time of Contract
              execution for the time period beginning on the date of Firm
              Operation for the first generating unit and ending on the date of
              termination or reduction of Contract Capacity under Capacity
              Payment Option B.

      2.2     Appendix A.1:  Interconnection Facilities Agreement -- Added
              Facilities Basis

      2.3     Appendix A.2:  Interconnection Facilities Agreement -- Capital
              Contribution Basis

      2.4     Appendix A.3:  Interconnection Facilities Agreement -- Seller
              Owned and Operated Basis

      2.5     Appendix B:  Forecast of Annual As Available Capacity Payment
              Schedule

      2.6     Appendix C:  Forecast of Annual Marginal Cost of Energy

      2.7     Appendix D:  Forecast of Incremental Energy Rates.

      2.8     Capacity Payment Schedule(s): Published capacity payment
              schedule(s) as authorized by the Commission for as-available or
              firm capacity.







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                              SCE STANDARD CONTRACT
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      2.9     Commission: The Public Utilities Commission of the State of
              California.

      2.10    Contract: This document and Appendices, as amended from time to
              time.

      2.11    Contract Capacity: The electric power producing capability of the
              Generating Facility which is committed to Edison.

      2.12    Contract Capacity Price: The capacity purchase price from the
              Capacity Payment Schedule approved by the Commission for Capacity
              Payment Option B.

      2.13    Contract Term: Period in years commencing with date of Firm
              Operation for the first generating unit(s) during which Edison
              shall purchase electric power from Seller.

      2.14    Current Capacity Price: The $/kW-yr capacity price provided in the
              Capacity Payment Schedule determined by the year of termination or
              reduction of Contract Capacity and the number of years from such
              termination or reduction to the expiration of the Contract Term
              for Capacity Payment Option B.

      2.15    Edison:  The Southern California Edison Company.

      2.16    Edison Electric System Integrity: The state of operation of
              Edison's electric system in a manner which is deemed to minimize
              the risk of injury to persons and/or property and enables Edison
              to provide adequate and reliable electric service to its
              customers.

      2.17    Emergency: A condition or situation which in Edison's sole
              judgment affects Edison Electric System Integrity.






                                       7



                              SCE STANDARD CONTRACT
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      2.18    Energy: Kilowatthours generated by the Generating Facility which
              are purchased by Edison at the Point of Interconnection.

      2.19    Firm Operation: The date agreed on by the Parties on which each
              generating unit(s) of the Generating Facility is determined to be
              a reliable source of generation and on which such unit can be
              reasonably expected to operate continuously at its effective
              rating (expressed in kW).

      2.20    First Period: The period of the Contract Term specified in Section
              3.1.

      2.21    Forced Outage: Any outage other than a scheduled outage of the
              Generating Facility that fully or partially curtails its
              electrical output.

      2.22    Generating Facility: All of Seller's generators, together with all
              protective and other associated equipment and improvements,
              necessary to produce electrical power at Seller's Facility
              excluding associated land, land rights, and interests in land.

      2.23    Generator: The generator(s) and associated prime mover(s), which
              are a part of the Generating Facility.

      2.24    Interconnection Facilities: Those protection, metering, electric
              line(s), and other facilities required in Edison's sole judgment
              to permit an electrical interface between Edison's system and the
              Generating Facility in accordance with Edison's Tariff Rule No. 21
              titled Cogeneration and Small Power Production Interconnection
              Standards filed with the Commission.






                                       8



                              SCE STANDARD CONTRACT
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      2.25    Interconnection Facilities Agreement: That document which is
              specified in Section 1.10 and is attached hereto.

      2.26    KVAR: Reactive kilovolt-ampere, a unit of measure of reactive
              power.

      2.27    Operate: To provide the engineering, purchasing, repair,
              supervision, training, inspection, testing, protection, operation,
              use, management, replacement. retirement, reconstruction, and
              maintenance of and for the Generating Facility in accordance with
              applicable California utility standards and good engineering
              practices.

      2.28    Operating Representatives: Individual(s) appointed by each Party
              for the purpose of securing effective cooperation and interchange
              of information between the Parties in connection with
              administration and technical matters related to this Contract.

      2.29    Parties:  Edison and Seller.

      2.30    Party:  Edison or Seller.

      2.31    Peak Months: Those months which the Edison annual system peak
              demand could occur. Currently, but subject to change with notice,
              the peak months for the Edison system are June, July, August, and
              September.

      2.32    Point of Interconnection: The point where the transfer of
              electrical energy between Edison and Seller takes place.

      2.33    Project: The Generating Facility and Interconnection Facilities
              required to permit operation of Seller's Generator in parallel
              with Edison's electric system.







                                       9



                              SCE STANDARD CONTRACT
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      2.34    Protective Apparatus: That equipment and apparatus installed by
              Seller and/or Edison pursuant to Section 4.2.

      2.35    Qualifying Facility: Cogeneration or Small Power Production
              Facility which meets the criteria as defined in Title 18, Code of
              Federal Regulations, Section 292.201 through 292.207.

      2.36    Second Period: The period of the Contract Term specified in
              Section 3.2.

      2.37    Seller:  The Party identified in Section 1.0.

      2.38    Seller's Facility: The premises and equipment of Seller located as
              specified in Section 1.2.

      2.39    Small Power Production Facility: The facilities and equipment
              which use biomass, waste, or renewable resources, including wind,
              solar, geothermal, and water, to produce electrical energy as
              defined in Title 18, code of Federal Regulations, Section 292.201
              through 292.207.

      2.40    Standby Demand: Seller's electrical load requirement that Edison
              is expected to serve when Seller's Generating Facility is not
              available.

      2.41    Summer Period: Defined in Edison's Tariff Schedule No. TOU-8 as
              now in effect or as may hereafter be authorized by the Commission.

      2.42    Tariff Schedule No. TOU-8: Edison's time-of-use energy tariff for
              electric service exceeding 500 kW, as now in effect or as may
              hereafter be authorized by the Commission.





                                       10



                              SCE STANDARD CONTRACT
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      2.43    Uncontrollable Forces: Any occurrence beyond the control of a
              Party which causes that Party to be unable to perform its
              obligations hereunder and which a Party has been unable to
              overcome by the exercise of due diligence, including but not
              limited to flood, drought, earthquake, storm, fire, pestilence,
              lightning and other natural catastrophes, epidemic, war, riot,
              civil disturbance or disobedience, strike, labor dispute, action
              or inaction of legislative, judicial, or regulatory agencies, or
              other proper authority, which may conflict with the terms of this
              Contract, or failure, threat of failure or sabotage of facilities
              which have been maintained in accordance with good engineering and
              operating practices in California.

      2.44    Winter Period: Defined in Edison's Tariff Schedule No. TOU-8 as
              now in effect or as may hereafter be authorized by the Commission.

3.    TERM

      This Contract shall be effective upon execution by the Parties and shall
      remain effective until either Party gives 90 days prior written notice of
      termination to the other Party, except that such notice of termination
      shall not be effective to terminate this Contract prior to expiration of
      the Contract Term specified in Section 1.8.

      3.1     The First Period of the Contract Term shall commence upon date of
              Firm Operation but not later than five years from the date of
              execution of this Contract.




                                       11



                              SCE STANDARD CONTRACT
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              a.      If the Contract Term specified in Section 1.8 is 15
                      years, the First Period of the Contract Term shall be
                      for five years.

              b.      If the Contract Term specified in Section 1.8 is 20, 25,
                      or 30 years, the First Period of the Contract Term shall
                      be for 10 years.

      3.2     The Second Period of the Contract Term shall commence upon
              expiration of the First Period and shall continue for the
              remainder of the Contract Term.

4.    GENERATING FACILITY

      4.1     Ownership

              The Generating Facility shall be owned by Seller.

      4.2     Design

              4.2.1    Seller, at no cost to Edison, shall:


                       a.    Design the Generating Facility.

                       b.    Acquire all permits and other approvals necessary
                             for the construction, operation, and maintenance of
                             the Generating Facility.

                       c.    Complete all environmental impact studies necessary
                             for the construction, operation, and maintenance of
                             the Generating Facility.

                       d.    Furnish and install the relays, meters, power
                             circuit breakers, synchronizer, and other control
                             and Protective Apparatus as shall





                                       12



                              SCE STANDARD CONTRACT
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                             be agreed to by the Parties as being necessary for
                             proper and safe operation of the Project in
                             parallel with Edison's electric system.

              4.2.2    Edison shall have the right to:

                       a.    Review the design of the Generating Facility's
                             electrical system and the Seller's Interconnection
                             Facilities. Such review may include, but not be
                             limited to, the Generator, governor, excitation
                             system, synchronizing equipment, protective relays,
                             and neutral grounding. The Seller shall be notified
                             in writing of the outcome of the Edison review
                             within 30 days of the receipt of all specifications
                             for both the Generating Facility and the
                             Interconnection Facilities. Any flaws perceived by


                             Edison in the design shall be described in Edison's
                             written notice.

                       b.    Request modifications to the design of the
                             Generating Facility's electrical system and the
                             Seller's Interconnection Facilities. Such
                             modifications shall be required if necessary to
                             maintain Edison Electric System Integrity when in
                             parallel with the Edison electric system.

              4.2.3    If Seller's Generating Facility includes an
                       induction-type generator(s), Seller shall provide
                       individual power factor correction capacitors for each

                       such generator. Such capacitors shall be switched on and
                       off simultaneously with each of the associated
                       induction-type




                                       13



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                       generator(s) of the Generating Facility. The KVAR rating
                       of such capacitors shall be the highest standard value
                       which will not exceed such generators no-load KVAR
                       requirement. Seller shall not install power factor
                       correction in excess of that required by this Section
                       unless agreed to in writing by the Parties.

      4.3     Construction

              Edison shall have the right to review, consult with, and make
              recommendations regarding Seller's construction schedule and to
              monitor the construction and start-up of the Project. Seller shall


              notify Edison, at least one year prior to Firm Operation, of
              changes in Seller's Construction Schedule which may affect the
              date of Firm operation.

      4.4     Operation

              4.4.1    The Generating Facility and Seller's Protective Apparatus
                       shall be operated and maintained in accordance with
                       applicable California utility industry standards and good
                       engineering practices with respect to synchronizing,
                       voltage and reactive power control. Edison shall have the
                       right to monitor operation of the Project and may require

                       changes in Seller's method of operation if such changes


                       are necessary, in Edison's sole judgment, to maintain
                       Edison Electric System Integrity.




                                       14



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


              4.4.2    Seller shall notify in writing Edison's
                       Operating Representative at least 14 days prior to:

                       a.     the initial testing of Seller's Protective
                              Apparatus; and

                       b.     the initial parallel operation of Seller's
                              Generators with Edison's electrical system.

                       Edison shall have the right to have a representative
                       present at each event.

              4.4.3    Edison shall have the right to require Seller to
                       disconnect the Generator from the Edison electric system
                       or to reduce the electrical output from the Generator
                       into the Edison electric systems whenever Edison
                       determines, in its sole judgment, that such a
                       disconnection is necessary to facilitate maintenance of
                       Edison's facilities, or to maintain Edison Electric
                       System Integrity. If Edison requires Seller to disconnect
                       the Generator from the Edison electric system pursuant to
                       this section 4.4.3, Seller shall have the right to
                       continue to serve its total electrical requirements
                       provided Seller has elected Operating Option III. Each
                       Party shall endeavor to correct, within a reasonable
                       period, the condition on its system which necessitates
                       the disconnection or the reduction of electrical output.

                       The duration of the disconnection or the reduction in


                       electrical output shall be limited to the period of time
                       such a condition exists.





                                       15



                              SCE STANDARD CONTRACT
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              4.4.4    the Generating Facility shall be operated with all of
                       Seller's Protective Apparatus in service whenever the
                       Generator is connected to or is operated in parallel with
                       the Edison electric system. Any deviation for brief
                       periods of emergency or maintenance shall only be by
                       agreement of the Parties.

              4.4.5    Each Party shall keep the other Party's Operating
                       Representative informed as to the operating schedule of
                       their respective facilities affecting each other's
                       operation hereunder, including any reduction in Contract
                       Capacity availability. In addition, Seller shall provide
                       Edison with reasonable advance notice regarding its
                       scheduled outages including any reduction in Contract
                       Capacity availability. Reasonable advance notice is as
                       follows:

                       SCHEDULED OUTAGE EXPECTED DURATION         ADVANCE NOTICE
                                                                    TO EDISON
                      Less then one day                           24  Hours
                      One day or more
                          (except major overhauls)                1 Week
                          Major overhaul                          6 Months

              4.4.6    Notification by each Party's Operating Representative of
                       outage date and duration should be directed to the other

                       Party's Operating Representative by telephone.



              4.4.7    Seller shell not schedule major overhauls during Peak
                       Months.




                                       16



              4.4.8    Seller shall maintain an operating log at Seller's
                       Facility with records of: real and reactive power
                       production; changes in operating status, outages,
                       Protective Apparatus operations; and any unusual
                       conditions found during inspections. Changes in setting
                       shall also be logged for Generators which are
                       "block-loaded" to a specific kW capacity. In addition,
                       Seller shall maintain records applicable to the
                       Generating Facility, including the electrical
                       characteristics of the Generator and settings or
                       adjustments of the Generator control equipment and
                       protective devices. Information maintained pursuant to
                       this Section 4.4.8 shall be provided to Edison, within 30
                       days of Edison's request.

              4.4.9    If, at any time, Edison doubts the integrity of any of
                       Seller's Protective Apparatus and believes that such loss
                       of integrity would impair the Edison Electric System
                       Integrity, Seller shall demonstrate to Edison's
                       satisfaction, the correct calibration and operation of
                       the equipment in question.

              4.4.10   Seller shall test all protective devices specified in
                       Section 4.2 with qualified Edison personnel present at
                       intervals not to exceed four years.


              4.4.11   Seller shall, to the extent possible, provide reactive


                       power for its own requirements, and where applicable, the
                       reactive power losses of



                                       17



                              SCE STANDARD CONTRACT
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                       interfacing transformers. Seller shall not deliver excess
                       reactive power to Edison unless otherwise agreed upon
                       between the Parties.

              4.4.12   The Seller warrants that the Generating Facility meets
                       the requirements of a Qualifying Facility as of the
                       effective date of this Contract and continuing through
                       the Contract Term.

              4.4.13   The Seller warrants that the Generating Facility shall at
                       all times conform to all applicable laws and regulations.
                       Seller shall obtain and maintain any governmental
                       authorizations and permits for the continued operation of
                       the Generating Facility. If at any time Seller does not
                       hold such authorizations and permits, Seller agrees to
                       reimburse Edison for any loss which Edison incurs as a
                       result of the Seller's failure to maintain governmental
                       authorization and permits.

              4.4.14   At Edison's request, Seller shall make all reasonable
                       effort to deliver power at an average rate of delivery at
                       least equal to the Contract Capacity during periods at
                       Emergency. In the event that the Seller has previously
                       scheduled an outage coincident with an Emergency, Seller
                       shall make all reasonable efforts to reschedule the
                       outage. The notification periods listed in Section 4.4.5
                       shall be waived by Edison if Seller reschedules the
                       outage.


              4.4.15   Seller shall demonstrate the ability to provide Edison


                       the specified Contract Capacity within 30 days of the
                       date of Firm Operation.





                                       18



                              SCE STANDARD CONTRACT
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                       Thereafter, at least once per year at Edison's request,
                       Seller shall demonstrate the ability to provide Contract
                       Capacity for a reasonable period of time as required by
                       Edison. Seller's demonstration of Contract Capacity shall
                       be at Seller's expense and conducted at a time and
                       pursuant to procedures mutually agreed upon by the
                       Parties. If Seller fails to demonstrate the ability to
                       provide Contract Capacity, the Contract Capacity shall be
                       reduced by agreement of the Parties pursuant to Section
                       9.1.2.5.

      4.5     Maintenance

              4.5.1    Seller shall maintain the Generating Facility in
                       accordance with applicable California utility industry
                       standards and good engineering and operating practices.
                       Edison shall have the right to monitor such maintenance
                       of the Generating Facility. Seller shall maintain and
                       deliver a maintenance record of the Generating Facility
                       to Edison's Operating Representatives upon request.

              4.5.2    Seller shall make a reasonable effort to schedule routine
                       maintenance during Off-Peak Months. Outages for scheduled
                       maintenance shall not exceed a total of 30 peak hours for
                       the Peak Months.

              4.5.3    The allowance for scheduled maintenance is as follows:


                       a.    Outage periods for scheduled maintenance shall not
                             exceed 840 hours (35 days) in any 12-month period.
                             This allowance may be




                                       19



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                             used in increments of an hour or longer on a
                             consecutive or nonconsecutive basis.

                       b.    Seller may accumulate unused maintenance hours on a
                             year-to-year basis up to a maximum of 1,080 hours
                             (45 days). This accrued time must be used
                             consecutively and only for major overhauls.

      4.6     Any review by Edison of the design, construction, operation, or
              maintenance of the Project is solely for the information of
              Edison. By making such review, Edison makes no representation as
              to the economic and technical feasibility, operational capability,
              or reliability of the Project. Seller shall in no way represent to
              any third party that any such review by Edison of the Project,
              including, but not limited to, any review of the design,
              construction, operation, or maintenance of the Project by Edison,
              is a representation by Edison as to the economic and technical
              feasibility, operational capability, or reliability of said
              facilities. Seller is solely responsible for economic and
              technical feasibility, operational capability, and reliability
              thereof.

5.    OPERATING OPTIONS

      5.1     Seller shall elect in Section 1.9 to Operate its Generating
              Facility in parallel with Edison's electric system pursuant to one
              of the following options:

              a.     Operating Option I: Seller dedicates the entire Generator
                     output to Edison with no electrical service required from
                     Edison.




                                       20



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


              b.     Operating Option II: Seller dedicates the entire
                     Generator output to Edison with electrical service
                     required from Edison.

              c.     Operating Option III: Seller dedicates to Edison only
                     that portion of the Generator output in excess of
                     Seller's electrical service requirements. As much as
                     practicable, Seller intends to serve its electrical
                     requirements from the Generator output and will require
                     electrical standby from Edison as designated in Section
                     1.9.

      5.2     After expiration of the First Period of the Contract Term, Seller
              may change the Operating Option, but not more than once per year
              upon at least 90 days prior written notice to Edison. A reduction
              in Contract Capacity as a result of a change in operating options
              shall be subject to Section 9.1.2.5. Edison shall not be required
              to remove or reserve capacity of Interconnection Facilities made
              idle by a change in operating options. Edison may dedicate any
              such idle Interconnection Facilities at any time to serve other
              customers or to interconnect with other electric power sources.
              Edison shall process requests for changes of operating option in
              the chronological order received.

              5.2.1.   When the Seller wishes to reserve Interconnection
                       Facilities paid for by the Seller but idled by a change
                       in operation option, Edison shall impose a special
                       facilities charge related to the operation and
                       maintenance of the Interconnection Facility. When the
                       Seller no longer needs said facilities for which it has
                       paid, the Seller shall



                                       21



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                       receive credit for the net salvage value of the
                       Interconnection Facilities dedicated to Edison's use. If
                       Edison is able to make use of these facilities to serve
                       other customers, the Seller shall receive the fair market
                       value of the facilities determined as of the date the
                       Seller either decides no longer to use said facilities or
                       fails to pay the required maintenance fee.

6.    INTERCONNECTION FACILITIES

      6.1     The Parties shall execute an Interconnection Facilities Agreement
              selected by Seller in Section 1.10, covering the design,
              installation, operation and maintenance of the Interconnection
              Facilities required in Edison's sole judgment, to permit an
              electrical interface between the Parties pursuant to Edison's
              Tariff Rule No. 21.

      6.2     The cost for the Interconnection Facilities set forth in the
              appendices specified in Section 1.10, are estimates only for
              Seller's information and will be adjusted to reflect recorded
              costs after installation is complete; except that, upon Seller's
              written request to Edison, Edison shall provide a binding estimate
              which shall be the basis for the Interconnection Facilities cost
              in the Interconnection Facilities Agreement executed by the
              Parties.

      6.3     The nature of the Interconnection Facilities and the Point of
              Interconnection shall be set forth either by equipment lists or
              appropriate one-line diagrams and shall be attached to the
              appropriate appendix specified in Section 1.10.




                                       22



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


      6.4     The design, installation, operation, maintenance, and
              modifications of the Interconnection Facilities shall be at
              Seller's expense.

      6.5     Seller shall not commence parallel operation of the Generating
              Facility until written approval for operation of the
              Interconnection Facilities has been received from Edison. The
              Seller shall notify Edison at least forty-five days prior to the
              initial energizing of the Point of Interconnection. Edison shall
              have the right to inspect the Interconnection Facilities within
              thirty days of receipt of such notice. It the facilities do not
              pass Edison's inspection, Edison shall provide in writing the
              reasons for this failure within five days of the inspection.

      6.6     Seller, at no cost to Edison, shall acquire all permits and
              approvals and complete all environmental impact studies necessary
              for the design, installation, operation, and maintenance of the
              Interconnection Facilities.

7.    ELECTRIC LINES AND ASSOCIATED EASEMENTS

      7.1     Edison shall, as it deems necessary or desirable, build electric
              lines, facilities and other equipment, both overhead and
              underground, on and off Seller's Facility, for the purpose of
              effecting the agreements contained in this Contract. The physical
              location of such electric lines, facilities and other equipment on
              Seller's Facility shall be determined by agreement of the Parties.




                                       23



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


      7.2     Seller shall reimburse Edison for the cost of acquiring property
              rights off Sellers's Facility required by Edison to meet its
              obligations under this Contract.

      7.3     Seller shall grant to Edison, without cost to Edison, and by an
              instrument of conveyance, acceptable to Edison, rights of way,
              easements and other property interests necessary to construct,
              reconstruct, use, maintain, alter, add to, enlarge, repair,
              replace, inspect and remove, at any time, the electric lines,
              facilities or other equipment, both overhead and underground,
              which are required by Edison to effect the agreements contained in
              the Contract. Seller shall also provide the rights of ingress and
              egress at all reasonable times necessary for Edison to perform the
              activities contemplated in the Contract.

      7.4     The electric lines, facilities, or other equipment referred to in
              this Section 7 installed by Edison on or off Seller's Facility
              shall be and remain the property of Edison.

      7.5     Edison shall have no obligation to Seller for any delay or
              cancellation due to inability to acquire a satisfactory right of
              way, easements, or other property interests.

8.    METERING

      8.1     All meters and equipment used for the measurement of electric
              power for determining Edison's payments to Seller pursuant to this
              Contract shall be



                                       24



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


              provided, owned, and maintained by Edison at Seller's expense in
              accordance with Edison's Tariff Rule No. 21.

      8.2     All meters and equipment used for billing Seller for electric
              service provided to Seller by Edison under Operating Options II or
              III shall be provided, owned, and maintained by Edison at Edison's
              expense in accordance with Edison's Tariff Rule No. 16.

      8.3     The meters and equipment used for measuring the Energy sold to
              Edison shall be located on the side of the Interconnection
              Facilities as specified by Seller in Section 1.13. If the metering
              equipment is located on Seller's side of the Interconnection
              Facilities, then a loss compensation factor agreed upon by the
              Parties shall be applied. At the written request of the Seller,
              and at Seller's sole expense, Edison shall measure actual
              transformer losses. If the actual measured value differs from the
              agreed upon loss compensation factor, the actual value shall be
              applied prospectively. If the meters are placed on Edison's side
              of the Interconnection Facilities, service shall be provided at
              the available transformer high-side voltage.

      8.4     For purposes of monitoring the Generator operation and the
              determination of standby charges, Edison shall have the right to
              require, at Seller's expense, the installation of generation
              metering. Edison may also require the installation of telemetering
              equipment at Seller's expense for Generating Facilities equal to






                                       25



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


              or greater than 10 MW. Edison may require the installation of
              telemetering equipment at Edison's expense for Generating
              Facilities less than 10 MW.

      8.5     Edison's meters shall be sealed and the seals shall be broken only
              when the meters are to be inspected, tested, or adjusted by
              Edison. Seller shall be given reasonable notice of testing and
              have the right to have its Operating Representative present on
              such occasions.

      8.6     Edison's meters installed pursuant to this Contract shall be
              tested by Edison, at Edison's expense, at least once each year and
              at any reasonable time upon request by either Party, at the
              requesting Party's expense. If Seller makes such request, Seller
              shall reimburse said expense to Edison within thirty days after
              presentation of a bill therefor.

      8.7     Metering equipment found to be inaccurate shall be repaired,
              adjusted, or replaced by Edison such that the metering accuracy of
              said equipment shall be within two percent. If metering equipment
              inaccuracy exceeds two percent, the correct amount of Energy and
              Contract Capacity delivered during the period of said inaccuracy
              shall be estimated by Edison and agreed upon by the Parties.

9.    POWER PURCHASE PROVISIONS

      Prior to the date of Firm Operation, Seller shall be paid for Energy only
      pursuant to Edison's published avoided cost of energy based on Edison's
      full avoided operating cost as periodically updated and accepted by the
      Commission. If at any time Energy





                                       26



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


      can be delivered to Edison and Seller is contesting the claimed
      jurisdiction of any entity which has not issued a license or other
      approval for the Project, Seller, in its sole discretion and risk, may
      deliver Energy to Edison and for any Energy purchased by Edison, Seller
      shall receive payment from Edison for (i) Energy pursuant to this Section,
      and (ii) as-available capacity based on a capacity price from the Standard
      Offer No. 1 Capacity Payment Schedule as approved by the Commission.
      Unless and until all required licenses and approvals have been obtained,
      Seller may discontinue deliveries at any time.

      9.1     Capacity Payments

              Seller shall sell to Edison and Edison shall purchase from Seller
              capacity pursuant to the Capacity Payment Option selected by
              Seller in Section 1.11. The Capacity Payment Schedules will be
              based on Edison's full avoided operating costs as approved by the


              Commission throughout the life of this Contract. Data used to
              derive Edison's full avoided costs will be made available to the
              Seller, to the extent specified by Seller upon request.

              9.1.1    Capacity Payment Option A -- As Available Capacity.

                       If Seller selects Capacity Payment Option A, Seller shall

                       be paid a monthly capacity payment calculated pursuant to


                       the following formula:

MONTHLY               CAPACITY PAYMENT = (A x D)+(B x D)+(C x D)



                                       27



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                         Where A =    kWh purchased by Edison during on-peak
                                      periods defined in Edison's Tariff
                                      Schedule No. TOU-8.

                               B =    kWh purchased by Edison during mid-peak
                                      periods defined in Edison's Tariff
                                      Schedule No. TOU-8.

                               C =    kWh purchased by Edison during off-peak
                                      periods defined in Edison's Tariff
                                      Schedule No. TOU-8.

                               D =    The appropriate time differentiated
                                      capacity price from either the Standard
                                      Offer No. 1 Capacity Payment Schedule or
                                      Forecast of Annual As-Available Capacity
                                      Payment Schedule as specified by Seller in
                                      Section 1.11.

                        9.1.1.1     If Seller specifies the Standard Offer No.
                                    1 Capacity Payment Schedule in Section
                                    1.11, then the formula set forth in
                                    Section 9.1.1 shall be computed with D
                                    equal to the appropriate time
                                    differentiated capacity price from the
                                    Standard Offer No. 1 Capacity Payment
                                    Schedule for the Contract Term.

                        9.1.1.2     If Seller specifies the Forecast of Annual

                                    As-Available Capacity Payment Schedule in


                                    Section 1.11, the formula set forth in
                                    Section 9.1.1 shall be computed as follows:



                                       28



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                                    a.    During the First period of the
                                          Contract Term, D shall equal the
                                          appropriate time differentiated
                                          capacity price from the Forecast of
                                          Annual As-Available Capacity Payment
                                          Schedule.

                                    b.    During the Second Period of the
                                          Contract Term, the formula shall be
                                          computed with D equal to the
                                          appropriate time differentiated
                                          capacity price from Standard Offer No.
                                          1 Capacity Payment Schedule, but not
                                          less than the greater of (i) the
                                          appropriate time differentiated
                                          capacity price from the Forecast of
                                          Annual As-Available Capacity Payment
                                          Schedule for the last year of the
                                          First Period, or (ii) the appropriate
                                          time differentiated capacity price
                                          from the Standard Offer No. 1 Capacity
                                          Payment Schedule for the first year of
                                          the Second Period.

              9.1.2    Capacity payment Option B -- Firm Capacity Purchase
                       If Seller selects Capacity Payment Option B, Seller shall
                       provide to Edison for the Contract Term the Contract

                       Capacity specified in Section 1.5, or as adjusted


                       pursuant to Section 9.1.2.6, and Seller shall be paid as
                       follows:




                                       29



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                        9.1.2.1     If Seller meets the performance requirements
                                    set forth in Section 9.1.2.2, Seller shall
                                    be paid a Monthly Capacity Payment,
                                    beginning from the date of Firm Operation
                                    equal to the sum of the on-peak, mid-peak,
                                    and off-peak Capacity Period Payments. Each
                                    capacity period payment is calculated
                                    pursuant to the following formula:

MONTHLY PERIOD CAPACITY PAYMENT   =   A x B x C x D

                       Where    A =   Contract Capacity Price specified in
                                      Section 1.11 based on the Standard Offer
                                      No. 2 Capacity Payment Schedule as
                                      approved by the Commission and in effect
                                      on the date of the execution of this
                                      Contract.

                                B =   Conversion factors to convert annual
                                      capacity prices to monthly payments by
                                      time of delivery as specified in Standard
                                      Offer No. 2 Capacity Payment Schedule and
                                      subject to periodic modifications as
                                      approved by the Commission.

                                C =   Contract Capacity specified in Section
                                      1.5.

                                D =   Period Performance Factor, not to exceed
                                      1.0, calculated as follows:


                                      Period kWh purchased by Edison limited by


                                      the level of Contract Capacity
                                      ------------------------------------------



                                       30



                                      0.8 x Contract Capacity x (Period Hours
                                      minus Maintenance Hours Allowed in Section
                                      4.5.)

                        9.1.2.2     Performance Requirements to receive the
                                    Monthly Capacity Payment in Section 9.1.2.1,
                                    Seller shall provide the Contract Capacity
                                    in each Peak Month for all on-peak hours as
                                    such peak hours are defined in Edison's
                                    Tariff Schedule No. TOU-8 on file with the
                                    Commission, except that Seller is entitled
                                    to a 20% allowance for Forced Outages for
                                    each Peak Month. Seller shall not be subject
                                    to such performance requirements for the
                                    remaining hours of the year.

                                    a.    If Seller fails to meet the
                                          requirements specified in Section
                                          9.1.2.2, Seller, in Edison's sole
                                          discretion, may be placed on probation
                                          for a period not to exceed 15 months.
                                          If Seller fails to meet the
                                          requirements specified in Section
                                          9.1.2.2 during the probationary
                                          period, Edison may derate the Contract
                                          Capacity to the greater of the
                                          capacity actually delivered during the

                                          probationary period, or the capacity


                                          at which Seller can reasonably meet
                                          such requirements. A




                                       31



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                                          reduction in Contract Capacity as a
                                          result of this Section 9.1.2.2 shall
                                          be subject to Section 9.1.2.5.

                                    b.    If Seller fails to meet the
                                          requirements set forth in Section
                                          9.1.2.2 due to a Forced Outage on the
                                          Edison system or a request to reduce
                                          or curtail delivery under Section 9.4,
                                          Edison shall continue Monthly Capacity
                                          Payments pursuant to Capacity Payment
                                          Option B. The Contract Capacity
                                          curtailed shall be treated the same as
                                          scheduled maintenance outages in the
                                          calculation of the Monthly Capacity
                                          Payment.

                        9.1.2.3     If Seller is unable to provide Contract
                                    Capacity due to Uncontrollable Forces,
                                    Edison shall continue Monthly Capacity
                                    Payments for 90 days from the occurrence of
                                    the Uncontrollable Force. Monthly Capacity
                                    Payments payable during a period of
                                    interruption or reduction by reason of an
                                    Uncontrollable Force shall be treated the
                                    same as scheduled maintenance outages.

                        9.1.2.4     Capacity Bonus Payment for Capacity Payment
                                    Option B, Seller may receive a Capacity
                                    Bonus Payment as follows:


                                    a.    Bonus During Peak Months -- For a Peak


                                          Month, Seller shall receive a Capacity
                                          Bonus Payment if (i)



                                       32



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                                          the requirements set forth in Section
                                          9.1.2.2 have been met, and (ii) the
                                          on-peak capacity factor exceeds 85%.

                                    b.    Bonus During Non-Peak Months -- For a
                                          non-peak month, Seller shall receive a
                                          Capacity Bonus Payment if (i) the
                                          requirements set forth in Section
                                          9.1.2.2 have been met (ii) the on-peak
                                          capacity factor for each Peak Month
                                          during the year was at least 85%, and
                                          (iii) the on-peak capacity factor for
                                          the non-peak month exceeds 85%.

                                    c.    For any eligible month, the Capacity
                                          Bonus Payment shall be calculated as
                                          follows:

CAPACITY BONUS PAYMENT   =   A x B x C x D
                            Where A = (1.2 x On-Peak Capacity Factor) - 1.02
                                      Where the On-Peak Capacity Factor, not to
                                      exceed 1.0, is calculated as follows:
                                      Period kWh purchased by Edison limited by
                                      the level of Contract Capacity (Contract
                                      Capacity) x (Period Hours minus
                                      Maintenance Hours Allowed in Section 4.5)


                                  B = Contract Capacity Price specified in
                                      Section 1.11 for Capacity Payment Option B




                                       33



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                                  C = 1/12

                                  D = Contract Capacity specified in Section 1.5

                                    d.    When Seller is entitled to receive a
                                          Capacity Bonus Payment, the Monthly
                                          Capacity Payment shall be the sum of
                                          the Monthly Capacity Payment pursuant
                                          to Section 9.1.2.1 and the Monthly
                                          Capacity Bonus Payment pursuant to
                                          this Section.

                                    e.    For Capacity Payment Option B, Seller
                                          shall be paid for capacity in excess
                                          of Contract Capacity based on the
                                          as-available capacity price in
                                          Standard Offer No. 1 Capacity Payment
                                          Schedule, as updated and approved by
                                          the Commission. Seller shall not
                                          receive any as-available capacity
                                          payment in excess of Contract Capacity
                                          if Seller's Generating Facility is a
                                          small hydro project.

                        9.1.2.5     Capacity Reduction

                                    a.    Seller may reduce the Contract
                                          Capacity specified in Section 1.5,
                                          provided that Seller gives Edison
                                          prior written notice for a period


                                          determined by the amount of Contract
                                          Capacity reduced as follows:




                                       34



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                              Amount of Contract                   Length of
                               Capacity Reduced                 Notice Required

                            25,000 kW or under                     12 months
                            25,001 - 50,000 kW                     36 months

                            50,001 - 100,000 kW                    48 months
                                over 100,000 kW                    60 months

                                    b.    Subject to Section 10.4, Seller shall
                                          refund to Edison with interest at the
                                          current published Federal Reserve
                                          Board three months prime commercial
                                          paper rate an amount equal to the
                                          difference between (i) the accumulated
                                          Monthly Capacity Payments paid by
                                          Edison pursuant to Capacity Payment
                                          Option B up to the time the reduction
                                          notice is received by Edison, and (ii)
                                          the total capacity payments which
                                          Edison would have paid if based on the
                                          Adjusted Capacity Price.

                                    c.    From the date the reduction notice is
                                          received to the date of actual
                                          capacity reduction, Edison shall make
                                          capacity payments based on the
                                          Adjusted Capacity Price for the amount
                                          of Contract Capacity being reduced.

                                    d.    Seller may reduce Contract Capacity


                                          without the notice prescribed in
                                          Section 9.1.2.5(a), provided that





                                       35



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                                          Seller shall refund to Edison the
                                          amount specified in Section 9.1.2.5(b)
                                          and an amount equal to: (i) the amount
                                          of Contract Capacity being reduced,
                                          times (ii) the difference between the
                                          Current Capacity Price and the
                                          Contract Capacity Price, times (iii)
                                          the number of years and fractions
                                          thereof (not less than one year) by
                                          which the Seller has been deficient in
                                          giving prescribed notice. If the
                                          Current Capacity Price is less than
                                          Contract Capacity Price, only payment
                                          under Section 9.1.2.5(b) shall be due
                                          to Edison.

                        9.1.2.6     Adjustment to Contract Capacity. The Parties
                                    may agree in writing at any time to adjust
                                    the Contract Capacity. Seller may reduce the
                                    Contract Capacity pursuant to Section
                                    9.1.2.5. Seller may increase the Contract
                                    Capacity with Edison's approval and
                                    thereafter receive payment for the increased
                                    capacity in accordance with the Contract

                                    Capacity Price for the Capacity Payment
                                    Option selected by Seller for the remaining
                                    Contract Term.

      9.2     Energy Payments - First Period

              During the First Period of the Contract Term, Seller shall be paid


              a Monthly Energy Payment for the Energy delivered by the Seller to
              Edison at the Point





                                       36



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


              of Interconnection pursuant to the Energy Payment Option selected
              by Seller in Section 1.12, as follows. (Data used to derive
              Edison's Energy payments for the First Period will be made
              available to the Seller, to the extent specified by Seller, upon
              request.)

              9.2.1    Energy Payment Option 1 -- Forecast of Annual Marginal
                       Cost of Energy. If Seller selects Energy Payment Option
                       1, then during the First Period of the Contract Term,
                       Seller shall be paid a Monthly Energy Payment for Energy



                       delivered by Seller and purchased by Edison during each
                       month in the First Period of the Contract Term pursuant
                       to the following formula:

MONTHLY ENERGY PAYMENT   =   (A x D)+(B x D)+(C x D)

                        Where  A  =   kWh purchased by Edison during on-peak
                                      periods defined in Edison's Tariff
                                      Schedule No. TOU-8.

                               B  =   kWh purchased by Edison during mid-peak
                                      periods defined in Edison's Tariff
                                      Schedule No. TOU-8.

                               C  =   kWh purchased by Edison during off-peak
                                      periods defined in Edison's Tariff
                                      Schedule No. TOU-8.

                               D  =   The sum of:

                                      (i) the appropriate time differentiated
                                      energy price from the Forecast of Annual



                                      Marginal Cost of Energy, multiplied by the
                                      decimal equivalent of the percentage of




                                       37



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                                      the forecast specified in Section 1.12,
                                      and (ii) the appropriate time
                                      differentiated energy price from Edison's
                                      published avoided cost of energy
                                      multiplied by the decimal equivalent of
                                      the percentage of the published energy
                                      price specified in Section 1.12.

              9.2.2    Energy Payment Option 2 -- Levelized Forecast of Marginal
                       Cost of Energy. If Seller selects Energy Payment Option
                       2, then during the First Period of the Contract Term,
                       Seller shall be paid a Monthly Energy Payment for Energy



                       delivered by Seller and purchased by Edison each month
                       during the First Period of the Contract Term pursuant to
                       the following formula:

MONTHLY ENERGY PAYMENT   =   (A x D) + (B x D) + (C x D)

                         Where A   =  kWh purchased by Edison during on-peak
                                      periods defined in Edison's Tariff
                                      Schedule No. TOU-8.

                               B   =  kWh purchased by Edison during mid-peak
                                      periods defined in Edison's Tariff
                                      Schedule No. TOU-8.

                               C   =  kWh purchased by Edison during off-peak
                                      periods defined in Edison's Tariff
                                      Schedule No. TOU-8.

                               D  =   The sum of:


                                      (i) the appropriate time differentiated


                                      energy price from the Levelized Forecast
                                      of Marginal Cost of Energy, for



                                       38



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                                      the First Period of the Contract Term
                                      multiplied by the decimal equivalent of
                                      the percentage of the levelized forecast
                                      specified in Section 1.12, and (ii) the
                                      appropriate time differentiated energy
                                      price from Edison's published avoided
                                      cost of energy multiplied by the decimal
                                      equivalent of the percentage of the
                                      published energy price specified in
                                      Section 1.12.

                        9.2.2.1     Performance Requirement for Energy Payment
                                    Option 2 During the First Period when the
                                    annual forecast referred to in Section 9.2.1
                                    is greater than the levelized forecast
                                    referred to in Section 9.2.2, Seller shall
                                    deliver to Edison at least 70 percent of the
                                    average annual kWh delivered to Edison
                                    during those previous periods when the
                                    levelized forecast referred to in Section
                                    9.2.2 is greater than the annual forecast
                                    referred to in Section 9.2.1 as resource
                                    conditions permit for solar, wind, and hydro
                                    Generating Facilities and excluding
                                    uncontrollable forces. If Seller does not

                                    meet the performance requirements of this
                                    Section 9.2.2.1, Seller shall be subject to
                                    Section 9.5.

      9.3     Energy Payments - Second Period



              During the Second Period of the Contract Term, Seller shall be
              paid a



                                       39



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


              Monthly Energy Payment for Energy delivered by Seller and
              purchased by Edison at a rate equal to 100% of Edison's published
              avoided cost of energy based on Edison's full avoided operating
              cost as updated periodically and accepted by the Commission,
              pursuant to the following formula:

MONTHLY  ENERGY PAYMENT = kWh purchased by Edison for each on-peak, mid-peak,
                          and off-peak time period defined in Edison's Tariff
                          Schedule No. TOU-8.

                          x Edison's published avoided cost of energy by time of
                          delivery for each time period.

              Data used to derive Edison's full avoided costs will be made
              available to the Seller, to the extent specified by Seller, upon
              request.

      9.4     Edison shall not be obligated to accept or pay for Energy, and may
              request Seller whose Generating Facility is one (1) MW or greater
              to discontinue or reduce delivery of Energy, for not more than 300
              hours annually during off-peak hours when (i) purchases would
              result in costs greater than those which Edison would incur if it
              did not purchase Energy from Seller but instead utilized an

              equivalent amount of Energy generated from another Edison source,


              or (ii) the Edison Electric System demand would require that
              Edison hydro-energy be spilled to reduce generation.




                                       40



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


      9.5     Energy Payment Refund

              If Seller elects Energy Payment Option 2, Seller shall be subject
              to the following:

              9.5.1    If Seller fails to perform the Contract obligations for
                       any reason during the First Period of the Contract Term,
                       or fails to meet the performance requirements set forth
                       in Section 9.2.2.1, and at the time of such failure to
                       perform, the net present value of the cumulative Energy
                       payments received by Seller pursuant to Energy Payment
                       Option 2 exceeds the net present value of what Seller
                       would have been paid pursuant to Energy Payment Option 1,
                       Seller shall make an energy payment refund equal to the
                       difference in such net present values in the year in
                       which the refund is due. The present value calculation
                       shall be based upon the rate of Edison's incremental cost
                       of capital specified in Section 1.12.

              9.5.2    Not less than 90 days prior to the date Energy is first
                       delivered to the Point of Interconnection, Seller shall
                       provide and maintain a performance bond, surety bond,
                       performance insurance, corporate guarantee, or bank
                       letter of credit, satisfactory to Edison, which shall
                       insure payment to Edison of the Energy Payment Refund at

                       any time during the First Period. Edison may, in its sole


                       discretion accept another form of security except that in
                       such instance a 1-1/2 percent




                                       41



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                       reduction shall then apply to the levelized forecast
                       referred to in Section 9.2.2 in computing payments for
                       Energy. Edison shall be provided with certificates
                       evidencing Seller's compliance with the security
                       requirements in this Section which shall also include the
                       requirement that Edison be given 90 days prior written
                       notice of the expiration of such security.

              9.5.3    If Seller fails to provide replacement security not less
                       than 60 days prior to the date of expiration of existing
                       security, the Energy Payment Refund provided in Section
                       9.5 shall be payable forthwith. Thereafter, payments for
                       Energy shall be 100 percent of the Monthly Energy Payment
                       provided in Section 9.2.1.

              9.5.4    If Edison at any time determines the security to be
                       otherwise inadequate, and so notifies Seller, payments
                       thereafter for Energy shall be 100 percent of the Monthly
                       Energy Payment provided in Section 9.2.1. If within 30
                       days of the date Edison gives notice of such
                       inadequacies, Seller satisfies Edison's security
                       requirements, Energy Payment Option 2 shall be
                       reinstated. If Seller fails to satisfy Edison's security

                       requirements within the 30-day period, the Energy Payment
                       Refund provided in Section 9.5 shall be payable
                       forthwith.



10.     PAYMENT AND BILLING PROVISIONS

        10.1     For Energy and capacity purchased by Edison:





                                       42



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                  10.1.1      Edison shall mail to Seller not later than thirty
                              days after the end of each monthly billing period
                              (1) a statement showing the Energy and Contract
                              Capacity delivered to Edison during the on-peak,
                              mid-peak, and off-peak periods, as those periods
                              are specified in Edison's Tariff Schedule No.
                              TOU-8 for that monthly billing period, (2)
                              Edison's computation of the amount due Seller, and
                              (3) Edison's check in payment of said amount.

                  10.1.2      If the monthly payment period involves portions of
                              two different published Energy payment schedule
                              periods, the monthly Energy payment shall be
                              prorated on the basis of the percentage of days at
                              each price.

                  10.1.3      If the payment period is less than 27 days or
                              greater than 33 days, the capacity payment shall
                              be prorated on the basis of coverage days per
                              month per year.

                  10.1.4      If Within thirty days of receipt of the statement
                              Seller does not make a report in writing to Edison
                              of an error, Seller shall be deemed to have waived

                              any error in Edison's statement, computation, and
                              payment, and they shall be considered correct and


                              complete.

      10.2    For electric Service provided by Edison:



                                       43



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                  10.2.1      Under Operating Option III pursuant to Section
                              5.1, standby electric service shall be provided
                              under terms and conditions of Edison's tariff
                              schedule indicated below as now in effect or as
                              may hereafter be authorized by the Commission to
                              be revised. The applicable tariff schedules are:

                              STANDBY TARIFF              ELECTRICAL SERVICE
                               SCHEDULE NO                      TARIFF

                                  SCG-1                        TOU-8 or GS-2
                                  SCG-1                        TOU-8
                                  SCG-3                        TOU-8

                             10.2.1.1    (Applicable to SCG-I only) The Standby
                                         Demand for calculation of the standby
                                         charge in SCG-1 is specified in Section
                                         1.9. Edison reserves the right to
                                         adjust the Standby Demand based on
                                         recorded demand during periods standby
                                         power is required.

                             10.2.1.2    (Applicable to SCG-1 only) The capacity
                                         rating for determination of standby
                                         waiver qualifications shall be Contract
                                         Capacity plus the maximum electric load
                                         served by the Generating Facility

                                         during the on-peak time period recorded


                                         during the preceding 12-month time
                                         period.




                                       44



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                             10.2.1.3    A minimum monthly charge may be
                                         established for standby electric
                                         service as provided in the tariff
                                         schedule elected in Section 1.9. Said
                                         minimum monthly charge shall be
                                         specified in Section 1.9.

                  10.2.2      Under Operating Options II and III pursuant to
                              Section 5.1, electric service shall be provided
                              under terms, conditions, and rates of Edison's
                              tariff schedule indicated below as now in effect
                              or as may hereafter be authorized by the
                              Commission to be revised.
                              The applicable tariff schedule is:

                                       TOU-8, or

                                       GS2

                              The contract demand for calculation of the minimum
                              demand charge in the applicable tariff schedules
                              is specified in Section 1.9.

                  10.2.3      Edison shall commence billing Seller for electric

                              service rendered pursuant to the applicable tariff
                              schedule on the date that the Point of
                              Interconnection is energized.

        10.3     Monthly charges associated with Interconnection Facilities


                 shall be billed pursuant to the Interconnection Facilities
                 Agreement contained in the Appendix specified in Section 1.10.





                                       45



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


        10.4     Payments due to Contract Capacity Reduction

                  10.4.1      The Parties agree that the refund and payments
                              provided in Section 9.1.2.5 represent a fair
                              compensation for the reasonable losses that would
                              result from such reduction of Contract Capacity.

                  10.4.2      In the event of a reduction in Contract Capacity,
                              the quantity, in kW, by which the Contract
                              Capacity is reduced shall be used to calculate the
                              refunds and payments due Edison in accordance with
                              Section 9.1.2.5, as applicable.

                  10.4.3      Edison shall provide invoices to Seller for all
                              refunds and payments due Edison under this section
                              which shall be due within 60 days.

                  10.4.4      If Seller does not make payments as required in
                              Section 10.4.3, Edison shall have the right to
                              offset any amounts due it against any present or

                              future payments due Seller and may pursue any
                              other remedies available to Edison as a result of
                              Seller's failure to perform.

        10.5     Energy Payment Refund

                 Energy Payment Refund is immediately due and payable upon
                 Seller's failure to perform the contract obligations as
                 specified in Section 9.5.





                                       46



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


11.     TAXES

        11.1     Seller shall pay ad valorem taxes and other taxes properly
                 attributable to the Project. If such taxes are assessed or
                 levied against Edison, Seller shall pay Edison for such
                 assessment or levy.

        11.2     Seller shall pay ad valorem taxes and other taxes properly
                 attributed to land, land rights, or interest in land for the
                 Project. If such taxes are assessed or levied against Edison,
                 Seller shall pay Edison for such assessment or levy.

        11.3     If the interconnection Facilities are owned by Edison, Edison
                 shall pay ad valorem taxes and other taxes properly attributed
                 to said facilities. If such taxes are assessed or levied
                 against Seller, Edison shall pay Seller for such assessment or
                 levy.

        11.4     Seller or Edison shall provide information concerning the
                 Project to any requesting taxing authority.


12.    TERMINATION

        This Contract shall terminate if Firm Operation does not occur within 5
        years of the date of Contract execution.


13.     LIABILITY

        13.1     Each Party (First Party) releases the other Party (Second
                 Party), its directors, officers, employees and agents from any
                 loss, damage, claim, cost, charge, or expense of any kind or
                 nature (including any direct, indirect or consequential loss,
                 damage, claim, cost, charge, or expense), including attorneys'
                 fees and other costs of litigation incurred by the First Party
                 in



                                       47



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                 connection with damage to property of the First Party caused by
                 or arising out of the Second Party's construction, engineering,
                 repair, supervision, inspection, testing, protection,
                 operation, maintenance, replacement, reconstruction, use or
                 ownership of its facilities, to the extent that such loss,
                 damage, claim, cost, charge, or expense is caused by the
                 negligence of Second Party, its directors, officers, employees,
                 agents, or any person or entity whose negligence would be
                 imputed to Second Party.

        13.2     Each Party shall indemnify and hold harmless the other Party,
                 its directors, officers, and employees or agents from and
                 against any loss, damage, claim, cost, charge, (including
                 direct, indirect or consequential loss, damage, claim, cost,
                 charge, or expense) including attorneys' fees and other costs
                 of litigation, incurred by the other Party in connection with
                 the injury to or death of any person or damage to property of a
                 third party arising out of the indemnifying Party's
                 construction, engineering, repair, supervision, inspection,
                 testing, protection, operation, maintenance, replacement,
                 reconstruction, use, or ownership of its facilities, to the
                 extent that such loss, damage, claim, cost, charge, or expense
                 is caused by the negligence of the indemnifying Party, its
                 directors, officers, employees, agents, or any person or entity
                 whose negligence would be imputed to the indemnifying Party;
                 provided, however, that each Party shall be solely responsible
                 for and shall bear all cost of claims brought by its
                 contractors or its own employees




                                       48



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                 and shall indemnify and hold harmless the other Party for any
                 such costs including costs arising out of any workers
                 compensation law. Seller releases and shall defend and
                 indemnify Edison from any claim, cost, loss, damage, or
                 liability arising from any contrary representation concerning
                 the effect of Edison's review of the design, construction,
                 operation, or maintenance of the Project.

        13.3     The provisions of this Section 13 shall not be construed so as
                 to relieve any insurer of its obligations to pay any insurance
                 claims in accordance with the provisions of any valid insurance
                 policy.

        13.4     Neither Party shall be indemnified under this Section 13 for
                 its liability or loss resulting from its sole negligence or
                 willful misconduct.


14.     INSURANCE

        14.1     Until Contract is terminated, Seller shall obtain and maintain
                 in force as hereinafter provided comprehensive general
                 liability insurance, including contractual liability coverage,
                 with a combined single limit of (i) not less than $1,000,000
                 each occurrence for Generating Facilities 100 kW or greater;
                 (ii) not less than $500,000 for each occurrence for Generating
                 Facilities between 20 kW and 100 kW; and (iii) not less than
                 $100,000 for each occurrence for Generating Facilities less
                 than 20 kW. The insurance carrier or carriers and form of
                 policy shall be subject to review and approval by Edison.




                                       49



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


        14.2     Prior to the date Seller's Generating Facility is first
                 operated in parallel with Edison's electric system, Seller
                 shall (i) furnish certificate of insurance to Edison, which
                 certificate shall provide that such insurance shall not be
                 terminated nor expire except on thirty days prior written
                 notice to Edison, (ii) maintain such insurance in effect for so
                 long as Seller's Generating Facility is operated in parallel
                 with Edison's electric system, and (iii) furnish to Edison an
                 additional insured endorsement with respect to such insurance
                 in substantially the following forms:

                           "In consideration of the premium charged, Southern
                           California Edison Company (Edison) is named as
                           additional insured with respect to all liabilities
                           arising out seller's use and ownership of Seller's
                           Generating Facility." "The inclusion of more than one
                           insured under this policy shall not operate to impair
                           the rights of one insured against another insured and
                           the coverage afforded by this policy will apply as
                           though separate policies had been issued to each
                           insured. The inclusion of more than one insured will
                           not, however, operate to increase the limit of the
                           carrier's liability. Edison will not, by reason of
                           its inclusion under this policy, incur liability to
                           the insurance carrier for payment of premium for this
                           policy."



                                       50



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                           "Any other insurance carried by Edison which may be
                           applicable shall be deemed excess insurance and
                           Seller's insurance primary for all purposes despite
                           any conflicting provisions in Seller's policy to the
                           contrary."

        If the requirement of Section 14.2 (iii) prevents Seller from obtaining
        the insurance required in Section 14.1 then upon written notification by
        Seller to Edison, Section l4.2 (iii) shall be waived.

        14.3     The requirements of this Section 14 shall not apply to Seller
                 who is a self-insured governmental agency with established
                 record of self-insurance.

        14.4     If Seller fails to comply with the provisions of this Section
                 14, Seller shall, at its own cost, defend, indemnify, and hold
                 harmless Edison, its directors, officers, employees, agents,
                 assigns, and successors in interest from and against any and
                 all loss, damage, claim, cost, charge, or expense of any kind
                 or nature (including direct, indirect or consequential loss,
                 damage, claim, cost, charge, or expense, including attorneys'
                 fees and other costs of litigation) resulting from the death or
                 injury to any person or damage to any property, including the
                 personnel and property of Edison, to the extent that Edison
                 would have been protected had Seller complied with all of the
                 provisions of this Section 14.




                                       51



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


15.     UNCONTROLLABLE FORCES

        15.1     Neither Party shall be considered to be in default in the
                 performance of any of the agreements contained in this
                 Contract, except for obligations to pay money, when and to the
                 extent failure of performance shall be caused by an
                 Uncontrollable Force.

        15.2     If either Party because of an Uncontrollable Force is rendered
                 wholly or partly unable to perform its obligations under this
                 Contract, the Party shall be excused from whatever performance
                 is affected by the Uncontrollable Force to the extent so
                 affected provided that:

                 (1)    the nonperforming Party, within two weeks after the
                        occurrence of the Uncontrollable Force, gives the other
                        Party written notice describing the particulars of the
                        occurrence,

                 (2)    the suspension of performance is of no greater scope and
                        of no longer duration than is required by the
                        Uncontrollable Force,

                 (3)    the nonperforming Party uses its best efforts to remedy
                        its inability to perform (this subsection shall not
                        require the settlement of any strike, walkout, lockout
                        or other labor dispute on terms which, in the sole
                        judgment of the Party involved in the dispute, are
                        contrary to its interest. It is understood and agreed
                        that the settlement of strikes, walkouts, lockouts or
                        other labor disputes shall be at the sole discretion of
                        the Party having the difficulty),



                                       52



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


                 (4)    when the nonperforming Party is able to resume
                        performance of its obligations under this Contract,
                        that Party shall give the other Party written notice to
                        that effect, and

                 (5)    capacity payments during such periods of Uncontrollable
                        Force on Seller's part shall be governed by Section
                        9.1.2.3.

        15.3     In the event that either Party's ability to perform cannot be
                 corrected when the Uncontrollable Force is caused by the
                 actions or inactions of legislative, judicial or regulatory
                 agencies or other proper authority, this Contract may be
                 amended to comply with the legal or regulatory change which
                 caused the nonperformance.

                 If a loss of Qualifying Facility status occurs due to an
                 Uncontrollable Force and Seller fails to make the changes
                 necessary to maintain its Qualifying Facility status, the
                 Seller shall compensate Edison for any economic detriment
                 incurred by Edison as a result of such failure.

16.     NONDEDICATION OF FACILITIES

        Neither Party, by this Contract, dedicates any part of its facilities
        involved in this Project to the public or to the service provided under
        the Contract, and such service shall cease upon termination of the
        Contract.

17.     PRIORITY OF DOCUMENTS

        If there is a conflict between this document and any Appendix, the
        provisions of




                                       53



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


        this document shall govern. Each Party shall notify the other
        immediately upon the determination of the existence of any such
        conflict.

18.     NOTICES AND CORRESPONDENCE

        All notices and correspondence pertaining to this contract shall be in
        writing and shall be sufficient if delivered in person or sent by
        certified mail, postage prepaid, return receipt requested, to Seller as
        specified in Section 1.1, or to Edison as follows:

                              Southern California Edison Company
                              Post Office  Box 800
                              Rosemead, California 9l770
                              Attention:  Secretary

        All notices sent pursuant to this Section 18 shall be effective when
        received, and each Party shall be entitled to specify as its proper
        address any other address in the United States upon written notice to
        the other Party.

19.     PREVIOUS COMMUNICATIONS

        This Contract contains the entire agreement and understanding between
        the Parties, their agents, and employees as to the subject matter of
        this contract, and merges and supersedes all prior agreements,
        commitments, representations, and discussions between the Parties. No
        Party shall be bound to any other obligations, conditions, or
        representations with respect to the subject matter of this Contract.

20.     NONWAIVER

        None of the provisions of the Contract shall be considered waived by
        either Party



                                       54



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


        except when such waiver is given in writing. The failure of either
        Edison or Seller to insist on any one or more instances upon strict
        performance of any of the provisions of the Contract or to take
        advantage of any of its rights hereunder shall not be construed as a
        waiver of any such provisions or the relinquishment of any such rights
        for the future, but the same shall continue to remain in full force and
        effect.

21.     SUCCESSORS AND ASSIGNS

        Neither Party shall voluntarily assign its rights nor delegate its
        duties under this Contract, or any part of such rights or duties,
        without the written consent of the other Party, except in connection
        with the sale or merger of a substantial portion of its properties. Any
        such assignment or delegation made without such written consent shall be
        null and void. Consent for assignment shall not be withheld
        unreasonably. Such assignment shall include, unless otherwise specified
        therein, all of Seller's rights to any refunds which might become due
        under this Contract.

22.     EFFECT OF SECTION READINGS

        Section headings appearing in this Agreement are inserted for
        convenience only, and shall not be construed as interpretations of text.

23      GOVERNING LAW

        This Contract shall be interpreted, governed, and construed under the
        laws of the State of California as if executed and to be performed
        wholly within the State of California.




                                       55



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


24.     MULTIPLE ORIGINALS

        This Contract is executed in two counterparts, each of which shall be
        deemed an original.

SIGNATURES

      IN WITNESS WHEREOF, the Parties hereto have executed this Contract this
15th  of April, 1985.


[Approved as to Form                        SOUTHERN CALIFORNIA EDISON COMPANY
 John R. Bury
Vice President and General Counsel          By /s/ Edward A. Myers, Jr.
                                            ----------------------------------
By  /s/ John R. Bury                               EDWARD A. MYERS, JR.
-----------------------                            Vice President
April 18, 1985]
                                            PACIFIC LIGHTING ENERGY SYSTEMS



                                            MAMMOTH PACIFIC

                                            By /s/ Lee H. Freeman
                                            ------------------------------------
                                                     LEE H. FREEMAN
                                                     Vice President

                                            PACIFIC LIGHTING ENERGY SYSTEMS





                                       56



                                                                 Exhibit 10.3.14






                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE




                                 AMENDMENT NO. 1
                         POWER PURCHASE CONTRACT BETWEEN
                     SOUTHERN CALIFORNIA EDISON COMPANY AND
                                 MAMMOTH PACIFIC
                          (Mammoth Pacific II Project)



















                                "Ammendment No. 1
               Power Purchase Contract Between Southern California
                       Edison Company and Mammoth Pacific"


1.            PARTIES:

              This Amendment No. 1 to the Power Purchase Contract between
Southern California Edison Company and Mammoth Pacific ("Contract") for the
Mammoth Pacific II project is entered into between Southern California Edison
Company ("Edison") and Mammoth Pacific ("Seller"), individually, "Party," and
collectively, "Parties."

2.            RECITALS:

              This Amendment No. 1 to the Contract is made with reference to the
following facts, among others:

              2.1   Edison and Mammoth Pacific executed the Contract on April
15, 1985.

              2.2. Mammoth Pacific executed an Interconnection Facilities
Agreement as Appendix A.3 to the Contract effective October 13, 1985 ("IFA").

              2.3 Seller desires to amend the Contract to delete the IFA as
Appendix A.3 to the Contract and replace it with the attached Interconnection
Facilities Agreement as Appendix A to the Contract.

3.            AGREEMENT:

              The Parties agree to amend the Contract as follows:

              3.1 The attached Interconnection Facilities Agreement shall
replace and supersede the IFA as Appendix A to the Contract.

4.            OTHER TERMS AND CONDITIONS:

              Except as expressly amended by this Amendment No. 1, the terms and
conditions of the Contract shall remain in full force and effect.

5.            EFFECTIVE DATE:

              This Amendment No. 1 shall become effective when it has been duly
executed by the Parties.

6.            SIGNATURE CLAUSE:

              The signatories hereto represent that they have been appropriately
authorized to enter into this Amendment No. 1 to the Contract on behalf of the
Party for whom they sign. This Amendment No. 1 is hereby executed as of this
27th day of October, 1989.





                                       2




SOUTHERN CALIFORNIA                              MAMMOTH PACIFIC
EDISON COMPANY

                                                By:  /s/ Claude Harrey
By: /s/  Robert Dietch                               -------------------------
    -----------------------                     Name:  Claude Harrey
         Robert Dietch                                ------------------------
         Vice President                         Title: Vice President
                                                      ------------------------




















                                       3



                                                                 Exhibit 10.3.15

                                             AMENDMENT NO. 2

                                     POWER PURCHASE CONTRACT BETWEEN

                                  SOUTHERN CALIFORNIA EDISON COMPANY AND

                                             MAMMOTH PACIFIC

1.  PARTIES:

This Amendment No. 2 to the Power Purchase Contract between Southern California
Edison Company and Mammoth-Pacific ("Contract") for the Mammoth-Pacific II
project is entered into between Southern California Edison Company ("Edison")
and Mammoth-Pacific ("Seller"), individually, "Party," and collectively,
"Parties."


2.  RECITALS:

This Amendment No. 2 to the Contract is made with reference to the following
facts, among others:

              2.1  Edison and Seller executed the Contract on April 15, 1985.

              2.2  Edison and Seller executed Amendment No. 1 to the Contract on
October 27, 1989.

              2.3 The Contract was subject to Uncontrollable Forces which
rendered Mammoth-Pacific unable to perform its obligations under the Contract
for a period of five hundred fifty-three (553) days.







              2.4 The Parties desire to amend the Contract to change the date of
expected Firm Operation set forth at Section 1.7 of the Contract to reflect the
effect of the Uncontrollable Force.


3.  AGREEMENT:

The Parties agree to amend the Contract as follows:

              (A) The expected Firm Operation date of "February 1967" set forth
at Section 1.7 of the Contract is deleted, and replaced with "October 20, 1991."

              (B) The First Period of the Contract Term set forth at Section 3.1
of the Contract shall commence upon date of Firm Operation, and the phrase "but
not later than five years from the date of execution of this Contract" is
deleted.

              (C) The text of Section 12 should be deleted and replaced with:
"This Contract shall terminate if Firm Operation does not occur by October 20,
1991."


4.  OTHER TERMS AND CONDITIONS:

Except as expressly amended by this Amendment No. 2, the terms and conditions of
the Contract shall remain in full force and effect.


5.  EFFECTIVE DATE:

This Amendment No. 2 shall become effective when it has been duly executed by
the Parties.






                                       2






6.  SIGNATURE CLAUSE:

The signatories hereto represent that they have been appropriately authorized to
enter into this Amendment No. 2 to the Contract on behalf of the Party for whom
they sign. This Amendment No. 2 is hereby executed as of this 20th day of
December, 1989.

                                           SOUTHERN CALIFORNIA EDISON COMPANY

                                           By:  /s/ Robert Dietch
                                                -------------------------------
                                                 Robert Dietch
                                                 Vice President

                                           MAMMOTH-PACIFIC

                                           By:  /s/ Robert J. Cushman
                                                --------------------------------
                                                 Name:  Robert J. Cushman
                                                 Title: Senior Vice President






                                       3



                                                                 Exhibit 10.3.16









                              SCE STANDARD CONTRACT

                            LONG TERM POWER PURCHASE









                             POWER PURCHASE CONTRACT

                                     BETWEEN

                       SOUTHERN CALIFORNIA EDISON COMPANY

                                       AND

                            SANTA FE GEOTHERMAL, INC.

                                  (CASA DIABLO)


                                10 MW NAME PLATE
                                NEW FACILITY GIII


                                               DOCUMENT NO.: 2430H
                                               EFFECTIVE DATE: September 7, 1983
                                               REVISED:  May 4, 1984






                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE

                                TABLE OF CONTENTS
                                -----------------

SECTION        TITLE                                                       PAGE
-------        -----                                                       ----

1              PROJECT SUMMARY                                               1

                          GENERAL TERMS & CONDITIONS

2              DEFINITIONS                                                   2

3              TERM                                                          9

4              GENERATING FACILITY                                           9

5              OPERATING OPTIONS                                            20

6              INTERCONNECTION FACILITIES                                   22

7              ELECTRIC LINES AND ASSOCIATED EASEMENTS                      24

8              METERING                                                     25

9              POWER PURCHASE PROVISIONS                                    27

10             PAYMENT AND BILLING PROVISIONS                               48

11             TAXES                                                        52

12             TERMINATION                                                  53

13             LIABILITY                                                    53

14             INSURANCE                                                    55

15             UNCONTROLLABLE FORCES                                        58

16             NONDEDICATION OF FACILITIES                                  60



17             PRIORITY OF DOCUMENTS                                        60

18             NOTICES AND CORRESPONDENCE                                   60


                                       2


19             PREVIOUS COMMUNICATIONS                                      61

20             NONWAIVER                                                    61

21             SUCCESSORS AND ASSIGNS                                       62

22             EFFECT OF SECTION HEADINGS                                   62

23             GOVERNING LAW                                                62


24             MULTIPLE ORIGINALS                                           63

               SIGNATURES                                                   63





                                       3


1. PROJECT SUMMARY
   ---------------

         This Contract is entered into between Southern California Edison
Company ("Edison") and Santa Fe Geothermal, Inc. ("Seller"). Seller is willing
to construct, own, and operate a Qualifying Facility and sell electric power to
Edison and Edison is willing to purchase electric power delivered by Seller to
Edison at the Point of Interconnection pursuant to the terms and conditions set
forth as follows:

         1.1 All notices shall be sent to Seller at the following address:

         Santa Fe Geothermal, Inc.
         5001 East Commerce Center Drive
         Bakersfield, CA 93309

         1.2 Seller's Generating Facility:

             a. Nameplate Rating: 10,000 kW.

             b. Location: Section 9, T35, R28E, MDBM

             c. Type (Check One):

                N/A Cogeneration Facility
                ---

                 X  Small Power Production Facility
                ---

             d. Delivery of power to Edison at a nominal 33,000 volts.

             e. Seller shall commence construction of the Generating Facility by
                1987.

             1.3 Edison Customer Service District;

             Bishop District
             374 Lagoon Street
             Bishop, CA 93514

             1.4 Location of Edison Operating Switching Center:

             Bishop Hydro Division
             Control Substation, Route 1
             Bishop, CA 93514

                                       4


             1.5 Contract Capacity: 10,000 kW

                  1.5.1 Estimated as-available capacity: 0 kW.

             1.6 Expected annual production: 74,460,000 kWh.

             1.7 Expected Firm Operation for each generating unit(s): January
                 1988

             1.8 Contract Term: 30 years

             1.9 Operating Options pursuant to Section 5: (Check One)

                    N/A    Operating Option I. Entire Generator output
                    ---    dedicated to Edison. No electric service or
                           standby service required.

                    N/A    Operating Option II. Entire Generator output
                    ---    dedicated to Edison with separate electric
                           service required.

                           a.  Electric service Tariff Schedule No. ____
                               pursuant to Section 10.2.

                           b.  Contact demand: ____ kW.

                    X      Operating Option III. Excess generator output
                           dedicated to Edison with Seller serving own load.

                           a.  Electric service Tariff Schedule No. TOG-8
                               pursuant to Section 10.2.

                           b.  Contract demand: 1,500 kW.

                           c.  Standby Demand: 1,500 kW pursuant to Section
                               10.2.

                           d.  Maximum electrical requirements expected: 1,500
                               kW.

                           e.  Standby electric service Tariff Schedule No.
                               SCG-l pursuant to Section 10.2.

                           f.  Minimum monthly charge for standby service: N/A.
                                                                           ---

         l.10 Interconnection Facilities Agreement pursuant to Section 6 shall
be: (Check One)

                    N/A    - Added Facilities Basis (Appendix A.1)
                    ---

                                       5


                    X      - Capital Contribution Basis (Appendix A.2)
                    ---

                    N/A    - Seller Owned and Operated Basis (Appendix A.3)
                    ---

         1.11 The Capacity Payment Option selected by Seller pursuant to Section
9.1 shall be: (Check One)

                    N/A    Option A - As-available capacity based upon:
                    ---
                           N/A   Standard Offer No. 1 Capacity Payment Schedule,
                           ---   or

                           N/A   Forecast of Annual As-Available Capacity
                           ---   Payment Schedule. The as-available capacity
                                 price (first year): $_______/kW-yr. (Appendix
                                 B)

                    X      Option B - Firm Capacity (check one)
                    ---
                           X     Standard Offer No. 2 Capacity Payment Schedule
                           ---   in effect at time of Contract execution.

                           N/A   Standard Offer No. 2 Capacity Payment Schedule
                           ---   in effect at time of Firm Operation of first
                                 generating unit.

                           Contract Capacity Price: $165/kW-yr. (Firm Capacity).

         1.12 The Energy Payment Option selected by Seller pursuant to Section
9.2 shall be: (Check One)

                    X      Option 1 - Forecast of Annual Marginal Cost of Energy
                    ---    in effect at date of execution of this Contract.
                           (Appendix C)

                    N/A    Option 2 - Levelized Forecast of Marginal Cost of
                    ---    Energy in effect at date of execution of this
                           Contract. Levelized Forecast for the expected date of
                           Firm Operation is _____(cent)/kWh. If Seller's
                           Generating Facility is an oil/natural gas fueled
                           cogenerator. Seller may not select Option 2.

                           For the energy payment refund pursuant to Section 9.5
                           under Option 2, Edison's Incremental Cost of Capital
                           is ____%.

                           Seller may change once between Options 1 and 2,
                           provided Seller delivers written notice of such
                           change at least 90 days prior to the date of Firm
                           Operation.

                                       6


                           For option 1 or 2, Seller elects to receive the
                           following percentages in 20% increments, the total of
                           which shall equal 100%:

                           100   Percent of Forecast of Marginal Cost of Energy
                           ---   (Annual or Levelized), not to exceed 20% of the
                                 annual forecast for oil/natural gas fueled
                                 cogenerators, and

                           0     Percent of Edison's published avoided cost of
                           ---   energy based on Edison's full avoided operating
                                 costs as updated periodically and accepted by
                                 the Commission.

                    N/A    Option 3 - Incremental Energy Rate. Seller may
                    ---    select:

                           N/A   Forecast of Incremental Energy Rate in effect
                           ---   at date of execution of this Contract (Appendix
                                 D),

                                                     or


                           N/A   A range in increments of 100 Btu/kWh above and


                           ---   below the forecast of incremental energy rates
                                 for each year during the First Period of the
                                 Contract Term as follows:

                           Year     Range      Year      Range     Year    Range

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

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


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

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

         1.13 Metering Location (Check one)

                    Seller elects metering location pursuant to Section 8 as
                    follows:

                    X      Edison's side of the Interconnection Facilities
                    ---

                    N/A    Seller's side of the Interconnection Facilities. Loss
                    ---    compensation factor is equal to ______, pursuant to
                           Section 8.3.

                                       7


                           GENERAL TERMS & CONDITIONS

2. DEFINITIONS
   -----------

         When used with initial capitalizations, whether in the singular or in
the plural, the following terms shall have the following meanings:

         2.1 Adjusted Capacity Price: The $/kW-yr capacity purchase price based
on the Capacity Payment Schedule in effect at time of Contract execution for the
time period beginning on the date of Firm Operation for the first generating
unit and ending on the date of termination or reduction of Contract Capacity
under Capacity Payment Option B.

         2.2 Appendix A.l: Interconnection Facilities Agreement -- Added
Facilities Basis

         2.3 Appendix A.2: Interconnection Facilities Agreement -- Capital
Contribution Basis

         2.4 Appendix A.3: Interconnection Facilities Agreement -- Seller Owned
and Operated Basis

         2.5 Appendix B: Forecast of Annual As Available Capacity Payment
Schedule

         2.6 Appendix C: Forecast of Annual Marginal Cost of Energy

         2.7 Appendix D: Forecast of Incremental Energy Rates.

         2.8 Capacity Payment Schedule(s): Published capacity payment
schedule(s) as authorized by the Commission for as-available or firm capacity.

         2.9 Commission: The Public Utilities Commission of the State of
California.

         2.10 Contract: This document and Appendices, as amended from time to
time.

         2.11 Contract Capacity: The electric power producing capability at the
Generating Facility which is committed to Edison.

         2.12 Contract Capacity Price: The capacity purchase price from the
Capacity Payment Schedule approved by the Commission for Capacity Payment Option
B.

         2.13 Contract Term: Period in years commencing with date of Firm
Operation for the first generating unit(s) during which Edison shall purchase
electric power from Seller.

                                       8


         2.14 Current Capacity Price: The $/kW-yr capacity price provided in the
Capacity Payment Schedule determined by the year of termination or reduction of
Contract Capacity and the number of years from such termination or reduction to
the expiration of the Contract Term for Capacity Payment Option B.

         2.15 Edison: The Southern California Edison Company.

         2.16 Edison Electric System Integrity: The state of operation of
Edison's electric system in a manner which is deemed to minimize the risk of
injury to persons and/or property and enables Edison to provide adequate and
reliable electric service to its customers.

         2.17 Emergency: A condition or situation which in Edison's sole
judgment affects Edison Electric System Integrity.

         2.18 Energy: Kilowatthours generated by the Generating Facility which
are purchased by Edison at the Point of Interconnection.

         2.19 Firm Operation: The date agreed on by the Parties on which each
generating unit(s) of the Generating Facility is determined to be a reliable
source of generation and on which such unit can be reasonably expected to
operate continuously at its effective rating (expressed in kW).

         2.20 First Period: The period of the Contract Term specified in Section
3.1.

         2.21 Forced Outage: Any outage other than a scheduled outage of the
Generating Facility that fully or partially curtails its electrical output.

         2.22 Generation Facility: All of Seller's generators, together with all
protective and other associated equipment and improvements, necessary to produce
electrical power at Seller's Facility excluding associated land, land rights,
and interests in land.

         2.23 Generator: The generator(s) and associated prime mover(s), which
are a part of the Generating Facility.

         2.24 Interconnection Facilities: Those protection, metering, electric
line(s), and other facilities required in Edison's sole judgment to permit an
electrical interface between Edison's system and the Generating Facility in
accordance with Edison's Tariff Rule No. 21 titled Cogeneration and Small Power
Production Interconnection Standards filed with the Commission.

         2.25 Interconnection Facilities Agreement: That document which is
specified in Section 1.10 and is attached hereto.

                                       9


         2.26 KVAR: Reactive kilovolt-ampere, a unit of measure of reactive
power.

         2.27 Operate: To provide the engineering, purchasing, repair,
supervision, training, inspection, testing, protection, operation, use,
management, replacement, retirement, reconstruction, and maintenance of and for
the Generating Facility in accordance with applicable California utility
standards and good engineering practices.

         2.28 Operating Representatives: Individual(s) appointed by each Party
for the purpose of securing effective cooperation and interchange of information
between the Parties in connection with administration and technical matters
related to this Contract.

         2.29 Parties: Edison and Seller.

         2.30 Party: Edison or Seller.

         2.31 Peak Months: Those months which the Edison annual system peak
demand could occur. Currently, but subject to change with notice, the peak
months for the Edison system are June, July, August, and September.

         2.32 Point of Interconnection: The point where the transfer of
electrical energy between Edison and Seller takes place.

         2.33 Project: The Generating Facility and Interconnection Facilities
required to permit operation of Seller's Generator in parallel with Edison's
electric system.

         2.34 Protective Apparatus: That equipment and apparatus installed by
Seller and/or Edison pursuant to Section 4.2.

         2.35 Qualifying Faculty: Cogeneration or Small Power Production
Facility which meets the criteria as defined in Title 18, Code of Federal
Regulations, Section 292.201 through 292.207.

         2.36 Second Period: The period of the Contract Term specified in
Section 3.2.

         2.37 Seller: The Party identified in Section 1.0.

         2.38 Seller's Facility: The premises and equipment of Seller located as
specified in Section 1.2.

         2.39 Small Power Production Facility: The facilities and equipment
which use biomass, waste, or renewable resources, including wind, solar,
geothermal, and water, to produce electrical energy as defined in Title 18, Code
of Federal Regulations, Section 292.201 through 292.207.

                                       10


         2.40 Standby Demand: Seller's electrical load requirement that Edison
is expected to serve when Seller's Generating Facility is not available.

         2.41 Summer Period: Defined in Edison's Tariff Schedule No. TOU-8 as
now in effect or as may hereafter be authorized by the Commission.

         2.42 Tariff Schedule No. TOU-8: Edison's time-of-use energy tariff for
electric service exceeding 500 kW, as now in effect or as may hereafter be
authorized by the Commission.

         2.43 Uncontrollable Forces: Any occurrence beyond the control of a
Party which causes that Party to be unable to perform its obligations hereunder
and which a Party has been unable to overcome by the exercise of due diligence,
including but not limited to flood, drought, earthquake, storm, fire,
pestilence, lightning and other natural catastrophes, epidemic, war, riot, civil
disturbance or disobedience, strike, labor dispute, action or inaction of
legislative, judicial, or regulatory agencies, or other proper authority, which
may conflict with the terms of this Contract, or failure, threat of failure or
sabotage of facilities which have been maintained in accordance with good
engineering and operating practices in California.

         2.44 Winter Period: Defined in Edison's Tariff Schedule No. TOU-8 as
now in effect or as may hereafter be authorized by the Commission.

         3. TERM
            ----

         This Contract shall be effective upon execution by the Parties and
shall remain effective until either Party gives 90 days prior written notice of
termination to the other Party, except that such notice of termination shall not
be effective to terminate this Contract prior to expiration of the Contract Term
specified in Section 1.8.

         3.1 The First Period of the Contract Term shall commence upon date of
Firm Operation but not later than five years from the date of execution of this
Contract.

         a.  If the Contract Term specified in Section 1.8 is 15 years, the
             First Period of the Contract Term shall be for five years.

         b.  If the Contract Term specified in Section 1.8 is 20, 25, or 30
             years, the First Period of the Contract Term shall be for 10 years.

         3.2 The Second Period of the Contract Term shall commence upon
expiration of the First Period and shall continue for the remainder of the
Contract Term.

                                       11


4. GENERATING FACILITY
   -------------------

         4.1 Ownership

         The Generating Facility shall be owned by Seller.

         4.2 Design

                  4.2.1 Seller, at no cost to Edison, shall:

                        a.  Design the Generating Facility.

                        b.  Acquire all permits and other approvals necessary
                            for the construction, operation, and maintenance of
                            the Generating Facility.

                        c.  Complete all environmental impact studies necessary
                            for the construction, operation, and maintenance of
                            the Generating Facility.

                        d.  Furnish and install the relays, meters, power
                            circuit breakers, synchronizer, and other control
                            and Protective Apparatus as shall be agreed to by
                            the Parties as being necessary for proper and safe
                            operation of the Project in parallel with Edison's
                            electric system.

                  4.2.2 Edison shall have the right to:

                        a.  Review the design of the Generating Facility's
                            electrical system and the Seller's Interconnection
                            Facilities. Such review may include, but not be
                            limited to, the Generator, governor, excitation
                            system, synchronizing equipment, protective relays,
                            and neutral grounding.

                            The Seller shall be notified in writing of the
                            outcome of the Edison review within 30 days of the
                            receipt of all specifications for both the
                            Generating Facility and the Interconnection
                            Facilities. Any flaws perceived by Edison in the
                            design shall be described in Edison's written
                            notice.

                        b.  Request modifications to the design of the
                            Generating Facility's electrical system and the
                            Interconnection Facilities. Such modifications shall
                            be required if necessary to maintain Edison

                                       12


                            Electric System Integrity when in parallel with the
                            Edison electric system.

         4.2.3 If Seller's Generating Facility includes an induction-type
generator(s), Seller shall provide individual power factor correction capacitors
for each such generator. Such capacitors shall be switched on and off
simultaneously with each of the associated induction-type generator(s) of the
Generating Facility. The KVAR rating of such capacitors shall be the highest
standard value which will not exceed such generators no-load KVAR requirement.
Seller shall not install power factor correction in excess of that required by
this Section unless agreed to in writing by the Parties.

         4.3 Construction

         Edison shall have the right to review, consult with, and make
recommendations regarding Seller's construction schedule and to monitor the
construction and start-up of the Project. Seller shall notify Edison, at least
one year prior to Firm Operation, of changes in Seller's Construction Schedule
which may affect the date of Firm Operation.

         4.4 Operation

               4.4.1 The Generating Facility and Seller's Protective Apparatus
shall be operated and maintained in accordance with applicable California
utility industry standards and good engineering practices with respect to
synchronizing, voltage and reactive power control. Edison shall have the right
to monitor operation of the Project and may require changes in Seller's method
of operation if such changes are necessary, in Edison's sole judgment, to
maintain Edison Electric System Integrity.

               4.4.2 Seller shall notify in writing Edison's Operating
Representative at least 14 days prior to:

                    a.   the initial testing of Seller's Protective Apparatus;
                         and

                    b.   the initial parallel operation of Seller's Generators
                         with Edison's electrical system.

                    Edison shall have the right to have a representative present
                    at each event.

               4.4.3 Edison shall have the right to require Seller to disconnect
the Generator from the Edison electric system or to reduce the electrical output
from the Generator into the Edison electric system, whenever Edison determines,
in its sole judgment, that such a disconnection is necessary to facilitate
maintenance of Edison's facilities, or to maintain Edison Electric System
Integrity. If Edison requires Seller to disconnect the

                                       13


Generator from the Edison electric system pursuant to this Section 4.4.3, Seller
shall have the right to continue to serve its total electrical requirements
provided Seller has elected Operating Option III. Each Party shall endeavor to
correct, within a reasonable period, the condition on its system which
necessitates the disconnection or the reduction of electrical output. The
duration of the disconnection or the reduction In electrical output shall be
limited to the period of time such a condition exists.

               4.4.4 The Generating Facility shall be operated with all of
Seller's Protective Apparatus in service whenever the Generator is connected to
or is operated in parallel with the Edison electric system. Any deviation for
brief periods of emergency or maintenance shall only be by agreement of the
Parties.

               4.4.5 Each Party shall keep the other Party's Operating
Representative informed as to the operating schedule of their respective
facilities affecting each other's operation hereunder, including any reduction
in Contract Capacity availability. In addition, Seller shall provide Edison with


reasonable advance notice regarding its scheduled outages including any
reduction in Contract Capacity availability. Reasonable advance notice is as
follows:

                     SCHEDULED OUTAGE                        ADVICE NOTICE TO
                    EXPECTED DURATION                             EDISON
                    -----------------                             ------

  Less than one day                                             24 Hours

  One day or more (except major overhauls)                      1 Week

           Major overhaul                                       6 Months

               4.4.6 Notification by each Party's Operating Representative of
outage date and duration should be directed to the other Party's Operating
Representative by telephone.

               4.4.7 Seller shall not schedule major overhauls during Peak
Months.

               4.4.8 Seller shall maintain in operating log at Seller's Facility
with records of: real and reactive power production; changes in operating
status, outages, Protective Apparatus operations; and any unusual conditions
found during inspections. Changes in setting shall also be logged for Generators
which are "block-loaded" to a specific kW capacity. In addition, Seller shall
maintain records applicable to the Generating Facility, including the electrical
characteristics of the Generator and settings or adjustments of the Generator
control equipment and protective devices. Information maintained pursuant to
this Section 4.4.8 shall be provided to Edison, within 30 days of Edison's
request.

                                       14


               4.4.9 If, at any time, Edison doubts the integrity of any of
Seller's Protective Apparatus and believes that such loss of integrity would
impair the Edison Electric System Integrity, Seller shall demonstrate, to
Edison's satisfaction, the correct calibration and operation of the equipment in
question.

               4.4.10 Seller shall test all protective devices specified in
Section 4.2 with qualified Edison personnel present at intervals not to exceed
four years.

               4.4.11 Seller shall, to the extent possible, provide reactive
power for its own requirements, and where applicable, the reactive power losses
of interfacing transformers. Seller shall not deliver excess reactive power to
Edison unless otherwise agreed upon between the Parties.

               4.4.12 Seller warrants that the Generating Facility meets the
requirements of a Qualifying Facility as of the effective date of this Contract
and continuing through the Contract Term.

               4.4.13 The Seller warrants that the Generating Facility shall at
all times conform to all applicable laws and regulations. Seller shall obtain
and maintain any governmental authorizations and permits for the continued
operation of the Generating Facility. If at any time Seller does not hold such
authorizations and permits, Seller agrees to reimburse Edison for any loss which
Edison incurs as a result of the Seller's failure to maintain governmental
authorization and permits.

               4.4.14 At Edison's request, Seller shall make all reasonable
effort to deliver power at an average rate of delivery at least equal to the
Contract Capacity during periods of Emergency. In the event that the Seller has
previously scheduled an outage coincident with an Emergency, Seller shall make
all reasonable efforts to reschedule the outage. The notification periods listed
in Section 4.4.5 shall be waived by Edison if Seller reschedules the outage.

               4.4.15 Seller shall demonstrate the ability to provide Edison the
specified Contract Capacity within 30 days of the date of Firm Operation.
Thereafter, at least once per year at Edison's request, Seller shall demonstrate
the ability to provide Contract Capacity for a reasonable period of time as
required by Edison. Seller's demonstration of Contract Capacity shall be at
Seller's expense and conducted at a time and pursuant to procedures mutually
agreed upon by the Parties. If Seller fails to demonstrate the ability to
provide the Contract Capacity, the Contract Capacity shall be reduced by
agreement of the Parties pursuant to Section 9.1.2.5.

                                       15


         4.5 Maintenance

               4.5.l Seller shall maintain the Generating Facility in accordance
with applicable California utility industry standards and good engineering and
operating practices. Edison shall have the right to monitor such maintenance of
the Generating Facility. Seller shall maintain and deliver a maintenance record
of the Generating Facility to Edison's Operating Representatives upon request.

               4.5.2 Seller shall make a reasonable effort to schedule routine
maintenance during Off-Peak Months. Outages for scheduled maintenance shall not
exceed a total of 30 peak hours for the Peak Months.

               4.5.3 The allowance for scheduled maintenance is as follows:

                    a.   Outage periods for scheduled maintenance shall not
                         exceed 840 hours (35 days) in any 12-month period. This
                         allowance may be used in increments of an hour or
                         longer on a consecutive or nonconsecutive basis.

                    b.   Seller may accumulate unused maintenance hours on a
                         year-to-year basis up to a maximum of 1,080 hours (45
                         days). This accrued time must be used consecutively and
                         only for major overhauls.

         4.6. Any review by Edison of the design, construction, operation, or
maintenance of the Project is solely for the information of Edison. By making
such review, Edison makes no representation as to the economic and technical
feasibility, operational capability, or reliability of the Project. Seller shall
in no way represent to any third party that any such review by Edison of the
Project, including, but not limited to, any review of the design, construction,
operation, or maintenance of the Project by Edison, is a representation by
Edison as to the economic and technical feasibility, operational capability, or
reliability of said facilities. Seller is solely responsible for economic and
technical feasibility, operational capability, and reliability thereof.

5. OPERATING OPTIONS
   -----------------

         5.1 Seller shall elect in Section 1.9 to Operate its Generating
Facility in parallel with Edison's electric system pursuant to one of the
following options:

               a.   Operating Option I: Seller dedicates the entire Generator
                    output to Edison with no electrical service required from
                    Edison.

                                       16


               b.   Operating Option II: Seller dedicates the entire Generator
                    output to Edison with electrical service required from
                    Edison.

               c.   Operating Option III: Seller dedicates to Edison only that
                    portion of the Generator output in excess of Seller's
                    electrical service requirements. As much as practicable,
                    Seller intends to serve its electrical requirements from the
                    Generator output and will require electrical standby from
                    Edison as designated in Section 1.9.

         5.2 After expiration of the First Period of the Contract Term, Seller
may change the Operating Option, but not more than once per year upon at least
90 days prior written notice to Edison. A reduction in Contract Capacity as a
result of a change in operating options shall be subject to Section 9.1.2.5.
Edison shall not be required to remove or reserve capacity of Interconnection
Facilities made idle by a change in operating options. Edison may dedicate any
such idle Interconnection Facilities at any time to serve other customers or to
interconnect with other electric power sources. Edison shall process requests
for changes of operating option in the chronological order received.

         5.2.1 When the Seller wishes to reserve Interconnection Facilities paid
for by the Seller but idled by a change in operation option, Edison shall impose
a special facilities charge related to the operation and maintenance of the
Interconnection Facility. When the Seller no longer needs said facilities for
which it has paid, the Seller shall receive credit for the net salvage value of
the Interconnection Facilities dedicated to Edison's use. If Edison is able to
make use of these facilities to serve other customers, the Seller shall receive
the fair market value of the facilities determined as of the date the Seller
either decides no longer to use said facilities or fails to pay the required
maintenance fee.

6.  INTERCONNECTION FACILITIES
    --------------------------

         6.1 The Parties shall execute an Interconnection Facilities Agreement
selected by Seller in Section 1.10, covering the design, installation, operation
and maintenance of the Interconnection Facilities required in Edison's sole
judgment, to permit an electrical interface between the Parties pursuant to
Edison's Tariff Rule No. 21.

         6.2 The cost for the Interconnection Facilities set forth in the
appendices specified in Section 1.10, are estimates only for Seller's
information and will be adjusted to reflect recorded costs after installation is
complete; except that, upon Seller's written request to Edison, Edison shall
provide a binding estimate which shall be the basis for the Interconnection
Facilities cost in the Interconnection Facilities Agreement executed by the
Parties.

                                       17


         6.3 The nature of the Interconnection Facilities and the Point of
Interconnection shall be set forth either by equipment lists or appropriate
one-line diagrams and shall be attached to the appropriate appendix specified in
Section 1.10.

         6.4 The design, installation, operation, maintenance, and modifications
of the Interconnection Facilities shall be a Sellers expense.

         6.5 Seller shall not commence parallel operation of the Generating
Facility until written approval for operation of the Interconnection Facilities
has been received from Edison. The Seller shall notify Edison at least
forty-five days prior to the initial energizing of the Point of Interconnection.
Edison shall have the right to inspect the Interconnection Facilities within
thirty days of receipt of such notice. If the facilities do not pass Edison's
inspection, Edison shall provide in writing the reasons for this failure within
five days of the inspection.

         6.6 Seller, at no cost to Edison, shall acquire all permits and
approvals and complete all environmental impact studies necessary for the
design, installation, operation, and maintenance of the Interconnection
Facilities.

7. ELECTRIC LINES AND ASSOCIATED EASEMENTS
   ---------------------------------------

         7.1 Edison shall, as it deems necessary or desirable, build electric
lines, facilities and other equipment, both overhead and underground, on and off
Seller's Facility, for the purpose of effecting the agreements contained in this
Contract. The physical location of such electric lines, facilities and other
equipment on Seller's Facility shall be determined by agreement of the Parties.

         7.2 Seller shall reimburse Edison for the cost of acquiring property
rights off Sellers's Facility required by Edison to meet its obligations under
this Contract.

         7.3 Seller shall grant to Edison, without cost to Edison, and by an
instrument of conveyance, acceptable to Edison, rights of way, easements and
other property interests necessary to construct, reconstruct, use, maintain,
alter, add to, enlarge, repair, replace, inspect and remove, at any time, the
electric lines, facilities or other equipment, both overhead and underground,
which are required by Edison to effect the agreements contained in the Contract.
Seller shall also provide the rights of ingress and egress at all reasonable
times necessary for Edison to perform the activities contemplated in the
Contract.

         7.4 The electric lines, facilities, or other equipment referred to in
this Section 7 installed by Edison on or off Seller's Facility shall be and
remain the property of Edison.

                                       18


         7.5 Edison shall have no obligation to Seller for any delay or
cancellation due to inability to acquire a satisfactory right of way, easements,
or other property interests.

8. METERING
  ---------

         8.1 All meters and equipment used for the measurement of electric power
for determining Edison's payments to Seller pursuant to this Contract shall be
provided, owned, and maintained by Edison at Seller's expense in accordance with
Edison's Tariff Rule No. 21.

         8.2 All meters and equipment used for billing Seller for electric
service provided to Seller by Edison under Operating Options II or III shall be
provided, owned, and maintained by Edison at Edison's expense in accordance with
Edison's Tariff Rule No. 16.

         8.3 The meters and equipment used for measuring the Energy sold to
Edison shall be located on the side of the Interconnection Facilities as
specified by Seller in Section 1.13. If the metering equipment is located on
Seller's side of the Interconnection Facilities, then a loss compensation factor
agreed upon by the Parties shall be applied. At the written request of the
Seller, and at Seller's sole expense, Edison shall measure actual transformer
losses. If the actual measured value differs from the agreed-upon loss
compensation factor, the actual value shall be applied prospectively. If the
meters are placed on Edison's side of the Interconnection Facilities, service
shall be provided at the available transformer high-side voltage.

         8.4 For purposes of monitoring the Generator operation and the
determination of standby charges, Edison shall have the right to require, at
Seller's expense, the installation of generation metering. Edison may also
require the installation of telemetering equipment at Seller's expense for
Generating Facilities equal to or greater than 10 MW. Edison may require the
installation of telemetering equipment at Edison's expense for Generating
Facilities less than 10 MW.

         8.5 Edison's meters shall be sealed and the seals shall be broken only
when the meters are to be inspected, tested, or adjusted by Edison. Seller shall
be given reasonable notice of testing and have the right to have its Operating
Representative present on such occasions.

         8.6 Edison's meters installed pursuant to this Contract shall be tested
by Edison, at Edison's expense, at least once each year and at any reasonable
time upon request by either Party, at the requesting Party's expense. If Seller
makes such request, Seller shall reimburse said expense to Edison within thirty
days after presentation of a bill therefor.

         8.7 Metering equipment found to be inaccurate shall be repaired,
adjusted, or replaced by Edison such that the metering accuracy of said
equipment shall be within two

                                       19


percent. If metering equipment inaccuracy exceeds two percent, the correct
amount of Energy and Contract Capacity delivered during the period of said
inaccuracy shall be estimated by Edison and agreed upon by the Parties.

9. POWER PURCHASE PROVISIONS
   -------------------------

         Prior to the date of Firm Operation, Seller shall be paid for Energy
only pursuant to Edison's published avoided cost of energy based on Edison's
full avoided operating cost as periodically updated and accepted by the
Commission. If at any time Energy can be delivered to Edison and Seller is
contesting the claimed jurisdiction of any entity which has not issued a license
or other approval for the Project, Seller, in its sole discretion and risk, may
deliver Energy to Edison and for any Energy purchased by Edison, Seller shall
receive payment from Edison for (i) Energy pursuant to this Section, and (ii)
as-available capacity based on a capacity price from the Standard Offer No. 1
Capacity Payment Schedule as approved by the Commission. Unless and until all
required license; and approvals have been obtained, Seller may discontinue
deliveries at any time.

9.1 Capacity Payments

         Seller shall sell to Edison and Edison shall purchase from Seller
capacity pursuant to the Capacity Payment Option selected by Seller in Section
1.11. The Capacity Payment Schedules will be based on Edison's full avoided
operating costs as approved by the Commission through the life of this Contract.
Data used to derive Edison's full avoided costs will be made available to the
Seller, to the extent specified by Seller upon request.

               9.1.1 Capacity Payment Option A -- As Available Capacity.



               If Seller selects Capacity Payment Option A, Seller shall be paid
a monthly, capacity payment calculated pursuant to the following formula:

               MONTHLY CAPACITY PAYMENT = (A x D) + (B x D) / (C x D)

               Where A =  kWh purchased by Edison during on-peak periods defined

                          in Edison's Tariff Schedule No. TOU-8.

                     B =  kWh purchased by Edison during mid-peak periods
                          defined in Edison's Tariff Schedule No. TOU-8.

                     *C = kWh purchased by Edison during off-peak periods
                          defined in Edison's Tariff Schedule No. TOU-8.

                     D  = The appropriate time differentiated capacity price
                          from either the Standard Offer No. 1 Capacity Payment
                          Schedule or

                                       20

                          Forecast of Annual As-Available Capacity Payment
                          Schedule as specified by Seller in Section 1.11.

               9.1.1.1 If Seller specifies the Standard Offer No. 1 Capacity
Payment Schedule in Section 1.11, then the formula set forth in Section 9.1.1
shall be computed with D equal to the appropriate time differentiated capacity
price from the Standard Offer No. 1 Capacity Payment Schedule for the Contract
Term.

               9.1.1.2 If Seller specifies the Forecast of Annual As-Available
Capacity Payment Schedule in Section 1.11, the formula set forth in Section
9.1.1 shall be computed as follows:

                    a.   During the First Period of the Contract Term, D shall
                         equal the appropriate time differentiated capacity
                         price from the Forecast of Annual As-Available Capacity
                         Payment Schedule.

                    b.   During the Second Period of the Contract Term, the
                         formula shall be computed with D equal to the
                         appropriate time differentiated capacity price from
                         Standard Offer No. 1 Capacity Payment Schedule, but not
                         less than the greater of (i) the appropriate time
                         differentiated capacity price from the Forecast of
                         Annual As-Available Capacity Payment Schedule for the
                         last year of the First Period, or (ii) the appropriate
                         time differentiated capacity price from the Standard
                         Offer No. 1 Capacity Payment Schedule for the first
                         year of the Second Period.

               9.1.2 Capacity Payment Option B - Firm Capacity Purchase

               If Seller selects Capacity Payment Option B, Seller shall provide
to Edison for the Contract Term the Contract Capacity specified in Section 1.5,
or as adjusted pursuant to Section 9.1.2.6, and Seller shall be paid as follows:

               9.1.2.1 If Seller meets the performance requirements set forth in
Section 9.1.2.2, Seller shall be paid a Monthly Capacity Payment, beginning from
the date of Firm Operation equal to the sum of the on-peak, mid-peak, and
off-peak Capacity Period Payments. Each capacity period payment is calculated
pursuant to the following formula:

               MONTHLY CAPACITY PAYMENT = A x B x C x D

               Where A = Contract Capacity Price specified in Section 1.11 based
                         on the Standard Offer No. 2 Capacity Payment Schedule
                         as approved

                                       21


                         by the Commission and in effect on the date of the
                         execution of this Contract.

                     B = Conversion factors to convert annual capacity prices to
                         monthly payments by time of delivery as specified in
                         Standard Offer No. 2 Capacity Payment Schedule and
                         subject to periodic modifications as approved by the
                         Commission.

                     C = Contract Capacity specified in Section 1.5.

                     D = Period Performance Factor, not to exceed 1.0,
                         calculated as follows:

                         Period kWh purchased by Edison limited by the level of
                         Contract Capacity
                         ------------------------------------------------------
                         0.8 x Contract Capacity x (Period Hours minus
                         Maintenance Hours Allowed in Section 4.5.)

               9.1.2.2 Performance Requirements

               To receive the Monthly Capacity Payment in Section 9.1.2.1,
Seller shall provide the Contract Capacity in each Peak Month for all on-peak
hours as such peak hours are defined in Edison's Tariff Schedule No. TOU-8 on
file with the Commission, except that Seller is entitled to a 20% allowance for
Forced Outages for each Peak Month. Seller shall not be subject to such
performance requirements for the remaining hours of the year.

                    a.   If Seller fails to meet the requirements specified in
                         Section 9.1.2.2, Seller, in Edison's sole discretion,
                         may be placed on probation for a period not to exceed
                         13 months. If Seller fails to meet the requirements
                         specified in Section 9.1.2.2 during the probationary
                         period, Edison may derate the Contract Capacity to the
                         greater of the capacity actually delivered during the
                         probationary period, or the capacity at which Seller
                         can reasonably meet such requirements. A reduction in
                         Contract Capacity as a result of this Section 9.1.2.2
                         shall be subject to Section 9.1.2.5.

                    b.   If Seller fails to meet the requirements set forth in
                         Section 9.1.2.2 due to a Forced Outage on the Edison
                         system or a request to reduce or curtail delivery under
                         Section 9.4. Edison shall continue Monthly Capacity
                         Payments pursuant to Capacity Payment Option B. The
                         Contract Capacity curtailed shall be

                                       22


                         treated the same as scheduled maintenance outages in
                         the calculation of the Monthly Capacity Payment.

               9.1.2.3 If Seller is unable to provide Contract Capacity due to
Uncontrollable Forces, Edison shall continue Monthly Capacity Payments for 90
days from the occurrence of the Uncontrollable Force. Monthly Capacity Payments
payable during a period of interruption or reduction by reason of an
Uncontrollable Force shall be treated the same as scheduled maintenance outages.

               9.1.2.4 Capacity Bonus Payment For Capacity Payment Option B,
Seller may receive a Capacity Bonus Payment as follows:

                    a.   Bonus During Peak Months -- For a Peak Month, Seller
                         shall receive a Capacity Bonus Payment if (i) the
                         requirements set forth in Section 9.1.2.2 have been
                         met, and (ii) the on-peak capacity factor exceeds 85%.

                    b.   Bonus During Non-Peak Months -- For a non-peak month,
                         Seller shall receive a Capacity Bonus Payment if (i)
                         the requirements set forth in Section 9.1.2.2 have been
                         met, (ii) the on-peak capacity factor for each Peak
                         Month during the year was at least 85%, and (iii) the
                         on-peak capacity factor for the non-peak month exceeds
                         85%.

                    c.   For any eligible month, the Capacity Bonus Payment
                         shall be calculated as follows:

               CAPACITY BONUS PAYMENT = A x B x C x D

               Where A = (1.2 On-Peak Capacity Factor) - 1.02

               Where the On-Peak Capacity Factor, not to exceed 1.0, is
calculated as follows:

                    Period kWh purchased by Edison limited by the level of
                    Contract Capacity
                    ------------------------------------------------------
                    (Contract Capacity) x (Period Hours minus Maintenance
                    Hours Allowed in Section 4.5)

               B =  Contract Capacity Price specified in Section 1.11 for
                    Capacity Payment Option B

               C =  1/12

                                       23


               D =  Contract Capacity specified in Section 1.5

                    d.   When Seller is entitled to receive a Capacity Bonus
                         Payment, the Monthly Capacity Payment shall be the sum
                         of the Monthly Capacity Payment pursuant to Section
                         9.1.2.1 and the Monthly Capacity Bonus Payment pursuant
                         to this Section.

                    e.   For Capacity Payment Option B, Seller shall be paid for
                         capacity in excess of Contract Capacity based on the
                         as-available capacity price in Standard Offer No. 1
                         Capacity Payment Schedule, as updated and approved by
                         the Commission. Seller shall not receive any
                         as-available capacity payment in excess of Contract
                         Capacity if Sellers Generating Facility is a small
                         hydro project.

               9.1.2.5 Capacity Reduction

                    a.   Seller may reduce the Contract Capacity specified in


                         Section 1.5, provided that Seller gives Edison prior
                         written notice for a period determined by the amount of
                         Contract Capacity reduced as follows:

                                Amount of Contract                Length of
                                 Capacity Reduced              Notice Required
                                 ----------------              ---------------

                                25,000 kW or under                12 months

                                25,001 - 50,000 kW                36 months


                                50,001 - 100,000 kW               48 months

                                  over 100,000 kW                 60 months

                    b.   Subject to Section 10.4, Seller shall refund to Edison
                         with interest at the current published Federal Reserve
                         Board three months prime commercial paper rate an
                         amount equal to the difference between (i) the
                         accumulated Monthly Capacity Payments paid by Edison
                         pursuant to Capacity Payment Option B up to the time
                         the reduction notice is received by Edison, and (ii)
                         the total capacity payments which Edison would have
                         paid if based on the Adjusted Capacity Price.

                                       24


                    c.   From the date the reduction notice is received to the
                         date of actual capacity reduction, Edison shall make
                         capacity payments based on the Adjusted Capacity Price
                         for the amount of Contract Capacity being reduced.

                    d.   Seller may reduce Contract Capacity without the notice
                         prescribed in Section 9.1.2.5(a), provided that Seller
                         shall refund to Edison the amount specified in Section
                         9.1.2.5(b) and an amount equal to: (i) the amount of
                         Contract Capacity being reduced, times (ii) the
                         difference between the Current Capacity Price and the
                         Contract Capacity Price, times (iii) the number of
                         years and fractions thereof (not less than one year) by
                         which the Seller has been deficient in giving
                         prescribed notice. If the Current Capacity Price is
                         less than the Contract Capacity Price, only payment
                         under Section 9.1.2.5(b) shall be due to Edison.

               9.1.2. Adjustment to Contract Capacity. The Parties may agree in
writing at any time to adjust the Contract Capacity. Seller may reduce the
Contract Capacity pursuant to Section 9.1.2.5. Seller may increase the Contract
Capacity with Edison's approval and thereafter receive payment for the increased
capacity in accordance with the Contract Capacity Price for the Capacity Payment
Option selected by Seller for the remaining Contract Term.

         9.2 Energy Payments - First Period

         During the First Period of the Contract Term, Seller shall be paid a
Monthly Energy Payment for the Energy delivered by the Seller to Edison at the
Point of Interconnection pursuant to the Energy Payment Option selected by
Seller in Section 1.12, as follows. (Data used to derive Edison's Energy
payments for the First Period will be made available to the Seller, to the
extent specified by Seller, upon request.)

               9.2.1 Energy Payment Option 1 -- Forecast of Annual Marginal Cost
of Energy. If Seller selects Energy Payment Option 1, then during the First
Period of the Contract Term, Seller shall be paid a Monthly Energy Payment for
Energy delivered by Seller and purchased by Edison during each month in the
First Period of the Contract Term pursuant to the following formula:

               MONTHLY ENERGY PAYMENT = (A x D) + (B x D) + (C x D)

                                       25


               Where A = kWh purchased by Edison during on-peak periods defined
                         in Edison's Tariff Schedule No. TOU-8.

                     B = kWh purchased by Edison during mid-peak periods defined
                         in Edison's Tariff Schedule No. TOU-8.

                     C = kWh purchased by Edison during off-peak periods defined
                         in Edison's Tariff Schedule No. TOU-8.

                     D = The sum of:

                         (i) the appropriate time differentiated energy price
                         from the Forecast of Annual Marginal Cost of Energy,
                         multiplied by the decimal equivalent of the percentage
                         of the forecast specified in Section 1.12, and (ii) the
                         appropriate time differentiated energy price from
                         Edison's published avoided cost of energy multiplied by
                         the decimal equivalent of the percentage of the
                         published energy price specified in Section 1.12.

                     9.2.2 Energy Payment Option 2 -- Levelized Forecast of
Marginal Cost of Energy. If Seller selects Energy Payment Option 2, then during
the First Period of the Contract Term, Seller shall be paid a Monthly Energy
Payment for Energy delivered by Seller and purchased by Edison each month during
the First Period of the Contract Term pursuant to the following formula:

MONTHLY ENERGY PAYMENT = (A x D) + (B x D) + (C x D)

               Where A = kWh purchased by Edison during on-peak periods defined
                         in Edison's Tariff Schedule No. TOU-8.

                     B = kWh purchased by Edison during mid-peak periods defined
                         in Edison's Tariff Schedule No. TOU-8.

                     C = kWh purchased by Edison during off-peak periods defined
                         in Edison's Tariff Schedule No. TOU-8.

                     D = The sum of:

                         (i) the appropriate time differentiated energy price
                         from the Levelized Forecast of Marginal Cost of Energy,
                         for the First Period of the Contract Term multiplied by
                         the decimal

                                       26


                         equivalent of the percentage of the forecast levelized
                         specified in Section 1.12, and

                         (ii) the appropriate time differentiated energy price
                         from Edison's published avoided cost of energy
                         multiplied by the decimal equivalent of the percentage
                         of the published energy price specified in Section
                         1.12.

               9.2.2.1 Performance Requirement for Energy Payment Option 2

               During the First Period when the annual forecast referred to in
Section 9.2.1 is greater than the levelized forecast referred to in Section
9.2.2, Seller shall deliver to Edison at least 70 percent of the average annual
kWh delivered to Edison during those previous periods when the levelized
forecast referred to in Section 9.2.2 is greater than the annual forecast
referred to in Section 9.2.1 as resource conditions permit for solar, wind, and
hydro Generating Facilities and excluding uncontrollable forces. If Seller does
not meet the performance requirements of this Section 9.2.2.1, Seller shall be
subject to Section 9.5.

         9.3 Energy Payments - Second Period

         During the Second Period of the Contract Term, Seller shall be paid a
Monthly Energy Payment for Energy delivered by Seller and purchased by Edison at
a rate equal to 100% of Edison's published avoided cost of energy based on
Edison's full avoided operating cost as updated periodically and accepted by the
Commission, pursuant to the following formula:

MONTHLY ENERGY PAYMENT = kWh purchased by Edison for each on-peek, mid-peak, and
                         off-peak time period defined in Edison's Tariff
                         Schedule No. TOU-8
                       x Edison's published avoided cost of energy by time of
                         delivery for each time period.

         Data used to derive Edison's full avoided costs will be made available
to the Seller, to the extent specified by Seller, upon request.

         9.4 Edison shall not be obligated to accept or pay for Energy, and may
request Seller whose Generating Facility is one (l) MW or greater to discontinue
or reduce delivery of Energy, for not more than 300 hours annually during
off-peak hours when (i) purchases would result in costs greater than those which
Edison would incur if it did not purchase Energy from Seller but instead
utilized an equivalent amount of Energy generated from another Edison source, or
(ii) the Edison Electric System demand would require that Edison hydro-energy be
spilled to reduce generation.

                                       27


         9.5 Energy Payment Refund

         If Seller elects Energy Payment option 2, Seller shall be subject to
the following:

               9.5.1 If Seller fails to perform the Contract obligations for any
reason during the First Period of the Contract Term, or fails to meet the
performance requirements set forth in Section 9.2.2.1, and at the time of such
failure to perform, the net present value of the cumulative Energy payments
received by Seller pursuant to Energy Payment Option 2 exceeds the net present
value of what Seller would have been paid pursuant to Energy Payment Option 1,
Seller shall make an energy payment refund equal to the difference in such net
present values in the year in which the refund is due. The present value
calculation shall be based upon the rate of Edison's incremental cost of capital
specified in Section 1.12.

               9.5.2 Not less than 90 days prior to the date Energy is first
delivered to the Point of Interconnection, Seller shall provide and maintain a
performance bond, surety bond, performance insurance, corporate guarantee, or
bank letter of credit, satisfactory to Edison, which shall insure payment to
Edison of the Energy Payment Refund at any time during the First Period. Edison
may, in its sole discretion accept another form of security except that in such
instance a 1-1/2 percent reduction shall then apply to the levelized forecast
referred to in Section 9.2.2 in computing payments for Energy. Edison shall be
provided with certificates evidencing Seller's compliance with the security
requirements in this Section which shall also include the requirement that
Edison be given 90 days prior written notice of the expiration of such security.

               9.5.3 If Seller fails to provide replacement security not less
than 60 days prior to the date of expiration of existing security, the Energy
Payment Refund provided in Section 9.5 shall be payable forthwith. Thereafter,
payments for Energy shall be 100 percent of the Monthly Energy Payment provided
in Section 9.2.1.

               9.5.4 If Edison at any time determines the security to be
otherwise inadequate, and so notifies Seller, payments thereafter for Energy
shall be 100 percent of the Monthly Energy Payment provided in Section 9.2.1. If
within 30 days of the date Edison gives notice of such inadequacies, Seller
satisfies Edison's security requirements, Energy Payment Option 2 shall be
reinstated. If Seller fails to satisfy Edison's security requirements within the
30-day period, the Energy Payment Refund provided in Section 9.5 shall be
payable forthwith.

         10. PAYMENT AND BILLING PROVISIONS
             ------------------------------

         10.1 For Energy and capacity purchased by Edison:

                                       28


               10.1.1 Edison shall mail to Seller not later than thirty days
after the end of each monthly billing period (1) a statement showing the Energy
and Contract Capacity delivered to Edison during the on-peak, mid-peak, and
off-peak periods, as those periods are specified in Edison's Tariff Schedule No.
TOU-8 for that monthly billing period, (2) Edison's computation of the amount
due Seller, and (3) Edison's check in payment of said amount.

               10.1.2 If the monthly payment period involves portions of two
different published Energy payment schedule periods, the monthly Energy payment
shall be prorated on the basis of the percentage of days at each price.

               10.1.3 If the payment period is less than 27 days or greater than
33 days, the capacity payment shall be prorated on the basis of the average days
per month per year.

               10.1.4 If within thirty days of receipt of the statement Seller
does not make a report in writing to Edison of an error, Seller shall be deemed
to have waived any error in Edison's statement, computation, and payment, and
they shall be considered correct and complete.

         10.2 For electric service provided by Edison:

               10.2.1 Under Operating Option III pursuant to Section 5.1,
standby electric service shall be provided under terms and conditions of


Edison's tariff schedule indicated below as now in effect or as may hereafter be
authorized by the Commission to be revised. The applicable tariff schedules are:

                   STANDBY TARIFF              ELECTRIC SERVICE TARIFF
                   --------------              -----------------------
                   SCHEDULE NO.
                   ------------


                      SCG-1                         TOU-8 or GS-2
                      SCG-2                         TOU-8
                      SCG-3                         TOU-8

               10.2.1.1 (Applicable to SCG-1 only) The Standby Demand for
calculation of the standby charge in SCG-1 is specified in Section 1.9. Edison
reserves the right to adjust the Standby Demand based on recorded demand during
periods standby power is required.

               10.2.1.2 (Applicable to SCG-1 only) The capacity rating for
determination of standby waiver qualifications shall be Contract Capacity plus
the maximum electric load served by the Generating Facility during the on-peak
time period recorded during the preceding 12-month time period.

                                       29


               10.2.1.3 A minimum monthly charge may be established for standby
electric service as provided in the tariff schedule elected in section 1.9. Said
minimum monthly charge shall be specified in Section 1.9.

               10.2.2 Under Operating Options II and III pursuant to Section
5.1, electric service shall be provided under terms, conditions, and rates of
Edison's tariff schedule indicated below as now in effect or as may hereafter be
authorized by the Commission to be revised. The applicable tariff schedule is:

                       TOU-8, or

                       GS-2

               The contract demand for calculation of the minimum demand charge
in the applicable tariff schedules is specified in Section 1.9.

               10.2.3 Edison shall commence billing Seller for electric service
rendered pursuant to the applicable tariff schedule on the date that the Point
of Interconnection is energized.

         10.3 Monthly charges associated with Interconnection Facilities shall
be billed pursuant to the Interconnection Facilities Agreement contained in the
Appendix specified in Section 1.10.

         10.4 Payments due to Contract Capacity Reduction

               10.4.1 The Parties agree that the refund and payments provided in
Section 9.1.2.5 represent a fair compensation for the reasonable losses that
would result from such reduction of Contract Capacity.

               10.4.2 In the event of a reduction in Contract Capacity, the
quantity, in kW, by which the Contract Capacity is reduced shall be used to
calculate the refunds and payments due Edison in accordance with Section
9.1.2.5, as applicable.

               10.4.3 Edison shall provide invoices to Seller for all refunds
and payments due Edison under this section which shall be due within 60 days.

               10.4.4 If Seller does not make payments as required in Section
10.4.3, Edison shall have the right to offset any amounts due it against any
present or future payments due Seller and may pursue any other remedies
available to Edison as a result of Seller's failure to perform.

         10.5 Energy Payment Refund

                                       30


         Energy Payment Refund is immediately due and payable upon Seller's
failure to perform the contract obligations as specified in Section 9.5.

         11. TAXES
             -----

               11.1 Seller shall pay ad valorem taxes and other taxes properly
attributable to the Project. If such taxes are assessed or levied against
Edison, Seller shall pay Edison for such assessment or levy.

               11.2 Seller shall pay ad valorem taxes and other taxes properly
attributed to land, land rights, or interest in land for the Project. If such
taxes are assessed or levied against Edison, Seller shall pay Edison for such
assessment or levy.

               11.3 If the Interconnection Facilities are owned by Edison,
Edison shall pay ad valorem taxes and other taxes properly attributed to said
facilities. If such taxes are assessed or levied against Seller, Edison shall
pay Seller for such assessment or levy.

               11.4 Seller or Edison shall provide information concerning the
Project to any requesting taxing authority.

         12. TERMINATION
             -----------

         This Contract shall terminate if Firm Operation does not occur within 5
years of the date of Contract execution.

         13. LIABILITY
             ---------

         13.1 Each Party (First Party) releases the other Party (Second Party),
its directors, officers, employees and agents from any loss, damage, claim,
cost, charge, or expense of any kind or nature (including any direct, indirect
or consequential loss, damage, claim, cost, charge, or expense), including
attorneys' fees and other costs of litigation incurred by the First Party in
connection with damage to property of the First Party caused by or arising out
of the Second Party's construction, engineering, repair, supervision,
inspection, testing, protection, operation, maintenance, replacement,
reconstruction, use or ownership of its facilities, to the extent that such
loss, damage, claim, cost, charge, or expense is caused by the negligence of
Second Party, its directors, officers, employees, agents, or any person or
entity whose negligence would be imputed to Second Party.

         13.2 Each Party shall indemnify and hold harmless the other Party, its
directors, officers, and employees or agents from and against any loss, damage,
claim, cost, charge, (including direct, indirect or consequential loss, damage,
claim, cost, charge, or expense), including attorneys' fees and other costs of
litigation, incurred by the other Party in connection with the injury to or
death of any person or damage to property of a third party

                                       31


arising out of the indemnifying Party's construction, engineering, repair,
supervision, inspection, testing, protection, operation, maintenance,
replacement, reconstruction, use, or ownership of its facilities, to the extent
that such loss, damage, claim, cost, charge, or expense is caused by the
negligence of the indemnifying Party, its directors, officers, employees,
agents, or any person or entity whose negligence would be imputed to the
indemnifying Party; provided, however, that each Party shall be solely
responsible for and shall bear all cost of claims brought by its contractors or
its own employees and shall indemnify and hold harmless the other Party for any
such costs including costs arising out of any workers compensation law. Seller
releases and shall defend and indemnify Edison from any claim, cost, loss,
damage, or liability arising from any contrary representation concerning the
effect of Edison's review of the design, construction, operation, or maintenance
of the Project.

         13.3 The provisions of this Section 13 shall not be construed so as to
relieve any insurer of its obligations to pay any insurance claims in accordance
with the provisions of any valid insurance policy.

         13.4 Neither Party shall be indemnified under this Section 13 for its
liability or loss resulting from its sole negligence or willful misconduct.

         14. INSURANCE
             ---------

         14.1 Until Contract is terminated, Seller shall obtain and maintain in
force as hereinafter provided comprehensive general liability insurance,
including contractual liability coverage, with a combined single limit of (i)
not less than $1,000,000 each occurrence for Generating Facilities 100 kW or
greater; (ii) not less than $500,000 for each occurrence for Generating
Facilities between 20 kW and 100 kW; and (iii) not less than $l00,000 for each
occurrence for Generating Facilities less than 20 kW. The insurance carrier or
carriers and form of policy shall be subject to review and approval by Edison.

         l4.2 Prior to the date Sellers Generating Facility is first operated in
parallel with Edison's electric system, Seller shall (i), furnish certificate of
insurance to Edison, which certificate shall provide that such insurance shall
not be terminated nor expire except on thirty days prior written notice to
Edison, (ii) maintain such insurance in effect for so long as Seller's
Generating Facility is operated in parallel with Edison's electric system, and
(iii) furnish to Edison an additional insured endorsement with respect to such
insurance in substantially the following form:

               "In consideration of the premium charged, Southern California
               Edison Company (Edison) is named as additional insured with
               respect to all liabilities arising out of Sellers use and
               ownership of Seller's Generating Facility."

                                       32


               "The inclusion of more than one insured under this policy shall
               not operate to impair the rights of one insured against another
               insured and the coverages afforded by this policy will apply as
               though separate policies had been issued to each insured. The
               inclusion of more than one insured will not, however, operate to
               increase the limit of the carrier's liability. Edison will not,
               by reason. of its inclusion under this policy, incur liability to
               the insurance carrier for payment of premium for this policy."

               "Any other insurance carried by Edison which may be applicable
               shall be deemed excess insurance and Seller's insurance primary
               for all purposes despite any conflicting provisions in Seller's
               policy to the contrary."

         If the requirement of Section 14.2(iii) prevents Seller from obtaining
the insurance required in Section 14.1 then upon written notification by Seller
to Edison, Section 14.2(iii) shall be waived.

         14.3 The requirements of this Section 14 shall not apply to Seller who
is a self-insured governmental agency with established record of self-insurance.

         l4.4 If Seller fails to comply with the provisions of this Section 14,
Seller shall, at its own cost, defend, indemnify, and hold harmless Edison, its
directors, officers, employees, agents, assigns, and successors in interest from
and against any and all loss, damage, claim, cost, charge, or expense of any
kind or nature (including direct, indirect or consequential loss, damage, claim,
cost, charge, or expense, including attorneys' fees and other costs of
litigation) resulting from the death or injury to any person or damage to any
property, including the personnel and property of Edison, to the extent that
Edison would have been protected had Seller complied with all of the provisions
of this Section 14.

         15.  UNCONTROLLABLE FORCE
              --------------------

         15.1 Neither Party shall be considered to be in default in the
performance of any of the agreements contained in this Contract, except for
obligations to pay money, when and to the extent failure of performance shall be
caused by an Uncontrollable Force.

         15.2 If either Party because of an Uncontrollable Force is rendered
wholly or partly unable to perform its obligations under this Contract, the
Party shall be excused from whatever performance is affected by the
Uncontrollable Force to the extent so affected provided that:

                                       33


         (1) the nonperforming Party, within two weeks after the occurrence of
the Uncontrollable Force, gives the other Party written notice describing the
particulars of the occurrence,

         (2) the suspension of performance is of no greater scope and of no
longer duration than is required by the Uncontrollable Force,

         (3) the nonperforming Party uses its best efforts to remedy its
inability to perform (this subsection shall not require the settlement of any
strike, walkout, lockout or other labor dispute on terms which, in the sole
judgment of the Party involved in the dispute, are contrary to its interest. It
is understood and agreed that the settlement of strikes, walkouts, lockouts or
other labor disputes shall be at the sole discretion of the Party having the
difficulty),

         (4) when the nonperforming Party is able to resume performance of its
obligations under this Contract, that Party shall give the other Party written
notice to that effect, and

         (5) capacity payments during such periods of Uncontrollable Force, on
Seller's part shall be governed by Section 9.1.2.3.

         15.3 In the event that either Party's ability to perform cannot be
corrected when the Uncontrollable Force is caused by the actions or inactions of
legislative, judicial or regulatory agencies or other proper authority, this
Contract may be amended to comply with the legal or regulatory change which
caused the nonperformance.

         If a loss of Qualifying Facility status occurs due to an Uncontrollable
Force and Seller fails to make the changes necessary to maintain its Qualifying
Facility status, the Seller shall compensate Edison for any economic detriment
incurred by Edison as a result of such failure.

         16. NONDEDICATION OF FACILITIES
             ---------------------------

         Neither Party, by this Contract, dedicates any part of its facilities
involved in this Project to the public or to the service provided under the
Contract, and such service shall cease upon termination of the Contract.

         17. PRIORITY OF DOCUMENTS
             ---------------------

              If there is a conflict between this document and any Appendix, the
provisions of this document shall govern. Each Party shall notify the other
immediately upon the determination of the existence of any such conflict.

                                       34


         18. NOTICES AND CORRESPONDENCE
             --------------------------

         All notices and correspondence pertaining to this Contract shall be in
writing and shall be sufficient if delivered in person or sent by certified
mail, postage prepaid, return receipt requested, to Seller as specified in
Section 1.1, or to Edison as follows:

                    Southern California Edison Company
                    Post Office Box 800
                    Rosemead, California 91770
                    Attention:  Secretary

         All notices sent pursuant to this Section 18 shall be effective when
received, and each Party shall be entitled to specify as its proper address any
other address in the United States upon written notice to the other Party.

         19. PREVIOUS COMMUNICATIONS
             -----------------------

         This Contract contains the entire agreement and understanding between
the Parties, their agents, and employees as to the subject matter of this
contract, and merges and supersedes all prior agreements, commitments,
representations, and discussions between the Parties. No Party shall be bound to
any other obligations, conditions, or representations with respect to the
subject matter of this Contract.

         20. NONWAIVER
             ---------

         None of the provisions of the Contract shall be considered waived by
either Party except when such waiver is given in writing. The failure of either
Edison or Seller to insist on any one or more instances upon strict performance
of any of the provisions of the Contract or to take advantage of any of its
rights hereunder shall not be construed as a waiver of any such provisions or
the relinquishment of any such rights for the future, but the same shall
continue to remain in full force and effect.

         21. SUCCESSORS AND ASSIGNS
             ----------------------

         Neither Party shall voluntarily assign its rights nor delegate its
duties under this Contract, or any part of such rights or duties, without the
written consent of the other Party, except in connection with the sale or merger
of a substantial portion of its properties. Any such assignment or delegation
made without such written consent shall be null and void. Consent for assignment
shall not be withheld unreasonably. Such assignment shall include, unless
otherwise specified therein, all of Seller's rights to any refunds which might
become due under this Contract.

         22. EFFECT OF SECTION HEADINGS
             --------------------------

                                       35



         Section headings appearing in this Agreement are inserted for
convenience only, and shall not be construed as interpretations of text.

         23. GOVERNING LAW
             -------------

         This Contract shall be interpreted, governed, and construed under the
laws of the State of California if executed and to be performed wholly within
the State of California.

         24. MULTIPLE ORIGINALS
             ------------------

         This Contract is executed in two counterparts, each of which shall be
deemed an original.

         SIGNATURES
         ----------

         IN WITNESS WHEREOF, the Parties hereto have executed this Contract this
16 of April, 1985.

                                     SOUTHERN CALIFORNIA EDISON COMPANY



                                     By /s/ Edward A. Myers, Jr.
                                       ----------------------------------------
                                                  EDWARD A. MYERS, JR.
                                                     Vice President



                                     SANTE FE GEOTHERMAL, INC.



                                     By /s/ Robert J. Fernandes
                                       ----------------------------------------
                                                   ROBERT J. FERNANDES
                                                         President



                                                                 Exhibit 10.3.17

                                 AMENDMENT NO. 1
                                 ---------------

                                     TO THE
                                     ------

                             POWER PURCHASE CONTRACT
                             -----------------------

                                     BETWEEN
                                     -------

                       SOUTHERN CALIFORNIA EDISON COMPANY
                       ----------------------------------

                                       AND
                                       ---

                                 MAMMOTH PACIFIC
                                 ---------------

                          (CASA DIABLO GEOTHERMAL III)
                          ----------------------------

1.  PARTIES
    -------

              The Parties to this Amendment No. 1 to the Power Purchase Contract
are Mammoth Pacific, hereinafter referred to as "Mammoth Pacific", and Southern
California Edison Company, a California corporation, hereinafter referred to as
"Edison", individually "Party", collectively "Parties".

2.  RECITALS
    --------

              2.1 On April 15, 1985, the Parties executed an agreement entitled
Power Purchase Contract between Mammoth Pacific and Southern California Edison
Company (referred to in this Amendment as the "Original Contract").

              2.2 The parties wish to amend the Original Contract to revise the
date construction shall commence.



3.  AGREEMENT
    ---------

              In consideration of the terms and conditions contained in this
Amendment No. 1, the Parties agree as follows:

              3.1  Effective Date
                   --------------

              This Amendment No. 1 shall become effective when it has been duly
executed by the Parties.

              3.2  Changes to Contract Provisions
                   ------------------------------

              The date Seller shall commence construction of the Generating
Facility, as specified on page 1a, Section 1.2.e, in the Original Contract, is
hereby amended to be July 1987.

4.  OTHER CONTRACT TERMS AND CONDITIONS
    -----------------------------------

              Except as expressly amended herein, all terms and conditions of
the Original Contract shall remain in force and effect.

                                       2


5.  DUPLICATE ORIGINALS
    -------------------

              This Amendment No. 1 is executed in two originals. The signatories
hereto represent that they have been appropriately authorized to enter into this
Amendment on behalf of the Party for whom they sign. This Amendment is hereby
executed as of this 25th day of October, 1985.


ATTEST:                                       MAMMOTH PACIFIC

By:                                           By: /s/ Lee H. Freeman
    ------------------------------------         -------------------------------
                                                         LEE H. FREEMAN
                                                         Vice President
                                                 Pacific Lighting Energy Systems


ATTEST:                                       SOUTHERN CALIFORNIA EDISON COMPANY

By:                                           By:
    ------------------------------------         -------------------------------
                                                        Edward A. Myers, Jr.
                                                           Vice President


Approved as to form:
  John R. Bury
Vice President and General Counsel

By /s/ John R. Bury
   -------------------------------
   Attorney
   10/25/1985


                                       3



                                                                 Exhibit 10.3.18


                                 AMENDMENT NO. 2
                         POWER PURCHASE CONTRACT BETWEEN
                       SOUTHERN CALIFORNIA EDISON COMPANY
                       AND PACIFIC LIGHTING ENERGY SYSTEMS
                       -----------------------------------

1.  PARTIES:
    -------

              This Amendment No. 2 to the Power Purchase Contract between
Southern California Edison Company and Pacific Lighting Energy Systems
("Contract") for the PLES I project is entered into between Southern California
Edison Company ("Edison") and Pacific Lighting Energy Systems, renamed Pacific
Energy ("Seller"), individually, "Party," and collectively, "Parties."

2.  RECITALS:
    --------

              This Amendment No. 2 to the Contract is made with reference to the
following facts, among others:

              2.1 Edison and Santa Fe Geothermal, Inc. ("Santa Fe") executed the
Contract on April 16, 1985.

              2.2 Santa Fe assigned the Contract to Seller effective April 2,
1986.

              2.3 Edison and Seller executed Amendment No. 1 to the Contract on
October 27, 1989.

              2.4 The Contract was subject to Uncontrollable Force which
rendered Pacific Energy unable to perform its obligations under the Contract for
a period of five hundred forty-eight (548) days.



              2.5 The Parties desire to amend the Contract to change the date of
expected Firm Operation set forth at Section 1.7 of the Contract to reflect the
ffect of the Uncontrollable Force.

3.  AGREEMENT:
    ---------

              The Parties agree to amend the Contract as follows:

              (A) The Expected Firm Operation date of "February 1987" set forth
at Section 1.7 of the Contract is deleted, and replaced with "October 16, 1991."

              (B) The First Period of the Contract Term set forth at Section 3.1
of the Contract shall commence upon date of Firm Operation, and the phrase "but
not later than five years from the date of execution of this Contract" is
deleted.

              (C) The text of Section 12 should be deleted, and replaced with:
"This Contract shall terminate if Firm Operation does not occur by October 16,
1991."

4.  OTHER TERMS AND CONDITIONS:
    --------------------------

              Except as expressly amended by this Amendment No. 2, the terms and
conditions of the Contract shall remain in full force and effect.

5.  EFFECTIVE DATE:
    --------------

              This Amendment No. 2 shall become effective when it has been duly
executed by the Parties.



                                       2


6.  SIGNATURE CLAUSE:
    ----------------

              The signatories hereto represent that they have been appropriately
authorized to enter into this Amendment No. 2 to the Contract on behalf of the
Party for whom they sign. This Amendment No. 2 is hereby executed as of this
20th day of December, 1989.


                                            SOUTHERN CALIFORNIA EDISON COMPANY

                                            By:/s/ Robert Dietch
                                               ---------------------------------
                                                         Robert Dietch
                                                         Vice President



                                            PACIFIC ENERGY

                                            By:   /s/ Robert J. Cushman
                                                  ------------------------------

                                            Name:  Robert J. Cushman
                                                  ------------------------------

                                            Title: Senior Vice President
                                                  ------------------------------











                                       3




                                                                 Exhibit 10.3.19


                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE

                                   APPENDIX A
               INTERCONNECTION FACILITIES AGREEMENT ("AGREEMENT")
                       SELLER OWNED AND OPERATED FACILITY


A.1      Seller acknowledges that Seller has read Edison's Tariff Rule No. 21
         and the Qualifying Facility Milestone Procedure ("QFMP") and
         understands Seller's obligations and the consequences to Seller for
         failure to meet any of the "milestones" in the QFMP which is in effect
         on the earlier of Seller's (1) payment of the Project Fee or to (2)
         execution of this Agreement.

A.2      In the event Seller loses its priority for existing available Edison
         line capacity, Seller shall, pursuant to Tariff Rule No. 21., be
         obligated to pay any additional cost for upgrades or additions
         necessary to accommodate Seller's deliveries. In such event, Edison and
         Seller shall amend this Agreement to reflect the conditions resulting
         from the change in priority.

A.3      Seller shall design, purchase, construct, operate and maintain Seller
         owned Interconnection Facilities as described on page A-10 herein, at
         its sole expense. Edison shall have the right to review the design as
         to the adequacy of the Protective Apparatus provided. Any additions or
         modifications required by Edison shall be incorporated by Seller.

A.4      Notwithstanding the provisions of Section 13, Seller, having elected to


         own, operate, and maintain the Interconnection Facilities, shall accept
         all liability and release Edison from and indemnify Edison against any
         liability for faults or damage to Seller's



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE



         Interconnection Facilities, the Edison electric system and the public
         as a result of the operation of Seller's project.

A.5      Edison shall have the right to observe the construction of the
         Interconnection Facilities, and inspect said facilities after
         construction is completed at the Seller's expense.

A.6      Facilities which are deemed necessary by Edison for the proper and safe
         operation of the Interconnection Facilities and which Seller desires
         Edison to own and operate at Seller's expense shall be provided as
         appendant facilities. Edison shall own, operate and maintain any
         necessary appendant facilities which may be installed in connection
         with the Interconnection Facilities at Seller's expense. Edison may, as
         it deems necessary, modify the aforementioned facilities at Seller's
         expense.

A.7      For the appendant facilities, Edison shall install, own, operate, and
         maintain a portion of the appendant facilities ("Edison Installed
         Appendant Facilities"), as described on page A-10 herein, and Seller
         shall, pay to Edison the total estimated coat for these appendant
         facilities prior to the start of construction of the appendant
         facilities. In addition, Seller shall install at Seller's expense its
         portion of the appendant facilities ("Seller Installed Appendant
         Facilities"), as described on page A-10 herein, in accordance with Rule

         21. Within 30 days after installation is complete, Seller shall


         transfer ownership of the Seller Installed Appendant Facilities to
         Edison in a manner acceptable to Edison.

                                      A-2

                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


A.8      Maintenance of facilities referred to in Section A.6 shall be paid by
         Seller pursuant to the attached Application and Contract for
                                         ----------------------------
         Interconnection Facilities Plus Operation and Maintenance
         ---------------------------------------------------------
         ("Application").

A.9      To the extent that Edison deems it necessary to effect the arrangements
         contemplated by this Agreement, Edison may, from time to time, request
         the Seller to design, install, operate, maintain, modify, replace,
         repair or remove any or all of the Interconnection Facilities. Such
         equipment and/or Protective Apparatus shall be treated as
         Interconnection Facilities and added to the Agreement by amendment
         pursuant to Section A.6.

A.l0     Edison shall have the right to review any changes in the design of the
         Interconnection Facilities and recommend modification(s) to the design
         as it deems necessary for proper and safe operation of the Project when
         in parallel with the Edison electric system. The Seller shall be
         notified of the results of such review by Edison, in writing, within 30

         days of the receipt of all specifications related to the proposed
         design changes. Any flaws perceived by Edison in the proposed design
         changes, shall be described in the written notice.


                                      A-3


                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


             APPLICATION AND CONTRACT FOR INTERCONNECTION FACILITIES
                         PLUS OPERATION AND MAINTENANCE


               The undersigned Seller hereby requests the Southern California
Edison Company ("Edison") to provide the appendant facilities described on the
last page hereof and by this reference herein incorporated, hereinafter called
"Interconnection Facilities." Interconnection Facilities as defined and used
herein are a group of Added Facilities which have been designated as
Interconnection Facilities, to accommodate negotiation and preparation of
contracts for parallel generation projects. Interconnection Facilities, as are
Added Facilities, shall be provided in accordance with the applicable Tariff
Schedules of Edison. Such Interconnection Facilities are to be owned, operated
and maintained by Edison.

               In consideration of Edison's acceptance of this Application,
Seller hereby agrees to the following:

1.       Seller shall pay to Edison, prior to the start of construction of the
         Interconnection Facilities, the total estimated costs for the
         Interconnection Facilities as determined by Edison and entered on page
         A-11 hereof. In the event Seller abandons its plans for installation of
         such Interconnection Facilities, for any reason whatsoever, including
         failure to obtain any required permits, Seller shall reimburse Edison
         upon receipt of supporting documentation for any and all expenses
         incurred by Edison pursuant to this agreement with thirty (30) days
         after presentation of a bill.

                                      A-4


                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


2.       Edison shall have the right to observe the construction of any
         Interconnection Facilities constructed by Seller and inspect and test
         said facilities after construction is completed at the Seller's
         expense.

3.       The parties also understand and agree that due to equipment acquisition
         lead time and construction time requirements, Edison requires a minimum
         of six (6) months from the time of authorization to construct the
         aforementioned Interconnection Facilities and place them in operation.
         Edison shall have no obligation to Seller with regard to any target
         date established by Seller which is less than eighteen (18) months from
         the date this Application is executed. However, Edison shall exercise
         its best effort to meet Seller's projected operational date.

4.       Seller shall pay a monthly charge for the Interconnection Facilities'
         operation and maintenance in the amount of 0.9% of the added equipment
         investment as determined by Edison and as entered by Edison on page
         A-11 hereof. The monthly charge shall be adjusted periodically in
         accordance with the pro-rata operation and maintenance charges for
         added facilities pursuant to Rule No. 2. The monthly charge may be
         based upon estimated costs of the Interconnection Facilities and when
         the recorded book cost of the Interconnection Facilities has been
         determined by Edison, the charges shall be adjusted retroactively to
         the date when service is first rendered by means of such
         Interconnection Facilities. Additional charges resulting from such
         adjustment shall, unless other terms are

                                      A-5

                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE



        mutually agreed upon, be payable within thirty (30) days from the date
        of presentation of a bill therefor. Any credits resulting from such
        adjustment will, unless other terms are mutually agreed upon, be
        refunded upon demand of Seller.

5.      Whenever a change is made in the Interconnection Facilities which
        results in changes in the added equipment investment, the monthly
        charge will be adjusted on the basis of the revised added equipment
        investment. The cost of such change shall be payable by Seller within
        sixty (60) days from the date of presentation of a bill thereof. The
        description of the Interconnection Facilities will be amended by Edison
        on page A-10 hereof to reflect any changes in equipment, installation
        and removal cost, amount of added equipment investment, and monthly
        charge resulting from any such change in the Interconnection Facilities
        or adjustment as aforesaid.

6.      The monthly charges payable hereunder shall commence upon the date when
        said Interconnection Facilities are available for use but not before
        service is first established and rendered through Edison's normal
        facilities and shall first be payable when Edison shall submit the first
        energy bill after such date and shall continue until the abandonment of
        such Interconnection Facilities by Seller, subject to the provisions of
        Paragraphs 4 and 5 hereof.

7.      Seller agrees to utilize said Interconnection Facilities in accordance
        with good operating practice and to reimburse Edison for damage to said
        Facilities occasioned or caused by the


                                 A-6




                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE


        Seller or any of his agents, employees or licensees. Failure so to
        exercise due diligence in the utilization of said Interconnection
        Facilities will give Edison the right to terminate this Agreement.

8.      Edison's performance under this Contract is subject to the availability
        of materials required to provide the Interconnection Facilities provided
        for herein and to all applicable Tariff Schedules of Edison.

9.      This Application and Contract for Interconnection Facilities supplements
        the appropriate application and contract(s) for electric service
        presently in effect between Seller and Edison.

10.     This Agreement shall at all times be subject to such changes or
        modifications by the Public Utilities Commission of the State of
        California as said Commission may, from time to time, direct in the
        exercise of its jurisdiction.







                                    A-7



                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE




SOUTHERN CALIFORNIA EDISON                      MAMMOTH PACIFIC
      COMPANY

By: /s/ Robert Dietch
    -----------------------------               By: /s/ Claude Harvey
        Robert Dietch                               ---------------------------
        Vice President                              Name: Claude Harvey
                                                          ---------------------
                                                    Title: Vice President
                                                           --------------------

Date:   October 27, 1989                            Date:  Oct. 20, 1989
        -------------------------                          --------------------













                                   A-8



                                                                 EXHIBIT 10.3.20


                        LONG-TERM POWER PURCHASE CONTRACT












                                  APPENDIX A.3


                      INTERCONNECTION FACILITIES AGREEMENT

                         SELLER OWNED AND OPERATED BASIS

                                     BETWEEN

                              MAMMOTH--PACIFIC (II)

                                       AND

                       SOUTHERN CALIFORNIA EDISON COMPANY



                        LONG-TERM POWER PURCHASE CONTRACT


                                  APPENDIX A.3

INTERCONNECTION FACILITIES-- SELLER OWNED AND OPERATED FACILITY

     A.3.1 Seller acknowledges that Seller has read Edison's Tariff Rule No. 21
and the Qualifying Facility Milestone Procedure ("QFMP") and understands
Seller's obligations and the consequences to Seller for failure to meet any of
the "milestones" in the QFMP which is in effect on the earlier of Seller's (l)
payment of the Project Fee or (2) execution of this Interconnection Facilities
Agreement ("This Agreement").

     A.3.2 In the event Seller loses its priority for existing available Edison
line capacity, Seller shall, pursuant to Tariff Rule No. 21, be obligated, to
pay any additional cost for upgrades or additions necessary to accommodate
Seller's deliveries. In such event, Edison and Seller shall amend this Agreement
to reflect the conditions resulting from the change in priority.

     A.3.3 Seller shall design, purchase, construct, operate and maintain Seller
owned Interconnection Facilities at its sole expense. Edison shall have the
right to review the design as to the adequacy of the protective Apparatus
provided. Any additions or modifications required by Edison shall be
incorporated by Seller.

     A.3.4 Notwithstanding the provisions of Section 13, Seller, having elected
to own, operate, and maintain the Interconnection Facilities, shall accept all
liability and release Edison from and indemnify Edison against any liability for
faults or damage to Seller's


                                     A.3-1


                        LONG-TERM POWER PURCHASE CONTRACT


Interconnection Facility, the Edison electric system and the public as a result
of the operation of Seller's project.

     A.3.5 Edison shall have the right to observe the construction of the
Interconnection Facilities, and inspect said facilities after construction is
completed at the Seller's expense.

     A.3.6 Facilities which are deemed necessary by Edison for the proper and
safe operation of the Interconnection Facilities and which Seller desires Edison
to own and operate at Seller's expense shall be provided as appendant
facilities. Edison shall own, operate and maintain any necessary appendant
facilities which may be installed in connection with the Interconnection
Facilities at Seller's expense. Edison may, as it deems necessary, modify the
aforementioned facilities at Seller's expense.

     A.3.7 For the appendant facilities, Seller elects (check one):

     X
     --   Option I: Edison shall install, own, operate and maintain the
appendant facilities and Seller shall pay to Edison the total estimated cost for
the appendant facilities prior to the start of construction of the appendant
facilities.


     --   Option II: Seller shall install at Seller's expense its portion of the
appendant facilities in accordance with Rule 21. Within 30 days after
installation is complete, Seller shall transfer ownership of the appendant
facilities to Edison in a manner acceptable to Edison.


                                     A.3-2


                        LONG-TERM POWER PURCHASE CONTRACT


     A.3.8 Maintenance of facilities referred to in Section A.3.6 shall be paid
by Seller pursuant to the attached Application and Contract for Interconnection
                                   --------------------------------------------
Facilities Plus Operation and Maintenance ("Interconnection Facilities
------------------------------------------
Contract").

     A.3.9 To the extent that Edison deems it necessary to effect the
arrangements contemplated by this Agreement, Edison may, from time to time,
request the Seller to design, install, operate, maintain, modify, replace,
repair or remove any or all of the Interconnection Facility. Such equipment
and/or Protective Apparatus shall be treated as Interconnection Facilities and
added to the Interconnection Facilities Contract by amendment pursuant to
Section A.3.6.

     A.3.10 Edison shall have the right to review any changes in the design of
the Interconnection Facilities and recommend modification(s) to the design as it
deems necessary for proper and safe operation of the Project when in parallel
with the Edison electric system. The Seller shall be notified of the results of
such review by Edison, in writing, within 30 days of the receipt of all
specifications related to the proposed design changes. Any flaws perceived by
Edison in the proposed design changes, shall be described in the written notice.


                                     A.3-3


                        LONG-TERM POWER PURCHASE CONTRACT

             APPLICATION AND CONTRACT FOR INTERCONNECTION FACILITIES

                         PLUS OPERATION AND MAINTENANCE

                     ("INTERCONNECTION FACILITIES CONTRACT")

     The undersigned Seller hereby requests the Southern California Edison
Company (Edison) to provide the appendant facilities described on the last page
hereof and by this reference herein incorporated, hereinafter called
"Interconnection Facilities." Interconnection Facilities as defined and used
herein are a group of Added Facilities which have been designated as
Interconnection Facilities, to accommodate negotiation and preparation of
contracts for parallel generation projects. Interconnection Facilities, as are
Added Facilities, shall be provided in accordance with the applicable Tariff
Schedules of Edison. Such Interconnection Facilities are to be owned, operated
and maintained by Edison.

     In consideration of Edison's acceptance of this application, Seller hereby
agrees to the following:

     1. It Seller elects Option I in Section A.3.7, Seller shall pay to Edison,
prior to the start of construction of the Interconnection Facilities, the total
estimated costs for the Interconnection Facility as determined by Edison and
entered on the last page hereof. In the event Seller abandons its plans for
installation of such Interconnection Facility, for any reason whatsoever,
including failure to obtain any required permits, Seller shall reimburse Edison
upon receipt of supporting documentation for any and all expenses incurred by
Edison pursuant to this Interconnection Facilities Contract within thirty (30)
days after presentation of a bill.


                                       -1-


                        LONG-TERM POWER PURCHASE CONTRACT


     2. If Seller elects Option II in Section A.3.7, Edison shall have the right
to observe the construction of the Interconnection Facilities and inspect and
test said facilities after construction is completed at the Seller's expense.

     3. The parties also understand and agree that due to equipment acquisition
lead time and construction time requirements, Edison requires a minimum of six
(6) months from the time of authorization to construct the aforementioned
Interconnection Facility and place it in operation. Edison shall have no
obligation to Seller with regard to any target date established by Seller which
is less than eighteen (18) months from the date this application is executed.
However, Edison shall exercise its best effort to meet Seller's projected
operational date.

     4. Seller shall pay a monthly charge for the Interconnection Facilities'
operation and maintenance in the amount of 0.9% of the added equipment
investment as determined by Edison and as entered by Edison on the last page
hereof. The monthly charge shall be adjusted periodically in accordance with the
pro-rata operation and maintenance charges for added facilities pursuant to Rule
No. 2.H. The monthly charge may be based upon estimated costs of the
Interconnection Facilities and when the recorded book cost of the
Interconnection Facilities has been determined by Edison, the charges shall be
adjusted retroactively to the date when service is first rendered by means of
such Interconnection Facilities. Additional charges resulting from such
adjustment shall, unless other terms are mutually agreed upon, be payable within
thirty (30) days from the date of presentation of a bill


                                       -2-


                        LONG-TERM POWER PURCHASE CONTRACT


therefor. Any credits resulting from such adjustment will, unless other terms
are mutually agreed upon, be refunded upon demand of Seller.

     5. Whenever a change is made in the Interconnection Facilities which
results in changes in the added equipment investment, the monthly charge will be
adjusted on the basis of the revised added equipment investment. The cost of
such change shall be payable by Seller within sixty (60) days from the date of
presentation of a bill thereof. The description of the Interconnection
Facilities will be amended by Edison on the last page hereof to reflect any
changes in equipment, installation and removal cost, amount of added equipment
investment, and monthly charge resulting from any such change in the
Interconnection Facilities or adjustment as aforesaid.

     6. The monthly charges payable hereunder shall commence upon the date when
said Interconnection Facilities are available for use but not before service is
first established and rendered through Edison's normal facilities and shall
first be payable when Edison shall submit the first energy bill after such date
and shall continue until the abandonment of such Interconnection Facilities by
Seller, subject to the provisions of Paragraphs 5. and 6 hereof.

     7. Seller agrees to utilize said Interconnection Facilities in accordance
with good operating practice and to reimburse Edison for damage to said
Facilities occasioned or caused by the Seller or any of his agents, employees or
licensees. Failure so to exercise due


                                      -3-


                        LONG-TERM POWER PURCHASE CONTRACT


diligence in the utilization of said Interconnection Facilities will give Edison
the right to terminate this Agreement.

     8. Edison's performance under this Interconnection Facilities Contract is
subject to the availability of materials required to provide the Interconnection
Facilities provided for herein and to all applicable Tariff Schedules of Edison.

     9. This Application and Contract for Interconnection Facilities supplements
the appropriate application and contract(s) for electric service presently in
effect between Seller and Edison.

     10. This Interconnection Facilities Contract shall at all times be subject
to such changes or modifications by the Public Utilities commission of the State
of California as said Commission may, from time to time, direct in the exercise
of its jurisdiction.

DATED:  October 13, 1985               SELLER:  MAMMOTH-PACIFIC

WITNESS:                               BY: /s/ Lee M. Freeman
        ------------------------------     ------------------------------------
                                           LEE M. FREEMAN
                                           Vice President
                                           (Pacific Lighting Energy Systems)
Approved and Accepted for
SOUTHERN CALIFORNIA EDISON COMPANY         Mail (Address)
                                                          ----------------------
By: /s/ Edward A. Myers, Jr.               6055 East Washington Blvd.
   ----------------------------------      Commerce, CA  90040
   EDWARD A. MYERS, JR.
   Vice President






Approved as to Form:

John R. Dury
Vice President and General Counsel

By: /s/ Anne P. Cohn
    --------------------
    Attorney
    10/18/85




                                      -4-



                                                                Exhibit 10.3.21

                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE

                                   APPENDIX A
               INTERCONNECTION FACILITIES AGREEMENT ("AGREEMENT")
                       SELLER OWNED AND OPERATED FACILITY

A.1      Seller acknowledges that Seller has read Edison's Tariff Rule No. 21
         and the Qualifying Facility Milestone Procedure ("QFMP") and
         understands Seller's obligations and the consequences to Seller for
         failure to meet any of the "milestones" in the QFMP which is in effect
         on the earlier of Seller's (1) payment of the Project Fee or (2)
         execution of this Agreement.

A.2      In the event Seller loses its priority for existing available Edison
         line capacity, Seller shall, pursuant to Tariff Rule No. 21, be
         obligated to pay any additional cost for upgrades or additions
         necessary to accommodate Seller's deliveries. In such event, Edison and
         Seller shall amend this Agreement to reflect the conditions resulting
         from the change in priority.

A.3      Seller shall design, purchase, construct, operate and maintain Seller
         owned Interconnection Facilities as described on page A-10 herein, at
         its sole expense. Edison shall have the right to review the design as
         to the adequacy of the Protective Apparatus provided. Any additions or
         modifications required by Edison shall be incorporated by Seller.

A.4      Notwithstanding the provisions of Section 13, Seller, having elected to


         own, operate, and maintain the Interconnection Facilities, shall accept
         all liability and release Edison from and indemnify Edison against any


                                      A-1


                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE

         liability for faults or damage to Seller's Interconnection Facilities,
         the Edison electric system and the public as a result of the operation
         of Seller's project.

A.5      Edison shall have the right to observe the construction of the
         Interconnection Facilities, and inspect said facilities after
         construction is completed at the Seller's expense.

A.6      Facilities which are deemed necessary by Edison for the proper and safe
         operation of the Interconnection Facilities and which Seller desires
         Edison to own and operate at Seller's expense shall be provided as
         appendant facilities. Edison shall own, operate and maintain any
         necessary appendant facilities which may be installed in connection
         with the Interconnection Facilities at Seller's expense. Edison may, as
         it deems necessary, modify the aforementioned facilities at Seller's
         expense.

A.7      For the appendant facilities, Edison shall install, own, operate, and
         maintain a portion of the appendant facilities ("Edison Installed
         Appendant Facilities"), as described on page A-10 herein, and Seller
         shall pay to Edison the total estimated cost for these appendant

         facilities prior to the start of construction of the appendant


         facilities. In addition, Seller shall install at Seller's expense its
         portion of the appendant facilities ("Seller


                                      A-2


                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE

         Installed Appendant Facilities"), as described on page A-10 herein, in
         accordance with Rule 21. Within 30 days after installation is complete,
         Seller shall transfer ownership of the Seller Installed Appendant
         Facilities to Edison in a manner acceptable to Edison.

A.8      Maintenance of facilities referred to in Section A.6 shall be paid by
         Seller pursuant to the attached Application and Contract for
         Interconnection Facilities Plus Operation and Maintenance
         ("Application").

A.9      To the extent that Edison deems it necessary to effect the arrangements
         contemplated by this Agreement, Edison may, from time to time, request
         the Seller to design, install, operate, maintain, modify, replace,
         repair or remove any or all of the Interconnection Facilities. Such
         equipment and/or Protective Apparatus shall be treated as
         Interconnection Facilities and added to the Agreement by amendment
         pursuant to Section A.6.

A.10     Edison shall have the right to review any changes in the design of the
         Interconnection Facilities and recommend modification(s) to the design
         as it deems necessary for proper and safe operation of the Project when
         in parallel with the Edison electric system. The Seller shall be

         notified of the results of such review by Edison, in writing, within 30
         days of the receipt of all specifications related to the proposed
         design changes. Any flaws


                                      A-3


                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE

         perceived by Edison in the proposed design changes, shall be described
         in the written notice.






                                      A-4


                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE

             APPLICATION AND CONTRACT FOR INTERCONNECTION FACILITIES
                         PLUS OPERATION AND MAINTENANCE

         The undersigned Seller hereby requests the Southern California Edison
Company ("Edison") to provide the appendant facilities described on the last
page hereof and by this reference herein incorporated, hereinafter called
"Interconnection Facilities." Interconnection Facilities as defined and used
herein are a group of Added Facilities which have been designated as
Interconnection Facilities, to accommodate negotiation and preparation of
contracts for parallel generation projects. Interconnection Facilities, as are
Added Facilities, shall be provided in accordance with the applicable Tariff
Schedules of Edison. Such Interconnection Facilities are to be owned, operated
and maintained by Edison.

         In consideration of Edison's acceptance of this Application, Seller
hereby agrees to the following:

1.      Seller shall pay to Edison, prior to the start of construction of the
        Interconnection Facilities, the total estimated costs for the
        Interconnection Facilities as determined by Edison and entered on page
        A-11 hereof. In the event Seller abandons its plans for installation of
        such Interconnection Facilities, for any reason whatsoever, including
        failure to obtain any required permits, Seller shall reimburse Edison
        upon receipt of supporting


                                      A-5


                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE

        documentation for any and all expenses incurred by Edison pursuant to
        this agreement within thirty (30) days after presentation of a bill.

2.      Edison shall have the right to observe the construction of any
        Interconnection Facilities constructed by Seller and inspect and test
        said facilities after construction is completed at the Seller's expense.

3.      The parties also understand and agree that due to equipment acquisition
        lead time and construction time requirements, Edison requires a minimum
        of six (6) months from the time of authorization to construct the
        aforementioned Interconnection Facilities and place them in operation.
        Edison shall have no obligation to Seller with regard to any target date
        established by Seller which is less than eighteen (18) months from the
        date this Application is executed. However, Edison shall exercise its
        best effort to meet Seller's projected operational date.

4.      Seller shall pay a monthly charge for the Interconnection Facilities'
        operation and maintenance in the amount of 0.9% of the added equipment
        investment as determined by Edison and as entered by Edison on page A-11
        hereof. The monthly charge shall be adjusted periodically in accordance
        with the pro-rata operation and maintenance charges for added facilities
        pursuant to Rule No. 2. The monthly charge may be based upon estimated




                                      A-6


                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE

        costs of the Interconnection Facilities and when the recorded book cost
        of the Interconnection Facilities has been determined by Edison, the
        charges shall be adjusted retroactively to the date when service is
        first rendered by means of such Interconnection Facilities. Additional
        charges resulting from such adjustment shall, unless other terms are
        mutually agreed upon, be payable within thirty (30) days from the date
        of presentation of a bill therefor. Any credits resulting from such
        adjustment will, unless other terms are mutually agreed upon, be
        refunded upon demand of Seller.

5.      Whenever a change is made in the Interconnection Facilities which
        results in changes in the added equipment investment, the monthly charge
        will be adjusted on the basis of the revised added equipment investment.
        The cost of such change shall be payable by Seller within sixty (60)
        days from the date of presentation of a bill thereof. The description of
        the Interconnection Facilities will be amended by Edison on page A-10
        hereof to reflect any changes in equipment, installation and removal
        cost, amount of added equipment investment, and monthly charge resulting
        from any such change in the Interconnection Facilities or adjustment as
        aforesaid.

6.      The monthly charges payable hereunder shall commence upon the date when
        said Interconnection Facilities are available for use but not before
        service is first established and rendered through Edison's normal
        facilities


                                      A-7


                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE

        and shall first be payable when Edison shall submit the first energy
        bill after such date and shall continue until the abandonment of such
        Interconnection Facilities by Seller, subject to the provisions of
        Paragraphs 4 and 5 hereof.

7.      Seller agrees to utilize said Interconnection Facilities in accordance
        with good operating practice and to reimburse Edison for damage to said
        Facilities occasioned or caused by the Seller or any of his agents,
        employees or licensees. Failure so to exercise due diligence in the
        utilization of said Interconnection Facilities will give Edison the
        right to terminate this Agreement.

8.      Edison's performance under this Contract is subject to the availability
        of materials required to provide the Interconnection Facilities provided
        for herein and to all applicable Tariff Schedules of Edison.

9.      This Application and Contract for Interconnection Facilities supplements
        the appropriate application and contract(s) for electric service
        presently in effect between Seller and Edison.





                                      A-8


                              SCE STANDARD CONTRACT
                            LONG-TERM POWER PURCHASE

10.     This Agreement shall at all times be subject to such changes or
        modifications by the Public Utilities Commission of the State of
        California as said Commission may, from time to time, direct in the
        exercise of its jurisdiction.


SOUTHERN CALIFORNIA EDISON COMPANY          PACIFIC LIGHTING ENERGY SYSTEMS

By: /s/ Robert Dietch                       By: /s/ Claude Harvey
   --------------------------------            --------------------------------
           Robert Dietch                    Name: Claude Harvey
           Vice President                        ------------------------------
                                            Title: Vice President
                                                  -----------------------------
Date: October 27, 1989                      Date: October 20, 1989
     ------------------------------              ------------------------------











Approved as to form:

David N. Barry
Vice President and General Counsel

By /s/ David N. Barry
   --------------------------------
   Attorney
   10/26, 1989










                                      A-9




                                                                 Exhibit 10.3.22


                            INTERCONNECTION AGREEMENT

                                     BETWEEN

                       SOUTHERN CALIFORNIA EDISON COMPANY

                                       AND

                            HEBER GEOTHERMAL COMPANY






                        INTERCONNECTION AGREEMENT BETWEEN
                       SOUTHERN CALIFORNIA EDISON COMPANY
                          AND HEBER GEOTHERMAL COMPANY

         1. PARTIES: The Parties to this Interconnection Agreement, hereinafter
referred to as "Agreement", are Southern California Edison Company, a California
corporation, hereinafter referred to as "Edison", and Heber Geothermal Company,
a California general partnership, hereinafter referred to as "Seller",
hereinafter sometimes referred to individually as "Party" and collectively as
"Parties".

         2. RECITALS: This Agreement is made with reference to the following
facts, among others:

               2.1 On August 26, 1983, Edison and Chevron U.S.A. Inc., executed
the Power Purchase and Sales Agreement to provide the terms and conditions for
the sale by Chevron and purchase by Edison of capacity and energy delivered to
the Point of Interconnection from a 47 MW (Net) electrical generating facility
located at Heber, California, utilizing geothermal steam as the prime mover
energy source.

               2.2 On August 26, 1983, Chevron assigned and Heber Geothermal
Company assumed Chevron's right, title, and interest in the Power Purchase and
Sales Agreement between Chevron and Edison, dated August 26, 1983.

               2.3 On March 16, 1984, Chevron and Heber Geothermal Company
issued a Notice of Intention to Proceed to Edison. The Notice of Intention to
Proceed stated Chevron and Heber Geothermal Company's desire to construct the
facilities necessary to proceed with the Power Purchase and Sales Agreement,
dated August 26, 1983.

               2.4 On December 11, 1984, Edison and Heber Geothermal Company
executed an Amendment No. 1 to the Power Purchase and Sales Agreement, dated
August 26, 1983.


                                       2


Amendment No. 1 provided for modifications to the terms of: (i) Payments
for Energy; (ii) Payments for Capacity; and (iii) Transmission Cost.

               2.5 Pursuant to Section 34.2.2 of the Power Purchase and Sales
Agreement, these Parties desire to establish the terms and conditions for the
design, construction, ownership, operation, maintenance, and cost responsibility
for the 115/92 kV Mirage Substation, located near Thousand Palms, California
("Interconnection Facilities").

         3. Edison shall, pursuant to the Edison Tariff Rule No. 21, engineer,
design, construct, own, operate, and maintain the Interconnection Facilities,
described in Exhibit A, and procure equipment, materials, and necessary
rights-of-way for such facilities.

         4. Seller shall pay Edison a pro rata share of the cost of the
Interconnection Facilities to be constructed, owned, operated, and maintained by
Edison as provided in this Section 4 and Exhibit A. The cost figures set forth
in Exhibit A are estimates only and shall be adjusted to reflect the recorded
cost after installation is complete.

               4.1 Not later than thirty (30) days after the date of execution
of this Agreement, Seller shall pay Edison a pro rata share of the Total
Estimated Installed Cost of the Interconnection Facilities as set forth in
Exhibit A. The Seller's pro rata share is 25/65 of the total installed cost of
the Interconnection Facilities and represents the Seller's 25,000 kVA portion of
the total 65,000 kVA Interconnection Facilities.

               4.2 Pursuant to Edison's Tariff Rule No. 2H for Seller-financed
added facilities (Interconnection Facilities), Seller shall pay a monthly charge
of 0.9% of the Seller's pro rata share of the Total Estimated Installed Cost of
the Interconnection Facilities as set forth in Exhibit A. When the recorded book
cost of the Interconnection Facilities has been determined by Edison, the charge
to Seller shall be adjusted retroactively to the date when the Interconnection

                                       3


Facilities were first available for use. Charges or credits to the Seller
resulting from such adjustment shall, unless otherwise agreed to, be payable
within thirty (30) days of the presentation of a statement therefor.

               4.3 If Seller abandons its plans for the generating facility or
otherwise terminates its need for the Interconnection Facilities prior to the
Interconnection Facilities being placed in use, for any reason whatsoever,
Seller shall pay Edison costs which Edison incurred as a direct result of such a
termination. Such costs shall include the cost of engineering, design,
procurement of equipment and materials, acquisition of rights-of-way, and
construction of the Interconnection Facilities.

               4.4 Pursuant to Edison's Tariff Rule No. 21, when a change in the
Interconnection Facilities results in a change in the installed cost of the
Interconnection Facilities, the charges provided herein shall be adjusted
consistent with such change.

               4.5 Monthly charges for Interconnection Facilities shall commence
upon the date the Interconnection Facilities are available for use and shall be
payable within thirty (30) days after Edison submits a statement therefor.

         5. Edison's obligations under this Agreement shall be subject to the
availability of materials required for construction of the Interconnection
Facilities and all applicable Tariff Schedules of Edison.

         6. Edison shall exercise its best efforts to provide the
Interconnection Facilities to accommodate Seller's projected operation date.

         7. This Agreement shall be subject to applicable tariff rules and
modification of such rules as directed by the Public Utilities Commission of the
State of California in the exercise of its jurisdiction.

                                       4



         8. This Agreement shall become effective upon execution by the Parties
and consent by Chevron U.S.A. Inc. and shall remain in effect for the period the
Seller uses the Interconnection Facilities.

         9. SIGNATURE CLAUSE: The signatories hereto represent that they have
been appropriately authorized to enter into this Interconnection Agreement on
behalf of the Party for whom they sign. This Interconnection Agreement is hereby
executed as of this 12th day of August, 1985.


                                SOUTHERN CALIFORNIA EDISON COMPANY

                                BY    /s/ Edward A. Myers, Jr.
                                     -------------------------------------------

                                     Name  Edward A. Myers, Jr.
                                           -------------------------------------

                                     Title  Vice President
                                            ------------------------------------


                                HEBER GEOTHERMAL COMPANY, A PARTNERSHIP
                                DRAVO ENERGY, INC., A PARTNER


                                BY     /s/ John E. Jacobsen
                                     -------------------------------------------

                                     Name  John E. Jacobsen
                                           -------------------------------------

                                     Title  Asst. General Manager
                                            ------------------------------------

                                CENTENNIAL GEOTHERMAL, INC. PARTNER


                                BY     /s/ Robert O'Leary
                                     -------------------------------------------

                                     Name  Robert O'Leary
                                           -------------------------------------

                                     Title  President
                                            ------------------------------------


                                       5



                                CHEVRON U.S.A. INC., REPRESENTED BY ITS AGENT,
                                CHEVRON RESOURCES COMPANY


                                BY   /s/ A.M. Cooper
                                     -------------------------------------------

                                     Name  A.M. Cooper
                                           -------------------------------------

                                     Title  Vice President
                                            ------------------------------------


                                       6



                                                                 Exhibit 10.3.23
                                                                 Execution Copy







                           PLANT CONNECTION AGREEMENT

                                     FOR THE

                          HEBER GEOTHERMAL PLANT NO. 1

                                     BETWEEN

                          IMPERIAL IRRIGATION DISTRICT

                                       AND

                            HEBER GEOTHERMAL COMPANY




Execution Copy





                                TABLE OF CONTENTS
SECTION                               TITLE                              PAGE
-------                               -----                              ----

 1   PARTIES .........................................................    1

 2   RECITALS ........................................................    1

 3   AGREEMENT .......................................................    3

 4   DEFINITIONS .....................................................    3

 5   EFFECTIVE DATE AND TERM .........................................    4

 6   CONNECTION OF PLANT .............................................    4

 7   ELECTRIC SERVICE TO HEBER GEOTHERMAL ............................    4

 8   METERING OF ENERGY DELIVERIES ...................................    4

 9   HEBER GEOTHERMAL DELIVERY AND IID ACCEPTANCE OF
     ENERGY FROM PLANT ...............................................    5

10   HEBER GEOTHERMAL'S GENERAL OBLIGATIONS ..........................    6

11   IID'S GENERAL OBLIGATIONS .......................................    6

12   BILLING .........................................................    7

13   AUTHORIZED REPRESENTATIVES ......................................    7

14   METERS ..........................................................    8

15   CONTINUITY OF SERVICE ...........................................    9

16   LIABILITY .......................................................   10

17   UNCONTROLLABLE FORCE ............................................   10

18   INTEGRATION AND AMENDMENTS ......................................   11

19   NON-WAIVER ......................................................   11

20   NO DEDICATION OF FACILITIES .....................................   11

21   SUCCESSORS AND ASSIGNS ..........................................   11



                                        i








22   EFFECT OF SECTION HEADINGS .......................................   12

23   GOVERNING LAW ....................................................   12

24   ARBITRATION ......................................................   13

25   ENTIRE AGREEMENT .................................................   14

26   NOTICES ..........................................................   15

27   SEVERAL OBLIGATIONS ..............................................   15

28   SIGNATURE CLAUSE .................................................   16

     ATTACHMENTS



     EXHIBIT "A" ......................................................   17

     EXHIBIT "B" ......................................................   19



                                       ii






1.     PARTIES

         The parties to this Agreement are IMPERIAL IRRIGATION DISTRICT (IID),
an irrigation district organized and operating under the laws of the State of
California and HEBER GEOTHERMAL COMPANY (Heber Geothermal), a California
Partnership (hereinafter individually Party, collectively Parties).

2.     RECITALS

         2.1 Heber Geothermal leases and operates a geothermal generating
facility with a maximum 49.9 megawatt net output at the Heber known Geothermal
Resource Area (KGRA) and sells the Electric Output From the Plant to Southern
California Edison Company (SCE).

                    2.1.1 Heber Geothermal intends to construct the Plant, and
           upon completion of such construction, sell the Plant to United States
           Trust Company of New York, a New York corporation, not in its
           individual capacity (except as expressly provided in the
           Participation Agreement and the Trust Agreement) but solely as Owner
           Trustee under the Trust Agreement, and its successors and assigns as
           such Owner Trustee (the "Owner Trustee") and lease back the Plant
           from the Owner Trustee pursuant to the Lease Agreement, dated the
           Lease Closing Date, between the Owner Trustee, as Lessor, and Heber
           Geothermal, as Lessee (the "Lease"). To finance construction of the
           Plant, Heber Geothermal proposes to borrow money from General
           Electric Credit Corporation, a New York corporation ("GECC"),
           pursuant to a loan agreement. Such borrowing will be secured in
           accordance with the Construction Deed of Trust, Assignment of Rents,
           Security Agreement and Fixture Filing, dated as of December 1, 1983,
           among Heber Geothermal, the deed trustee and GECC, and as it may be
           amended, modified and supplemented from time to time in accordance
           with the terms thereof (the "Mortgage")




           by a first mortgage on the Plant and by an assignment (for security
           purposes only) of certain contractual rights of Heber Geothermal.
           Upon completion of such construction, Haber Geothermal intends to
           assign all of its rights under certain contracts outright to the
           Owner Trustee pursuant to the Bill of Sale and Assignment, dated the
           Lease Closing Date, from Heber Geothermal in favor of the Owner
           Trustee (the "Bill of Sale") in connection with the sale of the Plant
           to the Owner Trustee. Contemporaneously with such assignment and
           sale, Heber Geothermal intends to enter into the Lease pursuant to
           which all of the Owner Trustee's rights under such contracts will be
           assigned to Heber Geothermal during the term of the Lease and
           thereafter if Heber Geothermal purchases the Plant pursuant to the
           terms of the Lease. After giving effect to the aforesaid sale and
           leaseback, Heber Geothermal will be fully obligated to perform all of
           its obligations with respect to such contracts.

         2.2 SCE has entered into the Power Purchase Agreement dated August 26,
1983, (Purchase Agreement) with Heber Geothermal to purchase all the Electric
Output From the Plant.

         2.3 SCE and Heber Geothermal agree that the terms and conditions
regarding transmission of the Electric Output From the Plant to an IID/SCE point
of interconnection shall be pursuant to an agreement to be entered between IID
and SCE.

         2.4 Since the Plant has been built in the IID service territory, it
will be convenient to connect the Plant to the IID electric system.

         Heber Geothermal hereby grants the IID the right to enter the Plant
site for any reasonable purposes connected with this Agreement, by previous
arrangements with the Plant manager. Those reasonable purposes included
maintenance and




repairs to IID equipment in Heber Geothermal facilities, observing tests of said
facilities, reading of kilowatt-hour meters, and the like.

         2.5 Heber Geothermal desires to purchase and IID desires to sell the
electrical energy necessary to satisfy all of the corporation and maintenance
power consumption requirements of the Plant for the life of the Plant that is
not normally generated by the Plant itself, or portable generating equipment.

         2.6 The Parties desire, by means of this Agreement, to interconnect the
Plant to the IID electrical system and to establish the terms, conditions and
obligations of the Parties relating to such interconnection.

3.       AGREEMENT

         The Parties agree as follows:

4.       DEFINITIONS

         4.1 Authorized Representative: The representative of a Party designated
in accordance with Section 13.

         4.2 Energy: Electric energy in excess of Heber Geothermal's electric
energy requirements, expressed in kilowatt-hours, generated by the Plant and
measured and delivered to the Point of Delivery.

         4.3 Operation Date: The day on which the Plant Energy is accepted by
IID for SCE's account.

         4.4 Plant: A maximum of 49.9 MW net output geothermal generating
facility owned by Heber Geothermal including all associated equipment and
improvements necessary for generating electric energy and transmitting it to the
high voltage side of the power transformer.



         4.5 Point of Delivery: The point on the high voltage side of Heber
Geothermal's switchyard where IID's metering equipment measures the delivery of
Energy to the IID system as shown on Exhibit "B".

         4.6 System Emergency: A condition on IID's system which is likely to
result in imminent significant disruption of service to customers or is
imminently likely to endanger life or property.

         4.7 Electric Output From the Plant: For the purposes of this agreement,
the Electric Output From the Plant shall be defined as the net metered output of
the Plant plus the net metered usage of electric power by chevron, as shown on
in Exhibit B.

         4.8 Consumption of Energy From IID's Resources: For the purposes of
this agreement, Consumption of Energy From IID's Resources shall be defined as
the metered energy delivered to Heber Geothermal, less that metered energy
consumed by Chevron during deliveries from IID. Demand charges will be computed
in the same manner.

5.       EFFECTIVE DATE AND TERM

         This Agreement shall become effective when signed by the Parties and
shall terminate at the earlier of (i) midnight December 31, 2015, or (ii)
twenty-four (24) months from the date the plant has ceased to operate at the
option of the IID or (iii) the date agreed to by the Authorized Representatives.

6.       CONNECTION OF PLANT

         6.1 Heber Geothermal may electrically connect its Plant, in accordance
with the provisions of this Agreement, so that it can operate in parallel with
the IID electric system.

         6.2 Notwithstanding the provision that Heber Geothermal has furnished
the high voltage switchyard complete, including the high voltage oil circuit
breakers and disconnect



switches, the control of the high voltage oil circuit breakers and disconnect
switches shall be under the control of the IID dispatcher.

7.       ELECTRIC SERVICE TO HEBER GEOTHERMAL

         IID shall provide electric service to Heber Geothermal pursuant to
Section 12.

8.       METERING OF ENERGY DELIVERIES

         Metering for electric service to Heber Geothermal and for energy
deliveries by Heber Geothermal to IID for SCE's account shall be at the Point of
Delivery as shown on Exhibit "B". Four meters shall be installed which shall
measure and record flows in each direction as shown on Exhibit "3".

9.       HEBER GEOTHERMAL DELIVERY AND IID ACCEPTANCE OF ENERGY FROM PLANT


         Whenever Electric Output From the Plant exceeds Heber Geothermal 's
power requirements, Heber Geothermal shall deliver all such excess output to IID
for the account of SCE and IID shall accept such output for the account of SCE
and deliver such output to SCE pursuant to transmission service agreement to be
entered into between Southern California Edison Company and Imperial Irrigation
District.

10.      HEBER GEOTHERMAL'S GENERAL OBLIGATIONS

         Heber Geothermal shall:

         10.1 Operate the Plant in a manner consistent with applicable electric
utility industry standards, good engineering practice, and without degradation
of quality or reliability of the IID system.

         10.2 Deliver the Electric Output From the Plant to IID for the account
of SCE at the Point of Delivery.



         10.3 Each Party shall provide the reactive kilovolt ampere (KVA)
requirements of its own system so that there will be no interchange of reactive
KVA between systems. The Parties shall cooperate to control the flow of reactive
KVA to prevent the introduction of objectionable operating conditions on the
system of either Party.

         10.4 Coordinate, to the greatest extent practicable, major overhaul and
inspection outages of the Plant with IID.

         10.5 Give IID a written schedule on or before June 1, and December 1,
each year of the estimated amounts and rates of delivery of energy to be
delivered to IID for the account of SCE at the Point of Delivery during each
month of the succeeding twelve-month (12) period commencing July 1, and January
1.
         10.6 Give IID a written schedule on or before the fifteenth (15th) day
of each month of the estimated amounts and rates of delivery of energy to be
delivered to IID for the account of SCE at the Point of Delivery during each day
of the succeeding calendar month.

         10.7 Give IID a schedule on or before 12:01 p.m. on Tuesday of each
seven-day (7) period of the estimated amounts and rates of delivery of energy to
be delivered to IID for the account of SCE at the Point of Delivery during each
hour of the succeeding seven-day (7) period commencing at 12:01 a.m. on the
following Monday; provided, however, that if any changes in the hourly
deliveries so scheduled become necessary, Heber Geothermal shall notify IID of
such changes as far in advance as possible.

         10.8 Provide IID any reasonable rights-of-way and access required for
testing and reading of meters by previous arrangement with the Plant manager.

         10.9 When IID determines that it is necessary to utilize the
transmission capability being utilized by Heber Geothermal to meet IID's load
requirements,



                    a) pay its pro-rata share of the total costs associated with
           extensions or upgrades of IID's existing system and/or a new system
           required for delivery of Heber Geothermal's power, or

                    b) arrange for transmission capability exclusive of IID.

In any event, IID will give Heber Geothermal 60 months written notice of such
determination.

11.      IID'S GENERAL OBLIGATIONS

         11.1 Accept the Electric Output From the Plant for the account of SCE
at the Point of Delivery and concurrently deliver an equal amount of electric
energy to the SCE system at IID/SCE point(s) of interconnection.

         11.2 Coordinate, to the greatest extent practicable, major overhaul and
inspection outages of IID transmission facilities with Heber Geothermal and
notify Heber Geothermal of any changes as far in advance as possible.

         11.3 Carry out the directions of the Authorized Representative with
respect to the matters set forth in this Agreement.

12.      BILLING


         12.1 IID shall read the meters monthly according to its regular meter
reading schedule beginning no more than thirty (30) days after the date that
electric energy is first supplied to Heber Geothermal. IID monthly shall send
Heber Geothermal within ten (10) working days after the meter is read a bill for
electric service. Heber Geothermal shall pay IID the total amount billed within
thirty (30) days of receipt of the bill.

         12.2 IID shall bill Heber Geothermal for Heber Geothermal's Consumption
of Energy From IID's Resources in accordance with Rate Schedule A2, as it may be
revised from time to time. Copy of current Rate Schedule A2 is attached as
Exhibit "A".



         12.3 If Heber Geothermal disputes a bill, payment shall be made as if
no dispute existed pending resolution of the dispute by the Authorized
Representatives. If the bill is determined to be in error, the disputed amount
shall be refunded by IID including interest at the rate of one and one half
percent (1-1/2%) per month, compounded monthly, from the date of payment to the
date the refund check or adjusted bill is mailed.

13.      AUTHORIZED REPRESENTATIVES

         13.1 Within thirty (30) days after the date this Agreement is signed,
each Party shall designate, by written notice to the other Party, an Authorized
Representative who is authorized to act in its behalf in the implementation of
this Agreement and with respect to those matters contained herein which are the
functions and responsibilities for the Authorized Representatives. Either Party
may, at any time, change the designation of its Authorized Representative by
written notice to the other Party.

         13.2 IID's Authorized Representative shall develop detailed written
procedures necessary and convenient to administer this Agreement within six (6)
months after the date signed. Such procedures shall be submitted to Heber
Geothermal's Authorized Representative for review, comment, discussion and
concurrence before they are put into effect. Such procedures shall include,
without limitation: (i) communication between Heber Geothermal and IID's
electric system dispatcher with regard to daily operating matters, (ii) billing
and payments, (iii) specified equipment tests, and (iv) operating matters which
affect or may affect quality and reliability of service to electric customers
and continuity of deliveries to SCE.

         13.3 The Authorized Representative shall have no authority to modify
any of the provisions of this Agreement.



14.       METERS

         14.1 All meters shall be sealed and the seal shall be broken only upon
occasions when the meters are to be inspected, tested or adjusted.

         14.2 IID shall inspect and test all meters upon their installation and
at least once every year thereafter. If requested to do so by Heber Geothermal,
IID shall inspect or test a meter more frequently than every year, but the
expense of such inspection or test shall be paid by Heber Geothermal unless the
meter is found to register inaccurately by more than two percent (2%) from the
measurement made by a standard meter. Each Party shall give reasonable notice to
the other party of the time when any inspection or test shall take place and
that Party may have representatives present at the test or inspection. If a
meter is found to be inaccurate or defective, it shall be adjusted, repaired or
replaced in order to provide accurate metering. All adjustments due to
inaccurate meters shall be limited to the preceding six (6) months.

         14.3 If a meter fails to register, or if the measurement made by a
meter during a test varies by more than two percent (2%) from the measurement
made by the standard meter used in the test, adjustment shall be made correcting
all measurements made by the inaccurate meter for:

                    (i) the actual period during which inaccurate measurements
           were made, if the period can be determined, or if not,

                    (ii) the period immediately preceding the test of the meter
           equal the one-half (1/2) the time from the date of the last previous
           test of the meter; provided, however, that the period covered by the
           correction shall not exceed six (6) months.

         14.4 Heber Geothermal shall telemeter information to IID's new dispatch
center regarding the kilowatts, kilowatt-hours, kilovars and kilovar-hours
delivered to or received from IID at the Point of Delivery, as well as voltage
and breaker status over phone line leased by



Heber Geothermal. IID shall purchase, own, and shall design, install, operate,
maintain, or cause to be designed, installed, operated, and maintained,
equipment to automatically transmit from the Plant to IID's new dispatch center
continuous values of Plant output expressed as megawatts, megavars and
megawatt-hours. IID may thereupon bill and Heber Geothermal shall promptly pay
IID's cost of design, purchase and installation of said equipment. Heber
Geothermal shall have the right to audit IID's records and accounts to verify
the cost of said equipment.

15.      CONTINUITY OF SERVICE

         IID shall not be obligated to accept and IID may require Heber
Geothermal to temporarily curtail, interrupt or reduce deliveries of energy upon
advance notice to Heber Geothermal, when such curtailment, interruption or
reduction is required in order for IID to construct, install, maintain, repair,
replace, remove, investigate or inspect any of its equipment or any part of its
system or if IID determines that such curtailment, interruption or reduction is
necessary because of a System Emergency, forced outages or abnormal operating
conditions on its system which IID in its sole judgment deems to jeopardize its
system integrity. IID shall exercise due diligence to minimize the frequency and
duration of such curtailments, interruptions or reductions.

16.      LIABILITY

         16.1 Neither Party shall hold the other Party, its officers, agents or
employees liable for any loss, damage, claim, cost, or expense for less of or
damage to property, or injury or death of persons, which arises out of the first
Party's ownership, operation or maintenance of facilities on its own side of the
Point of Delivery.

         16.2 Each Party agrees to defend, indemnify and save harmless the other
Party, its officers, agents, or employees against all losses, claims, demands,
costs or expenses for loss of or



damage to property, or injury or death of persons, which directly or indirectly
arise out of the indemnifying Party's performance pursuant to this Agreement;
provided, however, that a Party shall be solely responsible for any such losses,
claims, demands, costs or expenses which result from its sole negligence or
willful misconduct.

17.      UNCONTROLLABLE FORCE

         Neither Party shall be considered to be in default with respect to any
obligation hereunder, other than the obligations to pay money, if prevented from
fulfilling such obligation by reason of an uncontrollable force. The term
"uncontrollable force" means any cause beyond the control of the Party affected,
including, but not limited to, failure or threat of imminent failure of
facilities, flood, earthquake, storm, lightning, fire, epidemic, war, riot,
civil disturbance, sabotage and restraint by court or public authority, which by
exercise of due diligence and foresight could not reasonably have been avoided.
Whichever Party is rendered unable to fulfill any obligation by reason of
uncontrollable forces shall give prompt written notice of such fact to the other
Party and shall exercise due diligence to remove such inability with all
reasonable dispatch. Nothing in this Agreement shall require a Party to settle
any strike or labor dispute in which it is involved.

18.       INTEGRATION AND AMENDMENTS

         This Agreement constitutes the entire agreement between the Parties
relating to the interconnection of Heber Geothermal's Plant to IID's electric
system, the acceptance of energy by IID from Heber Geothermal and the providing
of electric service by IID. No oral agreement or prior written agreement between
the Parties shall be of any effect whatsoever; provided, however, that any
arrangements agreed upon by the Authorized Representatives within the limits



of their authority, and consistent with this Agreement shall be binding upon the
Parties. All changes to this Agreement shall be in writing and shall be signed
by an officer of each Party.

19.      NON-WAIVER

         None of the provisions of this Agreement shall be considered waived by
either Party except when such waiver is given in writing. The failure of either
Party to insist in any one or more instances upon strict performance of any of
the provisions of this Agreement or to take advantage of any of its rights
hereunder shall not be construed as a waiver of any such provisions or the
relinquishment of any such rights for the future; but the same shall continue
and remain in full force and effect.

20.      NO DEDICATION OF FACILITIES

         Any undertaking by one Party to the other Party under any provision of
this Agreement shall not constitute the dedication of the system or any portion
thereof by the Party to the public or to the other Party, and it is understood
and agreed that any such undertaking under any provision of this Agreement by a
Party shall cease upon the termination of its obligations hereunder.

21.      SUCCESSORS AND ASSIGNS

         21.1 This Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of the Parties.

         21.2  IID hereby consents to the assignment of this Agreement:

                    (i) by Heber Geothermal to GECC, as security, pursuant to
           the Mortgage;

                    (ii) by Heber Geothermal to the Owner Trustee pursuant to
           the Bill of Sale;


                    (iii) by the Owner Trustee to Heber Geothermal pursuant to
           the Lease or otherwise to Heber Geothermal in connection with the
           transactions contemplated by the Participation Agreement;

                    (iv) by any assignee permitted by this Section 21.2
           (including any assignee permitted by this clause (iv) to any Person
           if such Person is, or has a binding contract for the operation of the
           Plant by, an experienced and prudent power plant operator and has a
           net worth (determined in accordance with generally accepted
           accounting principles) of at least $100,000,000;

                    (v) by any assignee permitted by this Section 21.2
           (including any assignee permitted by this clause (v) to any Person,
           unless IID shall have reasonably objected to such Person in writing
           within 30 days of notice to IID of the proposed assignment, which
           notice shall name the proposed assignee and the proposed operator of
           the Plant, such objection to be because such assignee either (a) is
           not a financially responsible entity, (b) is not, and does not have a
           contract for the operation of the Plant by, an experienced and
           prudent operating entity or (c) cannot obtain the rights, title and
           interest necessary to perform the assigned obligations.

22.      EFFECT OF SECTION HEADINGS

         Section headings appearing in this Agreement are inserted for
convenience only, and shall not be construed as interpretations of text.

23.      GOVERNING LAW

         This Agreement shall be interpreted, governed and construed under the
laws of the State of California or the laws of the United States, as applicable.



24.      ARBITRATION

         24.1 Any dispute arising out of or relating to this Agreement, or the
breach thereof, which is not resolved by the Parties acting through their
Authorized Representatives shall be settled by arbitration to the extent
permitted by the laws applicable to the Parties; provided, however, that no
Party to the dispute shall be bound to any greater extent than any other Party
to the dispute. Arbitration shall not apply to any dispute or matter that is
within the jurisdiction of any regulatory agency.

         24.2 Any demand for arbitration shall be made by written notice to the
other Party setting forth in adequate detail the nature of the dispute, the
issues to be arbitrated, the amount or amounts, if any, involved in the dispute,
and the remedy sought. Within twenty (20) days from the receipt of such notice,
the other Party may submit its own written statement of the dispute and may set
forth in adequate detail any additional related matters or issues to be
arbitrated.

         24.3 Within thirty (30) days after delivery of the written notice
demanding arbitration, the Parties acting through their Authorized
Representatives shall meet for the purpose of selecting an arbitrator. The.
Parties may agree upon a single arbitrator, but in the event that they cannot
agree, three arbitrators shall be used. Each Party shall designate one
arbitrator, and the two arbitrators shall then select a third arbitrator. All
arbitrators shall be persons skilled and experienced in the field in which the
dispute has arisen and no person shall be eligible for appointment as an
arbitrator who is or has been an officer or employee of either of the Parties or
otherwise interested in the matter to be arbitrated. Should either party refuse
or neglect to appoint an arbitrator or to furnish the arbitrators with any
papers or information demanded, the arbitrators are empowered, by both Parties,
to proceed without the participation or assistance of that Party.



         24.4 Except as otherwise provided in this Section, the arbitration
shall be governed by the rules and practices of the American Arbitration
Association, or a similar organization if the American Arbitration Association
should not at the time exist.

         24.5 Arbitration proceedings shall be held in Imperial, California, at
a time and place to be selected by the arbitrators. The arbitrators shall hear
evidence submitted by the Parties and may call for additional information which
shall be furnished by the Party having such information. The arbitrators shall
have no authority to call for information not related to the issues included in
the dispute or to determine other issues not in dispute.

         24.6 If there is only one arbitrator, his decision shall be binding and
conclusive on the Parties. If there are three arbitrators, the decision of any
two shall be binding and conclusive. The decision of the arbitrators shall
contain findings regarding the issues involved in the dispute, including the
merits of the positions of the Parties, the materiality of any default, and the
remedy or relief to which a Party shall be entitled. The arbitrators may not
grant any remedy or relief which is inconsistent with this Agreement, nor shall
the arbitrators make findings or decide issues not in dispute.

         24.7 The fees and expenses of the arbitrators shall be shared equally
by the Parties, unless the decision of the arbitrators specifies some other
apportionment. All other expenses and costs of the arbitration shall be borne by
the Party incurring such expenses and costs.

         24.8 Any decision or award granted by the arbitrators shall be final
and judgment may be entered on it in any court of competent jurisdiction. This
agreement to arbitrate shall be specifically enforceable.

25.      ENTIRE AGREEMENT

         The complete agreement of the Parties is set forth in this Agreement
and all prior



communications regarding subject interconnected operations whether oral or
written, are hereby abrogated and withdrawn.

26.      NOTICES

         Any formal communication or notice in connection with this Agreement
shall be in writing and shall be deemed properly given if delivered in person or
sent first class mail, postage prepaid to the person specified below:

                  Heber Geothermal Company
                  226 West Brokaw Road
                  Suite 550
                  San Jose, California  95110


                  Imperial Irrigation District
                  c/o General Manager
                  P.O. Box 937
                  Imperial, California  92251


27.      SEVERAL OBLIGATIONS

         Except where specifically stated in this Agreement to be otherwise, the
duties, obligations and liabilities of the Parties are intended to be several
and not joint or collective. Nothing contained in this Agreement shall ever be
construed to create an association, trust, partnership, or joint venture, or
impose a trust or partnership duty, obligation or liability on or with regard to
either Party. Each Party shall be individually and severally liable for its own
obligations under this Agreement.






28.      SIGNATURE CLAUSE

         The Parties have caused this Agreement to be executed in their
respective names, in duplicate, by their respective officers hereunto this 31st
day of July, 1985.


                                               HEBER GEOTHERMAL COMPANY


                                               By  /s/ John E. Jacobsen
                                                  ------------------------------
                                                  Assistant General Manager

WITNESS:


By /s/ Robert E. Sindilar
   ------------------------------

                                               IMPERIAL IRRIGATION DISTRICT


                                               By  /s/ W.R. Condit
                                                  ------------------------------
                                                  President, Board of Directors

ATTEST:


By /s/ Larry E. Beck
   ------------------------------
            Secretary



                                                                 EXHIBIT 10.3.24


                           PLANT CONNECTION AGREEMENT
                                     FOR THE
                 SECOND IMPERIAL GEOTHERMAL COMPANY POWER PLANT


                                     BETWEEN


                          IMPERIAL IRRIGATION DISTRICT
                                       AND
                       SECOND IMPERIAL GEOTHERMAL COMPANY



                                TABLE OF CONTENTS


SECTION   TITLE                                                             PAGE
-------   -----
   1      PARTIES                                                            1

   2      RECITALS                                                           1

   3      AGREEMENT                                                          2

   4      DEFINITIONS                                                        2

   5      EFFECTIVE DATE AND TERM                                            3

   6      CONNECTION OF PLANT                                                4

   7      ELECTRIC SERVICE TO PRODUCER                                       4

   8      METERING OF ENERGY DELIVERIES                                      4

   9      PRODUCER'S DELIVERY AND IID ACCEPTANCE                             4

   10     PRODUCER'S GENERAL OBLIGATIONS                                     5

   11     IID'S GENERAL OBLIGATIONS                                          6

   12     BILLING                                                            7

   13     AUTHORIZED REPRESENTATIVES                                         8

   14     METERS                                                             9

   15     CONTINUITY OF SERVICE                                             10

   16     LIABILITY                                                         11

   17     UNCONTROLLABLE FORCES                                             13



   18     INTEGRATION AND AMENDMENTS                                        14

   19     NON-WAIVER                                                        14


                                       i


   20     NO DEDICATION OF FACILITIES                                       14

   21     SUCCESSORS AND ASSIGNS                                            15

   22     EFFECT OF SECTION HEADINGS                                        15

   23     GOVERNING LAW                                                     15

   24     ARBITRATION                                                       16

   25     ENTIRE AGREEMENT                                                  18

   26     NOTICES                                                           18


   27     SEVERAL OBLIGATIONS                                               19

   28     SIGNATURE CLAUSE                                                  19


ATTACHMENTS
-----------

EXHIBIT "A" - RATE SCHEDULES GL AND A2

EXHIBIT "B" - METERING ONE-LINE DIAGRAM


                                       ii


1.   PARTIES

     The parties to this Agreement are IMPERIAL IRRIGATION DISTRICT ("IID"),
organized under the Water Code of the State of California and SECOND IMPERIAL
GEOTHERMAL COMPANY ("Producer"), hereinafter referred to individually as
"Party", and collectively as "Parties".

2.   RECITALS

          2.1 Producer intends to construct and operate, as owner or lessee, a
geothermal generating facility with a maximum 33.0 megawatt net operating
capacity at the Heber KGRA, Imperial County, California, and to sell the Plant
electrical output to Southern California Edison Company ("SCE").

          2.2 SCE has entered into the Power Purchase Agreement dated April 16,
1985, ("Purchase Agreement") with Producer, to purchase all the electrical
output from the Plant.

          2.3 SCE and Producer agree that the terms and conditions regarding
transmission of the Plant's Energy to an IID/SCE point of interconnection shall
be pursuant to a Transmission Service Agreement to be entered into between IID
and Producer.

          2.4 Since the Plant will be built in the IID service territory, it
will be convenient to connect the Plant to the IID electric system.

     Producer hereby grants the IID the right to enter the Plant site for any
reasonable purposes connected with this Agreement, by previous arrangements with
the



Plant manager. Those reasonable purposes include maintenance and repairs to IID
equipment in Producer's facilities, observing tests of said facilities, reading
of kilowatt-hour meters, and the like.

          2.5 Producer desires to purchase and IID desires to sell the
electrical energy necessary to satisfy their operation and maintenance power
consumption requirements of the Plant for the life of the Plant that is not
normally generated by the Plant itself, or portable generating equipment.

          2.6 The Parties desire, by means of this Agreement, to interconnect
the Plant to the IID electrical system and to establish the terms, conditions
and obligations of the Parties relating to such interconnection.

3.   AGREEMENT

     The Parties agree as follows:

4.   DEFINITIONS

          4.1 Agreement. This Plant Connection Agreement between IID and
Producer, and all Exhibits hereto, as may be amended from time to time.

          4.2 Authorized Representative: The representative of a Party
designated in accordance with Section 13.

          4.3 Energy: Electric energy in excess of Producer's electric energy
requirements, expressed in kilowatt-hours, generated by the Plant and measured
and delivered to the Point of Delivery.


                                       2


          4.4 Operation Date: The day on which the Plant Energy is first
accepted by IID for delivery to SCE.

          4.5 Plant: A maximum of 33.0 MW net operating capacity geothermal
facility operated by Producer, as owner or lessee, including all associated
equipment and improvements necessary for generating electric energy and
transmitting it to the high voltage side of the power transformer.

          4.6 Point of Delivery: The point on the high voltage side of
Producer's switchyard when IID's metering equipment measures the delivery of
Energy to the IID system as shown on Exhibit "B".

          4.7 System Emergency: A condition on IID's system which is likely to
result in imminent significant disruption of service to customers or is
imminently likely to endanger life or property.

5.   EFFECTIVE DATE AND TERM

     This Agreement shall become effective upon the Operation Date of the Plant,
and shall remain in effect until the earlier of (i) thirty years after the plant
achieves firm operation as such term is defined in Section 2.17 of the Power
Purchase Contract dated April 16th, 1985 between Second Imperial Geothermal
Company and Southern California Edison Company, or (ii) thirty six (36) months
from the date the Plant has ceased to operate at the option of IID. It is
understood that if the Operation Date does not occur within five (5) years after
the date this Agreement was executed, this Agreement shall be of no force or
effect.


                                       3


6.   CONNECTION OF PLANT

          6.1 Producer may electrically connect its Plant, in accordance with
the provisions of this Agreement, so that it can operate in parallel with the
IID electric system. Parallel operation will not commence until IID has
inspected and approved the interconnection facilities and operational
procedures.

          6.2 Notwithstanding the provision that Producer has furnished the high
voltage switchyard complete, including the high voltage oil circuit breakers and
disconnect switches, the control of the high voltage oil circuit breakers and
disconnect switches shall be under the control of the IID dispatcher.

7.   ELECTRIC SERVICE TO PRODUCER

     IID shall provide electric service to Producer pursuant to Section 12.

8.   METERING OF ENERGY DELIVERIES

     Metering for electric service to Producer and for energy deliveries by
Producer to IID for delivery to SCE shall be at the Point of Delivery as shown
on Exhibit "B." Four meters shall be installed which shall measure and record
flows in each direction as shown on Exhibit "B."

9.   PRODUCER'S DELIVERY AND IID ACCEPTANCE OF ENERGY FROM PLANT

     Whenever electric output from the Plant exceeds Producer's power
requirements, Producer shall deliver all such excess output to IID for delivery
to SCE and IID shall accept such output for delivery to SCE and deliver such
output to SCE pursuant to a transmission service agreement to be entered into
between Producer and IID.


                                       4


10.  PRODUCER' S GENERAL OBLIGATIONS

     Producer shall:

          10.1 Operate the Plant in a manner consistent with applicable electric
utility industry standards, good engineering practice, and without degradation
of quality or reliability of service to IID customers.

          10.2 Deliver the Plant's net electrical output to IID for the account
of SCE at the Point of Delivery.

          10.3 Each Party shall provide the reactive kilovolt-ampere (KVA)
requirements of its own system so that there will be no interchange of reactive
KVA between systems. The Parties shall cooperate to control the flow of reactive
KVA to prevent the introduction of objectionable operating conditions on the
system of either Party.

          10.4 Coordinate, to the greatest extent practicable, major overhaul
and inspection outages of the Plant with IID.

          10.5 Give IID a written schedule on or before June 1, and December 1,
each year of the estimated amounts and rates of delivery of energy to be
delivered to IID for the account of SCE at the Point of Delivery during each
month of the succeeding twelve-month (12) period commencing July 1, and January
1.

          10.6 Give IID a written schedule on or before the fifteenth (15th) day
of each month of the estimated amounts and rates of delivery of energy to be
delivered to


                                        5


IID for the account of SCE at the Point of Delivery during each day of the
succeeding calendar month.

          10.7 Give IID a schedule on or before 12:01 p.m. on Tuesday of each
seven-day (7) period of the estimated amounts and rates of delivery of energy to
be delivered to IID for the account of SCE at the Point of Delivery during each
hour of the succeeding seven-day (7) period commencing at 12:01 a.m. on the
following Monday; provided, however, that if any changes in the hourly
deliveries so scheduled become necessary, Producer shall notify IID of such
changes as far in advance as possible.

          10.8 Provide IID any reasonable rights-of-way and access required for
testing and reading of meters by previous arrangement with the Plant manager.

          10.9 Carry out the directions of the Authorized Representatives with
respect to the matters set forth in this Agreement.

11.  IID'S GENERAL OBLIGATIONS

     IID shall:

          11.1 Design, acquire, construct, operate and maintain, or cause to be
designed, acquired, constructed, operated and maintained, and shall own, a
connecting transmission line between IID's transmission system and the Plant.
Following the completion of such line, IID may bill and Producer shall pay IID's
costs of designing, acquiring and constructing such line. Producer shall have
the right to audit IID's records and accounts to verify the cost of such line.


                                       6


          11.2 Accept the Plant's net electrical output for the account of SCE
at the Point of Delivery and simultaneously deliver an equal amount of electric
energy (less applicable transmission losses) to the SCE system at IID/SCE
point(s) of interconnection.

          11.3 Coordinate, to the greatest extent practicable, major overhaul
and inspection outages of IID transmission facilities with Producer and notify
Producer of any changes as far in advance as possible.

          11.4 Carry out the directions of the Authorized Representative with
respect to the matters set forth in this Agreement.

          11.5 Operate its system in a manner consistent with applicable utility
industry standards and good engineering practices.

12.  BILLING

          12.1 IID shall read the meters monthly according to its regular meter
reading schedule beginning no more than thirty (30) days after the date that
electric energy is first supplied to Producer. IID monthly shall send Producer
within ten (10) working days after the meter is read a bill for electric
service. Producer shall pay IID the total amount billed within thirty (30) days
of receipt of the bill.

          12.2 IID shall bill Producer for Producer's consumption of energy from
IID's resources in accordance with Rate Schedule GL or Rate Schedule A-2, as
applicable, as it may be revised from time to time. Copies of current Rate
Schedule GL and current Rate Schedule A-2 are attached as Exhibit "A."


                                       7


          12.3 If Producer disputes a bill, payment shall be made as if no
dispute existed pending resolution of the dispute by the Authorized
Representatives. If the bill is determined to be in error, the disputed amount
shall be refunded by IID including interest at the rate of one and one-half
percent (1 1/2%) per month, compounded monthly, from the date of payment to the
date the refund check or adjusted bill is mailed.

13.  AUTHORIZED REPRESENTATIVES

          13.1 Within thirty (30) days after the date this Agreement is signed,
each Party shall designate, by written notice to the other Party, an Authorized
Representative who is authorized to act in its behalf in the implementation of
this Agreement and with respect to those matters contained herein which are the
functions and responsibilities for the Authorized Representatives. Either Party
may, at any time, change the designation of its Authorized Representative by
written notice to the other Party.

          13.2 IID's Authorized Representative shall develop detailed written
procedures necessary and convenient to administer this Agreement within six (6)
months after the date signed. Such procedures shall be submitted to Producer's
Authorized Representative for review, comment, discussion and concurrence before
they are put into effect. Such procedures shall include, without limitation: (i)
communication between Producer and IID's electric system dispatcher with regard
to daily operating matters, (ii) billing and payments, (iii) specified equipment
tests, and (iv) operating matters which affect or may affect quality and
reliability of service to electric customers and continuity of deliveries to
SCE.


                                       8


          13.3 The Authorized Representative shall have no authority to modify
any of the provisions of this Agreement.

14.  METERS

          14.1 All meters shall be sealed and the seal shall be broken only upon
occasions when the meters are to be inspected, tested or adjusted.

          14.2 IID shall inspect and test all meters upon their installation and
at least once every year thereafter. If requested to do so by Producer, IID
shall inspect or test a meter more frequently than every year, but the expense
of such inspection or test shall be paid by Producer unless the meter is found
to register inaccurately by more than two percent (2%) from the measurement made
by a standard meter. Each Party shall give reasonable notice to the other Party
of the time when any inspection or test shall take place and that Party may have
representatives, present at the test or inspection. If a meter is found to be
inaccurate or defective, it shall be adjusted, repaired or replaced in order to
provide accurate metering. All adjustments due to inaccurate meters shall be
limited to the preceding six (6) months.

          14.3 If a meter fails to register, or if the measurement made by a
meter during a test varies by more than two percent (2%) from the measurement
made by the standard meter used in the test, adjustment shall be made correcting
all measurements made by the inaccurate meter for:

          (i)  the actual period during which inaccurate measurements were made,
               if the period can be determined, or if not,


                                        9


          (ii) the period immediately preceding the test of the meter equal to
               one-half (1/2) the time from the date of the last previous test
               of the meter; provided, however, that the period covered by the
               correction shall not exceed six (6) months;

          14.4 Producer shall telemeter information to IID's Dispatch Center
regarding the kilowatts, kilowatt-hours, kilovars and kilovar-hours delivered to
or received from IID at the Point of Delivery over phone line leased by
Producer.

     IID shall purchase, own, and shall design, install, operate, maintain, or
cause to be designed, installed, operated, and maintained, equipment to
automatically transmit from the Plant to IID's Dispatch Center continuous values
of Plant output expressed as megawatts, megavars and megawatt-hours. IID may
thereupon bill and Producer shall promptly pay IID's cost of design, purchase
and installation of said equipment. Producer shall have the right to audit IID's
records and accounts to verify the cost of said equipment.

15.  CONTINUITY OF SERVICE

     IID shall not be obligated to accept and IID may require Producer to
temporarily curtail, interrupt or reduce deliveries of energy upon advance
notice to Producer, when such curtailment, interruption or reduction is required
in order for IID to construct, install, maintain, repair, replace, remove,
investigate or inspect any of its equipment or any part of its system or if IID
determines that such curtailment, interruption or reduction is necessary because
of a System Emergency, forced outages or


                                       10


abnormal operating conditions on its system. IID shall use reasonable efforts to
keep interruptions and curtailments to a minimum time.

16.  LIABILITY

          16.1 Except for any loss, damage, claim, costs, charge or expense
resulting from Willful Action, neither Party (the "released Party"), its
directors or other governing body, officers or employees shall be liable to the
other Party for any loss, damage, claim, cost, charge, or expense of any kind or
nature incurred by the other Party (including direct, indirect or consequential
loss, damage, claim, cost, charge or expense; and whether or not resulting from
the negligence of a Party, its directors or other governing body, officers,
employees or any person or entity whose negligence would be imputed to a Party)
from engineering, repair, supervision, inspection, testing, protection,
operation, maintenance, replacement, reconstruction, use or ownership of the
released Party's electrical system, Plant(s) or associated facilities in
connection with the implementation of this Agreement. Except for any loss,
damage, claim, cost, charge or expense resulting from Willful Action, each Party
releases the other Party, its directors or other governing body, officers and
employees from any such liability.

          16.2 For the purpose of this Section 16, Willful Action shall be
defined as action taken or not taken by a Party at the direction of its
directors or other governing body, officers or employees having management or
administrative responsibility affecting its performance under this Agreement, as
follows:


                                       11



               16.2.1 Action which is knowingly or intentionally taken or not
taken with conscious indifference to the consequences thereof or with intent
that injury or damage would result or would probably result therefrom.

               16.2.2 Action which has been determined by final arbitration
award or final judgment or judicial decree to be a material default under this
Agreement and which occurs or continues beyond the time specified in such
arbitration award or judgment or judicial decree for curing such default or, if
no time to cure is specified therein, occurs or continues thereafter beyond a
reasonable time to cure such default.

               16.2.3 Action which is knowingly or intentionally taken or not
taken with the knowledge that such action taken or not taken is a material
default under this Agreement.

          16.3 Willful Action does not include any act or failure to act which
is merely involuntary, accidental or negligent.

          16.4 The phrase "employees having management or administrative
responsibility," as used in Section 16.2, means the employees of a Party who are
responsible for one or more of the executive functions of planning, organizing,
coordinating, directing, controlling and supervising such Party's performance
under this Agreement with responsibility for results.

          16.5 Subject to the foregoing provisions of this Section 16, each
Party agrees to defend, indemnify and save harmless the other Party, its
officers, agents, or employees against all losses, claims, demands, costs or
expenses for loss of or damage to


                                       12


property, or injury or death of persons, which directly or indirectly arise out
of the indemnifying Party's performance pursuant to this Agreement; provided,
however, that a Party shall be solely responsible for any such losses, claims,
demands, costs or expenses which result from its sole negligence or Willful
Action.

17.  UNCONTROLLABLE FORCES

     Neither Party shall be considered to be in default in the performance of
any of its obligations under this Agreement when a failure of performance shall
be due to an uncontrollable force. The term "uncontrollable force" shall mean
any cause beyond the control of the Party affected including, but not restricted
to, failure of or threat of failure of facilities which have been maintained in
accordance with generally-accepted engineering and operating practices in the
electrical utility industry, flood, drought, earthquake, tornado, storm fire,
pestilence, lightning and other natural catastrophes, epidemic, war, riot, civil
disturbance or disobedience, strike, labor dispute, labor or material shortage,
sabotage, government priorities and restraint by court order or public authority
(whether valid or invalid) and actions or nonaction by or inability to obtain or
keep the necessary authorizations or approvals from any governmental agency or
authority, which by exercise of due diligence such Party could not reasonably
have been expected to avoid and which by exercise of due diligence it has been
unable to overcome. Nothing contained herein shall be construed as to require a
Party to settle any strike or labor dispute in which it may be involved. Either
Party rendered unable to fulfill any of its obligations under this Agreement by
reason of an uncontrollable force shall give


                                       13


prompt written notice of such fact to the other Party and shall exercise due
diligence to remove such inability with all reasonable dispatch.

18.  INTEGRATION AND AMENDMENTS

     This Agreement constitutes the entire agreement between the Parties
relating to the interconnection of Producer's Plant to IID's electric system,
the acceptance of energy by IID from Producer and the providing of electric
service by IID. No oral agreement or prior written agreement between the Parties
shall be of any effect whatsoever; provided, however, that any arrangements
agreed upon by the Authorized Representatives within the limits of their
authority, and consistent with this Agreement shall be binding upon the Parties.
All changes to this Agreement shall be in writing and shall be signed by an
officer of each Party.

19.  NON-WAIVER

     None of the provisions of this Agreement shall be considered waived by
either Party except when such waiver is given in writing. The failure of either
Party to insist in any one or more instances upon strict performance of any of
the provisions of this Agreement or to take advantage of any of its rights
hereunder shall not be construed as a waiver of any such provisions or the
relinquishment of any such rights for the future; but the same shall continue
and remain in full force and effect.

20.  NO DEDICATION OF FACILITIES

     Any undertaking by one Party to the other Party under any provision of this
Agreement shall not constitute the dedication of the system or any portion
thereof by the


                                       14


Party to the public or to the other Party, and it is understood and agreed that
any such undertaking under any provision of this Agreement by a Party shall
cease upon the termination of its obligations hereunder.

21.  SUCCESSORS AND ASSIGNS

          21.1 This Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of the Parties.

          21.2 This Agreement may be assigned by Producer only (i) to a
purchaser or co-owner of the Plant or to a person who will operate the Plant
pursuant to a contract or other arrangement with such purchaser and in either
case with the prior written consent of IID (which shall not be unreasonably
withheld) or (ii) for security purposes, to a bank or other entity which
provides financing for the Plant or any electrical transmission facilities
associated therewith. Producer and IID agree that nothing in this Section 21.2
may be amended, modified or waived without the prior written consent of each and
every Party to the Funding and Construction Agreement (except for any Parties in
default thereunder.)

22.  EFFECT OF SECTION HEADINGS

     Section headings appearing in this Agreement are inserted for convenience
only, and shall not be construed as interpretations of text.

23.  GOVERNING LAW

     This Agreement shall be interpreted, governed and construed under the laws
of the State of California or the laws of the United States as applicable.


                                       15


24.  ARBITRATION

          24.1 Any dispute arising out of or relating to this Agreement, or the
breach thereof, which is not resolved by the Parties acting through their
Authorized Representatives shall be settled by arbitration to the extent
permitted by the laws applicable to the Parties; provided, however, that no
Party to the dispute shall be bound to any greater extent than any other Party
to the dispute. Arbitration shall not apply to any dispute or matter that is
within the jurisdiction of any regulatory agency.

          24.2 Any demand for arbitration shall be made by written notice to the
other Party setting forth in adequate detail the nature of the dispute, the
issues to be arbitrated, the amount or amounts, if any involved in the dispute,
and the remedy sought. Within twenty (20) days from the receipt of such notice,
the other Party may submit its own written statement of the dispute and may set
forth in adequate detail any additional related matters or issues to be
arbitrated.

          24.3 Within thirty (30) days after delivery of the written notice
demanding arbitration, the Parties acting through their Authorized
Representatives shall meet for the purpose of selecting an arbitrator. The
Parties may agree upon a single arbitrator, but in the event that they cannot
agree, three arbitrators shall be used. Each Party shall designate one
arbitrator, and the two arbitrators shall then select a third arbitrator. All
arbitrators shall be persons skilled and experienced in the field in which the
dispute has arisen and no person shall be eligible for appointment as an
arbitrator who is or has been an officer or employee of either of the Parties or
otherwise interested in the


                                       16


matter to be arbitrated. Should either party refuse or neglect to appoint an
arbitrator or to furnish the arbitrators with any papers or information
demanded, the arbitrators are empowered, by both Parties, to proceed without the
participation or assistance of that Party.

          24.4 Except as otherwise provided in this Section, the arbitration
shall be governed by the rules and practices of the American Arbitration
Association, or a similar organization if the American Arbitration Association
should not at the time exist.

          24.5 Arbitration proceedings shall be held in Imperial, California, at
a time and place to be selected by the arbitrators. The arbitrators shall hear
evidence submitted by the Parties and may call for additional information which
shall be furnished by the Party having such information. The arbitrators shall
have no authority to call for information not related to the issues included in
the dispute or to determine other issues not, in dispute.

          24.6 If there is only one arbitrator, his decision shall be binding
and conclusive on the Parties. If there are three arbitrators, the decision of
any two shall be binding and conclusive. The decision of the arbitrators shall
contain findings regarding the issues involved in the dispute, including the
merits of the positions of the Parties, the materiality of any default, and the
remedy or relief to which a Party shall be entitled. The arbitrators may not
grant any remedy or relief which is inconsistent with this Agreement, nor shall
the arbitrators make findings or decide issues not in dispute.


                                       17


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

          24.8 Any decision or award granted by the arbitrators shall be final
and judgement may be entered on it in any court of competent jurisdiction. This
agreement to arbitrate shall be specifically enforceable.

25.  ENTIRE AGREEMENT

          25.1. The complete agreement of the Parties is set forth in this
Agreement and all communications regarding subject interconnected operations
whether oral or written, are hereby abrogated and withdrawn.

26.  NOTICES

     Any formal communication or notice in connection with this Agreement shall
be in writing and shall be deemed properly given if delivered in person or sent
first class mail, postage prepaid to the person specified below:

     SECOND IMPERIAL GEOTHERMAL COMPANY
     343 Second Street, Suite N
     Los Altos, CA 94022

     IMPERIAL IRRIGATION DISTRICT
     c/o General Manager
     P.O.  Box 937
     Imperial, California 92251


                                       18


27.  SEVERAL OBLIGATIONS

     Except where specifically stated in this Agreement to be otherwise, the
duties, obligations and liabilities of the Parties are intended to be several
and not joint or collective. Nothing contained in this Agreement shall ever be
construed to create an association, trust, partnership, or joint venture, or
impose a trust or partnership duty, obligation or liability on or with regard to
either Party. Each Party shall be individually and severally liable for its own
obligations under this Agreement.

28.  SIGNATURE CLAUSE

     The Parties have caused this Agreement to be executed in their respective
names, in duplicate, by their respective officers hereunto this 27th day of
October, 1992.


                                       SECOND IMPERIAL GEOTHERMAL COMPANY

                                       By:/s/ James W. Porter Jr.
                                          --------------------------------------

ATTEST:

By: /s/ Indecipherable
    ----------------------------------
              Secretary

                                       IMPERIAL IRRIGATION DISTRICT

                                       By: /s/ Indecipherable
                                          --------------------------------------
                                          President, Board of Directors

ATTEST:

By: /s/ Indecipherable
    ----------------------------------
              Secretary





                                       19



                                                                 Exhibit 10.3.25



                         TRANSMISSION SERVICE AGREEMENT

                            FOR ALTERNATIVE RESOURCES



                                     BETWEEN



                          IMPERIAL IRRIGATION DISTRICT

                                       AND

                       SECOND IMPERIAL GEOTHERMAL COMPANY







AGREE/SIGC.TSA
10/20/92






                                TABLE OF CONTENTS



SECTION                                TITLE                              PAGE
-------                                -----                              ----

  1        PARTIES                                                           1

  2        RECITALS                                                          1

  3        AGREEMENT                                                         1

  4        DEFINITIONS                                                       1

  5        TERM                                                              3

  6        TRANSMISSION SERVICE                                              4

  7        TRANSMISSION LOSSES                                               8

  8        CHARGES                                                           9

  9        BILLING AND PAYMENT                                               10

  10       LIABILITY                                                         12

  11       AUDITING                                                          14

  12       AUTHORIZED REPRESENTATIVES                                        14

  13       NO DEDICATION OF FACILITIES                                       14

  14       NON-WAIVER                                                        15

  15       NO THIRD PARTY RIGHTS                                             15

  16       UNCONTROLLABLE FORCES                                             15

  17       ASSIGNMENTS                                                       16

  18       GOVERNING LAW                                                     17

  19       NOTICES                                                           17

  20       SIGNATURE CLAUSE                                                  17

EXHIBIT I -  DEVELOPMENTS AND METHODOLOGIES FOR TRANSMISSION SERVICE CHARGES AND
             SCHEDULING FEE

EXHIBIT II - TRANSMISSION SERVICE FOR THE SIGC POWER PLANT





1. PARTIES: The parties to this Agreement are IMPERIAL IRRIGATION DISTRICT
("IID"), organized under the Water Code of the State of California and SECOND
IMPERIAL GEOTHERMAL COMPANY, a "Producer"), hereinafter referred to individually
as "Party", and collectively as "Parties".

2. RECITALS: This Agreement is made with reference to the following facts, among
others:

     2.1 Producer has caused to be constructed or intends to construct an
alternative energy resource facility located in IID's service area.

     2.2 Producer and IID have entered into a Plant connection Agreement.

     2.3 Producer desires to purchase, and IID desires to sell firm transmission
service of power from the Plant to Edison's Mirage Substation subject to the
terms and conditions specified herein.

     2.4 Producer is in the process of arranging for an institutional lender to
finance Producer's construction of the aforementioned alternative energy
resource facility. Such financing is expected to occur pursuant to a closing on
or prior to November 30, 1992 ("Closing"). Simultaneously with Closing, or
immediately thereafter, Producer will execute documentation necessary to become
a party to the Funding and Construction Agreement, dated June 29, 1987,
providing for the funding and construction of transmission lines within IID's
service area. It is agreed that this Agreement shall not become effective until
the execution of such Funding and Construction Agreement.

3. AGREEMENT: The Parties agree as follows:

4. DEFINITIONS: The following terms when used herein with initial
capitalization, whether in the singular or plural, shall have the meanings
specified:

                                       1


     4.1 Agreement: This IID-SIGC Transmission Service Agreement for Alternative
Resources between Second Imperial Geothermal Company and IID, and all Exhibits
attached hereto, as such Agreement may subsequently be amended for firm
transmission service between the Plant and Edison's Mirage Substation.

     4.2 Authorized Representative: The representative of a Party designated in
accordance with Section 12.

     4.3 Date of Initial Service: The date when the output from the Plant is
first available for delivery to Edison, as notified to IID pursuant to Section
5.2.

     4.4 Edison: Southern California Edison Company.

     4.5 Funding and Construction Agreement: The Funding and construction
Agreement dated June 29, 1987 entered into by IID and others, to which a form of
this Agreement is attached as Exhibit 2.

     4.6 Maximum Transmission Service Entitlement: The Maximum Transmission
Service Entitlement for the Plant, as specified in Exhibit II and in any
subsequent Plant Amendments.

     4.7 Normal Transmission Capacity: The maximum transfer capability,
expressed in megawatts (MW), from the Point of Receipt to the Point of Delivery.
Such transfer capability, as determined by IID, in its sole judgment shall be
consistent with prudent operating procedures and with generally-accepted
engineering and operating practices in the electrical utility industry.

     4.8 Operating Transmission Capability: The maximum transfer capability,
expressed in megawatts (MW), available to IID at any given time to transmit
power from Point of Receipt to Point of Delivery. Such transfer capability shall
be as determined by IID in its sole judgment, may vary from time-to-time
depending on system conditions, and shall be consistent with

                                       2


prudent operating procedures and generally-accepted engineering and operating
practices in the electrical utility industry.

     4.9 Plant: An electrical generating alternative energy resource facility
developed by Producer for which IID shall provide transmission service, as
specified in Exhibit II and in any subsequent Plant Amendments.

     4.10 Plant Amendment: An agreement reached by the Parties, as an amendment
to this Agreement, for transmission service to be provided by IID for the Plant
added by Producer or for Producer's account subsequent to the execution of this
Agreement.

     4.11 Plant Connection Agreement: An agreement between IID and Producer
providing for the connection of the Plant to IID's electrical system, as
specified in Exhibit II and in any subsequent Plant Amendments.

     4.12 Point(s) of Delivery: The 230 kV switchrack at the Mirage Substation
site where Edison's 230 kV facilities are attached to IID's 230 kV
Coachella-Mirage Line or other points as may be mutually agreed upon by the
Authorized Representatives.

     4.13 Point of Receipt: The point on the high voltage side of the Plant's
transformer where IID's metering equipment measures the delivery of energy to
the IID system.

     4.14 Transmission Service Entitlement: The amount of transmission service,
expressed in megawatts (MW), provided by IID for the Plant, from the applicable
Point of Receipt to the applicable Point(s) of Delivery.

5. TERM:

     5.1 Unless otherwise agreed to by the Parties, this Agreement shall be
effective on the date on which it is executed and shall remain in effect until
thirty years after the Plant achieves Firm Operation, as such term is defined in
Section 2.17 of the Power Purchase Contract dated


                                       3


April 16, 1985, between Second Imperial Geothermal Company and Southern
California Edison Company.

     5.2 The Transmission Service Entitlement to be provided by IID for the
Plant shall be contingent on a Plant Connection Agreement being in effect.
Transmission service for the Plant shall commence on the Date of Initial Service
of such Plant. Producer's Authorized Representative shall give IID's Authorized
Representative written notice of the Date of Initial Service at least thirty
(30) days before the Date of Initial Service.

6. TRANSMISSION SERVICE:

     6.1 Subject to the terms of this Agreement, IID shall provide to Producer
and Producer shall purchase from IID transmission service over IID's
transmission system for the Plant. IID shall make arrangements with Edison to
provide, at Producer's or Edison's expense, for the transfer of the electrical
power to be delivered to Edison hereunder from IID's transmission system to
Edison's transmission system at the Point(s) of Delivery.

     6.2 The Transmission Service Entitlement for the Plant shall be the Maximum
Transmission Service Entitlement for such Plant specified in Exhibit II or any
subsequent Plant Amendments, or such lesser amount as may be established as
follows. Beginning on the Date of Initial Service for the Plant, Producer shall
be entitled to specify a Transmission Service Entitlement by Advance written
notice given to IID's Authorized Representative at least thirty (30) days prior
to the Date of Initial Service. The Transmission Service Entitlement to be
provided by IID subsequent to the Date of Initial Service may be adjusted at six
(6) month intervals thereafter until two (2) years after the Date of Initial
Service for such Plant (the "Trial Period"). Such adjustments shall be made by
having Producers' Authorized Representative give IID's Authorized Representative
a ninety (90) day advance written notice as to the adjustment


                                       4


required. Beginning two (2) years after the Date of Initial Service for such
Plant, Producer shall be entitled to specify a Transmission Service Entitlement
for each successive 2-year period during the remaining term of this Agreement by
written notice from Producer's Authorized Representative to IID's Authorized
Representative given at least ninety (90) days prior to the beginning of each
2-year period.

     6.3 The Transmission Service Entitlement selected by Producer for the Plant
in accordance with Section 6.2 may be any amount which is less than or equal to
the Maximum Transmission Service Entitlement for such Plant specified in Exhibit
II or any subsequent Plant Amendments, provided, however, that the following
shall apply to the Plant after the Trial Period for such Plant has elapsed.

          6.3.1 If (i) the sum of the Transmission Service Entitlements for all
Plants which are no longer in their Trial Periods is less than the sum of the
Maximum Transmission Service Entitlements for such Plants, as shown in Exhibit
II and in any subsequent Plant Amendments, (the "Aggregate Maximum Transmission
Service Entitlement"), and (ii) provided that IID requires additional capacity
for transmitting electric power to Edison's transmission system for another
person (or, following the Credit Installment Period as defined in the Funding
and Construction Agreement, for itself) and (iii) IID's use of such required
capacity would be in conflict with Producer's right as provided herein to
increase the sum of the Transmission Service Entitlements for such Plants to the
Aggregate Maximum Transmission Service Entitlement, then IID shall so notify
Producer in writing, specifying in such notice the portion, expressed in
megawatts (MW), of the excess of the Maximum Transmission Service Entitlement
over the Transmission Service Entitlement for each such Plant which it desires
to use as stated above. Producer shall have ninety (90) days after receipt of
IID's notice to notify IID in writing that it


                                       5


desires to increase the Transmission Service Entitlements of such Plants. To the
extent that Producer does not elect to increase the Transmission Service
Entitlement of each such Plant up to the Maximum Transmission Service
Entitlement for such Plant, IID shall be entitled to use such unclaimed capacity
to satisfy the transmission requirements specified in its notice to Producer,
and to the extent that IID does so, Producer shall thereafter be foreclosed from
increasing the Transmission Service Entitlement for such Plant in a manner which
would conflict with such usage by IID.

          6.3.2 IID shall treat Producer and each other person who has entered
into a transmission service agreement similar in substance to this Agreement in
a fair and nondiscriminatory manner in requesting additional transmission
capacity as provided in this Section 6.3. Without limiting the generality of the
foregoing, IID shall request additional transmission capacity from Producer and
such other persons on a pro rata basis, in proportion to the aggregate Maximum
Transmission Service Entitlement for each person less the sum of the
Transmission Service Entitlements for each of such persons' generating plants
which is no longer in a Trial Period.

     6.4 In the event that the Original Capacity Nomination designated by
Producer (or the Participant associated with Producer) is adjusted pursuant to
Section 3.07 of the Funding and Construction Agreement, the Parties agree to
amend this Agreement in such a way that the sum of the Maximum Transmission
Service Entitlements for all Plants hereunder is equal to such Original Capacity
Nomination as so adjusted. As used in this Section 6.4, the terms Original
capacity Nomination and participant shall have the meanings assigned to them in
Article I of the funding and Construction Agreement.

                                       6


     6.5 IID reserves the right to interrupt or curtail the transmission service
provided hereunder as follows:

          6.5.1 If the Operating Transmission Capability is reduced to less than
Normal Transmission Capacity from a Point of Receipt to a Point of Delivery, and
when continuity of service within IID's service area is not being jeopardized,


IID may curtail the transmission service currently being provided from such
Point of Receipt to such Point of Delivery, to an amount "A" determined by the
following formula:


        Operating Transmission Capability
   A =  ---------------------------------  x  Transmission Service Entitlement
          Normal Transmission Capacity

          The transmission service for each Plant affected shall be curtailed by
multiplying the Transmission Service Entitlement in accordance with Exhibit II
and in any subsequent Plant Amendments by the same percentage (expressed as a
decimal as used in the determination of "A". However, any such curtailment shall
occur only after IID has made all reasonable efforts to eliminate the cause of
the reduction in Operating Transmission Capability, and IID shall then employ
reasonable efforts to eliminate expeditiously the cause of said reduction.

          6.5.2 If continuity of service within IID's control area is being
jeopardized, as determined by IID in its sole judgment, IID may interrupt or
curtail the transmission service provided hereunder to the extent necessary to
avoid or eliminate such jeopardy; provided that (i) such interruptions or
curtailments may be made so that IID may fully utilize all generating resources
owned by it or available to it under contract in order to avoid damage to IID's
electrical system caused by overloading, (ii) such interruption or curtailment
shall occur only after IID has made all reasonable efforts to avoid or eliminate
such jeopardy and (iii) to the extent feasible any curtailment of transmission
service provided hereunder from a Point of Receipt to a Point of Delivery shall
be made in accordance with the formula set forth in Section 6.5.1.

                                       7


     6.6 If IID's efforts do not avoid or eliminate such jeopardy, the Parties
shall endeavor to develop some other arrangement to avoid or eliminate such
jeopardy and minimize the effects of IID's interruption or curtailment on both
parties.

     6.7 In the event of any curtailments or interruptions made pursuant to
Section 6.5.1 or Section 6.5.2, Producer shall, immediately after being orally
notified by IID, reduce the electrical output of the Plants by the amounts
requested by IID.

     6.8 The transmission service to be provided by IID and purchased by
Producer for each Plant shall not exceed the Transmission Service Entitlement
for that Plant.

     6.9 Subject to Section 6.5, IID shall, during the periods that IID has
agreed to provide the transmission service at the specified Transmission Service
Entitlements, accept hourly scheduled energy deliveries at each Point of Receipt
and simultaneously deliver the same amount of energy (less transmission losses
as provided herein) at the Point(s) of Delivery mutually agreed upon by the
Parties' dispatchers and/or schedulers.

     6.10 Hourly scheduled energy deliveries at each Point of Receipt shall
conform with the practices and procedures developed by the Parties dispatchers
and schedulers and agreed to by the Authorized Representatives.

7. TRANSMISSION LOSSES:

     7.1 IID shall determine, by transmission power flow analysis, the
electrical losses (expressed as a percent amount of hourly scheduled energy
deliveries) associated with the electrical output from each Plant. Such analysis
shall be performed by IID at its sole expense. The initial percent amount, for
each Plant, representing the electrical losses as determined herein shall be as
specified in Exhibit II and in any subsequent Plant Amendments.

                                       8


     7.2 Unless otherwise agreed to by Producer's and IID's schedulers and
dispatchers, IID shall reduce the amount of all hourly scheduled energy
deliveries for Producer or Producer's account by the percent amount of such
hourly deliveries for each Plant in accordance with Exhibit II and in any
subsequent Plant Amendments.

     7.3 If either Party believes that there has been a significant change in
IID's electrical system and the electrical losses associated with any Plant
should be redetermined, either Party's Authorized Representative may submit a
written request to the other Party's Authorized Representative that the
electrical losses be redetermined. Following such request, a transmission flow
analysis shall be performed by IID as approved by the Authorized Representatives
and paid for by the requesting Party. Whenever the percent amount for electrical
losses is redetermined, such percent amount shall become effective as of the
first day of the month following the date of such redetermination; provided,
that such a redetermination may be no sooner than twelve (12) months after the
most recent redetermination. My redetermination of electrical losses made
pursuant to this Section 7 shall be based on conditions in existence at the time
of such redetermination.

     7.4 Along with the monthly billing pursuant to Section 9.1, for the
transmission service for each Plant, IID shall submit a monthly summary of
hourly scheduled energy deliveries and of electrical losses for each Plant.

8. CHARGES:

     8.1 For transmission service provided by IID, Producer shall pay IID at a
rate to be determined by IID pursuant to the methodologies specified in Exhibit
I. The initial rate is specified in Exhibit I-A and revisions thereto will be
specified in any subsequent Plant Amendments. Any specific facility charge to
Producer for connecting the Plant(s) to the IID


                                       9


transmission system shall be included only in the Plant Connection Agreement(s)
between IID and Producer.

     8.2 The transmission rate shall be reviewed annually and may be revised.
Any revision of the rates shall be based on the methodologies in Exhibit I.A and
on the conditions in existence at the time of the revision. Producer shall have
the right to review any exhibits or work papers prepared by IID to revise the
rates.

     8.3 An initial monthly scheduling fee, as specified in Exhibit II and
revisions thereto specified in any subsequent Plant Amendments, shall be paid by
Producer to IID for those months in which there were scheduled energy deliveries
from the Plant. The initial scheduling fee has been determined by IID pursuant
to the methodology specified in Exhibit I.B. The scheduling fee shall be
reviewed annually and may be revised. Any revision of the scheduling fee shall
be based on the methodology in Exhibit I.B and on the conditions in existence at
the time of the revision. Producer shall have the right to review any exhibits
or work papers prepared by IID to revise the scheduling fee.

9. BILLING AND PAYMENT:

     9.1 IID shall render bills to Producer, beginning in the month of the Date
of Initial Service, on or before the fifteenth (15th) day of each month for the
transmission service to be provided during the month. Producer shall pay such
bills within twenty (20) days after receipt thereof.

                               All payments by Producer shall be sent to:

                               Imperial Irrigation District
                               c/o Manager, Finance & Accounting
                               P.O. Box 937
                               Imperial, CA 92251

                               All billings by IID shall be sent to

                                       10


                               Second Imperial Geothermal Company
                               343 Second Street, Suite N
                               Los Altos, CA 94022

     9.2 Either Party's Authorized Representative may at any time, by advance
written notice to the other Party's Authorized Representative, change the
address to which payments or billings shall be sent.

     9.3 Bills which are not paid in full by said due date shall thereafter bear
an additional charge of one and one-half percent (1-1/2%) per month, or the
maximum legal rate of interest, whichever is less, compounded monthly on the
unpaid amount prorated by days from the due date until payment is received by
IID.

     9.4 In the event any portion of any bill is disputed, the disputed amount
shall be paid when due under protest. If the protested portion of the payment is
found to be incorrect by the Authorized Representatives, the dispute amount
shall be paid by IID to Producer, including interest at the rate of 1-1/2% per
month, or the maximum legal rate, whichever is less, compounded monthly from the
data of payment by Producer to the date the refund check or adjusted bill is
received by Producer.

     9.5 For a fractional part of a calendar month at the beginning or end of
the period for which the transmission service is provided hereunder, the charge
pursuant to Section 8.1 shall be proportionately adjusted by the ratio of days
that service is furnished by IID to Producer during such month to the total
number of days in such month.

     9.6 The charge for the transmission service pursuant to Section 8.1 shall
be proportionately reduced to the extent the duration of the interruptions or
curtailments of the transmission service which may concur pursuant to Section
6.5.1 or Section 6.5.2 exceed a cumulative total of twenty-four (24) hours
during any calendar month based on 730 hours per month representing the full
transmission service charge. The amount of such pro rata reduction


                                       11


in any month shall reflect the duration and amount of such interruptions or
curtailments which exceed said cumulative 24 hours. Such pro rata reduction
shall be reflected as a credit to Producer as soon as possible in a subsequent
monthly bill.

     9.7 The charge for the transmission service shall not be reduced if IID can
deliver, but Edison's transmission system cannot receive, the hourly scheduled
energy deliveries independent of the duration of time this condition exists.

10. LIABILITY

     10.1 Except for any loss, damage, claim, costs, charge or expanse resulting
from Willful Action, neither Party (the "released Party"), its directors or
other governing body, officers or employees shall be liable to the other Party
for any loss, damage, claim, cost, charge, or expense of any kind or nature
incurred by the other Party (including direct, indirect or consequential loss,
damage, claim, cost, charge or expense; and whether or not resulting from the
negligence of a Party, its directors or other governing body, officers,
employees or any person or entity whose negligence would be imputed to a Party)
from engineering, repair, supervision, inspection, testing, protection,
operation, maintenance, replacement, reconstruction, use or ownership of the
released Party's electrical system, Plant(s) or associated facilities in
connection with the implementation of this Agreement. Except for any loss,
damage, claim, cost, charge or expense resulting from Willful Action, each Party
releases the other Party, its directors or other governing body, officers and
employees from any such liability.

     10.2 For the purpose of this Section 10, Willful Action shall be defined as
action taken or not taken by a Party at the direction of its directors or other
governing body, officers or employees having management or administrative
responsibility affecting its performance under this Agreement, as follows:

                                       12


          10.2.1 Action which is knowingly or intentionally taken or not taken
with conscious indifference to the consequences thereof or with intent that
injury or damage would result or would probably result therefrom.

          10.2.2 Action which has been determined by final arbitration award or
final judgment or judicial decree to be a material default under this Agreement
and which occurs or continues beyond the time specified in such arbitration
award or judgment or judicial decree for curing such default or, if no time to
cure is specified therein, occurs or continues thereafter beyond a reasonable
time to cure such default.

          10.2.3 Action which is knowingly or intentionally taken or not taken
with the knowledge that such action taken or not taken is a material default
under this Agreement.

     10.3 Willful Action does not include any act or failure to act which is
merely involuntary, accidental or negligent.

     10.4 The phrase "employees having management or administrative
responsibility," as used in Section 10.2, means the employees of a Party who are
responsible for one or more of the executive functions of planning, organizing,
coordinating, directing, controlling and supervising such Party's performance
under this Agreement with responsibility for results.

     10.5 Subject to the foregoing provisions of this Section 16, each Party
agrees to defend, indemnify and save harmless the other Party, its officers,
agents, or employees against all losses, claims, demands, costs or expenses for
loss of or damage to property, or injury or death of persons, which directly or
indirectly arise out of the indemnifying Party's performance pursuant to this
Agreement; provided, however, that a Party shall be solely responsible for any
such losses, claims, demands, costs or expenses which result from its sole
negligence or Willful Action.

                                       13


11. AUDITING:

     11.1 IID shall make its books, records, and other supporting information,
as requested, available to Producer or to Producer's designated contracted
representative(s) with a CPA firm, for the purpose of auditing any charges or
accounts to be kept by IID hereunder. All such audits shall be undertaken at
reasonable times and in conformance with generally-accepted auditing standards.

     11.2 If as a result of such audits Producer believes its charges or
accounts should be adjusted, the findings shall be presented to the Authorized
Representatives. If the Authorized Representatives agree that any audit finding
should result in a revision of charges or accounts, such revisions shall be
retroactive to the first billing for such charges and accounts and shall be made
as soon as practical after determination.

     11.3 The amount of any unresolved dispute shall accrue interest at the rate
of one and one-half percent (1-1/2%) per month, or the maximum legal rate,
whichever is less, compounded monthly for any amount of money ultimately
refunded to Producer.

12. AUTHORIZED REPRESENTATIVES: Within thirty (30) calendar days after the
Completion Date, as defined in Article I of the Funding and Construction
Agreement, each Party shall designate by written notice to the other Party a
representative who is authorized to act on its behalf in the implementation of
this Agreement. Either Party may at any time change the designation of its
Authorized Representative by written notice to the other Party.

13. NO DEDICATION OF FACILITIES: Any undertaking by one Party to the other Party
under any provision of this Agreement shall not constitute the dedication of the
system or any portion thereof by the Party to the public or to the other Party,
and it is understood and agreed


                                       14


that any such undertaking under any provision of this Agreement by a Party shall
cease upon the termination of its obligations hereunder.

14. NON-WAIVER: None of the provisions of this Agreement shall be considered
waived by either Party except when such waiver is given in writing. The failure
of either Party to insist in any one or more instances upon strict performance
of any of the provisions of this Agreement or to take advantage of any of its
rights hereunder shall not be construed as a waiver of any such provisions or
the relinquishment of any such rights for the future; but the same shall
continue and remain in full force and effect.

15. NO THIRD PARTY RIGHTS: The Parties do not intend to create rights in or to
grant remedies to any Third Party or others as a beneficiary of this Agreement
or of any duty, covenant, obligation or undertaking established hereunder.

16. UNCONTROLLABLE FORCES: Neither Party shall be considered to be in default in
the performance of any of its obligations under this Agreement when a failure of
performance shall be due to an uncontrollable force. The term "uncontrollable
force" shall mean any cause beyond the control of the Party affected including,
but not restricted to, failure of or threat of failure of facilities which have
been maintained in accordance with generally-accepted engineering and operating
practices in the electrical utility industry, flood, drought, earthquake,
tornado, storm, fire, pestilence, lightning and other natural catastrophes,
epidemic, war, riot, civil disturbance or disobedience, strike, labor dispute,
labor or material shortage, sabotage, government priorities and restraint by
court order or public authority (whether valid or invalid) and actions or
nonaction by or inability to obtain or keep the necessary authorizations or
approvals from any governmental agency or authority, the failure or inability of
Edison to receive the electric power to be transmitted hereunder at the Point(s)
of Delivery, which by exercise of due diligence such


                                       15


Party could not reasonably have been expected to avoid and which by exercise of
due diligence it has been unable to overcome. Nothing contained herein shall be
construed as to require a Party to settle any strike or labor dispute in which
it may be involved. Either Party rendered unable to fulfill any of its
obligations under this Agreement by reason of an uncontrollable force shall give
prompt written notice of such fact to the other Party and shall exercise due
diligence to remove such inability with all reasonable dispatch.

17. ASSIGNMENTS:

     17.1 Any assignment by Producer of its interest in this Agreement which is
made without the written consent of IID (which shall not be unreasonably
withheld) shall not relieve Producer from its primary liability for any of its
duties and obligations hereunder, and in the event of any such assignment
Producer shall continue to remain primarily liable for payment of any and all
money due IID hereunder and for the performance and observance of all other
covenants, duties and obligations to be performed and observed hereunder by it
to the same extent as though no assignment has been made.

     17.2 Notwithstanding any provision of Section 17.1 to the contrary, prior
to the end of the Credit Installment Period, as defined in Article I of the
Funding and Construction Agreement, Producer's right to transmission service
under this Agreement with respect to the Plant may be assigned only (i) to a
purchaser or co-owner of such Plant or to a person who will operate such plants
pursuant to a contract or other arrangement with such purchaser and in either
case only with the prior written consent of IID (which shall not be unreasonably
withheld) or (ii) for security purposes, to a bank or other entity which
provides financing for such Plant or any electrical transmission facilities
associated therewith. Producer and IID agree that nothing in this Section 17.2
may be amended, modified or waived without the prior written consent of each and


                                       16


every party to the Funding and Construction Agreement (except for any parties in
default thereunder).

     17.3 Whenever an assignment of Producer's interest in this Agreement is
made with the written consent of IID, Producer's assignee shall expressly assume
in writing the duties and obligations hereunder of Producer and, within thirty
(30) days after any such assignment and assumption of duties and obligations,
Producer shall furnish or cause to be furnished to IID a true and correct copy
of such assignment and assumption of duties and obligations.

     17.4 Subject to the foregoing restrictions on assignments, all of the terms
of this Agreement shall be binding upon and inure to the benefit of both of the
Parties and their respective successors, permitted assigns and legal
representatives.

18. GOVERNING LAW: This Agreement shall be interpreted, governed by and
construed under the laws of the State of California or the laws of the United
States, as applicable.

19. NOTICES: Any notice, demand or request provided for in this Agreement, or
served, given or made in connection with it, shall be in writing and shall be
deemed properly served, given or made if delivered in person or sent by United
States mail, postage prepaid, to the persons specified below unless otherwise
provided for in this Agreement:

                               IMPERIAL IRRIGATION DISTRICT
                               c/o General Manager
                               P.O. Box 937
                               Imperial, California 92251

                               SECOND IMPERIAL GEOTHERMAL PLANT
                               343 Second Street, Suite N
                               Los Altos, CA 94022

Either Party may at any time, by notice to the other Party, change the
designation or address of the person so specified as the one to receive notices
pursuant to this Agreement.

20. SIGNATURE CLAUSE

                                       17


     The Parties have caused this Agreement to be executed in their respective
names, in duplicate, by their respective officers hereunto this 27th day of
October, 1992.

                                            SECOND IMPERIAL GEOTHERMAL COMPANY



                                            By /s/ James W. Porter, Jr.
                                              ----------------------------------

ATTEST:

By /s/ F. Neil Schmidt
  ---------------------------
           Secretary

                                            IMPERIAL IRRIGATION DISTRICT



                                            By /s/ Indecipherable
                                              ----------------------------------

ATTEST:

By /s/ Indecipherable
  ---------------------------
           Secretary





                                       18



EXECUTION COPY                                                   Exhibit 10.3.26




                           PLANT CONNECTION AGREEMENT

                                     FOR THE

                             ORMESA GEOTHERMAL PLANT







                                     BETWEEN





                          IMPERIAL IRRIGATION DISTRICT

                                       AND

                                ORMESA GEOTHERMAL















                                                                  EXECUTION COPY



                                TABLE OF CONTENTS
                                -----------------

SECTION                               TITLE                                PAGE
-------                               -----                                ----

    1      PARTIES.......................................................    1
    2      RECITALS......................................................    1
    3      AGREEMENT.....................................................    2
    4      DEFINITIONS...................................................    2
    5      EFFECTIVE DATE AND TERM.......................................    2
    6      CONNECTION OF PLANT...........................................    3
    7      ELECTRIC SERVICE TO ORMESA....................................    3
    8      METERING OF ENERGY DELIVERIES.................................    3
    9      ORMESA DELIVERY AND IID ACCEPTANCE OF ENERGY FROM PLANT.......    3
   10      ORMESA'S GENERAL OBLIGATIONS..................................    3
   11      IID'S GENERAL OBLIGATIONS.....................................    5
   12      BILLING.......................................................    5
   13      AUTHORIZED REPRESENTATIVES....................................    6
   14      METERS........................................................    6
   15      CONTINUITY OF SERVICE.........................................    8
   16      LIABILITY.....................................................    8
   17      UNCONTROLLABLE FORCE..........................................    9
   18      INTEGRATION AND AMENDMENTS....................................    9
   19      NON-WAIVER....................................................    9
   20      NO DEDICATION OF FACILITIES...................................   10
   21      SUCCESSORS AND ASSIGNS........................................   10
   22      EFFECT OF SECTION HEADINGS....................................   10
   23      GOVERNING LAW.................................................   10
   24      ARBITRATION...................................................   10
   25      ENTIRE AGREEMENT..............................................   12
   26      NOTICES.......................................................   13
   27      SEVERAL OBLIGATIONS...........................................   13
   28      SIGNATURE CLAUSE..............................................   14

           ATTACHMENTS

           EXHIBIT "A"...................................................   15
           EXHIBIT "B"...................................................   17





1. PARTIES

         The parties to this Agreement are IMPERIAL IRRIGATION DISTRICT (IID),
an irrigation district organized and operating under the laws of the State of
California and ORMESA GEOTHERMAL (ORMESA), a California Partnership (hereinafter
individually Party, collectively Parties).

2. RECITALS

         2.1 ORMESA owns and operates a geothermal generating facility with a
maximum 24 megawatt net output at the East Mesa Known Geothermal Resource Area
(KGRA) and sells the Plant electrical output to Southern California Edison
Company (SCE).

         2.2 SCE has entered into the Power Purchase Agreement dated July 18,
1984, (Purchase Agreement) with ORMESA to purchase all the electrical output
from the Plant.

         2.3 SCE and ORMESA agree that the terms and conditions regarding
transmission of the Plant's Energy to an IID/SCE point of interconnection shall
be pursuant to the IID-Edison Transmission Service Agreement for Alternate
Resources between IID and SCE of September 10, 1985.

         2.4 Since the Plant has been built in the IID service territory, it
will be convenient to connect the Plant to the IID electric system.

         ORMESA hereby grants the IID the right to enter the Plant site for any
reasonable purposes connected with this Agreement, by previous arrangements with
the Plant manager. Those reasonable purposes included maintenance and repairs to
IID equipment in ORMESA facilities, observing tests of said facilities, reading
of kilowatt-hour meters, and the like.

         2.5 ORMESA desires to purchase and IID desires to sell the electrical
energy necessary to satisfy the operation and maintenance power consumption
requirements of the Plant for the life of the Plant that is not normally
generated by the Plant itself, or portable generating equipment.



         2.6 The Parties desire, by means of this Agreement, to interconnect the
Plant to the IID electrical system and to establish the terms, conditions and
obligations of the parties relating to such interconnection.

3. AGREEMENT

         The Parties agree as follows:

4. DEFINITIONS

         4.1 Authorized Representative: The representative of a Party designated
in accordance with Section 13.

         4.2 Energy: Electric energy in excess of ORMESA's electric energy
requirements, expressed in kilowatt-hours, generated by the Plant and measured
and delivered to the Point of Delivery.

         4.3 Operation Date: The day on which the Plant Energy is accepted by
IID for SCE's account.

         4.4 Plant: A maximum of 24 MW net output geothermal generating facility
owned by ORMESA including all associated equipment and improvements necessary
for generating electric energy and transmitting it to the high voltage side of
the power transformer.

         4.5 Point of Delivery: The point on the high voltage side of ORMESA's
switchyard where IID's metering equipment measures the delivery of Energy to the
IID system as shown on Exhibit "B".

         4.6 System Emergency: A condition of IID's system which is likely to
result in imminent significant disruption of service to customers or is
imminently likely to endanger life or property.

5. EFFECTIVE DATE AND TERM

         This Agreement shall become effective when signed by the Parties and
shall terminate



at the earlier of (i) midnight December 31, 2015, or (ii) at the option of the
IID, at the termination of a twenty-four (24) month period during which the
Plant has failed to operate continuously, or (iii) the date agreed to by the
Authorized Representatives.

6. CONNECTION OF PLANT

         6.1 ORMESA may electrically connect its Plant, in accordance with the
provisions of this Agreement, so that it can operate in parallel with the IID
electric system.

         6.2 Notwithstanding the provision that ORMESA has furnished the high
voltage switchyard complete, including the high voltage oil circuit breakers and
disconnect switches, the control of the high voltage oil circuit breakers and
disconnect switches shall be under the control of the IID dispatcher.

7. ELECTRIC SERVICE TO ORMESA

         IID shall provide electric service to ORMESA pursuant to Section 12.

8. METERING OF ENERGY DELIVERIES

         Metering for electric service to ORMESA and for energy deliveries by
ORMESA to IID for SCE's account shall be at the Point of Delivery as shown on
Exhibit "B". Four meters shall be installed which shall measure and record flows
in each direction as shown on Exhibit "B".

9. ORMESA DELIVERY AND IID ACCEPTANCE OF ENERGY FROM PLANT

         Whenever electric output from the Plant exceeds ORMESA's power
requirements, ORMESA shall deliver all such excess output to IID for the account
of SCE and IID shall accept such output for the account of SCE and deliver such
output to SCE pursuant to transmission service agreement to be entered into
between Southern California Edison Company and Imperial Irrigation District.




10. ORMESA'S GENERAL OBLIGATIONS

         ORMESA shall:

         10.1 Operate the Plant in a manner consistent with applicable electric
utility industry standards, good engineering practice, and without degradation
of quality or reliability of service to IID customers.

         10.2 Deliver the Plant's net electrical output to IID for the account
of SCE at the Point of Delivery.

         10.3 Each Party shall provide the reactive K----- volt-ampere (KVA)
requirements of its own system so that there will be no interchange of reactive
KVA between systems. The Parties shall cooperate to control the flow of reactive
KVA to prevent the introduction of objectionable operating conditions on the
system of either Party.

         10.4 Coordinate, to the greatest extent practicable, major overhaul and
inspection outages of the Plant with IID.

         10.5 Give IID a written schedule on or before June 1, and December 1,
each year of the estimated amounts and rates of delivery of energy to be
delivered to IID for the account of SCE at the Point of Delivery during each
month of the succeeding twelve-month (12) period commencing July 1, and January
1.

         10.6 Give IID a written schedule on or before the fifteenth (15th) day
of each month of the estimated amounts and rates of delivery of energy to be
delivered to IID for the account of SCE at the Point of Delivery during each day
of the succeeding calendar month.

         10.7 Give IID a schedule on or before 12:01p.m . on Tuesday of each
seven-day (7) period of the estimated amounts and rates of delivery of energy to
be delivered to IID for the account of SCE at the Point of Delivery during each
hour of the succeeding seven-day (7) period commencing at 12:01 a.m. on the
following Monday; provided, however, that if any changes in the



hourly deliveries so scheduled become necessary, ORMESA shall notify IID of such
changes as far in advance as possible.

         10.8 Provide IID any reasonable rights-of-way and access required for
testing and reading of meters by previous arrangement with the Plant manager.

         10.9 When IID determines that it is necessary to utilize the
transmission capability being utilized by ORMESA to meet IID's load
requirements,

         a) pay its pro-rata share of the total costs associated with extensions
or upgrades of IID's existing system and/or a new system required for delivery
of ORMESA's power, or

         b) arrange for transmission capability exclusive of IID. In any event,
IID will give ORMESA 60 months written notice of such determination.

         10.10 Carry out the directions of the Authorized Representatives with
respect to the matters set forth in this Agreement.

11. IID'S GENERAL OBLIGATIONS

         11.1 Accept the Plant's net electrical output for the account of SCE at
the Point of Delivery and concurrently delivery an equal amount of electric
energy to the SCE system at IID/SCE point(s) of interconnection.

         11.2 Coordinate, to the greatest extent practicable, major overhaul and
inspection outages of IID transmission facilities with ORMESA and notify ORMESA
of any changes as far in advance as possible.

         11.3 Carry out the directions of the Authorized Representative with
respect to the matters set forth in this Agreement.

         11.4 Operate its system in a manner consistent with applicable utility
industry standards and good engineering practices.




12. BILLING

         12.1 IID shall read the meters monthly according to its regular meter
reading schedule beginning no more than thirty (30) days after the date that
electric energy is first supplied to ORMESA. IID monthly shall send ORMESA
within ten (10) working days after the meter is read a bill for electric
service. ORMESA shall pay IID the total amount billed within thirty (30) days of
receipt of the bill.

         12.2 IID shall bill ORMESA for ORMESA's consumption of energy from
IID's resources in accordance with Rate Schedule A-2, as it may be revised from
time to time. Copy of current Rate Schedule A-2, is attached as Exhibit "A".

         12.3 If ORMESA disputes a bill, payment shall be made as if no dispute
exists pending resolution of the dispute by the Authorized Representatives. If
the bill is determined to be in error, the disputed amount shall be refunded by
IID including interest at the rate of one and on-half percent (1-1/2%) per
month, compounded monthly, from the date of payment to the date the refund check
or adjusted bill is mailed.

13. AUTHORIZED REPRESENTATIVES

         13.1 Within thirty (30) days after the date this Agreement is signed,
each Party shall designate, by written notice to the other Party, an Authorized
Representative who is authorized to act in its behalf in the implementation of
this Agreement and with respect to those matters contained herein which are the
functions and responsibilities of the Authorized Representatives. Either Party
may, at any time, change the designation of its Authorized Representative by
written notice to the other Party.

         13.2 IID's Authorized Representative shall develop detailed written
procedures necessary and convenient to administer this Agreement within six (6)
months after the date signed. Such procedures shall be submitted to ORMESA
Authorized Representative for review, comment,



discussion and concurrence before they are put into effect. Such procedures
shall include, without limitation: (i) communication between ORMESA and IID's
electric system dispatcher with regard to daily operating matters, (ii) billing
and payments, (iii) specified equipment tests, and (iv) operating matters which
affect or may affect quality and reliability of service to electric customers
and continuity of delivers to SCE.

         13.3 The Authorized Representative shall have no authority to modify
any of the provisions of this Agreement.

14. METERS

         14.1 All meters shall be sealed and the seal shall be broken only upon
occasions when the meters are to be inspected, tested or adjusted.

         14.2 IID shall inspect and test all meters upon their installation and
at least once every year thereafter. If requested to do so by ORMESA, IID shall
inspect or test a meter more frequently than every year, but the expense of such
inspection or test shall be paid by ORMESA unless the meter is found to register
inaccurately by more than two percent (2%) from the measurement made by a
standard meter. Each Party shall give reasonable notice to the other Party of
the time when any inspection or test shall take place and that Party may have
representatives present at the test or inspections. If a meter is found to be
inaccurate or defective, it shall be adjusted, repaired or replaced in order to
provide accurate metering. All adjustments due to inaccurate meters shall be
limited to the preceding six (6) months.

         14.3 If a meter fails to register, or if the measurement made by a
meter during a test varies by more than two percent (2%) from the measurement
made by the standard meter used in the test, adjustment shall be made correcting
all measurements made by the inaccurate meter for:

               (i)  the actual period during which inaccurate measurements were
                    made, if the period can be determined, or if not,




               (ii) the period immediately preceding the test of the meter equal
                    the one-half (1/2) the time from the date of the last
                    previous test of the meter; provided, however, that the
                    period covered by the correction shall not exceed six (6)
                    months.,

         14.4 ORMESA shall telemeter information to IID's new dispatch center
regarding the kilowatts, kilowatt-hours, kilovars and kilovar-hours delivered to
or received from IID at the Point of Delivery over phone line leased by ORMESA.

         IID shall purchase, own and shall design, install, operate, maintain,
or cause to be designed, installed, operated, and maintained, equipment to
automatically transmit from the Plant to IID's new dispatch center continuous
values of Plant output expressed as megawatts, megavars and megawatt-hours. IID
may thereupon bill and ORMESA shall promptly pay IID's cost of design, purchase
and installation of said equipment which cost is estimated to be $35,000.00.
ORMESA shall have the right to audit IID's records and accounts to verify the
cost of said equipment.

15. CONTINUITY OF SERVICE

IID shall not be obligated to accept and IID may require ORMESA to temporarily
curtail, interrupt or reduce deliveries of energy upon advance notice to ORMESA,
when such curtailment, interruption or reduction is required in order for IID to
construct, install, maintain, repair, replace, remove, investigate or inspect
any of its equipment or any part of its system of if IID determines that such
curtailment, interruption or reduction is necessary because of a System
Emergency, forces outages or abnormal operating conditions on its system. IID
shall use reasonable efforts to



keep interruptions and curtailments to a minimum time.

16. LIABILITY

         16.1 Neither Party shall hold the other Party, its officers, agents or
employees liable for any loss, damage, claim, cost, or expense for loss of or
damage to property, or injury or death of persons, which arises out of the first
Party's ownership, operation or maintenance of facilities on its own side of the
Point of Delivery, except as provided in Section 16.2.

         16.2 Each Party agrees to defend, indemnify and save harmless the other
Party, its officers, agents, or employees against all losses, claims, demands,
costs or expenses for loss of or damage to property, or injury or death of
persons, which directly or indirectly arise out of the indemnifying Party's
performance pursuant to or breach of or default under this Agreement; provided,
however, that a Party shall be solely responsible for any such losses, claims,
demands, costs or expenses which result from its sole negligence or willful
misconduct.

17. UNCONTROLLABLE FORCE

         Neither Party shall be considered to be in default with respect to any
obligation hereunder, other than the obligations to pay money, if prevented from
fulfilling such obligation by reason of an uncontrollable force. The term
"uncontrollable force" means any cause beyond the control of the Party affected,
including, but not limited to, failure or threat of imminent failure of
facilities, flood, earthquake, storm, lighting, fire, epidemic, war, riot, civil
disturbance, sabotage and restraint by court or public authority, which by
exercise of due diligence and foresight could not reasonably have been avoided.
Whichever Party is rendered unable to fulfill any obligation by reason of
uncontrollable forces shall give prompt written notice of such fact to the other
Party and shall exercise due diligence to remove such inability with all
reasonable dispatch. Nothing in this Agreement shall require a Party to settle
any strike or labor dispute in which it is involved.






18. INTEGRATION AND AMENDMENTS

         This Agreement constitutes the entire agreement between the Parties
relating to the interconnection of ORMESA's Plant to IID's electric system, the
acceptance of energy by IID from ORMESA and the providing of the electric
service by IID. No oral agreement or prior written agreement between the Parties
shall be of any effect whatsoever; provided, however, that any arrangements
agreed upon by the Authorized Representatives within the limits of their
authority, and consistent with this Agreement shall be binding upon the Parties.
All changes to this Agreement shall be in writing and shall be signed by an
officer of each Party.

19. NON-WAIVER

         None of the provisions of this Agreement shall be considered waived by
either Party except when such waiver is given in writing. The failure of either
Party to insist in any one or more instances upon strict performance of any of
the provisions of this Agreement or to take advantage of any of its rights
hereunder shall not be construed as a waiver of any such provisions or the
relinquishment of any such rights for the future; but the same shall continue
and remain in full force and effect.

20. NO DEDICATION OF FACILITIES

         Any undertaking by one Party to the other Party under any provision of
this Agreement shall not constitute the dedication of the system or any portion
thereof by the Party to the public or to the other Party, and it is understood
and agreed that any such undertaking under any provision of this Agreement by a
Party shall cease upon the termination of its obligations hereunder.

21. SUCCESSORS AND ASSIGNS

         21.1 This Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of the Parties.

         21.2 No assignment of this Agreement, or any part thereof, by either
Party shall be



valid unless approved in writing in advance by the other Party. Such approval of
assignment shall not be unreasonably withheld.

22. EFFECT OF SECTION HEADINGS

         Section headings appearing in this Agreement are inserted for
convenience only, and shall not be construed as interpretations of text.

23. GOVERNING LAW

         This Agreement shall be interpreted, governed and construed under the
laws of the State of California or the laws of the United States, as applicable.

24. ARBITRATION

         24.1 Any dispute arising out of or relating to this Agreement, or the
breach thereof, which is not resolved by the Parties acting through their
Authorized Representatives shall be settled by arbitration to the extent
permitted by the laws applicable to the Parties; provided, however, that no
Party to the dispute shall be bound to any greater extent than any other Party
to the dispute. Arbitration shall not apply to any dispute or mater that is
within the jurisdiction of any regulatory agency.

         24.2 Any demand for arbitration shall be made by written notice to the
other Party setting forth in adequate detail the nature of the dispute, the
issues to be arbitrated, the amount or amounts, if any, involved in the dispute,
and the remedy sought. Within twenty (20) days from the receipt of such notice,
the other Party may submit its own written statement of the dispute and may set
forth in adequate detail any additional related matters or issues to be
arbitrated.

         24.3 Within thirty (30) days after delivery of the written notice
demanding arbitration, the Parties acting through their Authorized
Representatives shall meet for the purpose of selecting an arbitrator. The
Parties may agree upon a single arbitrator, but in the event that they cannot
agree, three arbitrators shall be used. Each Party shall designate one
arbitrator, and the two



arbitrators shall then select a third arbitrator. All arbitrators shall be
persons skilled and experienced in the field in which the dispute has arisen and
no person shall be eligible for appointment as an arbitrator who is or has been
an officer or employee of either of the Parties or otherwise interested in the
matter to be arbitrated. Should either party refuse or neglect to appoint an
arbitrator or to furnish the arbitrators with any papers or information
demanded, the arbitrators are empowered, by both Parties, to proceed without the
participation or assistance of that Party.

         24.4 Except as otherwise provided in this Section, the arbitration
shall be governed by the rules and practices of the American Arbitration
Association, or a similar organization if the American Arbitration Association
should not at the time exist.

         24.5 Arbitration proceedings shall be held in Imperial, California, at
a time and place to be selected by the arbitrators. The arbitrators shall hear
evidence submitted by the Parties and may call for additional information which
shall be furnished by the Party having such information. The arbitrators shall
have no authority to call for information not related to the issues included in
the dispute or to determine other issues not in dispute.

         24.6 If there is only one arbitrator, his decision shall be binding and
conclusive on the Parties. If there are three arbitrators, the decision of any
two shall be binding and conclusive. The decision of the arbitrators shall
contain findings regarding the issues involved in the dispute, including the
merits of the positions of the Parties, the materiality of any default, and the
remedy or relief to which a Party shall be entitled. The arbitrators may not
grant any remedy or relief which is inconsistent with this Agreement, nor shall
the arbitrators make findings or decide issues not in dispute.

         24.7 The fees and expenses of the arbitrators shall be shared equally
by the Parties, unless the decision of the arbitrators specifies some other
apportionment. All other expenses and costs of the arbitration shall be borne by
the Party incurring such expenses and costs.




         24.8 Any decision or award granted by the arbitrators shall be final
and judgement may be entered on it in any court of competent jurisdiction. This
agreement to arbitrate shall be specifically enforceable

25, ENTIRE AGREEMENT

         25.1 The complete agreement of the Parties is set forth in this
Agreement and all communications regarding subject interconnected operations
whether oral or written, are hereby abrogated and withdrawn.

         25.2 IID shall not amend the IID-Edison Transmission Service Agreement
for Alternate Resources between IID and SCE of September 10, 1985 to the extent
that any such amendment shall apply to the Plant without the prior written
consent of ORMESA.

         25.3 Notwithstanding any other provision of the Agreement, if IID has
or hereinafter enters into any plant connection agreement with any alternate
resource developer, which agreement contains terms more favorable to that
developer than the terms extended to ORMESA, IID shall, within thirty (30) days
following execution of such an agreement, modify this Agreement content with
those more favorable terms.

26. NOTICES

         Any formal communication or notice in connection with this Agreement
shall be in writing and shall be deemed properly given if delivered in person or
sent first class mail, postage prepaid to the person specified below:


                                             ORMESA GEOTHERMAL
                                             500 Oermody Way
                                             Sparks, Nevada 89431





                                             IMPERIAL IRRIGATION DISTRICT




                                             c/o General Manager
                                             P.O. Box 937
                                             Imperial, California 92251


27. SEVERAL OBLIGATIONS

Except where specifically stated in this Agreement to be otherwise, the duties,
obligations and liabilities of the Parties are intended to be several and not
joint or collective. Nothing contained in this Agreement shall ever be construed
to create an association, trust, partnership, or joint venture, or impose a
trust or partnership duty, obligation or liability on or with regard to either
Party. Each Party shall be individually and severally liable for its own
obligations under this Agreement.

28. SIGNATURE CLAUSE

         The Parties have caused this Agreement to be executed in their
respective names, in duplicate, by their respective officers hereunto this 1st
day of October, 1985.

                                           ORMESA GEOTHERMAL / ORMAT ENGINEERING
                                           INC.
                                              as General Partner

                                           By: /s/ Indecipherable
                                              ----------------------------------
                                                        Vice-President


ATTEST:


By: /s/ Indecipherable
   ----------------------------------
               Secretary

                                           IMPERIAL IRRIGATION DISTRICT


                                           By: /s/ W. R. Condit
                                              ----------------------------------
                                                President, Board of Directors







ATTEST:


By: /s/ Larry E. Beck
   ----------------------------------
              Secretary



                                                                 Exhibit 10.3.27


                                                                       ORMESA IE
                                                                        10-21-88
                                                                  EXECUTION COPY


                           PLANT CONNECTION AGREEMENT

                                     FOR THE

                        ORMESA IE GEOTHERMAL POWER PLANT


                                     BETWEEN


                          IMPERIAL IRRIGATION DISTRICT

                                  AND ORMESA IE























EXECUTION COPY
10-21-88





                                TABLE OF CONTENTS

SECTION   TITLE                                                            PAGE
-------   -----                                                            ----
   1      PARTIES ........................................................   1

   2      RECITALS .......................................................   1

   3      AGREEMENT ......................................................   2

   4      DEFINITIONS ....................................................   2

   5      EFFECTIVE DATE AND TERM ........................................   3

   6      CONNECTION OF PLANT ............................................   3

   7      ELECTRIC SERVICE TO PRODUCER ...................................   3

   8      METERING OF ENERGY DELIVERIES ..................................   3

   9      PRODUCERS DELIVERY AND ACCEPTANCE OF ENERGY FROM PLANT .........   4

   10     PRODUCER'S GENERAL OBLIGATIONS .................................   4

   11     IID'S GENERAL OBLIGATIONS ......................................   5

   12     BILLING ........................................................   6

   13     AUTHORIZED REPRESENTATIVES .....................................   6

   14     METERS .........................................................   7

   15     CONTINUITY OF SERVICE ..........................................   8

   16     LIABILITY ......................................................   9

   17     UNCONTROLLABLE FORCES ..........................................  10

   18     INTEGRATION AND AMENDMENTS .....................................  11

   19     NON-WAIVER .....................................................  11

   20     NO DEDICATION OF FACILITIES ....................................  12

   21     SUCCESSORS AND ASSIGNS .........................................  12



   22     EFFECT OF SECTION HEADINGS .....................................  12

   23     GOVERNING LAW ..................................................  13


                                       i


   24     ARBITRATION ....................................................  13

   25     ENTIRE AGREEMENT ...............................................  15

   26     NOTICES ........................................................  15


   27     SEVERAL OBLIGATIONS ............................................  15

   28     SIGNATURE CLAUSE ...............................................  16

          ATTACHMENTS

          EXHIBIT "A" - RATE SCHEDULES GL AND A2 .........................  17

          EXHIBIT "B" - METERING ONE-LINE DIAGRAM ........................  21


                                       ii


1.   PARTIES

     The parties to this Agreement are IMPERIAL IRRIGATION DISTRICT ("IID"),
organized under the Water Code of the State of California and ORMESA IE
("Producer"), hereinafter referred to individually as "Party", and collectively
as "Parties".

2.   RECITALS

     2.1  Producer intends to construct and operate, as owner or lessee, a
generating facility with a maximum 9 megawatt net operating capacity at the East
Mesa (KGRA), Imperial County, California, and to sell the Plant electrical
output to Southern California Edison Company ("SCE").

     2.2  SCE entered into the Power Purchase Agreement dated July 18, 1984
("Purchase Agreement"), with Republic Geothermal, Inc. ("Republic"). Republic
assigned the Power Purchase Contract to Ormat Systems, Inc. on November 6, 1984
to which assignment SCE consented on December 19, 1984. Ormat Systems, Inc.
assigned the Power Purchase Contract to Owners Geothermal on February 27, 1985
to which assignment SCE consented on July 22, 1985.

     2.3  SCE and Producer agree that the terms and conditions regarding
transmission of the Plant's Energy to an IID/SCE point of interconnection shall
be pursuant to a Transmission Service Agreement to be entered into between IID
and Ormesa Geothermal.

     2.4  Since the Plant will be built in the IID service territory, it will be
convenient to connect the Plant to the IID electric system.

          Producer hereby grants the IID the right to enter the Plant site for
any reasonable purposes connected with this Agreement, by previous arrangements
with the Plant manager. Those reasonable purposes include maintenance and
repairs to IID equipment in Producer's facilities, observing tests of said
facilities, reading of kilowatt-hour meters, and the like.

     2.5  Producer desires to purchase and IID desires to sell the electrical
energy necessary to satisfy the operation and maintenance power consumption
requirements of the Plant for the life of the Plant that is not normally
generated by the Plant itself, or portable generating equipment.

     2.6  The Parties desire, by means of this Agreement, to interconnect the
Plant to the IID electrical system and to establish the terms, conditions and
obligations of the Parties relating to such interconnection.

3.   AGREEMENT

     The Parties agree as follows:

4.   DEFINITIONS

     4.1 Agreement: This Plant Connection Agreement between IID and Producer,
and all Exhibits hereto, as may be amended from time to time.



     4.2 Authorized Representative: The representative of a Party designated in
accordance with Section 13.

     4.3 Energy: Electric energy in excess of Producer's electric energy
requirements, expressed in kilowatt-hours, generated by the Plant and measured
and delivered to the Point of Delivery.

     4.4 Funding and Construction Agreement: An agreement entered into by IID
and others dated June 29, 1987, providing for the funding and construction of
the Heber-Mirage Transmission Project, to which a form of this Agreement is
attached as Exhibit C.

     4.5 Operation Date: The day on which the Plant Energy is first accepted by
IID for delivery to SCE.

     4.6 Plant: A maximum of 9 MW net operating capacity Geothermal facility
operated by Producer, as owner or lessee, including all associated equipment and
improvements necessary for generating electric energy and transmitting it to the
high voltage side of the power transformer.

     4.7 Point of Delivery: The point on the high voltage side of Producer's
switchyard where IID's metering equipment measures the delivery of Energy to the
IID system as shown on Exhibit "B".

     4.8 System Emergency: A condition on IID'S system which is likely to result
in imminent significant disruption of service to customers or is imminently
likely to endanger life or property.

5.   EFFECTIVE DATE AND TERM

     This Agreement shall become effective upon the Operation Date of the Plant,
and shall remain in effect until the earlier of (i) October 12, 2017, or (ii)
thirty six (36) months from the date the Plant has ceased to operate at the
option of IID. It is understood that (i) if the Completion Date, as the term
Completion Date is defined In Article I of Funding and Construction Agreement
does not occur, or (ii) if the Operation Date does not occur within five (5)
years after the date this Agreement was executed, this Agreement shall be of no
force or effect.

6.   CONNECTION OF PLANT

     6.1 Producer may electrically connect its Plant, in accordance with the
provisions of this Agreement, so that it can operate in parallel with the IID
electric system. Parallel operation will not commence until IID has inspected
and approved the interconnection facilities and operational procedures.

     6.2 Notwithstanding the provision that Producer has furnished the high
voltage switchyard complete, including the high voltage oil circuit breakers and
disconnect switches, the control of the high voltage oil circuit breakers and
disconnect switches shall be under the control of the IID dispatcher.


                                       2


7.   ELECTRIC SERVICE TO PRODUCER

     IID shall provide electric service to Producer pursuant to Section 12.

8.   METERING OF ENERGY DELIVERIES

     Metering for electric service to Producer and for energy deliveries by
Producer to IID for delivery to SCE shall be at the Point of Delivery as shown
on Exhibit "B." Four meters shall be installed which shall measure and record
flows in each direction as shown on Exhibit "B."

9.   PRODUCER'S DELIVERY AND IID ACCEPTANCE OF ENERGY FROM PLANT

     Whenever electric output from the Plant exceeds Producer's power
requirements, Producer shall deliver all such excess output to IID for delivery
to SCE and IID shall accept such output for delivery to SCE and deliver such
output to SCE pursuant to a transmission service agreement to be entered into
between Ormesa Geothermal and IID.

10.  PRODUCER'S GENERAL OBLIGATIONS

     Producer shall:

     10.1 Operate the Plant in a manner consistent with applicable electric
utility industry standards, good engineering practice, and without degradation
of quality or reliability of service to IID customers.

     10.2 Deliver the Plant's net electrical output to IID for the account of
SCE at the Point of Delivery.

     10.3 Each Party shall provide the reactive kilovolt-ampere (KVA)
requirements of its own system so that there will be no interchange of reactive
KVA between systems. The Parties shall cooperate to control the flow of reactive
KVA to prevent the introduction of objectionable operating conditions on the
system of either Party.

     10.4 Coordinate, to the greatest extent practicable, major overhaul and
inspection outages of the Plant with IID.

     10.5 Give IID a written schedule on or before June 1, and December 1, each
year of the estimated amounts and rates of delivery of energy to be delivered to
IID for the account of SCE at the Point of Delivery during each month of the
succeeding twelve-month (12) period commencing July 1, and January 1.

     10.6 Give IID a written schedule on or before the fifteenth (15th) day of
each month of the estimated amounts and rates of delivery of energy to be
delivered to IID for the account of SCE at the Point of Delivery during each day
of the succeeding calendar month.

     10.7 Give IID a schedule on or before 12:01 p.m. on Tuesday of each
seven-day (7) period of the estimated amounts and rates of delivery of energy to
be delivered to IID for the account of SCE at the Point of Delivery during each
hour of the succeeding seven-day (7) period


                                       3


commencing at 12:01 a.m. on the following Monday; provided, however, that if any
changes in the hourly deliveries so scheduled become necessary, Producer shall
notify IID of such changes as far in advance as possible.

     10.8 Provide IID any reasonable rights-of-way and access required for
testing and reading of meters by previous arrangement with the Plant manager.

     10.9 Carry out the directions of the Authorized Representatives with
respect to the matters set forth in this Agreement.

11.  IID'S GENERAL OBLIGATIONS

     IID shall:

     11.1 Design, acquire, construct, operate and maintain, or cause to be
designed, acquired, constructed, operated and maintained, and shall own, a
connecting transmission line between IID's transmission system and the Plant.
Following the completion of such line, IID may bill and Producer shall pay IID's
costs of designing, acquiring and constructing such line. Producer shall have
the right to audit IID's records and accounts to verify the cost of such line.

     11.2 Accept the Plant's net electrical output for the account of SCE at the
Point of Delivery and simultaneously deliver an equal amount of electric energy
(less applicable transmission losses) to the SCE system at IID/SCE point(s) of
interconnection.

     11.3 Coordinate, to the greatest extent practicable, major overhaul and
inspection outages of IID transmission facilities with Producer and notify
Producer of any changes as far in advance as possible.

     11.4 Carry out the directions of the Authorized Representative with respect
to the matters set forth in this Agreement.

     11.5 Operate its system in a manner consistent with applicable utility
industry standards and good engineering practices.

12.  BILLING

     12.1 IID shall read the meters monthly according to its regular meter
reading schedule beginning no more than thirty (30) days after the date that
electric energy is first supplied to Producer. IID monthly shall send Producer
within ten (10) working days after the meter is read a bill for electric
service. Producer shall pay IID the total amount billed within thirty (30) days
of receipt of the bill.

     12.2 IID shall bill Producer for Producer's consumption of energy from
IID's resources in accordance with Rate Schedule GL or Rate Schedule A-2, as
applicable, as it may be revised from time to time. Copies of current Rate
Schedule GL and current Rate Schedule A-2 are attached as Exhibit "A."


                                       4


     12.3 If Producer disputes a bill, payment shall be made as if no dispute
existed pending resolution of the dispute by the Authorized Representatives. If
the bill is determined to be in error, the disputed amount shall be refunded by
IID including interest at the rate of one and one-half percent (1 1/2%) per
month, compounded monthly, from the date of payment to the date the refund check
or adjusted bill is mailed.

13.  AUTHORIZED REPRESENTATIVES

     13.1 Within thirty (30) days after the date this Agreement is signed, each
Party shall designate, by written notice to the other Party, an Authorized
Representative who is authorized to act in its behalf in the implementation of
this Agreement and with respect to those matters contained herein which are the
functions and responsibilities for the Authorized Representatives. Either Party
may, at any time, change the designation of its Authorized Representative by
written notice to the other Party.

     13.2 IID's Authorized Representative shall develop detailed written
procedures necessary and convenient to administer this Agreement within six (6)
months after the date signed. Such procedures shall be submitted to Producer's
Authorized Representative for review, comment, discussion and concurrence before
they are put into effect. Such procedures shall include, without limitation: (i)
communication between Producer and IID's electric system dispatcher with regard
to daily operating matters, (ii) billing and payments, (iii) specified equipment
tests, and (iv) operating matters which affect or may affect quality and
reliability of service to electric customers and continuity of deliveries to
SCE.

     13.3 The Authorized Representative shall have no authority to modify any of
the provisions of this Agreement.

14.  METERS

     14.1 All meters shall be sealed and the seal shall be broken only upon
occasions when the meters are to be inspected, tested or adjusted.

     14.2 IID shall inspect and test all meters upon their installation and at
least once every year thereafter. If requested to do so by Producer, IID shall
inspect or test a meter more frequently than every year, but the expense of such
inspection or test shall be paid by Producer unless the meter is found to
register inaccurately by more than two percent (2%) from the measurement made by
a standard meter. Each Party shall give reasonable notice to the other Party of
the time when any inspection or test shall take place and that Party may have
representatives present at the test or inspection. If a meter is found to be
inaccurate or defective, it shall be adjusted, repaired or replaced in order to
provide accurate metering. All adjustments due to inaccurate meters shall be
limited to the preceding six (6) months.

     14.3 If a meter fails to register, or if the measurement made by a meter
during a test varies by more than two percent (2%) from the measurement made by
the standard meter used in the test, adjustment shall be made correcting all
measurements made by the inaccurate meter for:

          (i)  the actual period during which inaccurate measurements were made,
               if the period can be determined, or if not,


                                       5


          (ii) the period immediately preceding the test of the meter equal to
               one-half (1/2) the time from the date of the last previous test
               of the meter; provided, however, that the period covered by the
               correction shall not exceed six (6) months.

     14.4 Producer shall telemeter information to IID's Dispatch Center
regarding the kilowatts, kilowatt-hours, kilovars and kilovar-hours delivered to
or received from IID at the Point of Delivery over phone line leased by
Producer.

          IID shall purchase, own, and shall design, install, operate, maintain,
or cause to be designed, installed, operated, and maintained, equipment to
automatically transmit from the Plant to IID's Dispatch Center continuous values
of Plant output expressed as megawatts, megavars and megawatt-hours. IID may
thereupon bill and Producer shall promptly pay IID's cost of design, purchase
and installation of said equipment. Producer shall have the right to audit IID's
records and accounts to verify the cost of said equipment.

15.  CONTINUITY OF SERVICE

     IID shall not be obligated to accept and IID may require Producer to
temporarily curtail, interrupt or reduce deliveries of energy upon advance
notice to Producer, when such curtailment, interruption or reduction is required
in order for IID to construct, install, maintain, repair, replace, remove,
investigate or inspect any of its equipment or any part of its system or if IID
determines that such curtailment, interruption or reduction is necessary because
of a System Emergency, forced outages or abnormal operating conditions on its
system. IID shall use reasonable efforts to keep interruptions and curtailments
to a minimum time.

16.  LIABILITY

     16.1 Except for any loss, damage, claim, costs, charge or expense resulting
from Willful Action, neither Party (the "released Party"), its directors or
other governing body, officers or employees shall be liable to the other Party
for any loss, damage, claim, cost, charge, or expense of, any kind or nature
incurred by the other Party (including direct, indirect or consequential loss,
damage, claim, cost, charge or expense; and whether or not resulting from the
negligence of a Party, its directors or other governing body, officers,
employees or any person or entity whose negligence would be imputed to a Party)
from engineering, repair, supervision, inspection, testing, protection,
operation, maintenance, replacement, reconstruction, use or ownership of the
released Party's electrical system, Plant(s) or associated facilities in
connection with the implementation of this Agreement. Except for any loss,
damage, claim, cost, charge or expense resulting from Willful Action, each Party
releases the other Party, its directors or other governing body, officers and
employees from any such liability.

     16.2 For the purpose of this Section 16, Willful Action shall be defined as
action taken or not taken by a Party at the direction of its directors or other
governing body, officers or employees having management or administrative
responsibility affecting its performance under this Agreement, as follows:


                                       6


          16.2.1 Action which is knowingly or intentionally taken or not taken
with conscious indifference to the consequences thereof or with intent that
injury or damage would result or would probably result therefrom.

          16.2.2 Action which has been determined by final arbitration award or
final judgment or judicial decree to be a material default under this Agreement
and which occurs or continues beyond the time specified in such arbitration
award or judgment or judicial decree for curing such default or, if no time to
cure is specified therein, occurs or continues thereafter beyond a reasonable
time to cure such default.

          16.2.3 Action which is knowingly or intentionally taken or not taken
with the knowledge that such action taken or not taken is a material default
under this Agreement.

     16.3 Willful Action does not include any act or failure to act which is
merely involuntary, accidental or negligent.

     16.4 The phrase "employees having management or administrative
responsibility," as used in Section 16.2, means the employees of a Party who are
responsible for one or more of the executive functions of planning, organizing,
coordinating, directing, controlling and supervising such Party's performance
under this Agreement with responsibility for results.

     16.5 Subject to the foregoing provisions of this Section 16, each Party
agrees to defend, indemnify and save harmless the other Party, its officers,
agents, or employees against all losses, claims, demands, costs or expenses for
loss of or damage to property, or injury or death of persons, which directly or
indirectly arise out of the indemnifying Party's performance pursuant to this
Agreement; provided, however, that a Party shall be solely responsible for any
such losses, claims, demands, costs or expenses which result from its sole
negligence or Willful Action.

17.  UNCONTROLLABLE FORCES

     Neither Party shall be considered to be in default in the performance of
any of its obligations under this Agreement when a failure of performance shall
be due to an uncontrollable force. The term "uncontrollable force" shall mean
any cause beyond the control of the Party affected including, but not restricted
to, failure of or threat of failure of facilities which have been maintained in
accordance with generally accepted engineering and operating practices in the
electrical utility industry, flood, drought, earthquake, tornado, storm fire,
pestilence, lightning and other natural catastrophes, epidemic, war, riot, civil
disturbance or disobedience, strike, labor dispute, labor or material shortage,
sabotage, government priorities and restraint by court order or public authority
(whether valid or invalid) and actions or nonaction by or inability to obtain or
keep the necessary authorizations or approvals from any governmental agency or
authority, which by exercise of due diligence such Party could not reasonably
have been expected to avoid and which by exercise of due diligence it has been
unable to overcome. Nothing contained herein shall be construed as to require a
Party to settle any strike or labor dispute in which it may be involved. Either
Party rendered unable to fulfill any of its obligations under this Agreement by
reason of an uncontrollable force shall give prompt written notice of such fact
to the other Party and shall exercise due diligence to remove such inability
with all reasonable dispatch.

                                       7


18.  INTEGRATION AND AMENDMENTS

     This Agreement constitutes the entire agreement between the Parties
relating to the interconnection of Producer's Plant to IID's electric system,
the acceptance of energy by IID from Producer and the providing of electric
service by IID. No oral agreement or prior written agreement between the Parties
shall be of any effect whatsoever; provided, however, that any arrangements
agreed upon by the Authorized Representatives within the limits of their
authority, and consistent with this Agreement shall be binding upon the Parties.
All changer to this Agreement shall be in writing and shall be signed by an
officer of each Party.

19.  NON-WAIVER

     None of the provisions of this Agreement shall be considered waived by
either Party except when such waiver is given in writing. The failure of either
Party to insist in any one or more instances upon strict performance of any of
the provisions of this Agreement or to take advantage of any of its rights
hereunder shall not be construed as a waiver of any such provisions or the
relinquishment of any such rights for the future; but the same shall continue
and remain in full force and effect.

20.  NO DEDICATION OF FACILITIES

     Any undertaking by one Party to the other Party under any provision of this
Agreement shall not constitute the dedication of the system or any portion
thereof by the Party to the public or to the other Party, and it is understood
and agreed that any such undertaking under any provision of this Agreement by a
Party shall cease upon the termination of its obligations hereunder.

21.  SUCCESSORS AND ASSIGNS

     21.1 This Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the Parties.

     21.2 This Agreement may be assigned by Producer only (i) to a purchaser or
co-owner of the Plant or to a person who will operate the Plant pursuant to a
contract or other arrangement with such purchaser and in either case with the
prior written consent of IID (which shall not be unreasonably withheld) or (ii)
for security purposes, to a bank or other entity which provides financing for
the Plant or any electrical transmission facilities associated therewith.
Producer and IID agree that nothing in this Section 21.2 may be amended,
modified or waived without the prior written consent of each and every Party to
the Funding and Construction Agreement (except for any Parties in default
thereunder).

22.  EFFECT OF SECTION HEADINGS

     Section headings appearing in this Agreement are inserted for convenience
only, and shall not be construed as interpretations of text.


                                       8


23.  GOVERNING LAW

     This Agreement shall be interpreted, governed and construed under the laws
of the State of California or the laws of the United States, as applicable.

24.  ARBITRATION

     24.1 Any dispute arising out of or relating to this Agreement, or the
breach thereof, which is not resolved by the Parties acting through their
Authorized Representatives shall be settled by arbitration to the extent
permitted by the laws applicable to the Parties; provided, however, that no
Party to the dispute shall be bound to any greater extent than any other Party
to the dispute. Arbitration shall not apply to any dispute or matter that is
within the jurisdiction of any regulatory agency.

     24.2 Any demand for arbitration shall be made by written notice to the
other Party setting forth in adequate detail the nature of the dispute, the
issues to be arbitrated, the amount or amounts, if any, involved In the dispute,
and the remedy sought. Within twenty (20) days from the receipt of such notice,
the other Party may submit its own written statement of the dispute and may set
forth in adequate detail any additional related matters or issues to be
arbitrated.

     24.3 Within thirty (30) days after delivery of the written notice demanding
arbitration, the Parties acting through their Authorized Representatives shall
meet for the purpose of selecting an arbitrator. The Parties may agree upon a
single arbitrator, but in the event that they cannot agree, three arbitrators
shall be used. Each Party shall designate one arbitrator, and the two
arbitrators shall then select a third arbitrator. All arbitrators shall be
persons skilled and experienced in the field in which the dispute has arisen and
no person shall be eligible for appointment as an arbitrator who is or has been
an officer or employee of either of the Parties or otherwise interested in the
matter to be arbitrated. Should either party refuse or neglect to appoint an
arbitrator or to furnish the arbitrators with any papers or information
demanded, the arbitrators are empowered, by both Parties, to proceed without the
participation or assistance of that Party.

     24.4 Except as otherwise provided in this Section, the arbitration shall be
governed by the rules and practices of the American Arbitration Association, or
a similar organization if the American Arbitration Association should not at the
time exist.

     24.5 Arbitration proceedings shall be held in Imperial, California, at a
time and place to be selected by the arbitrators. The arbitrators shall hear
evidence submitted by the Parties and may call for additional information which
shall be furnished by the Party having such information. The arbitrators shall
have no authority to call for information not related to the Issues included in
the dispute or to determine other issues not in dispute.

     24.6 If there is only one arbitrator, his decision shall be binding and
conclusive on the Parties. If there are three arbitrators, the decision of any
two shall be binding and conclusive. The decision of the arbitrators shall
contain findings regarding the issues involved in the dispute, including the
merits of the positions of the Parties, the materiality of any default, and the
remedy or relief to which a Party shall be entitled. The arbitrators may not
grant any remedy or relief


                                       9


which is inconsistent with this Agreement, nor shall the arbitrators make
findings or decide issues not in dispute.

     24.7 The fees and expenses of the arbitrators shall be shared equally by
the Parties, unless the decision of the arbitrators specifies some other
apportionment. All other expenses and costs of the arbitration shall be borne by
the Party incurring such expenses and costs.

     24.8 Any decision or award granted by the arbitrators shall be final and
judgement may be entered on it in any court of competent jurisdiction. This
agreement to arbitrate shall be specifically enforceable.

25.  ENTIRE AGREEMENT

     25.1 The complete agreement of the Parties is set forth in this Agreement
and all communications regarding subject interconnected operations whether oral
or written, are hereby abrogated and withdrawn.

26.  NOTICES

     Any formal communication or notice in connection with this Agreement shall
be in writing and shall be deemed properly given if delivered in person or sent
first class mail, postage prepaid to the person specified below:

                          ORMESA IE
                          c/o Plant Manager
                          P.O. Box 819
                          El Centro, California 92244

                          IMPERIAL IRRIGATION DISTRICT
                          c/o General Manager
                          P.O. Box 937
                          Imperial, California 92251

27.  SEVERAL OBLIGATIONS

     Except where specifically stated in this Agreement to be otherwise, the
duties, obligations and liabilities of the Parties are intended to be several
and not joint or collective. Nothing contained in this Agreement shall ever be
construed to create an association, trust, partnership or joint venture, or
impose a trust or partnership duty, obligation or liability on or with regard to
either Party. Each Party shall be individually and severally liable for its own
obligations under this Agreement.


                                       10


28.  SIGNATURE CLAUSE

     The Parties have caused this Agreement to be executed in their respective
names, in duplicate, by their respective officers hereunto this _________ day of
____________________, 1988.

                                       ORMESA IE

                                       By AMOR V, Managing General Partner


                                       By /s/ Indecipherable
                                          -------------------------------------

                                       Its V. President
                                           ------------------------------------

ATTEST:



By /s/ Indecipherable
   -----------------------------------
              Secretary



                                       IMPERIAL IRRIGATION DISTRICT

                                       By  /s/ Indecipherable
                                          -------------------------------------
                                          President, Board of Directors

                                       ATTEST:



By  /s/ Larry E. Beck
   -----------------------------------
              Secretary






                                       11






                                                                 Exhibit 10.3.28









                                                                           89__
                                                                         ORMESA
                                                                        9-21-89
                                                                 EXECUTION COPY


File No.
        ---------------------------------
Copy to Action:
               --------------------------
Copy for Info:
              ---------------------------
Follow up Req:
              ---------------------------

TO OTL FAX              Date
           ------------      ------------
                        Date
       ----------------      ------------








                           PLANT CONNECTION AGREEMENT

                                     FOR THE

                        ORMESA IH GEOTHERMAL POWER PLANT








                                     BETWEEN







                          IMPERIAL IRRIGATION DISTRICT

                                       AND

                                    ORMESA IH







EXECUTION COPY
9-21-89






                                TABLE OF CONTENTS

SECTION                       TITLE                                        PAGE
                                                                           ----

   1    PARTIES                                                               1

   2    RECITALS                                                              1

   3    AGREEMENT                                                             2

   4    DEFINITIONS                                                           2

   5    EFFECTIVE DATE AND TERM                                               3

   6    CONNECTION OF PLANT                                                   3

   7    ELECTRIC SERVICE TO PRODUCER                                          3

   8    METERING OF ENERGY DELIVERIES                                         3

   9    PRODUCER'S DELIVERY AND IID ACCEPTANCE OF ENERGY
        FROM PLANT                                                            4

  10    PRODUCER'S GENERAL OBLIGATIONS                                        4

  11    IID'S GENERAL OBLIGATIONS                                             5

  12    BILLING                                                               6

  13    AUTHORIZED REPRESENTATIVES                                            6

  14    METERS                                                                7

  15    CONTINUITY OF SERVICE                                                 8

  16    LIABILITY                                                             9

  17    UNCONTROLLABLE FORCES                                                10

  18    INTEGRATION AND AMENDMENTS                                           11

  19    NON-WAIVER                                                           11

  20    NO DEDICATION OF FACILITIES                                          12



  21    SUCCESSORS AND ASSIGNS                                               12

  22    EFFECT OF SECTION HEADINGS                                           12


                                       i




  23    GOVERNING LAW                                                        13

  24    ARBITRATION                                                          13

  25    ENTIRE AGREEMENT                                                     15

  26    NOTICES                                                              15


  27    SEVERAL OBLIGATIONS                                                  15

  28    SIGNATURE CLAUSE                                                     16

        ATTACHMENTS

        EXHIBIT "A" - RATE SCHEDULES GL AND A2                               17

        EXHIBIT "B" - METERING ONE-LINE DIAGRAM                              21











                                       ii




              1. PARTIES

              The parties to this Agreement are IMPERIAL IRRIGATION DISTRICT
("IID"), organized under the Water Code of the State of California and ORMESA IH
("Producer"), hereinafter referred to individually as "Party", and collectively
as "Parties".

              2. RECITALS

              2.1 Producer intends to construct and operate, as owner or lessee,
a generating facility with a maximum 9 megawatt net operating capacity at the
East Mesa (KGRA), Imperial County, California, and to sell the Plant electrical
output to Southern California Edison Company ("SCE").

              2.2 SCE entered into the Power Purchase Agreement dated July 18,
1984, ("Purchase Agreement") with Republic Geothermal, Inc. ("Republic").
Republic assigned the Power Purchase Contract to Ormat Systems, Inc. on November
6, 1984 to which assignment SCE consented on December 19, 1984. Ormat Systems,
Inc. assigned the Power Purchase Contract to Ormesa Geothermal on February 27,
1985 to which assignment SCE consented on July 22, 1985.

              2.3 SCE and Producer agree that the terms and conditions regarding
transmission of the Plant's Energy to an IID/SCE point of interconnection shall
be pursuant to a Transmission Service Agreement to be entered into between IID
and Ormesa Geothermal.

              2.4 Since the Plant will be built in the IID service territory, it
will be convenient to connect the Plant to the IID electric system.

              Producer hereby grants the IID the right to enter the Plant site
for any reasonable purposes connected with this Agreement, by previous
arrangements with the Plant manager.





                                       1




Those reasonable purposes include maintenance and repairs to IID equipment in
Producer's facilities, observing tests of said facilities, reading of
kilowatt-hour meters, and the like.

              2.5 Producer desires to purchase and IID desires to sell the
electrical energy necessary to satisfy the operation and maintenance power
consumption requirements of the Plant for the life of the Plant that is not
normally generated by the Plant itself, or portable generating equipment.

              2.6 The Parties desire, by means of this Agreement, to
interconnect the Plant to the IID electrical system and to establish the terms,
conditions and obligations of the Parties relating to such interconnection.

              3. AGREEMENT

              The Parties agree as follows:

              4. DEFINITIONS

              4.1 Agreement: This Plant Connection Agreement between IID and
Producer, and all Exhibits hereto, as may be amended from time to time.

              4.2 Authorized Representative: The representative of a Party
designated in accordance with Section 13.

              4.3 Energy: Electric energy in excess of Producer's electric
energy requirements, expressed in kilowatt-hours, generated by the Plant and
measured and delivered to the Point of Delivery.

              4.4 Funding and Construction Agreement: An agreement entered into
by IID and others dated June 29, 1987, providing for the funding and
construction of the Heber-Mirage Transmission Project, to which a form of this
Agreement is attached as Exhibit C.



                                       2



              4.5 Operation Date: The day on which the Plant Energy is first
accepted by IID for delivery to SCE.

              4.6 Plant: A maximum of 9 MW net operating capacity Geothermal
facility operated by Producer, as owner or lessee, including all associated
equipment and improvements necessary for generating electric energy and
transmitting it to the high voltage side of the power transformer.

              4.7 Point of Delivery: The point on the high voltage side of
Producer's switchyard where IID's metering equipment measures the delivery of
Energy to the IID system as shown on Exhibit "B".

              4.8 System Emergency: A condition on IID's system which is likely
to result in imminent significant disruption of service to customers or is
imminently likely to endanger life or property.

              5. EFFECTIVE DATE AND TERM

              This Agreement shall become effective upon the Operation Date of
the Plant, and shall remain in effect until the earlier of (i) October 12, 2017,
or (ii) thirty six (36) months from the date the Plant has ceased to operate at
the option of IID. It is understood that (i) if the Completion Date, as the term
Completion Date is defined in Article I of Funding and Construction Agreement
does not occur, or (ii) if the Operation Date does not occur within five (5)
years after the date this Agreement was executed, this Agreement shall be of no
force or effect.

              6. CONNECTION OF PLANT

              6.1 Producer may electrically connect its Plant, in accordance
with the provisions of this Agreement, so that it can operate in parallel with
the IID electric system. Parallel





                                       3



operation will not commence until IID has inspected and approved the
interconnection facilities and operational procedures.

              6.2 Notwithstanding the provision that Producer has furnished the
high voltage switchyard complete, including the high voltage oil circuit
breakers and disconnect switches, the control of the high voltage oil circuit
breakers and disconnect switches shall be under the control of the IID
dispatcher.

              7. ELECTRIC SERVICE TO PRODUCER

              IID shall provide electric service to Producer pursuant to Section
12.

              8. METERING OF ENERGY DELIVERIES

              Metering for electric service to Producer and for energy
deliveries by Producer to IID for delivery to SCE shall be at the Point of
Delivery as shown on Exhibit "B." Four meters shall be installed which shall
measure and record flows in each direction as shown on Exhibit "B." 9.

              9. PRODUCER'S DELIVERY AND IID ACCEPTANCE OF ENERGY FROM PLANT
Whenever electric output from the Plant exceeds Producer's power requirements,
Producer shall deliver all such excess output to IID for delivery to SCE and IID
shall accept such output for delivery to SCE and deliver such out-put to SCE
pursuant to a transmission service agreement to be entered into between Ormesa
Geothermal and IID.

              10. PRODUCER'S GENERAL OBLIGATIONS

              Producer shall:

              10.1 Operate the Plant in a manner consistent with applicable
electric utility industry standards, good engineering practice, and without
degradation of quality or reliability of service to IID customers.




                                       4



              10.2 Deliver the Plant's net electrical output to IID for the
account of SCE at the Point of Delivery.

              10.3 Each Party shall provide the reactive kilovolt-ampere (KVA)
requirements of its own system so that there will be no interchange of reactive
KVA between systems. The Parties shall cooperate to control the flow of reactive
KVA to prevent the introduction of objectionable operating conditions on the
system of either Party.

              10.4 Coordinate, to the greatest extent practicable, major
overhaul and inspection outages of the Plant with IID.

              10.5 Give IID a written schedule on or before June 1, and December
1, each year of the estimated amounts and rates of delivery of energy to be
delivered to IID for the account of SCE at the Point of Delivery during each
month of the succeeding twelve-month (12) period commencing July 1, and January
1.

              10.6 Give IID a written schedule on or before the fifteenth (15th)
day of each month of the estimated amounts and rates of delivery of energy to be
delivered to IID for the account of SCE at the Point of Delivery during each day
of the succeeding calendar month.

              10.7 Give IID a schedule on or before 12:01 p.m. on Tuesday of
each seven-day (7) period of the estimated amounts and rates of delivery of
energy to be delivered to IID for the account of SCE at the Point of Delivery
during each hour of the succeeding seven-day (7) period commencing at 12:01 a.m.
on the following Monday; provided, however, that if any changes in the hourly
deliveries so scheduled become necessary, Producer shall notify IID of such
changes as far in advance as possible.

              10.8 Provide IID any reasonable rights-of-way and access required
for testing and reading of meters by previous arrangement with the Plant
manager.



                                       5



              10.9 Carry out the directions of the Authorized Representatives
with respect to the matters set forth in this Agreement.

              11. IID'S GENERAL OBLIGATIONS

              IID shall:

              11.1 Design, acquire, construct, operate and maintain, or cause to
be designed, acquired, constructed, operated and maintained, and shall own, a
connecting transmission line between IID's transmission system and the Plant.
Following the completion of such line, IID may bill and Producer shall pay IID's
costs of designing, acquiring and constructing such line. Producer shall have
the right to audit IID's records and accounts to verify the cost of such line.

              11.2 Accept the Plant's net electrical output for the account of
SCE at the Point of Delivery and simultaneously deliver an equal amount of
electric energy (less applicable transmission losses) to the SCE system at
IID/SCE point(s) of interconnection.

              11.3 Coordinate, to the greatest extent practicable, major
overhaul and inspection outages of IID transmission facilities with Producer and
notify Producer of any changes as far in advance as possible.

              11.4 Carry out the directions of the Authorized Representative
with respect to the matters set forth in this Agreement.

              11.5 Operate its system in a manner consistent with applicable
utility industry standards and good engineering practices.

              12. BILLING

              12.1 IID shall read the meters monthly according to its regular
meter reading schedule beginning no more than thirty (30) days after the date
that electric energy is first supplied to Producer. IID monthly shall send
Producer within ten (10) working days after the




                                       6



meter is read a bill for electric service. Producer shall pay IID the total
amount billed within thirty (30) days of receipt of the bill.

              12.2 IID shall bill Producer for Producer's consumption of energy
from IID's resources in accordance with Rate Schedule GL or Rate Schedule A-2,
as applicable, as it may be revised from time to time. Copies of current Rate
Schedule GL and current Rate Schedule A-2 are attached as Exhibit "A."

              12.3 If Producer disputes a bill, payment shall be made as if no
dispute existed pending resolution of the dispute by the Authorized
Representatives. If the bill is determined to be in error, the disputed amount
shall be refunded by IID including interest at the rate of one and one-half
percent (1 1/2%) per month, compounded monthly, from the date of payment to the
date the refund check or adjusted bill is mailed.

              13. AUTHORIZED REPRESENTATIVES

              13.1 Within thirty (30) days after the date this Agreement is
signed, each Party shall designate, by written notice to the other Party, an
Authorized Representative who is authorized to act in its behalf in the
implementation of this Agreement and with respect to those matters contained
herein which are the functions and responsibilities for the Authorize
Representatives. Either Party may, at any time, change the designation of it
Authorized Representative by written notice to the other Party.

              13.2 IID's Authorized Representative shall develop detailed
written procedures necessary and convenient to administer this Agreement within
six (6) months after the date signed. Such procedures shall be submitted to
Producer's Authorized Representative for review, comment, discussion and
concurrence before they are put into effect. Such procedures shall include,
without limitation: (i) communication between Producer and IID's electric system





                                       7



dispatcher with regard to daily operating matters, (ii) billing and payments,
(iii) specified equipment tests, and (iv) operating matters which affect or may
affect quality and reliability of service to electric customers and continuity
of deliveries to SCE.

              13.3 The Authorized Representative shall have no authority to
modify any of the provisions of this Agreement.

              14. METERS

              14.1 All meters shall be sealed and the seal shall be broken only
upon occasions when the meters are to be inspected, tested or adjusted.

              14.2 IID shall inspect and test all meters upon their installation
and at least once every year thereafter. If requested to do so by Producer, IID
shall inspect or test a meter more frequently than every year, but the expense
of such inspection or test shall be paid by Producer unless the meter is found
to register inaccurately by more than two percent (2%) from the measurement made
by a standard meter. Each Party shall give reasonable notice to the other Party
of the time when any inspection or test shall take place and that Party may have
representatives present at the test or inspection. If a meter is found to be
inaccurate or defective, it shall be adjusted, repaired or replaced in order to
provide accurate metering. All adjustments due to inaccurate meters shall be
limited to the preceding six (6) months.

              14.3 If a meter fails to register, or if the measurement made by a
meter during a test varies by more than two percent (2%) from the measurement
made by the standard meter used in the test, adjustment shall be made correcting
all measurements made by the inaccurate meter for:

              (i)   the actual period during which inaccurate measurements were
                    made, if the period can be determined, or if not,



                                       8



              (ii)  the period immediately preceding the test of the meter equal
                    to one-half (1/2) the time from the date of the last
                    previous test of the meter; provided, however, that the
                    period covered by the correction shall not exceed six (6)
                    months.

              14.4 Producer shall telemeter information to IID's Dispatch Center
regarding the kilowatts, kilowatt-hours, kilovars and kilovars-hours delivered
to or received from IID at the Point of Delivery over phone line leased by
Producer.

              IID shall purchase, own, and shall design, install, operate,
maintain, or cause to be designed, installed, operated, and maintained,
equipment to automatically transmit from the Plant to IID's Dispatch Center
continuous values of Plant output expressed as megawatts, megavars and
megawatt-hours. IID may thereupon bill and Producer shall promptly pay IID's
cost of design, purchase and installation of said equipment. Producer shall have
the right to audit IID's records and accounts to verify the cost of said
equipment.

              15. CONTINUITY OF SERVICE

              IID shall not be obligated to accept and IID may require Producer
to temporarily curtail, interrupt or reduce deliveries of energy upon advance
notice to Producer, when such curtailment, interruption or reduction is required
in order for IID to construct, install, maintain, repair, replace, remove,
investigate or inspect any of its equipment or any part of its system or if IID
determines that such curtailment, interruption or reduction is necessary because
of a System Emergency, forced outages or abnormal operating conditions on its
system. IID shall use reasonable efforts to keep interruptions and curtailments
to a minimum time.

              16. LIABILITY

              16.1 Except for any loss, damage, claim, costs, charge or expense
resulting from Willful Action, neither Party (the "released Party"), its
directors or other governing body,






                                       9



officers or employees shall be liable to the other Party for any loss, damage,
claim, cost, charge, or expense of any kind or nature incurred by the other
Party (including direct, indirect or consequential loss, damage, claim, cost,
charge or expense; and whether or not resulting from the negligence of a Party,
its directors or other governing body, officers, employees or any person or
entity whose negligence would be imputed to a Party) from engineering, repair,
supervision, inspection, testing, protection, operation, maintenance,
replacement, reconstruction, use or ownership of the released Party's electrical
system, Plant(s) or associated facilities in connection with the implementation
of this Agreement. Except for any loss, damage, claim, cost, charge or expense
resulting from Willful Action, each Party releases the other Party, its
directors or other governing body, officers and employees from any such
liability.

              16.2 For the purpose of this Section 16, Willful Action shall be
defined as action taken or not taken by a Party at the direction of its
directors or other governing body, officers or employees having management or
administrative responsibility affecting its performance under this Agreement, as
follows:

              16.2.1 Action which is knowingly or intentionally taken or not
taken with conscious indifference to the consequences thereof or with intent
that injury or damage would result or would probably result therefrom.

              16.2.2 Action which has been determined by final arbitration award
or final judgment or judicial decree to be a material default under this
Agreement and which occurs or continues beyond the time specified in such
arbitration award or judgment or judicial decree for curing such default or, if
no time to cure is specified therein, occurs or continues thereafter beyond a
reasonable time to cure such default.



                                       10



              16.2.3 Action which is knowingly or intentionally taken or not
taken with the knowledge that such action taken or not taken is a material
default under this Agreement.

              16.3 Willful Action does not include any act or failure to act
which is merely involuntary, accidental or negligent.

              16.4 The phrase "employees having management or administrative
responsibility," as used in Section 16.2, means the employees of a Party who are
responsible for one or more of the executive functions of planning, organizing,
coordinating, directing, controlling and supervising such Party's performance
under this Agreement with responsibility for results.

              16.5 Subject to the foregoing provisions of this Section 16, each
Party agrees to defend, indemnify and save harmless the other Party, its
officers, agents, or employees against all losses, claims, demands, costs or
expenses for loss of or damage to property, or injury or death of persons, which
directly or indirectly arise out of the indemnifying Party's performance
pursuant to this Agreement; provided, however, that a Party shall be solely
responsible for any such losses, claims, demands, costs or expenses which result
from its sole negligence or Willful Action.

              17. UNCONTROLLABLE FORCES

              Neither Party shall be considered to be in default in the
performance of any of its obligations under this Agreement when a failure of
performance shall be due to an uncontrollable force. The term "uncontrollable
force" shall mean any cause beyond the control of the Party affected including,
but not restricted to, failure of or threat of failure of facilities which have
been maintained in accordance with generally-accepted engineering and operating
practices in the electrical utility industry, flood, drought, earthquake,
tornado, storm fire, pestilence, lightning and other natural catastrophes,
epidemic, war, riot, civil disturbance or disobedience, strike, labor




                                       11



dispute, labor or material shortage, sabotage, government priorities and
restraint by court order or public authority (whether valid or invalid) and
actions or nonaction by or inability to obtain or keep the necessary
authorizations or approvals from any governmental agency or authority, which by
exercise of due diligence such Party could not reasonably have been expected to
avoid and which by exercise of due diligence it has been unable to overcome.
Nothing contained herein shall be construed as to require a Party to settle any
strike or labor dispute in which it may be involved. Either Party rendered
unable to fulfill any of its obligations under this Agreement by reason of an
uncontrollable force shall give prompt written notice of such fact to the other
Party and shall exercise due diligence to remove such inability with all
reasonable dispatch.

              18. INTEGRATION AND AMENDMENTS

              This Agreement constitutes the entire agreement between the
Parties relating to the interconnection of Producer's Plant to IID's electric
system, the acceptance of energy by IID from Producer and the providing of
electric service by IID. No oral agreement or prior written agreement between
the Parties shall be of any effect whatsoever; provided, however, that any
arrangements agreed upon by the Authorized Representatives within the limits of
their authority, and consistent with this Agreement shall be binding upon the
Parties. All changes to this Agreement shall be in writing and shall be signed
by an officer of each Party.

              19. NON-WAIVER

              None of the provisions of this Agreement shall be considered
waived by either Party except when such waiver is given in writing. The failure
of either Party to insist in any one or more instances upon strict performance
of any of the provisions of this Agreement or to take advantage of any of its
rights hereunder shall not be construed as a waiver of any such provisions




                                       12



or the relinquishment of any such rights for the future; but the same shall
continue and remain in full force and effect.

              20. NO DEDICATION OF FACILITIES

              Any undertaking by one Party to the other Party under any
provision of this Agreement shall not constitute the dedication of the system or
any portion thereof by the Party to the public or to the other Party, and it is
understood and agreed that any such undertaking under any provision of this
Agreement by a Party shall cease upon the termination of its obligations
hereunder.

              21. SUCCESSORS AND ASSIGNS

              21.1 This Agreement shall be binding upon and inure to the benefit
of the respective successors and assigns of the Parties.

              21.2 This Agreement may be assigned by Producer only (i) to a
purchaser or co-owner of the Plant or to a person who will operate the Plant
pursuant to a contract or other arrangement with such purchaser and in either
case with the prior written consent of IID (which shall not be unreasonably
withheld) or (ii) for security purposes, to a bank or other entity which
provides financing for the Plant or any electrical transmission facilities
associated therewith. Producer and IID agree that nothing in this Section 21.2
may be amended, modified or waived without the prior written consent of each and
every Party to the Funding and Construction Agreement (except for any Parties in
default thereunder.)

              22. EFFECT OF SECTION HEADINGS

              Section headings appearing in this Agreement are inserted for
convenience only, and shall not be construed as interpretations of text.




                                       13



              23. GOVERNING LAW

              This Agreement shall be interpreted, governed and construed under
the laws of the State of California or the laws of the United States, as
applicable.

              24. ARBITRATION

              24.1 Any dispute arising out of or relating to this Agreement, or
the breach thereof, which is not resolved by the Parties acting through their
Authorized Representatives shall be settled by arbitration to the extent
permitted by the laws applicable to the Parties; provided, however, that no
Party to the dispute shall be bound to any greater extent than any other Party
to the dispute. Arbitration shall not apply to any dispute or matter that is
within the jurisdiction of any regulatory agency.

              24.2 Any demand for arbitration shall be made by written notice to
the other Party setting forth in adequate detail the nature of the dispute, the
issues to be arbitrated, the amount or amounts, if any, involved in the dispute,
and the remedy sought. Within twenty (20) days from the receipt of such notice,
the other Party may submit its own written statement of the dispute and may set
forth in adequate detail any additional related matters or issues to be
arbitrated.

              24.3 Within thirty (30) days after delivery of the written notice
demanding arbitration, the Parties acting through their Authorized
Representatives shall meet for the purpose of selecting an arbitrator. The
Parties may agree upon a single arbitrator, but in the event that they cannot
agree, three arbitrators shall be used. Each Party shall designate one
arbitrator, and the two arbitrators shall then select a third arbitrator. All
arbitrators shall be persons skilled and experienced in the field in which the
dispute has arisen and no person shall be eligible for appointment as an
arbitrator who is or has been an officer or employee of either of the Parties or
otherwise interested in the matter to be arbitrated. Should either party refuse
or neglect to




                                       14



appoint an arbitrator or to furnish the arbitrators with any papers or
information demanded, the arbitrators are empowered, by both Parties, to proceed
without the participation or assistance of that Party.

              24.4 Except as otherwise provided in this Section, the arbitration
shall be governed by the rules and practices of the American Arbitration
Association, or a similar organization if the American Arbitration Association
should not at the time exist.

              24.5 Arbitration proceedings shall be held in Imperial,
California, at a time and place to be selected by the arbitrators. The
arbitrators shall hear evidence submitted by the Parties and may call for
additional information which shall be furnished by the Party having such
information. The arbitrators shall have no authority to call for information not
related to the issues included in the dispute or to determine other issues not
in dispute.

              24.6 If there is only one arbitrator, his decision shall be
binding and conclusive on the Parties. If there are three arbitrators, the
decision of any two shall be binding and conclusive. The decision of the
arbitrators shall contain findings regarding the issues involved in the dispute,
including the merits of the positions of the Parties, the materiality of any
default, and the remedy or relief to which a Party shall be entitled. The
arbitrators may not grant any remedy or relief which is inconsistent with this
Agreement, nor shall the arbitrators make findings or decide issues not in
dispute.

              24.7 The fees and expenses of the arbitrators shall be shared
equally by the Parties, unless the decision of the arbitrators specifies some
other 24 apportionment. All other expenses and costs of the arbitration shall be
borne by the Party incurring such expenses and costs.



                                       15



              24.8 Any decision or award granted by the arbitrators shall be
final and judgement may be entered on it in any court of competent jurisdiction.
This agreement to arbitrate shall be specifically enforceable.

              25. ENTIRE AGREEMENT

              25.1 The complete agreement of the Parties is set forth in this
Agreement and all communications regarding subject interconnected operations
whether oral or written, are hereby abrogated and withdrawn.

              26. NOTICES

              Any formal communication or notice in connection with this
Agreement shall be in writing and shall be deemed properly given if delivered in
person or sent first class mail, postage prepaid to the person specified below:


                                    ORMESA IH
                                    c/o Plant Manager
                                    P.O. Box 819
                                    El Centro, California 92244



                                    IMPERIAL IRRIGATION DISTRICT
                                    c/o General Manager
                                    P.O. Box 937
                                    Imperial, California 92251



              27. SEVERAL OBLIGATIONS

              Except where specifically stated in this Agreement to be
otherwise, the duties, obligations and liabilities of the Parties are intended
to be several and not joint or collective, Nothing contained in this Agreement
shall ever be construed to create an association, trust, partnership or joint
venture, or impose a trust or partnership duty, obligation or liability on or





                                       16



with regard to either Party. Each Party shall be individually and severally
liable for its own obligations under this Agreement.

              28. SIGNATURE CLAUSE

              The Parties have caused this Agreement to be executed in their
respective names, in duplicate, by their respective officers hereunto this 3rd
day of October, 1989.


                                         ORMESA GEOTHERMAL
                                         by Ormat Geothermal, Inc.
                                         Managing General Partner



                                         By /s/ Indecipherable
                                           -------------------------------------

                                         Its V. President
                                            ------------------------------------



ATTEST:

By /s/ Indecipherable
  --------------------------
           Secretary


                                         IMPERIAL IRRIGATION DISTRICT



                                         By  /s/  Indecipherable
                                           -------------------------------------
                                           President, Board of Directors



ATTEST:

By  /s/ Larry E. Beck
  --------------------------



           Secretary

Exhibit 10.3.29
89A.1
GEOOC2
03-02-89
EXECUTION COPY

PLANT CONNECTION AGREEMENT

FOR THE

GEO EAST MESA LIMITED PARTNERSHIP

UNIT NO. 2

BETWEEN

IMPERIAL IRRIGATION DISTRICT

AND

GEO EAST MESA LIMITED PARTNERSHIP

EXECUTION COPY

03-02-89

TABLE OF CONTENTS
-----------------

SECTION TITLE PAGE
------- ----- ----

1 PARTIES . . . . . . . . . . . . . . . . . . 1

2 RECITALS . . . . . . . . . . . . . . . . . . 1

3 AGREEMENT . . . . . . . . . . . . . . . . . . 2

4 DEFINITIONS . . . . . . . . . . . . . . . . . 2

5 EFFECTIVE DATE AND TERM . . . . . . . . . . . . . . 3

6 CONNECTION OF PLANT . . . . . . . . . . . . . . . 3

7 ELECTRIC SERVICE TO PRODUCER . . . . . . . . . . . . . 3

8 METERING OF ENERGY DELIVERIES . . . . . . . . . . . . . 3

9 PRODUCER'S DELIVERY AND IID ACCEPTANCE OF ENERGY FROM PLANT . . . . . 3

10 PRODUCER'S GENERAL OBLIGATIONS . . . . . . . . . . . . . 4

11 IID'S GENERAL OBLIGATIONS . . . . . . . . . . . . . . 5

12 BILLING . . . . . . . . . . . . . . . . . . 6

13 AUTHORIZED REPRESENTATIVES . . . . . . . . . . . . . 6

14 METERS . . . . . . . . . . . . . . . . . . 7

15 CONTINUITY OF SERVICE . . . . . . . . . . . . . . 8

16 LIABILITY . . . . . . . . . . . . . . . . . 9

17 UNCONTROLLABLE FORCES . . . . . . . . . . . . . . 10

18 INTEGRATION AND AMENDMENTS . . . . . . . . . . . . . 11

19 NON-WAIVER . . . . . . . . . . . . . . . . . 11

20 NO DEDICATION OF FACILITIES . . . . . . . . . . . . . 12

21 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . 12

22 EFFECT OF SECTION HEADINGS . . . . . . . . . . . . . 12

23 GOVERNING LAW . . . . . . . . . . . . . . . . 13

24 ARBITRATION . . . . . . . . . . . . . . . . . 13

25 ENTIRE AGREEMENT . . . . . . . . . . . . . . . 15

26 NOTICES . . . . . . . . . . . . . . . . . . 15

27 SEVERAL OBLIGATIONS . . . . . . . . . . . . . . . 15

28 SIGNATURE CLAUSE . . . . . . . . . . . . . . . 16

ATTACHMENTS
-----------

EXHIBIT "A" - RATE SCHEDULES GL AND A2 . . . . . . . . 17

EXHIBIT "B" - METERING ONE-LINE DIAGRAM . . . . . . . 21

EXHIBIT "C" - FUNDING AND CONSTRUCTION AGREEMENT
HEBER-MIRAGE TRANSMISSION PROJECT . . . . . 22

1. PARTIES
-------

The parties to this Agreement are IMPERIAL IRRIGATION DISTRICT ("IID"),
organized under the Water Code of the State of California and GEO EAST MESA
LIMITED PARTNERSHIP ("Producer"), hereinafter referred to individually as
"Party", and collectively as "Parties".

2. RECITALS
--------
2.1 Producer intends to construct and operate, as owner or lessee, a
megawatt generating facility with a maximum 27.5 megawatt net operating capacity
at the East Mesa (KGRA), Imperial County, California, and to sell the Plant
electrical output to Southern California Edison Company ("SCE").

2.2 SCE entered into the Power Purchase Agreement dated May 20, 1988,
("Purchase Agreement") with Producer, to purchase all the electrical output from
the Plant.

2.3 SCE and Producer agree that the terms and conditions regarding
transmission of the Plant's Energy to an IID/SCE point of interconnection shall
be pursuant to a Transmission Service Agreement to be entered into between IID
and Producer.

2.4 Since the Plant will be built in the IID service territory, it will
be convenient to connect the Plant to the IID electric system.
Producer hereby grants the IID the right to enter the Plant site for any
reasonable purposes connected with this Agreement, by previous arrangements with
the Plant manager. Those reasonable purposes include maintenance and repairs to
IID equipment in Producer's facilities, observing tests of said facilities,
reading of kilowatt-hour meters, and the like.

2.5 Producer desires to purchase and IID desires to sell the electrical
energy necessary to satisfy the operation and maintenance power consumption
requirements of the Plant for the life of the Plant that is not normally
generated by the Plant itself, or portable generating equipment.

2.6 The Parties desire, by means of this Agreement, to interconnect the
Plant to the IID electrical system and to establish the terms, conditions and
obligations of the Parties relating to such interconnection.

3. AGREEMENT
---------

The Parties agree as follows:

4. DEFINITIONS
-----------
4.1 Agreement: This Plant Connection Agreement between IID and
Producer, and all Exhibits hereto, as may be amended from time to time.

4.2 Authorized Representative: The representative of a Party
designated accordance with Section 13.

4.3 Energy: Electric energy in excess of Producer's electric energy
requirements, expressed in kilowatt-hours, generated by the Plant and measured
and delivered to the Point of Delivery.

4.4 Funding and Construction Agreement: An agreement entered into by
IID and others dated June 29, 1987, providing for the funding and construction
of the Heber-Mirage Transmission Project, to which a form of this Agreement is
attached as Exhibit C.

4.5 Operation Date: The day on which the Plant Energy is first
accepted by IID for delivery to SCE.

4.6 Plant: A maximum of 27.5 MW net operating capacity Geothermal
facility operated by Producer, as owner or lessee, including all associated
equipment and improvements necessary for generating electric energy and
transmitting it to the high voltage side of the power transformer.

4.7 Point of Delivery: The point on the high voltage side of
Producer's switchyard where IID's metering equipment measures the delivery of
Energy to the IID system as shown on Exhibit "B".

4.8 System Emergency: A condition on IID's system which is likely
to result in imminent significant disruption of service to customers or is
imminently likely to endanger life or property.

5. EFFECTIVE DATE AND TERM
-----------------------

This Agreement shall become effective upon the Operation Date of the
Plant, and shall remain in effect until the earlier of (i) April 15, 2015, or
(ii) thirty six (36) months from the date the Plant has ceased to operate at the
option of IID. It is understood that (i) if the Completion Date, as the term
Completion Date is defined in Article I of Funding and Construction Agreement
does not occur, or (ii) if the Operation Date does not occur within five (5)
years after the date this Agreement was executed, this Agreement shall be of no
force or effect.

6. CONNECTION OF PLANT
-------------------

6.1 Producer may electrically connect its Plant, in accordance with
the provisions of this Agreement, so that it can operate in parallel with the
IID electric system. Parallel operation will not commence until IID has
inspected and approved the interconnection facilities and operational
procedures.

6.2 Notwithstanding the provision that Producer has furnished the
high voltage switchyard complete, including the high voltage oil circuit
breakers and disconnect switches, the control of the high voltage oil circuit
breakers and disconnect switches shall be under the control of the IID
dispatcher.

7. ELECTRIC SERVICE TO PRODUCER
----------------------------

IID shall provide electric service to Producer pursuant to Section 12.

8. METERING OF ENERGY DELIVERIES
-----------------------------

Metering for electric service to Producer and for energy deliveries by
Producer to IID for delivery to SCE shall be at the Point of Delivery as shown
on Exhibit "B." Four meters shall be installed which shall measure and record
flows in each direction as shown on Exhibit "B."

9. PRODUCER'S DELIVERY AND IID ACCEPTANCE OF ENERGY FROM PLANT
-----------------------------------------------------------

Whenever electric output from the Plant exceeds Producer's power
requirements, Producer shall deliver all such excess output to IID for delivery
to SCE and IID shall accept such output for delivery to SCE and deliver such
output to SCE pursuant to a transmission service agreement to be entered into
between Producer and IID.

10. PRODUCER'S GENERAL OBLIGATIONS
------------------------------

Producer shall:

10.1 Operate the Plant in a manner consistent with applicable electric
utility industry standards, good engineering practice, and without degradation
of quality or reliability of service to IID customers.

10.2 Deliver the Plant's net electrical output to IID for the account
of SCE at the Point of Delivery.

10.3 Each Party shall provide the reactive kilovolt-ampere (KVA)
requirements of its own system so that there will be no interchange of reactive
KVA between systems. The Parties shall cooperate to control the flow of reactive
KVA to prevent the introduction of objectionable operating conditions on the
system of either Party.

10.4 Coordinate, to the greatest extent practicable, major overhaul
and inspection outages of the Plant with IID.

10.5 Give IID a written schedule on or before June 1, and December 1,
each year of the estimated amounts and rates of delivery of energy to be
delivered to IID for the account of SCE at the Point of Delivery during each
month of the succeeding twelve-month (12) period commencing July 1, and
January 1.

10.6 Give IID a written schedule on or before the fifteenth (15th) day
of each month of the estimated amounts and rates of delivery of energy to be
delivered to IID for the account of SCE at the Point of Delivery during each day
of the succeeding calendar month.

10.7 Give IID a schedule on or before 12:01 p.m. on Tuesday of each
seven-day (7) period of the estimated amounts and rates of delivery of energy to
be delivered to IID for the account of SCE at the Point of Delivery during each
hour of the succeeding seven-day (7) period commencing at 12:01 a.m. on the
following Monday; provided, however, that if any changes in the hourly
deliveries so scheduled become necessary, Producer shall notify IID of such
changes as far in advance as possible.

10.8 Provide IID any reasonable rights-of-way and access required for
testing and reading of meters by previous arrangement with the Plant manager.

10.9 Carry out the directions of the Authorized Representatives with
respect to the matters set forth in this Agreement.

11. IID'S GENERAL OBLIGATIONS
-------------------------

IID shall:

11.1 Design, acquire, construct, operate and maintain, or cause to be
designed, acquired, constructed, operated and maintained, and shall own, a
connecting transmission line between

IID's transmission system and the Plant. Following the completion of such line,
IID may bill and Producer shall pay IID's costs of designing, acquiring and
constructing such line. Producer shall have the right to audit IID's records and
accounts to verify the cost of such line.

11.2 Accept the Plant's net electrical output for the account of SCE
at the Point of Delivery and simultaneously deliver an equal amount of electric
energy (less applicable transmission losses) to the SCE system at IID/SCE
point(s) of interconnection.

11.3 Coordinate, to the greatest extent practicable, major overhaul
and inspection outages of IID transmission facilities with Producer and notify
Producer of any changes as far in advance as possible.

11.4 Carry out the directions of the Authorized Representative with
respect to the matters set forth in this Agreement.

11.5 Operate its system in a manner consistent with applicable utility
industry standards and good engineering practices.

12. BILLING
-------

12.1 IID shall read the meters monthly according to its regular meter
reading schedule beginning no more than thirty (30) days after the date that
electric energy is first supplied to Producer. IID monthly shall send Producer
within ten (10) working days after the meter is read a bill for electric
service. Producer shall pay IID the total amount billed within thirty (30) days
of receipt of the bill.

12.2 IID shall bill Producer for Producer's consumption of energy from
IID's resources in accordance with Rate Schedule GL or Rate Schedule A-2, as
applicable, as it may be revised from time to time. Copies of current Rate
Schedule GL and current Rate Schedule A-2 are attached as Exhibit "A."

12.3 If Producer disputes a bill, payment shall be made as if no
dispute existed pending resolution of the dispute by the Authorized
Representatives. If the bill is determined to be in error, the disputed amount
shall be refunded by IID including interest at the rate of one and one-half
percent (1 1/2%) per month, compounded monthly, from the date of payment to the
date the refund check or adjusted bill is mailed.

13. AUTHORIZED REPRESENTATIVES
--------------------------

13.1 Within thirty (30) days after the date this Agreement is signed,
each Party shall designate, by written notice to the other Party, an Authorized
Representative who is authorized to act in its behalf in the implementation of
this Agreement and with respect to those matters contained herein which are the
functions and responsibilities for the Authorized Representatives. Either Party
may, at any time, change the designation of it Authorized Representative by
written notice to the other Party.

13.2 IID's Authorized Representative shall develop detailed written
procedures necessary and convenient to administer this Agreement within six (6)
months after the date signed. Such procedures shall be submitted to Producer's
Authorized Representative for review, comment, discussion and concurrence before
they are put into effect. Such procedures shall include, without limitation: (i)
communication between Producer and IID's electric system dispatcher with regard
to daily operating matters, (ii) billing and payments, (iii) specified equipment
tests, and (iv) operating matters which affect or may affect quality and
reliability of service to electric customers and continuity of deliveries to
SCE.

13.3 The Authorized Representative shall have no authority to modify
any of the provisions of this Agreement.

14. METERS
------

14.1 All meters shall be sealed and the seal shall be broken only upon
occasions when the meters are to be inspected, tested or adjusted.

14.2 IID shall inspect and test all meters upon their installation and
at least once every year thereafter. If requested to do so by Producer, IID
shall inspect or test a meter more frequently than every year, but the expense
of such inspection or test shall be paid by Producer unless the meter is found
to register inaccurately by more than two percent (2%) from the measurement made
by a standard meter. Each Party shall give reasonable notice to the other Party
of the time when any inspection or test shall take place and that Party may have
representatives present at the test or inspection. If a meter is found to be
inaccurate or defective, it shall be adjusted, repaired or replaced in order to
provide accurate metering. All adjustments due to inaccurate meters shall be
limited to the preceding six (6) months.

14.3 If a meter fails to register, or if the measurement made by a
meter during a test varies by more than two percent (2%) from the measurement
made by the standard meter used in the test, adjustment shall be made correcting
all measurements made by the inaccurate meter for:

(i) the actual period during which inaccurate measurements were
made, if the period can be determined, or if not,

(ii) the period immediately preceding the test of the meter equal

to one-half (1/2) the time from the date of the last previous
test of the meter; provided, however, that the period covered
by the correction shall not exceed six (6) months.

14.4 Producer shall telemeter information to IID's Dispatch Center
regarding the kilowatts, kilowatt-hours, kilovars and kilovar-hours delivered to
or received from IID at the Point of Delivery over phone line leased by
Producer.

IID shall purchase, own, and shall design, install, operate, maintain, or
cause to be designed, installed, operated, and maintained, equipment to
automatically transmit from the Plant to IID's Dispatch Center continuous values
of Plant output expressed as megawatts, megavars and megawatt-hours. IID may
thereupon bill and Producer shall promptly pay IID's cost of design, purchase
and installation of said equipment. Producer shall have the right to audit IID's
records and accounts to verify the cost of said equipment.

15. CONTINUITY OF SERVICE
---------------------

IID shall not be obligated to accept and IID may require Producer to
temporarily curtail, interrupt or reduce deliveries of energy upon advance
notice to Producer, when such curtailment, interruption or reduction is required
in order for IID to construct, install, maintain, repair, replace, remove,
investigate or inspect any of its equipment or any part of its system or if IID
determines that such curtailment, interruption or reduction is necessary because
of a System Emergency, forced outages or abnormal operating conditions on its
system. IID shall use reasonable efforts to keep interruptions and curtailments
to a minimum time.

16. LIABILITY
---------

16.1 Except for any loss, damage, claim, costs, charge or expense
resulting from Willful Action, neither Party (the "released Party"), its
directors or other governing body, officers or employees shall be liable to the
other Party for any loss, damage, claim, cost, charge, or expense of any kind or
nature incurred by the other Party (including direct, indirect or consequential
loss, damage, claim, cost, charge or expense; and whether or not resulting from
the negligence of a Party, its directors or other governing body, officers,
employees or any person or entity whose negligence would be imputed to a Party)
from engineering, repair, supervision, inspection, testing, protection,
operation, maintenance, replacement, reconstruction, use or ownership of the

released Party's electrical system, Plant(s) or associated facilities in
connection with the implementation of this Agreement. Except for any loss,
damage, claim, cost, charge or expense resulting from Willful Action, each Party
releases the other Party, its directors or other governing body, officers and
employees from any such liability.

16.2 For the purpose of this Section 16, Willful Action shall be
defined as action taken or not taken by a Party at the direction of its
directors or other governing body, officers or employees having management or
administrative responsibility affecting its performance under this Agreement, as
follows:

16.2.1 Action which is knowingly or intentionally taken or not taken
with conscious indifference to the consequences thereof or with intent that
injury or damage would result or would probably result therefrom.

16.2.2 Action which has been determined by final arbitration award or
final judgment or judicial decree to be a material default under this Agreement
and which occurs or continues beyond the time specified in such arbitration
award or judgment or judicial decree for curing such default or, if no time to
cure is specified therein, occurs or continues thereafter beyond a reasonable
time to cure such default.

16.2.3 Action which is knowingly or intentionally taken or not taken
with the knowledge that such action taken or not taken is a material default
under this Agreement.

16.3 Willful Action does not include any act or failure to act which
is merely involuntary, accidental or negligent.

16.4 The phrase "employees having management or administrative
responsibility," as used in Section 16.2, means the employees of a Party who are
responsible for one or more of the

executive functions of planning, organizing, coordinating, directing,
controlling and supervising such Party's performance under this Agreement with
responsibility for results.

16.5 Subject to the foregoing provisions of this Section 16, each
Party agrees to defend, indemnify and save harmless the other Party, its
officers, agents, or employees against all losses, claims, demands, costs or
expenses for loss of or damage to property, or injury or death of persons, which
directly or indirectly arise out of the indemnifying Party's performance
pursuant to this Agreement; provided, however, that a Party shall be solely
responsible for any such losses, claims, demands, costs or expenses which result
from its sole negligence or Willful Action.

17. UNCONTROLLABLE FORCES
---------------------

Neither Party shall be considered to be in default in the performance of
any of its obligations under this Agreement when a failure of performance shall
be due to an uncontrollable force. The term "uncontrollable force" shall mean
any cause beyond the control of the Party affected including, but not restricted
to, failure of or threat of failure of facilities which have been maintained in
accordance with generally-accepted engineering and operating practices in the
electrical utility industry, flood, drought, earthquake, tornado, storm fire,
pestilence, lightning and other natural catastrophes, epidemic, war, riot, civil
disturbance or disobedience, strike, labor dispute, labor or material shortage,
sabotage, government priorities and restraint by court order or public authority
(whether valid or invalid) and actions or nonaction by or inability to obtain or
keep the necessary authorizations or approvals from any governmental agency or
authority, which by exercise of due diligence such Party could not reasonably
have been expected to avoid and which by exercise of due diligence it has been
unable to overcome. Nothing contained herein shall be construed as to require a
Party to settle any strike or labor dispute in which it may be

involved. Either Party rendered unable to fulfill any of its obligations under
this Agreement by reason of an uncontrollable force shall give prompt written
notice of such fact to the other Party and shall exercise due diligence to
remove such inability with all reasonable dispatch.

18. INTEGRATION AND AMENDMENTS
--------------------------

This Agreement constitutes the entire agreement between the Parties
relating to the interconnection of Producer's Plant to IID's electric system,
the acceptance of energy by IID from Producer and the providing of electric
service by IID. No oral agreement or prior written agreement between the Parties
shall be of any effect whatsoever; provided, however, that any arrangements
agreed upon by the Authorized Representatives within the limits of their
authority, and consistent with this Agreement shall be binding upon the Parties.
All changes to this Agreement shall be in writing and shall be signed by an
officer of each Party.

19 NON-WAIVER
----------

None of the provisions of this Agreement shall be considered waived by
either Party except when such waiver is given in writing. The failure of either
Party to insist in any one or more instances upon strict performance of any of
the provisions of this Agreement or to take advantage of any of its rights
hereunder shall not be construed as a waiver of any such provisions or the
relinquishment of any such rights for the future; but the same shall continue
and remain in full force and effect.

20. NO DEDICATION OF FACILITIES
---------------------------

Any undertaking by one Party to the other Party under any provision of
this Agreement shall not constitute the dedication of the system or any portion
thereof by the Party to the public or to the other Party, and it is understood
and agreed that any such undertaking under any

provision of this Agreement by a Party shall cease upon the termination of its
obligations hereunder.

21. SUCCESSORS AND ASSIGNS
----------------------

21.1 This Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of the Parties.

21.2 This Agreement may be assigned by Producer only (i) to a
purchaser or co-owner of the Plant or to a person who will operate the Plant
pursuant to a contract or other arrangement with such purchaser and in either
case with the prior written consent of IID (which shall not be unreasonably
withheld) or (ii) for security purposes, to a bank or other entity which
provides financing for the Plant or any electrical transmission facilities
associated therewith. Producer and IID agree that nothing in this Section 21.2
may be amended, modified or waived without the prior written consent of each and
every Party to the Funding and Construction Agreement (except for any Parties in
default thereunder.)

22. EFFECT OF SECTION HEADINGS
--------------------------

Section heading appearing in this Agreement are inserted for convenience
only, and shall not be construed as interpretations of text.

23. GOVERNING LAW
-------------
This Agreement shall be interpreted, governed and construed under the
laws of the State of California or the laws of the United States, as applicable.

24. ARBITRATION
-----------

24.1 Any dispute arising out of or relating to this Agreement, or the
breach thereof, which is not resolved by the Parties acting through their
Authorized Representatives shall be settled by arbitration to the extent
permitted by the laws applicable to the Parties; provided,

however, that no Party to the dispute shall be bound to any greater extent than
any other Party to the dispute. Arbitration shall not apply to any dispute or
matter that is within the jurisdiction of any regulatory agency.

24.2 Any demand for arbitration shall be made by written notice ot the
other Party setting forth in adequate detail the nature of the dispute, the
issues to be arbitrated, the amount or amounts, if any, involved in t he
dispute, and the remedy sought. Within twenty (20) drays from the receipt of
such notice, the other Party may submit its own written statement of the dispute
and may set forth in adequate detail any additional related matters or issues to
be arbitrated.

24.3 Within thirty (30) days after delivery of the written notice
demanding arbitration the Parties acting through their Authorized
Representatives shall meet for the purpose of selecting an arbitrator. The
Parties may agree upon a singe arbitrator, but in the event that they cannot
agree, three arbitrators shall be used. Each Party shall designate one
arbitrator, and the two arbitrators shall then select a third arbitrator. All
arbitrators hall be persons skilled and experienced in the field in which the
dispute has arisen and no person shall be eligible for appointment as an
arbitrator who is or has been an officer or employee of either of the Parties or
otherwise interested in the matter to be arbitrated. Should either party refuse
or neglect to appoint an arbitrator or to furnish the arbitrators with any
papers or information demanded, the arbitrators are empowered, by both Parties,
to proceed without the participation or assistance of that Party.

24.4 Except as otherwise provided in this Section, the arbitration
shall be governed by the rules and practices of the American Arbitration
Association, or a similar organization if the American Arbitration Association
should not at the time exist.

24.5 Arbitration proceedings shall be held in Imperial, California, at
a time and place to be selected by the arbitrators. The arbitrators shall hear
evidence submitted by the Parties and

may call for additional information which shall be furnished by the Party having
such information. The arbitrators shall have no authority to call for
information not related to the issues included in the dispute or to determine
other issues not in dispute.

24.6 If there is only one arbitrator, his decision shall be binding
and conclusive on the Parties. If there are three arbitrators, the decision of
any two shall be binding and conclusive. The decision of the arbitrators shall
contain findings regarding the issues involved in the dispute, including the
merits of the positions of the Parties, the materiality of any default, and the
remedy or relief to which a Party shall be entitled. The arbitrators may not
grant any remedy or relief which is inconsistent with this Agreement, nor shall
be arbitrators make findings or decide issues not in dispute.

24.7 The fees and expenses of the arbitrators shall be shared equally
by the Parties, unless the decision of the arbitrators specifies some other
apportionment. All other expenses and costs of the arbitration shall be borne by
the Party incurring such expenses and costs.

24.8 Any decision or award granted by the arbitrators shall be final
and judgment may be entered on it in any court of competent jurisdiction. This
agreement to arbitrate shall be specifically enforceable.

25. ENTIRE AGREEMENT
----------------

25.1 The complete agreement of the Parties is set forth in this
Agreement and all communications regarding subject interconnected operations
whether oral or written, are hereby abrogated and withdrawn.

26. NOTICES
-------

Any formal communication or notice in connection with this Agreement
shall be in writing and shall be deemed properly given if delivered in person or
sent first class mail, postage prepaid to the person specified below:

GEO EAST MESA
LIMITED PARTNERSHIP
P.O. Box 748
Holtville, CA 92250

IMPERIAL IRRIGATION DISTRICT
c/o General Manager
P. O. Box 937
Imperial, California 92251

27. SEVERAL OBLIGATIONS
-------------------

Except where specifically stated in this Agreement to be otherwise, the
duties, obligations and liabilities of the Parties are intended to be several
and not joint or collective. Nothing contained in this Agreement shall ever be
construed to create an association, trust, partnership, or joint venture, or
impose a trust or partnership duty, obligation or liability on or with regard to
either Party. Each Party shall be individually and severally liable for its own
obligations under this Agreement.

28. SIGNATURE CLAUSE
----------------

The Parties have caused this Agreement to be executed in their respective
names, in duplicate, by their respective officers hereunto this 21st day of
March, 1989.
GEO EAST MESA LIMITED PARTNERSHIP

By /s/ Indecipherable
-----------------------------------
3-16-89

ATTEST:

By /s/ Indecipherable
--------------------------------
Secretary

IMPERIAL IRRIGATION DISTRICT

By /s/ Indecipherable
---------------------------------------
President, Board of Directors

ATTEST:

By /s/ Larry E. Beck
---------------------------------
Secretary




                                                                 Exhibit 10.3.30

                                                                          89A.1
                                                                          GE00C3
                                                                        03-02-89
                                                                  EXECUTION COPY







                           PLANT CONNECTION AGREEMENT
                                     FOR THE
                        GEO EAST MESA LIMITED PARTNERSHIP
                                   UNIT NO. 3

                                     BETWEEN

                          IMPERIAL IRRIGATION DISTRICT
                                       AND
                        GEO EAST MESA LIMITED PARTNERSHIP
















EXECUTION COPY
03-02-89






                                TABLE OF CONTENTS
                                -----------------



SECTION                                     TITLE                                          PAGE
-------                                     -----                                          ----

1           PARTIES ........................................................................1

2           RECITALS........................................................................1

3           AGREEMENT.......................................................................2

4           DEFINITIONS.....................................................................2

5           EFFECTIVE DATE AND TERM.........................................................3

6           CONNECTION OF PLANT.............................................................3

7           ELECTRIC SERVICE TO PRODUCER....................................................3

8           METERING OF ENERGY DELIVERIES...................................................3

9           PRODUCER'S DELIVERY AND IID ACCEPTANCE
             OF ENERGY FROM PLANT...........................................................3

10          PRODUCER'S GENERAL OBLIGATIONS..................................................4

11          IID'S GENERAL OBLIGATIONS ......................................................5

12          BILLING.........................................................................6

13          AUTHORIZED REPRESENTATIVES......................................................6

14          METERS..........................................................................7

15          CONTINUITY OF SERVICE...........................................................8

16          LIABILITY.......................................................................9

17          UNCONTROLLABLE FORCES..........................................................10

18          INTEGRATION AND AMENDMENTS.....................................................11

19          NON-WAIVER.....................................................................11



20          NO DEDICATION OF FACILITIES ...................................................12

                                       i




21          SUCCESSORS AND ASSIGNS.........................................................12

22          EFFECT OF SECTION HEADINGS.....................................................12

23          GOVERNING LAW..................................................................13

24          ARBITRATION....................................................................13

25          ENTIRE AGREEMENT...............................................................15

26          NOTICES........................................................................15

27          SEVERAL OBLIGATIONS............................................................15

28          SIGNATURE CLAUSE...............................................................16


        ATTACHMENTS
        -----------


        EXHIBIT "A" - RATE SCHEDULES GL AND A2.............................................17

        EXHIBIT "B" - METERING ONE-LINE DIAGRAM............................................21


        EXHIBIT "C" - FUNDING AND CONSTRUCTION
                      AGREEMENT HEBER-MIRAGE
                      TRANSMISSION PROJECT.................................................22




                                       ii




1.  PARTIES

              The parties to this Agreement are IMPERIAL IRRIGATION DISTRICT
("IID"), organized under the Water Code of the State of California and GEO EAST
MESA LIMITED PARTNERSHIP ("Producer"), hereinafter referred to individually as
"Party", and collectively as "Parties".

2.  RECITALS

              2.1 Producer intends to construct and operate, as owner or lessee,
a megawatt generating facility with a maximum 27.5 megawatt net operating
capacity at the East Mesa (KGRA), Imperial County, California, and to sell the
Plant electrical output to Southern California Edison Company ("SCE").

              2.2 SCE has entered into the Power Purchase Agreement dated May
20, 1988, ("Purchase Agreement") with Producer, to purchase all the electrical
output from the Plant.

              2.3 SCE and Producer agree that the terms and conditions regarding
transmission of the Plant's Energy to an IID/SCE point of interconnection shall
be pursuant to a Transmission Service Agreement to be entered into between IID
and Producer.

              2.4   Since the Plant will be built In the IID service territory,
it will be convenient to connect the Plant to the IID electric system.
              Producer hereby grants the IID the right to enter the Plant site
for any reasonable purposes connected with this Agreement, by previous
arrangements with the



Plant manager. Those reasonable purposes include maintenance and repairs to IID
equipment in Producer's facilities, observing tests of said facilities, reading
of kilowatt-hour meters, and the like.

              2.5 Producer desires to purchase and IID desires to sell the
electrical energy necessary to satisfy the operation and maintenance power
consumption requirements of the Plant for the life of the Plant that is not
normally generated by the Plant itself, or portable generating equipment.

              2.6 The Parties desire, by means of this Agreement, to
Interconnect the Plant to the IID electrical system and to establish the terms,
conditions and obligations of the Parties relating to such Interconnection.

3.  AGREEMENT

              The Parties agree as follows:

4.  DEFINITIONS

              4.1 Agreement: This Plant Connection Agreement between IID and
Producer, and all Exhibits hereto, as may be amended from time to time.

              4.2   Authorized Representative:  The representative of a Party
designated in accordance with Section 13.

              4.3   Energy:  Electric energy in excess of Producer's electric
energy requirements, expressed in kilowatt-hours, generated by the Plant and
measured and delivered to the Point of Delivery.

                                       2


              4.4 Funding and Construction Agreement: An agreement entered into
by IID and others dated June 29, 1987, providing for the funding and
construction of the Heber-Mirage Transmission Project, to which a form of this
Agreement is attached as Exhibit C.

              4.5   Operation Date:  The day on which the Plant Energy is first
accepted by IID for delivery to SCE.

              4.6   Plant:  A maximum of 27.5 MW net operating capacity
Geothermal facility operated by Producer, as owner or lessee, including all
associated equipment and improvements necessary for generating electric energy
and transmitting it to the high voltage side of the power transformer.

              4.7 Point of Delivery: The point on the high voltage side of
Producer's switchyard where IID's metering equipment measures the delivery of
Energy to the IID system as shown on Exhibit "5".

              4.8   System Emergency:  A condition on IID's system which is
likely to result in imminent significant disruption of service to customers or
is imminently likely to endanger life or property.

5.  EFFECTIVE DATE AND TERM
    -----------------------

              This Agreement shall become effective upon the Operation Date of
the Plant, and shall remain in effect until the earlier of (i) April 15, 2015,
or (ii) thirty six (36) months from the date the Plant has ceased to operate at
the option of IID. It is understood that (i) if the Completion Date, as the term
Completion Date is defined in Article I of Funding and Construction Agreement
does not occur, or (ii) if the Operation Date does

                                       3


not occur within five (5) years after the date this Agreement was executed, this
Agreement shall be of no force or effect.

6.  CONNECTION OF PLANT
    -------------------

              6.1 Producer may electrically connect its Plant, in accordance
with the provisions of this Agreement, so that it can operate in parallel with
the IID electric system. Parallel operation will not commence until IID has
inspected and approved the interconnection facilities and operational
procedures.

              6.2 Notwithstanding the provision that Producer has furnished the
high voltage switchyard complete, including the high voltage oil circuit
breakers and disconnect switches, the control of the high voltage oil circuit
breakers and disconnect switches shall be under the control of the IID
dispatcher.

7.  ELECTRIC SERVICE TO PRODUCER
    ----------------------------

              IID shall provide electric service to Producer pursuant to
Section 12.

8.  METERING OF ENERGY DELIVERIES
    -----------------------------

              Metering for electric service to Producer and for energy
deliveries by Producer to IID for delivery to SCE shall be at the Point of
Delivery as shown on Exhibit "B." Four meters shall be installed which shall
measure and record flows in each direction as shown on Exhibit "B."

9.  PRODUCER'S DELIVERY AND IID ACCEPTANCE OF ENERGY FROM PLANT
    -----------------------------------------------------------

              Whenever electric output from the Plant exceeds Producer's power
requirements, Producer shall deliver all such excess output to IID for delivery
to SCE and

                                       4


IID shall accept such output for delivery to SCE and deliver such output to SCE
pursuant to a transmission service agreement to be entered into between Producer
and IID.

10.  PRODUCER'S GENERAL OBLIGATIONS
     ------------------------------

              Producer shall:

              10.1  Operate the Plant in a manner consistent with applicable
electric utility industry standards, good engineering practice, and without
degradation of quality or reliability of service to IID customers.

              10.2  Deliver the Plant's net electrical output to IID for the
account of SCE at the Point of Delivery.

              10.3  Each Party shall provide the reactive kilovolt-ampere (KVA)
requirements of its own system so that there will be no interchange of reactive
KVA between systems. The Parties shall cooperate to control the flow of reactive
KVA to prevent the introduction of objectionable operating conditions on the
system of either Party.

              10.4  Coordinate, to the greatest extent practicable, major
overhaul and inspection outages of the Plant with IID.

              10.5  Give IID a written schedule on or before June 1, and
December 1, each year of the estimated amounts and rates of delivery of energy
to be delivered to IID for the account of SCE at the Point of Delivery during
each month of the succeeding twelve-month (12) period commencing July 1, and
January 1.

                                       5


              10.6  Give IID a written schedule on or before the fifteenth
(15th) day of each month of the estimated amounts and rates of delivery of
energy to be delivered to IID for the account of SCE at the Point of Delivery
during each day of the succeeding calendar month.

              10.7  Give IID a schedule on or before 12:01 p.m. on Tuesday of
each seven-day (7) period of the estimated amounts and rates of delivery of
energy to be delivered to IID for the account of SCE at the Point of Delivery
during each hour of the succeeding seven-day (7) period commencing at 12:01 a.m.
on the following Monday; provided, however, that if any changes In the hourly
deliveries so scheduled become necessary, Producer shall notify IID of such
changes as far in advance as possible.

              10.8  Provide IID any reasonable rights-of-way and access required
for testing and reading of meters by previous arrangement with the Plant
manager.

              10.9  Carry out the directions of the Authorized Representatives
with respect to the matters set forth in this Agreement.

11.  IID'S GENERAL OBLIGATIONS
     -------------------------

              IID shall:

              11.1 Design, acquire, construct, operate and maintain, or cause to
be designed, acquired, constructed, operated and maintained, and shall own, a
connecting transmission line between IID's transmission system and the Plant.
Following the completion of such line, IID may bill and Producer shall pay IID's
costs of designing,

                                       6


acquiring and constructing such line. Producer shall have the right to audit
IID's records and accounts to verify the cost of such line.

              11.2 Accept the Plant's net electrical output for the account of
SCE at the Point of Delivery and simultaneously deliver an equal amount of
electric energy (less applicable transmission losses) to the SCE system at
IID/SCE point(s) of interconnection.

              11.3 Coordinate, to the greatest extent practicable, major
overhaul and inspection outages of IID transmission facilities with Producer and
notify Producer of any changes as far in advance as possible.

              11.4 Carry out the directions of the Authorized Representative
with respect to the matters set forth in this Agreement.

              11.5 Operate its system in a manner consistent with applicable
utility industry standards and good engineering practices.

12.  BILLING
     -------

              12.1 IID shall read the meters monthly according to its regular
meter reading schedule beginning no more than thirty (30) days after the date
that electric energy is first supplied to Producer. IID monthly shall send
Producer within ten (10) working days after the meter is read a bill for
electric service. Producer shall pay IID the total amount billed within thirty
(30) days of receipt of the bill.

              12.2 IID shall bill Producer for Producer's consumption of energy
from IID's resources in accordance with Rate Schedule GL or Rate Schedule A-2,
as applicable, as it

                                       7


may be revised from time to time. Copies of current Rate Schedule GL and current
Rate Schedule A-2 are attached as Exhibit "A."

              12.3 If Producer disputes a bill, payment shall be made as if no
dispute existed pending resolution of the dispute by the Authorized
Representatives. If the bill is determined to be in error, the disputed amount
shall be refunded by IID including interest at the rate of one and one-half
percent (l 1/2%) per month, compounded monthly, from the date of payment to the
date the refund check or adjusted bill is mailed.

13.  AUTHORIZED REPRESENTATIVES
     --------------------------

              13.1 Within thirty (30) days after the date this Agreement is
signed, each Party shall designate, by written notice to the other Party, an
Authorized Representative who is authorized to act in its behalf in the
implementation of this Agreement and with respect to those matters contained
herein which are the functions and responsibilities for the Authorized
Representatives. Either Party may, at any time, change the designation of its
Authorized Representative by written notice to the other Party.

              13.2 IID's Authorized Representative shall develop detailed
written procedures necessary and convenient to administer this Agreement within
six (6) months after the date signed. Such procedures shall be submitted to
Producer's Authorized Representative for review, comment, discussion and
concurrence before they are put into effect. Such procedures shall include,
without limitation: (i) communication between Producer and IID's electric system
dispatcher with regard to daily operating matters, (ii) billing and payments,
(iii) specified equipment tests, and (iv) operating matters which

                                       8


affect or may affect quality and reliability of service to electric customers
and continuity of deliveries to SCE.

              13.3 The Authorized Representative shall have no authority to
modify any of the provisions of this Agreement.

14.  METERS
     ------

              14.1 All meters shall be sealed and the seal shall be broken only
upon occasions when the meters are to be inspected, tested or adjusted.

              14.2 IID shall inspect and test all meters upon their installation
and at least once every year thereafter. If requested to do so by Producer, IID
shall inspect or test a meter more frequently than every year, but the expense
of such inspection or test shall be paid by Producer unless the meter is found
to register inaccurately by more than two percent (2%) from the measurement made
by a standard meter. Each Party shall give reasonable notice to the other Party
of the time when any inspection or test shall take place and that Party may have
representatives present at the test or inspection. If a meter is found to be
inaccurate or defective, it shall be adjusted, repaired or replaced in order to
provide accurate metering. All adjustments due to accurate meters shall be
limited to the preceding six (6) months.

              14.3 If a meter fails to register, or if the measurement made by a
meter during a test varies by more than two percent (2%) from the measurement
made by the standard meter used in the test, adjustment shall be made correcting
all measurements made by the inaccurate meter for:

                                       9


          (i)  the actual period during which inaccurate measurements were made,
               if the period can be determined, or if not,

          (ii) the period immediately preceding the test of the meter equal to
               one-half (1/2) the time from the date of the last previous test
               of the meter; provided, however, that the period covered by the
               correction shall not exceed six (6) months.

              14.4 Producer shall telemeter information to IID's Dispatch Center
regarding the kilowatts, kilowatt-hours, kilovars and kilovar-hours delivered to
or received from IID at the Point of Delivery over phone line leased by
Producer.
              IID shall purchase, own, and shall design, install, operate,
maintain, or cause to be designed, installed, operated, and maintained,
equipment to automatically transmit from the Plant to IID's Dispatch Center
continuous values of Plant output expressed as megawatts, megavars and
megawatt-hours. IID may thereupon bill and Producer shall promptly pay IID's
cost of design, purchase and installation of said equipment. Producer shall have
the right to audit IID's records and accounts to verify the cost of said
equipment.

15.  CONTINUITY OF SERVICE
     ---------------------

              IID shall not be obligated to accept and IID may require Producer
to temporarily curtail, interrupt or reduce deliveries of energy upon advance
notice to Producer, when such curtailment, interruption or reduction is required
in order for IID to construct, install, maintain, repair, replace, remove,
investigate or inspect any of its equipment or any part of its


                                       10


system or if IID determines that such curtailment, interruption or reduction is
necessary because of a System Emergency, forced outages or abnormal operating
conditions on its system. IID shall use reasonable efforts to keep interruptions
and curtailments to a minimum time.

16.  LIABILITY
     ---------

              16.1 Except for any loss, damage, claim, costs, charge or expense
resulting from Willful Action, neither Party (the "released Party"), its
directors or other governing body, officers or employees shall be liable to the
other Party for any loss, damage, claim, cost, charge, or expense of any kind or
nature incurred by the other Party (including direct, indirect or consequential
loss, damage, claim, cost, charge or expense; and whether or not resulting from
the negligence of a Party, its directors or other governing body, officers,
employees or any person or entity whose negligence would be imputed to a Party)
from engineering, repair, supervision, inspection, testing, protection,
operation, maintenance, replacement, reconstruction, use or ownership of the
released Party's electrical system, Plant(s) or associated facilities in
connection with the implementation of this Agreement. Except for any loss,
damage, claim, cost, charge or expense resulting from Willful Action, each Party
releases the other Party, its directors or other governing body, officers and
employees from any such liability.

              16.2 For the purpose of this Section 16, Willful Action shall be
defined as action taken or not taken by a Party at the direction of its
directors or other governing

                                       11



body, officers or employees having management or administrative responsibility
affecting its performance under this Agreement, as follows:

              16.2.1 Action which is knowingly or intentionally taken or not
taken with conscious indifference to the consequences thereof or with intent
that injury or damage would result or would probably result therefrom.

              16.2.2 Action which has been determined by final arbitration award
or final judgment or judicial decree to be a material default under this
Agreement and which occurs or continues beyond the time specified in such
arbitration award or judgment or judicial decree for curing such default or, if
no time to cure is specified therein, occurs or continues thereafter beyond a
reasonable time to cure such default.

              16.2.3 Action which is knowingly or intentionally taken or not
taken with the knowledge that such action taken or not taken is a material
default under this Agreement.

              16.3 Willful Action does not include any act or failure to act
which is merely involuntary, accidental or negligent.

              16.4 The phrase "employees having management or administrative
responsibility," as used in Section 16.2, means the employees of a Party who are
responsible for one on more of the executive functions of planning, organizing,
coordinating, directing, controlling and supervising such Party's performance
under this Agreement with responsibility for results.

              16.5 Subject to the foregoing provisions of this Section 16, each
Party agrees to defend, indemnify and save harmless the other Party, its
officers, agents, or employees


                                       12


against all losses, claims, demands, costs or expenses for loss of or damage to
property, or injury or death of persons, which directly or indirectly arise out
of the indemnifying Party's performance pursuant to this Agreement; provided,
however, that a Party shall be solely responsible for any such losses, claims,
demands, costs or expenses which result from its sole negligence or Willful
Action.

17.  UNCONTROLLABLE FORCES
     ---------------------

              Neither Party shall be considered to be in default in the
performance of any of its obligations under this Agreement when a failure of
performance shall be due to an uncontrollable force. The term "uncontrollable
force" shall mean any cause beyond the control of the Party affected including,
but not restricted to, failure of or threat of failure of facilities which have
been maintained in accordance with generally-accepted engineering and operating
practices in the electrical utility industry, flood, drought, earthquake,
tornado, storm fire, pestilence, lightning and other natural catastrophes,
epidemic, war, riot, civil disturbance or disobedience, strike, labor dispute,
labor or material shortage, sabotage, government priorities and restraint by
court order or public authority (whether valid or invalid) and actions or
nonaction by or inability to obtain or keep the necessary authorizations or
approvals from-any governmental agency or authority, which by exercise of due
diligence such Party could not reasonably have been expected to avoid and which
by exercise of due diligence it has been unable to overcome. Nothing contained
herein shall be construed as to require a Party to settle any strike or labor
dispute in which it may be involved. Either Party rendered unable to fulfill any
of

                                       13



its obligations under this Agreement by reason of an uncontrollable force shall
give prompt written notice of such fact to the other Party and shall exercise
due diligence to remove such inability with all reasonable dispatch.

18.  INTEGRATION AND AMENDMENTS
     --------------------------

              This Agreement constitutes the entire agreement between the
Parties relating to the interconnection of Producer's Plant to IID's electric
system, the acceptance of energy by IID from Producer and the providing of
electric service by IID. No oral agreement or prior written agreement between
the Parties shall be of any effect whatsoever; provided, however, that any
arrangements agreed upon by the Authorized Representatives within the limits of
their authority, and consistent with this Agreement shall be binding upon the
Parties. All changes to this Agreement shall be in writing and shall be signed
by an officer of each Party.

19.  NON-WAIVER

              None of the provisions of this Agreement shall be considered
waived by either Party except when such waiver is given in writing. The failure
of either Party to insist in any one or more instances upon strict performance
of any of the provisions of this Agreement or to take advantage of any of its
rights hereunder shall not be construed as a waiver of any such provisions or
the relinquishment of any such rights for the future; but the same shall
continue and remain in full force and effect.

                                       14


20.  NO DEDICATION OF FACILITIES
     ---------------------------

              Any undertaking by one Party to the other Party under any
provision of this Agreement shall not constitute the dedication of the system or
any portion thereof by the Party to the public or to the other Party, and it is
understood and agreed that any such undertaking under any provision of this
Agreement by a Party shall cease upon the termination of its obligations
hereunder.

21.  SUCCESSORS AND ASSIGNS
     ----------------------

              21.1   This Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of the Parties.

              21.2 This Agreement may be assigned by Producer only (i) to a
purchaser or co-owner of the Plant or to a person who will operate the Plant
pursuant to a contract or other arrangement with such purchaser and in either
case with the prior written consent of IID (which shall not be unreasonably
withheld) or (ii) for security purposes, to a bank or other entity which
provides financing for the Plant or any electrical transmission facilities
associated therewith. Producer and IID agree that nothing in this Section 21.2
may be amended, modified or waived without the prior written consent of each and
every Party to the Funding and Construction Agreement (except for any Parties in
default thereunder.)

22. EFFECT OF SECTION HEADINGS
    --------------------------

              Section headings appearing in this Agreement are inserted for
convenience only, and shall not be construed as interpretations of text.


                                       15


23.  GOVERNING LAW
     -------------

              This Agreement shall be interpreted, governed and construed under
the laws of the State of California or the laws of the United States, as
applicable.

24.  ARBITRATION
     -----------

              24.1 Any dispute arising out of or relating to this Agreement, or
the breach thereof, which is not resolved by the Parties acting through their
Authorized Representatives shall be settled by arbitration to the extent
permitted by the laws applicable to the Parties; provided, however, that no
Party to the dispute shall be bound to any greater extent than any other Party
to the dispute. Arbitration shall not apply to any dispute or matter that is
within the jurisdiction of any regulatory agency.

              24.2 Any demand for arbitration shall be made by written notice to
the other Party setting forth in adequate detail the nature of the dispute, the
issues to be arbitrated, the amount or amounts, if any, involved in the dispute,
and the remedy sought. Within twenty (20) days from the receipt of such notice,
the other Party may submit its own written statement of the dispute and may set
forth in adequate detail any additional related matters or issues to be
arbitrated.

              24.3 Within thirty (30) days after delivery of the written notice
demanding arbitration, the Parties acting through their Authorized
Representatives shall meet for the purpose of selecting an arbitrator. The
Parties may agree upon a single arbitrator, but in the event that they cannot
agree, three arbitrators shall be used. Each Party shall designate one
arbitrator, and the two arbitrators shall then select a third arbitrator. All


                                       16


arbitrators shall be persons skilled and experienced in the field in which the
dispute has arisen and no person shall be eligible for appointment as an
arbitrator who is or has been an officer or employee of either of the Parties or
otherwise interested in the matter to be arbitrated. Should either party refuse
or neglect to appoint an arbitrator or to furnish the arbitrators with any
papers or information demanded, the arbitrators are empowered, by both Parties,
to proceed without the participation or assistance of that Party.

              24.4 Except as otherwise provided in this Section, the arbitration
shall be governed by the rules and practices of the American Arbitration
Association, or a similar organization if the American Arbitration Association
should not at the time exist.

              24.5 Arbitration proceedings shall be held in Imperial,
California, at a time and place to be selected by the arbitrators. The
arbitrators shall hear evidence submitted by the Parties and may call for
additional information which shall be furnished by the Party having such
information. The arbitrators shall have no authority to call for information not
related to the issues included in the dispute or to determine other issues not
in dispute.

              24.6 If there is only one arbitrator, his decision shall be
binding and conclusive on the Parties. If there are three arbitrators, the
decision of any two shall be binding and conclusive. The decision of the
arbitrators shall contain findings regarding the issues involved in the dispute,
including the merits of the positions of the Parties, the materiality of any
default, and the remedy or relief to which a Party shall be entitled. The

                                       17


arbitrators may not grant any remedy or relief which is inconsistent with this
Agreement, nor shall the arbitrators make findings or decide issues not in
dispute.

              24.7 The fees and expenses of the arbitrators shall be shared
equally by the Parties, unless the decision of the arbitrators specifies one
other apportionment. All other expenses and costs of the arbitration shall be
borne by the Party incurring such expenses and costs.

              24.8 Any decision or award granted by the arbitrators shall be
final and judgement may be entered on it in any court of competent jurisdiction.
This agreement to arbitrate shall be specifically enforceable.

25.  ENTIRE AGREEMENT
     ----------------

              25.1 The complete agreement of the Parties is set forth in this
Agreement and all communications regarding subject interconnected operations
whether oral or written, are hereby abrogated and withdrawn.

26.  NOTICES
     -------

              Any formal communication or notice in connection with this
Agreement shall be in writing and shall be deemed properly given if delivered in
person or sent first class mail, postage prepaid to the person specified below:

              GEO EAST MESA
              LIMITED PARTNERSHIP
              P.O. Box 748
              Holtville, CA 92250

                                       18


              IMPERIAL IRRIGATION DISTRICT
              c/o General Manager
              P. O. Box 937
              Imperial, California 92251

27.  SEVERAL OBLIGATIONS
     -------------------

              Except where specifically stated in this Agreement to be
otherwise, the duties, obligations and liabilities of the Parties are intended
to be several and not joint or collective. Nothing contained in this Agreement
shall ever be construed to create an association, trust, partnership, or joint
venture, or impose a trust or partnership duty, obligation or liability on or
with regard to either Party. Each Party shall be individually and severally
liable for its own obligations under this Agreement.


                                       19



28.  SIGNATURE CLAUSE
     ----------------

              The Parties have caused this Agreement to be executed in their
respective names, in duplicate, by their respective officers hereunto this 21st
day of March, 1989.

                                   GEO EAST MESA LIMITED
                                   PARTNERHIP



                                   By /s/ M.N.  Brunano
                                      ---------------------------------

ATTEST:


By /s/ Letitia D. Davis
   ---------------------------
            Secretary

                                   IMPERIAL IRRIGATION DISTRICT



                                   By /s/ Lester A. Bornt
                                      -------------------------------
                                      President, Board of Directors

ATTEST:


By /s/ Larry E. Beck
   ---------------------------
            Secretary







                                       20



                                                                 Exhibit 10.3.31

                                                                         9-21-89
                                                                  EXECUTION COPY








                         TRANSMISSION SERVICE AGREEMENT

                                     FOR THE

            ORMESA I, ORMESA IE AND ORMESA IH GEOTHERMAL POWER PLANTS



                                     BETWEEN



                          IMPERIAL IRRIGATION DISTRICT



                                       AND



                                ORMESA GEOTHERMAL









EXECUTION COPY
9-21-89







                                TABLE OF CONTENTS

Section                       Title                                       Page
-------                       -----                                       ----

1        PARTIES                                                            1

2        RECITALS                                                           1

3        AGREEMENT                                                          1

4        DEFINITIONS                                                        1

5        TERM                                                               3

6        TRANSMISSION SERVICE                                               4

7        TRANSMISSION LOSSES                                                8

8        CHARGES                                                            9

9        BILLING AND PAYMENT                                                10

10       LIABILITY                                                          12

11       AUDITING                                                           12

12.      AUTHORIZED REPRESENTATIVES                                         15

13       NO DEDICATION OF FACILITIES                                        15

14       NON-WAIVER                                                         15

15       NO THIRD PARTY RIGHTS                                              15

16       UNCONTROLLABLE FORCES                                              15

17       ASSIGNMENTS                                                        16

18       GOVERNING LAW                                                      18

19       NOTICES                                                            18

20       SIGNATURE CLAUSE                                                   19



EXHIBIT I -  DEVELOPMENTS AND METHODOLOGIES FOR TRANSMISSION
             SERVICE CHARGES AND SCHEDULING FEE

EXHIBIT II- TRANSMISSION SERVICE FOR ORMESA I, ORMESA IE, AND ORMESA IH
            GEOTHERMAL POWER PLANTS


                                       2



1. PARTIES: The Parties to this Agreement are Imperial Irrigation District,
organized under the Water Code of the State of California ("IID"), and Ormesa
Geothermal ("Producer"), hereinafter sometimes referred to individually as
"Party," and collectively as "Parties."

2. RECITALS: This Agreement is made with reference to the following facts, among
others:

     2.1 Ormesa I, Ormesa IE and Ormesa IH have caused to be constructed
alternate energy resource facilities located in IID's service area.

     2.2 Ormesa I, Ormesa IE and Ormesa IH and IID have entered into Plant
Connection Agreements.

     2.3 Producer desires to purchase, and IID desires to sell firm transmission
service of power from the Plants to Edison's Mirage Substation subject to the
terms and conditions specified herein.

     2.4 Producer and IID are parties to that certain Funding and Construction
Agreement dated June 29, 1987, providing for the funding and construction of
transmission lines within IID's service area.

3.  AGREEMENT:  The Parties agree as follows:

4. DEFINITIONS: The following terms, when used herein with initial
capitalization, whether in the singular or plural, shall have the meanings
specified:

     4.1 AGREEMENT: This IID - Producer Transmission Service Agreement for
Alternative Resources between Ormesa Geothermal and IID, and all Exhibits
attached hereto, as


                                       3


such Agreement may subsequently be amended for firm transmission service between
each Plant and Edison's Mirage Substation.

         4.2 Authorized Representative:  The representative of a party
designated in accordance with Section 12.

         4.3 Date of Initial Service: The date when the output from each Plant
is first available for delivery to Edison, as notified to IID pursuant to
Section 5.2.

         4.4  Edison:  Southern California Edison Company.

         4.5 Funding and Construction Agreement: An agreement entered into by
LED and others dated June 29, 1987, providing for the funding and construction
of the Heber-Mirage Transmission Project, to which a form of this agreement is
attached as Exhibit III.

         4.6  Maximum Transmission Service Entitlement:  The Maximum
Transmission Service Entitlement as specified in Exhibit[s] II, Transmission
Service, and in any subsequent Plant Amendments.

         4.7 Normal Transmission Capacity: The maximum transfer capability,
expressed in megawatts (MW), from the Point of Receipt to the Point of Delivery.
Such transfer capability, as determined by IID, in its sole judgment, shall be
consistent with prudent operating procedures and with generally-accepted
engineering and operating practices in the electrical utility industry.

         4.8 Operating Transmission Capability: The maximum transfer capability,
expressed in megawatts (MW), available to IID at any given time to transmit
power from Point of Receipt to Point of Delivery. Such transfer capability shall
be as determined by IID in its sole judgment,

                                       4


may vary from time-to-time depending on system conditions, and shall be
consistent with prudent operating procedures and generally-accepted engineering
and operating practices in the electrical utility industry.

         4.9 Plants: The electrical generating alternative energy resource
facilities developed by Producer and Ormesa IH respectively for which IID shall
provide transmission service, as specified in Exhibit(s) II, Transmission
Service, and in any subsequent Plant Amendments.

         4.10 Plant Amendment: An agreement reached by the Parties, as an
amendment to this Agreement, for transmission service to be provided by IID for
a Plant added by Producer or for Producer's account subsequent to the execution
of this Agreement.

         4.11 Plant Connection Agreements: The agreements between IID and
Producer and between IID and Ormesa IH respectively providing for the connection
of the Plants to IID's electrical system, as specified in Exhibit[s] II,
Transmission Service, and in any subsequent Plant Amendments. The existing
Ormesa I, Ormesa IE and the Ormesa IH Plant each operate under a separate Plant
Connection Agreement. This 38 MW Transmission Service Agreement covers all
facilities because all plants deliver energy to IID at the same point.

         4.12 Point(s) of Delivery: The 230-kV switchrack at the Mirage
Substation site where Edison's 230-kV facilities are attached to IID's 230-kV
Coachella-Mirage Line or other points as may be mutually agreed upon by the
Authorized Representatives.

         4.13 Point of Receipt: The point on the high voltage side of the
Plant's transformer where IID's metering equipment measures the delivery of
energy to the IID system.

                                       5


         4.14  Transmission Service Entitlement:  The amount of transmission
service, expressed in megawatts (MW), provided by IID for the Plants, from the
applicable Point of Receipt to the applicable Point(s) of Delivery.

5.  TERM:

         5.1 Unless otherwise agreed to by the Parties, this Agreement shall be
effective on the Completion Date for the transmission lines being constructed
pursuant to the Funding and Construction Agreement, as the term Completion Date
is defined in Article I thereof, and shall remain in effect until October 12,
2017. It is understood that if such Completion Date does not occur, this
Agreement shall be of no force or effect.

         5.2 The Transmission Service Entitlement to be provided by IID for each
Plant shall be contingent on Plant Connection Agreements being in effect.
Transmission service for each Plant shall commence on the Date of Initial
Service of such Plant. Producer's Authorized Representative shall give IID's
Authorized Representative written notice of the Date of Initial Service at least
thirty (30) days before the Date of Initial Service.

6.  TRANSMISSION SERVICE:

         6.1 Subject to the terms of this Agreement, IID shall provide to
Producer and Producer shall purchase from IID transmission service over IID's
transmission system for each Plant. IID shall make arrangements with Edison to
provide, at Producer's or Edison's expense, for the transfer of the electrical
power to be delivered to Edison hereunder from IID's transmission system to
Edison's transmission system at the Point(s) of Delivery.

                                       6


         6.2 The Transmission Service Entitlement for the Plants shall be the
Maximum Transmission Service Entitlement for such Plants specified in Exhibit(s)
II, Transmission Service, or any subsequent Plant Amendments, or such lesser
amount as may be established as follows. Beginning on the Date of Initial
Service for each Plant, Producer shall be entitled to specify a Transmission
Service Entitlement by advance written notice given to IID's Authorized
Representative at least thirty (30) days prior to the Date of Initial Service.
The Transmission Service Entitlement to be provided by IID subsequent to the
Date of Initial Service may be adjusted at six (6) month intervals thereafter
until two (2) years after the Date of Initial Service for such Plant (the "Trial
Period"). Such adjustments shall be made by having Producer's Authorized
Representative give IID's Authorized Representative a ninety (90) day advance
written notice as to the adjustment required. Beginning two (2) years after the
Date of Initial Service for such Plant, Producer shall be entitled to specify a
Transmission Service Entitlement for each successive two-year period during the
remaining term of this Agreement by written notice from Producer's Authorized
Representative to IID's Authorized Representative given at least ninety (90)
days prior to the beginning of each two-year period.

         6.3 The Transmission Service Entitlement selected by Producer for the
Plants in accordance with Section 6.2 may be any amount which is less than or
equal to the Maximum Transmission Service Entitlement for such Plant specified
in Exhibit[s] II, Transmission Service and in any subsequent Plant Amendments,
provided, however, that the following shall apply to each Plant after the Trial
Period for such Plant has elapsed.

                6.3.1 If (i) the sum of the Transmission Service Entitlements
for all Plants which are no longer in their Trial Periods is less than the sum
of the Maximum Transmission Service Entitlements for such Plants, as shown in
Exhibit(s) II, Transmission Service and in any

                                       7


subsequent Plant Amendments, (the "Aggregate Maximum Transmission Service
Entitlement"), and (ii) provided that IID requires additional capacity for
transmitting electric power to Edison's transmission system for another person
(or, following the Credit Installment Period as defined in the Funding and
Construction Agreement, for itself) and (iii) IID's use of such required
capacity would be in conflict with Producer's right as provided herein to
increase the sum of the Transmission Service Entitlements for such Plants to the
Aggregate Maximum Transmission Service Entitlement, then IID shall so notify
Producer in writing, specifying in such notice the portion, expressed in
megawatts (MW), of the excess of the Maximum Transmission Service Entitlement
over the Transmission Service Entitlement for each such Plant which it desires
to use as stated above. Producer shall have ninety (90) days after receipt of
IID's notice to notify IID in writing that it desires to increase the
Transmission Service Entitlements of such Plants. To the extent that Producer
does not elect to increase the Transmission Service Entitlement of each such
Plant up to the Maximum Transmission Service Entitlement for such Plant, IID
shall be entitled to use such unclaimed capacity to satisfy the transmission
requirements specified in its notice to Producer, and to the extent that IID
does so, Producer shall thereafter be foreclosed from increasing the
Transmission Service Entitlement for such Plant in a manner which would conflict
with such usage by IID.

                6.3.2 IID shall treat Producer and each other person who has
entered into a transmission service agreement similar in substance to this
Agreement in a fair and nondiscriminatory manner in requesting additional
transmission capacity as provided In this Section 6.3. Without limiting the
generality of the foregoing, IID shall request additional transmission capacity
from Producer and such other persons on a pro rata basis, in proportion to the
Aggregate Maximum Transmission Service Entitlement for each person less the sum
of the

                                       8


Transmission Service Entitlements for each of such persons' generating plants
which is no longer in a Trial Period.

         6.4 In the event that the Original Capacity Nomination designated by
Producer (or the Participant associated with Producer) is adjusted pursuant to
Section 3.07 of the Funding and Construction Agreement, the Parties agree to
amend this Agreement in such a way that the sum of the Maximum Transmission
Service Entitlements for all Plants hereunder is equal to such Original Capacity
Nomination as so adjusted. As used in this Section 6.4, the terms Original
Capacity Nomination and Participant shall have the meanings assigned to them in
Article I of the Funding and Construction Agreement.

         6.5 IID reserves the right to interrupt or curtail the transmission
service provided hereunder as follows:

                6.5.1 If the Operating Transmission Capability is reduced to
less than Normal Transmission Capacity from a Point of Receipt to a Point of
Delivery, and when continuity of service within IID's service area is not being


jeopardized, IID may curtail the transmission service currently being provided
from such Point of Receipt to such Point of Delivery, to an amount "A"
determined by the following formula:


     A = Operating Transmission Capability          X     Transmission Service
------------------------------------------------              Entitlement
          Normal Transmission Capacity

              The transmission service shall be curtailed by multiplying the
Transmission Service Entitlement in accordance with Exhibit[s] II, Transmission
Service and in any subsequent Plant Amendments by the same percentage (expressed
as a decimal) as used in the determination of "A." However, any such curtailment
shall occur only after IID has made all reasonable efforts to

                                       9


eliminate the cause of the reduction in Operating Transmission Capability, and
IID shall then employ reasonable efforts to eliminate expeditiously the cause of
said reduction.

                6.5.2 If continuity of service within IID's control area is
being jeopardized, as determined by IID in its sole judgment, ITO may interrupt
or curtail the transmission service provided hereunder to the extent necessary
to avoid or eliminate such jeopardy; provided that (i) such interruptions or
curtailments may be made so that IID may fully utilize all generating resources
owned by it or available to it under contract in order to avoid damage to IID's
electrical system caused by overloading, (ii) such interruption or curtailment
shall occur only after IID has made all reasonable efforts to avoid or eliminate
such jeopardy and (iii) to the extent feasible any curtailment of transmission
service provided hereunder from a Point of Receipt to a Point of Delivery shall
be made in accordance with the formula set forth in Section 6.5.1.

         6.6 If IID's efforts do not avoid or eliminate such jeopardy, the
Parties shall endeavor to develop some other arrangement to avoid or eliminate
such jeopardy and minimize the effects of IID's interruption or curtailment on
both parties.

         6.7 In the event of any curtailments or interruptions made pursuant to
Section 6.5.1 or Section 6.5.2, Producer shall, immediately after being orally
notified by IID, reduce the electrical output of the Plants by the amounts
requested by IID.

         6.8 The transmission service to be provided by IID and purchased by
Producer for the Plants shall not exceed the Transmission Service Entitlement
for the Plants.

         6.9 Subject to Section 6.5, IID shall, during the periods that IID has
agreed to provide the transmission service at the specified Transmission Service
Entitlements, accept hourly


                                       10


scheduled energy deliveries at each Point of Receipt and simultaneously deliver
the same amount of energy (less transmission losses as provided herein) at the
Point(s) of Delivery mutually agreed upon by the Parties' dispatchers and/or
schedulers.

         6.10 Hourly scheduled energy deliveries at each Point of Receipt shall
conform with the practices and procedures developed by the Parties' dispatchers
and schedulers and agreed to by the Authorized Representatives.

7.  TRANSMISSION LOSSES:

         7.1 IID shall determine, by transmission power flow analysis, the
electrical losses (expressed as a percent amount of hourly scheduled energy
deliveries) associated with the electrical output from the Plants. Such analysis
shall be performed by IID at its sole expense. The initial percent amount, for
each Plant, representing the electrical losses as determined herein shall be as
specified in Exhibit(s) II, Transmission Service and in any subsequent Plant
Amendments.

         7.2 Unless otherwise agreed to by Producer's and IID's schedulers and
dispatchers, IID shall reduce the amount of all hourly scheduled energy
deliveries for Producer or Producer's account by the percent amount of such
hourly deliveries for each Plant in accordance with Exhibit[s] II, Transmission
Service and in any subsequent Plant Amendments.

         7.3 If either Party believes that there has been a significant change
in IID's electrical system and the electrical losses associated with any Plant
should be redetermined, either Party's Authorized Representative may submit a
written request to the other Party's Authorized Representative that the
electrical losses be redetermined. Following such request, a transmission


                                       11


flow analysis shall be performed by IID as approved by the Authorized
Representatives and paid for by the requesting Party. Whenever the percent
amount for electrical losses is redetermined, such percent amount shall become
effective as of the first day of the month following the date of such
redetermination; provided, that such a redetermination may be no sooner than
twelve (12) months after the most recent redetermination. Any redetermination of
electrical losses made pursuant to this Section 7 shall be based on conditions
in existence at the time of such redetermination.

         7.4 Along with the monthly billing pursuant to Section 9.1, for the
transmission service for each Plant, IID shall submit a monthly summary of
hourly scheduled energy deliveries and of electrical losses for each Plant.

8.  CHARGES:

         8.1 For transmission service provided by IID, Producer shall pay IID at
a rate to be determined by IID pursuant to the methodologies specified in
Exhibit I.A. The initial rate is specified in Exhibit[s] II, Transmission
Service and revisions thereto will be specified in any subsequent Plant
Amendments. Any specific facility charge to Producer for connecting the Plant(s)
to the IID transmission system shall be included only in the Plant Connection
Agreement(s) between IID and Producer.

         8.2 The transmission rate shall be reviewed annually and may be
revised. Any revision of the rates shall be based on the methodologies in
Exhibit I.A and on the conditions in existence at the time of the revision.
Producer shall have the right to review any exhibits or work papers prepared by
IID to revise the rates.

                                       12


         8.3 An initial monthly scheduling fee, as specified in Exhibit[s] II,
Transmission Service and revisions thereto specified in any subsequent Plant
Amendments, shall be paid by Producer to IID for those months in which there
were scheduled energy deliveries from the Plant(s). The initial scheduling fee
has been determined by IID pursuant to the methodology specified in Exhibit I.B.
The scheduling fee shall be reviewed annually and may be revised. Any revision
of the scheduling fee shall be based on the methodology in Exhibit I.B and on
the conditions in existence at the time of the revision. Producer shall have the
right to review any exhibits or work papers prepared by IID to revise the
scheduling fee.

9.  BILLING AND PAYMENT:

         9.1 IID shall render bills to Producer, beginning in the month of the
Date of Initial Service, on or before the fifteenth (15th) day of each month for
the transmission service to be provided during the month. Producer shall pay
such bills within twenty (20) days after receipt thereof.

              All payments by Producer shall be sent to:

                  Imperial Irrigation District
                  c/o Manager, Finance and Accounting
                  P.O.  Box 937
                  Imperial, California 92251

              All billings by IID shall be sent to:

                  Ormesa Geothermal
                  P.O.  Box 819
                  El Centro, California 92244

         9.2 Either Party's Authorized Representative may at any time, by
advance written notice to the other Party's Authorized Representative, change
the address to which payments or billings shall be sent.

                                       13


         9.3 Bills which are not paid in full by said due date shall thereafter
bear an additional charge of one and one-half percent (1-1/2%) per month, or the
maximum legal rate of interest, whichever is less, compounded monthly on the
unpaid amount prorated by days from the due date until payment is received by
IID.

         9.4 In the event any portion of any bill is disputed, the disputed
amount shall be paid when due under protest. If the protested portion of the
payment is found to be incorrect by the Authorized Representatives, the disputed
amount shall be paid by IID to Producer, including interest at the rate of
1-1/2% per month, or the maximum legal rate, whichever is less, compounded
monthly from the date of payment by Producer to the date the refund check or
adjusted bill is received by Producer.

         9.5 For a fractional part of a calendar month at the beginning or end
of the period for which the transmission service is provided hereunder, the
charge pursuant to Section 8.1 shall be proportionately adjusted by the ratio of
days that service is furnished by IID to Producer during such month to the total
number of days in such month.

         9.6 The charge for the transmission service pursuant to Section 8.1
shall be proportionately reduced to the extent the duration of the interruptions
or curtailments of the transmission service which may occur pursuant to Section
6.5.1 or Section 6.5.2 exceed a cumulative total of twenty-four (24) hours
during any calendar month based on 730 hours per month representing the full
transmission service charge. The amount of such prorata reduction in any month
shall reflect the duration and amount of such interruptions or curtailments
which exceed said cumulative 24 hours. Such prorata reduction shall be reflected
as a credit to Producer as soon as possible in a subsequent monthly bill.

                                       14


         9.7 The charge for the transmission service shall not be reduced if IID
can deliver, but Edison's transmission system cannot receive, the hourly
scheduled energy deliveries independent of the duration of time this condition
exists.

10.  LIABILITY:

         10.1 Except for any loss, damage, claim, costs, charge or expense
resulting from Willful Action, neither Party (the "released Party"), its
directors or other governing body, officers or employees shall be liable to the
other Party for any loss, damage, claim, cost, charge, or expense of any kind or
nature incurred by the other Party (including direct, indirect or consequential
loss, damage, claim, cost, charge or expense; and whether or not resulting from
the negligence of a Party, its directors or other governing body, officers,
employees or any person or entity whose negligence would be imputed to a Party)
from engineering, repair, supervision, inspection, testing, protection,
operation, maintenance, replacement, reconstruction, use or ownership of the
released Party's electrical system, Plant(s) or associated facilities in
connection with the implementation of this Agreement. Except for any loss,
damage, claim, cost, charge or expense resulting from Willful Action, each Party
releases the other Party, its directors or other governing body, officers and
employees from any such liability.

         10.2 For the purpose of this Section 10, Willful Action shall be
defined as action taken or not taken by a Party at the direction of its
directors or other governing body, officers or employees having management or
administrative responsibility affecting its performance under this Agreement, as
follows:

                                       15


                10.2.1 Action which is knowingly or intentionally taken or not
taken with conscious indifference to the consequences thereof or with intent
that injury or damage would result or would probably result therefrom.

                10.2.2 Action which has been determined by final arbitration
award or final judgment or judicial decree to be a material default under this
Agreement and which occurs or continues beyond the time specified in such
arbitration award or judgment or judicial decree for curing such default or, if
no time to cure is specified therein, occurs or continues thereafter beyond a
reasonable time to cure such default.

                10.2.3 Action which is knowingly or intentionally taken or not
taken with the knowledge that such action taken or not taken is a material
default under this Agreement.

         10.3 Willful Action does not include any act or failure to act which is
merely involuntary, accidental or negligent.

         10.4 The phrase "employees having management or administrative
responsibility," as used in Section 10.2, means the employees of a Party who are
responsible for one or more of the executive functions of planning, organizing,
coordinating, directing, controlling and supervising such Party's performance
under this Agreement with responsibility for results.

         10.5 Subject to the foregoing provisions of this Section 10, each Party
agrees to defend, indemnify and save harmless the other Party, its officers,
agents, or employees against all losses, claims, demands, costs or expenses for
loss of or damage to property, or injury or death of persons, which directly or
indirectly arise out of the Indemnifying Party's performance pursuant to this
Agreement; provided, however, that a Party shall be solely responsible for any
such

                                       16


losses, claims, demands, costs or expenses which result from its sole negligence
or Willful Action.

11.  AUDITING

         11.1 IID shall make its books, records, and other supporting
information, as requested, available to Producer or to Producer's designated
contracted representative(s) with a CPA firm, for the purpose of auditing any
charges or accounts to be kept by IID hereunder. All such audits shall be
undertaken at reasonable times and in conformance with generally-accepted
auditing standards.

         11.2 If as a result of such audits Producer believes its charges or
accounts should be adjusted, the findings shall be presented to the Authorized
Representatives. If the Authorized Representatives agree that any audit finding
should result in a revision of charges or accounts, such revisions shall be
retroactive to the first billing for such charges and accounts and shall be made
as soon as practical after determination.

         11.3 The amount of any unresolved dispute shall accrue interest at the
rate of one and one-half percent (1-1/2%) per month, or the maximum legal rate,
whichever is less, compounded monthly for any amount of money ultimately
refunded to Producer.

12. AUTHORIZED REPRESENTATIVES: Within thirty (30) calendar days after the
Completion Date, as defined in Article I of the Funding and Construction
Agreement, each Party shall designate by written notice to the other Party a
representative who is authorized to act on its behalf in the implementation of
this Agreement. Either Party may at any time change the designation of its
Authorized Representative by written notice to the other Party.

                                       17


13. NO DEDICATION OF FACILITIES: Any undertaking by one Party to the other Party
under any provision of this Agreement shall not constitute the dedication of the
system or any portion thereof of the Party to the public or to the other Party,
and it is understood and agreed that any such undertaking under any provision of
this Agreement by a Party shall cease upon the termination of its obliqations
hereunder.

14. NON-WAIVER: None of the provisions of this Agreement shall be considered
waived by either Party except when such waiver is given in writing. The failure
of either Party to insist in any one or more instances upon strict performance
of any of the provisions of this Agreement or to take advantage of any of its
rights hereunder shall not be construed as a waiver of any such provisions or
the relinquishment of any such rights for the future, but the same shall
continue and remain in full force and effect.

15. NO THIRD PARTY RIGHTS: The Parties do not intend to create rights in or to
grant remedies to any Third Party or others as a beneficiary of this Agreement
or of any duty, covenant, obligation or undertaking established hereunder.

16. UNCONTROLLABLE FORCES: Neither Party shall be considered to be in default in
the performance of any of its obligations under this Agreement when a failure of
performance shall be due to an uncontrollable force. The term "uncontrollable
force" shall mean any cause beyond the control of the Party affected including,
but not restricted to, failure of or threat of failure of facilities which have
been maintained in accordance with generally-accepted engineering and operating
practices in the electrical utility industry, flood, drought, earthquake,
tornado, storm, fire, pestilence, lightning and other natural catastrophes,
epidemic, war, riot, civil disturbance or disobedience, strike, labor dispute,
labor or material shortage, sabotage, government priorities


                                       18


and restraint by court order or public authority (whether valid or invalid) and
actions or nonaction by or inability to obtain or keep the necessary
authorizations or approvals from any governmental agency or authority, the
failure or inability of Edison to receive the electric power to be transmitted
hereunder at the Point(s) of Delivery, which by exercise of due diligence such
Party could not reasonably have been expected to avoid and which by exercise of
due diligence it has been unable to overcome. Nothing contained herein shall be
construed as to require a Party to settle any strike or labor dispute in which
it may be involved. Either Party rendered unable to fulfill any of its
obligations under this Agreement by reason of an uncontrollable force shall give
prompt written notice of such fact to the other Party and shall exercise due
diligence to remove such inability with all reasonable dispatch.

17.  ASSIGNMENTS:

         17.1 Any assignment by Producer of its interest in this Agreement which
is made without the written consent of IID (which shall not be unreasonably
withheld) shall not relieve Producer from its primary liability for any of its
duties and obligations hereunder, and in the event of any such assignment
Producer shall continue to remain primarily liable for payment of any and all
money due IID hereunder and for the performance and observance of all other
covenants, duties and obligations to be performed and observed hereunder by it
to the same extent as though no assignment has been made.

         17.2 Notwithstanding any provision of Section 17.1 to the contrary,
prior to the end of the Credit Installment Period, as defined in Article I of
the Funding and Construction Agreement, Producer's right to transmission service
under this Agreement with respect to one or more of the Plants may be assigned
only (i) to a purchaser or co-owner of such Plants or to a person who will

                                       19


operate such Plants pursuant to a contract or other arrangement with such
purchaser and in either case only with the prior written consent of IID (which
shall not be unreasonably withheld) or (ii) for security purposes, to a bank or
other entity which provides financing for such Plants or any electrical
transmission facilities associated therewith. Producer and IID agree that
nothing in this Section 17.2 may be amended, modified or waived without the
prior written consent of each and every party to the Funding and Construction
Agreement (except for any parties in default thereunder).

         17.3 Whenever an assignment of Producer's interest in this Agreement is
made with the written consent of IID, Producer's assignee shall expressly assume
in writing the duties and obligations hereunder of Producer and, within thirty
(30) days after any such assignment and assumption of duties and obligations,
Producer shall furnish or cause to be furnished to IID a true and correct copy
of such assignment and assumption of duties and obligations.

         17.4 Subject to the foregoing restrictions on assignments, all of the
terms of this Agreement shall be binding upon and inure to the benefit of both
of the Parties and their respective successors, permitted assigns and legal
representatives.

18.  GOVERNING LAW:  This Agreement shall be interpreted, governed by and
construed under the laws of the State of California or the laws of the United
States, as applicable.

19. NOTICES: Any notice, demand or request provided for in this Agreement, or
served, given or made in connection with it, shall be in writing and shall be
deemed properly served, given or made if delivered in person or sent by United
States mail, postage prepaid, to the persons specified below unless otherwise
provided for in this Agreement:

                                       20


              All payments by Producer shall be sent to:

                  Imperial Irrigation District
                  c/o General Manager
                  P.O.  Box 937
                  Imperial, California 92251

              All billings by IID shall be sent to:

                  Ormesa Geothermal
                  c/o Plant Manager
                  P.O.  Box 819
                  El Centro, California 92244

         Either Party may at any time, by notice to the other Party, change the
designation or address of the person so specified as the one to receive notices
pursuant to this Agreement.


                                       21



20. SIGNATURE CLAUSE: The signatories hereto represent that they have been
appropriately authorized to enter into this IID-Ormesa Geothermal Transmission
Service Agreement for Alternative Resources (Standard Form) on behalf of the
Party for whom they signed. This Agreement is hereby executed as of the 3rd day
of October, 1989.

                                      IMPERIAL IRRIGATION DISTRICT




                                      By: /s/ Lester A. Bornt
                                         -------------------------------
                                           President, Board of Directors




                                      ORMESA GEOTHERMAL
                                      BY ORMAT GEOTHERMAL, INC.
                                      Managing General Partner




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




                                      Its: V. Pres.
                                          -------------------------------








                                       22



                                                                 Exhibit 10.3.32



                         TRANSMISSION SERVICE AGREEMENT

                                     FOR THE

                        GEO EAST MESA LIMITED PARTNERSHIP

                                   UNIT NO. 2


                                     BETWEEN

                          IMPERIAL IRRIGATION DISTRICT

                                       AND

                        GEO EAST MESA LIMITED PARTNERSHIP























                           TABLE OF CONTENTS



Section                             Title                                                  Page

   1         PARTIES..........................................................................1
   2         RECITALS.........................................................................1
   3         AGREEMENT........................................................................1
   4         DEFINITIONS......................................................................1
   5         TERM.............................................................................3
   6         TRANSMISSION SERVICE.............................................................4
   7         TRANSMISSION LOSSES..............................................................8
   8         CHARGES..........................................................................9
   9         BILLING AND PAYMENT.............................................................10
  10         LIABILITY.......................................................................12
  11         AUDITING........................................................................14
  12         AUTHORIZED REPRESENTATIVES......................................................15
  13         NO DEDICATION OF FACILITIES.....................................................15
  14         NON-WAIVER......................................................................15
  15         NO THIRD PARTY RIGHTS...........................................................15
  16         UNCONTROLLABLE FORCES...........................................................15
  17         ASSIGNMENTS.....................................................................16
  18         GOVERNING LAW...................................................................18
  19         NOTICES.........................................................................18
  20         SIGNATURE CLAUSE................................................................19


EXHIBIT I    -    DEVELOPMENTS AND METHODOLOGIES FOR TRANSMISSION SERVICE CHARGES AND SCHEDULING FEE

EXHIBIT II   -    TRANSMISSION SERVICE FOR GEO EAST MESA LIMITED PARTNERSHIP





1. PARTIES: The Parties to this Agreement are Imperial Irrigation District,
organized under the Water Code of the State of California ("IID"), and Geo East
Mesa Limited Partnership, L. P. ("Producer"), hereinafter sometimes referred to
individually as "Party," and collectively as "Parties."

2. RECITALS: This Agreement is made with reference to the following facts, among
others:

      2.1 Producer has caused to be constructed or intends to construct an
alternative energy resource facility located in IID's service area.

      2.2     Producer and IID have entered into a Plant Connection Agreement.

      2.3 Producer desires to purchase, and IID desires to sell firm
transmission service of power from the Plant to Edison's Mirage Substation
subject to the terms and conditions specified herein.

      2.4 Producer and IID are parties to that certain Funding and Construction
Agreement dated June 29, 1987, providing for the funding and construction of
transmission lines within IID's service area.

3. AGREEMENT: The Parties agree as follows:

4. DEFINITIONS: The following terms, when used herein with initial
capitalization, whether in the singular or plural, shall have the meanings
specified:

      4.1 Agreement: This IID - Producer Transmission Service Agreement for
Alternative Resources between Geo East Mesa Limited Partnership, L. P. and IID,
and all

                                       1


Exhibits attached hereto, as such Agreement may subsequently be amended
for firm transmission service between each Plant and Edison's Mirage Substation.

      4.2 Authorized Representative: The representative of a party designated in
accordance with Section 12.

      4.3 Date of Initial Service: The date when the output from each Plant is
first available for delivery to Edison, as notified to IID pursuant to Section
5.2.

      4.4 Edison: Southern California Edison Company.

      4.5 Funding and Construction Agreement: An agreement entered into by IID
and others dated June 29, 1987, providing for the funding and construction of
the Heber-Mirage Transmission Project, to which a form of this agreement is
attached as Exhibit III.

      4.6 Maximum Transmission Service Entitlement: The Maximum Transmission
Service Entitlement for each Plant, as specified in Exhibit[s] II, Transmission
Service, and in any subsequent Plant Amendments.

      4.7 Normal Transmission Capacity: The maximum transfer capability,
expressed in megawatts (MW), from the Point of Receipt to the Point of Delivery.
Such transfer capability, as determined by IID, in its sole judgment, shall be
consistent with prudent operating procedures and with generally-accepted
engineering and operating practices in the electrical utility industry.

      4.8 Operating Transmission Capability: The maximum transfer capability,
expressed in megawatts (MW), available to IID at any given time to transmit
power from Point of Receipt to Point of Delivery. Such transfer capability shall
be as determined by



                                       2


IID in its sole judgment, may vary from time-to-time depending on system
conditions, and shall be consistent with prudent operating procedures and
generally-accepted engineering and operating practices in the electrical utility
industry.

      4.9 Plant: An electrical generating alternative energy resource facility
developed by Producer for which IID shall provide transmission service, as
specified in Exhibit[s] II, Transmission Service, and in any subsequent Plant
Amendments.

      4.10 Plant Amendment: An agreement reached by the Parties, as an amendment
to this Agreement, for transmission service to be provided by IID for a Plant
added by Producer or for Producer's account subsequent to the execution of this
Agreement.

      4.11 Plant Connection Agreement: An agreement between IID and Producer
providing for the connection of a Plant to IID's electrical system, as specified
in Exhibit[s] II, Transmission Service, and in any subsequent Plant Amendments.

      4.12 Point(s) of Delivery: The 230-kV switchrack at the Mirage Substation
site where Edison's 230-kV facilities are attached to IID's 230-kV
Coachella-Mirage Line or other points as may be mutually agreed upon by the
Authorized Representatives.

      4.13 Point of Receipt: The point on the high voltage side of the Plant's
transformer where IID's metering equipment measures the delivery of energy to
the IID system.

      4.14 Transmission Service Entitlement: The amount of transmission service,
expressed in megawatts (MW), provided by IID for each Plant, from the applicable
Point of Receipt to the applicable Point(s) of Delivery.



                                       3


5.   TERM:

      5.1 Unless otherwise agreed to by the Parties, this Agreement shall be
effective on the Completion Date for the transmission lines being constructed
pursuant to the Funding and Construction Agreement, as the term Completion Date
is defined in Article I thereof, and shall remain in effect until April 15,
2015. It is understood that if such Completion Date does not occur, this
Agreement shall be of no force or effect.

      5.2 The Transmission Service Entitlement to be provided by IID for each
Plant shall be contingent on a Plant Connection Agreement being in effect.
Transmission service for each Plant shall commence on the Date of Initial
Service of such Plant. Producer's Authorized Representative shall give IID's
Authorized Representative written notice of the Date of Initial Service at least
thirty (30) days before the Date of Initial Service.

6.   TRANSMISSION SERVICE:

      6.1 Subject to the terms of this Agreement, IID shall provide to Producer
and Producer shall purchase from IID transmission service over IID's
transmission system for each Plant. IID shall make arrangements with Edison to
provide, at Producer's or Edison's expense, for the transfer of the electrical
power to be delivered to Edison hereunder from IID's transmission system to
Edison's transmission system at the Point(s) of Delivery.

      6.2 The Transmission Service Entitlement for each Plant shall be the
Maximum Transmission Service Entitlement for such Plant specified in Exhibit[s]
II, Transmission



                                       4


Service, or any subsequent Plant Amendments, or such lesser
amount as may be established as follows. Beginning on the Date of Initial
Service for each Plant, Producer shall be entitled to specify a Transmission
Service Entitlement by advance written notice given to IID's Authorized
Representative at least thirty (30) days prior to the Date of Initial Service.
The Transmission Service Entitlement to be provided by IID subsequent to the
Date of Initial Service may be adjusted at six (6) month intervals thereafter
until two (2) years after the Date of Initial Service for such Plant (the "Trial
Period"). Such adjustments shall be made by having Producer's Authorized
Representative give IID's Authorized Representative a ninety (90) day advance
written notice as to the adjustment required. Beginning two (2) years after the
Date of Initial Service for such Plant, Producer shall be entitled to specify a
Transmission Service Entitlement for each successive two-year period during the
remaining term of this Agreement by written notice from Producer's Authorized
Representative to IID's Authorized Representative given at least ninety (90)
days prior to the beginning of each two-year period.

      6.3 The Transmission Service Entitlement selected by Producer for each
Plant in accordance with Section 6.2 may be any amount which is less than or
equal to the Maximum Transmission Service Entitlement for such Plant specified
in Exhibit[s] II, Transmission Service and in any subsequent Plant Amendments,
provided, however, that the following shall apply to each Plant after the Trial
Period for such Plant has elapsed.

              6.3.1 If (i) the sum of the Transmission Service Entitlements for
all Plants which are no longer in their Trial Periods is less than the sum of
the Maximum



                                       5


Transmission Service Entitlements for such Plants, as shown in Exhibit[s] II,
Transmission Service and in any subsequent Plant Amendments, (the "Aggregate
Maximum Transmission Service Entitlement"), and (ii) provided that IID requires
additional capacity for transmitting electric power to Edison's transmission
system for another person (or, following the Credit Installment Period as
defined in the Funding and Construction Agreement, for itself) and (iii) IID's
use of such required capacity would be in conflict with Producer's right as
provided herein to increase the sum of the Transmission Service Entitlements for
such Plants to the Aggregate Maximum Transmission Service Entitlement, then IID
shall so notify Producer in writing, specifying in such notice the portion,
expressed in megawatts (MW), of the excess of the Maximum Transmission Service
Entitlement over the Transmission Service Entitlement for each such Plant which
it desires to use as stated above. Producer shall have ninety (90) days after
receipt of IID's notice to notify IID in writing that it desires to increase the
Transmission Service Entitlements of such Plants. To the extent that Producer
does not elect to increase the Transmission Service Entitlement of each such
Plant up to the Maximum Transmission Service Entitlement for such Plant, IID
shall be entitled to use such unclaimed capacity to satisfy the transmission
requirements specified in its notice to Producer, and to the extent that IID
does so, Producer shall thereafter be foreclosed from increasing the
Transmission Service Entitlement for such Plant in a manner which would conflict
with such usage by IID.



                                       6


              6.3.2 IID shall treat Producer and each other person who has
entered into a transmission service agreement similar in substance to this
Agreement in a fair and nondiscriminatory manner in requesting additional
transmission capacity as provided in this Section 6.3. Without limiting the
generality of the foregoing, IID shall request additional transmission capacity
from Producer and such other persons on a pro rata basis, in proportion to the
Aggregate Maximum Transmission Service Entitlement for each person less the sum
of the Transmission Service Entitlements for each of such persons' generating
plants which is no longer in a Trial Period.

      6.4 In the event that the Original Capacity Nomination designated by
Producer (or the Participant associated with Producer) is adjusted pursuant to
Section 3.07 of the Funding and Construction Agreement, the Parties agree to
amend this Agreement in such a way that the sum of the Maximum Transmission
Service Entitlements for all Plants hereunder is equal to such Original Capacity
Nomination as so adjusted. As used in this Section 6.4, the terms Original
Capacity Nomination and Participant shall have the meanings assigned to them in
Article I of the Funding and Construction Agreement.

      6.5 IID reserves the right to interrupt or curtail the transmission
service provided hereunder as follows:

              6.5.1 If the Operating Transmission Capability is reduced to less
than Normal Transmission Capacity from a Point of Receipt to a Point of
Delivery, and when continuity of service within IID's service area is not being
jeopardized, IID may curtail



                                       7




the transmission service currently being provided from such Point of Receipt to
such Point of Delivery, to an amount "A" determined by the following formula:


A = Operating Transmission Capability   x      Transmission Service
    ---------------------------------               Entitlement
       Normal Transmission Capacity

              The transmission service for each Plant affected shall be
curtailed by multiplying the Transmission Service Entitlement in accordance with
Exhibit[s] II, Transmission Service and in any subsequent Plant Amendments by
the same percentage (expressed as a decimal) as used in the determination of
"A." However, any such curtailment shall occur only after IID has made all
reasonable efforts to eliminate the cause of the reduction in Operating
Transmission Capability, and IID shall then employ reasonable efforts to
eliminate expeditiously the cause of said reduction.

              6.5.2 If continuity of service within IID's control area is being
jeopardized, as determined by IID in its sole judgment, IID may interrupt or
curtail the transmission service provided hereunder to the extent necessary to
avoid or eliminate such jeopardy; provided that (i) such interruptions or
curtailments may be made so that IID may fully utilize all generating resources
owned by it or available to it under contract in order to avoid damage to IID's
electrical system caused by overloading, (ii) such interruption or curtailment
shall occur only after IID has made all reasonable efforts to avoid or eliminate
such jeopardy and (iii) to the extent feasible any curtailment of transmission
service provided hereunder from a Point of Receipt to a Point of Delivery shall
be made in accordance with the formula set forth in Section 6.5.1.



                                       8


      6.6 If IID's efforts do not avoid or eliminate such jeopardy, the Parties
shall endeavor to develop some other arrangement to avoid or eliminate such
jeopardy and minimize the effects of IID's interruption or curtailment on both
parties.

      6.7 In the event of any curtailments or interruptions made pursuant to
Section 6.5.1 or Section 6.5.2, Producer shall, immediately after being orally
notified by IID, reduce the electrical output of the Plants by the amounts
requested by IID.

      6.8 The transmission service to be provided by IID and purchased by
Producer for each Plant shall not exceed the Transmission Service Entitlement
for that Plant.

      6.9 Subject to Section 6.5, IID shall, during the periods that IID has
agreed to provide the transmission service at the specified Transmission Service
Entitlements, accept hourly scheduled energy deliveries at each Point of Receipt
and simultaneously deliver the same amount of energy (less transmission losses
as provided herein) at the Point(s) of Delivery mutually agreed upon by the
Parties' dispatchers and/or schedulers.

      6.10 Hourly scheduled energy deliveries at each Point of Receipt shall
conform with the practices and procedures developed by the Parties' dispatchers
and schedulers and agreed to by the Authorized Representatives.

7. TRANSMISSION LOSSES:

      7.1 IID shall determine, by transmission power flow analysis, the
electrical losses (expressed as a percent amount of hourly scheduled energy
deliveries) associated with the electrical output from each Plant. Such analysis
shall be performed by IID at its sole expense. The initial percent amount, for
each Plant, representing the electrical losses as



                                       9


determined herein shall be as specified in Exhibit[s] II, Transmission Service
and in any subsequent Plant Amendments.

      7.2 Unless otherwise agreed to by Producer's and IID's schedulers and
dispatchers, IID shall reduce the amount of all hourly scheduled energy
deliveries for Producer or Producer's account by the percent amount of such
hourly deliveries for each Plant in accordance with Exhibit[s] II, Transmission
Service and in any subsequent Plant Amendments.

      7.3 If either Party believes that there has been a significant change in
IID's electrical system and the electrical losses associated with any Plant
should be redetermined, either Party's Authorized Representative may submit a
written request to the other Party's Authorized Representative that the
electrical losses be redetermined. Following such request, a transmission flow
analysis shall be performed by IID as approved by the Authorized Representatives
and paid for by the requesting Party. Whenever the percent amount for electrical
losses is redetermined, such percent amount shall become effective as of the
first day of the month following the date of such redetermination; provided,
that such a redetermination may be no sooner than twelve (12) months after the
most recent redetermination. Any redetermination of electrical losses made
pursuant to this Section 7 shall be based on conditions in existence at the time
of such redetermination.



                                       10


      7.4 Along with the monthly billing pursuant to Section 9.1, for the
transmission service for each Plant, IID shall submit a monthly summary of
hourly scheduled energy deliveries and of electrical losses for each Plant.

8. CHARGES:

      8.1 For transmission service provided by IID, Producer shall pay IID at a
rate to be determined by IID pursuant to the methodologies specified in Exhibit
I.A. The initial rate is specified in Exhibit[s] II, Transmission Service and
revisions thereto will be specified in any subsequent Plant Amendments. Any
specific facility charge to Producer for connecting the Plant(s) to the IID
transmission system shall be included only in the Plant Connection Agreement(s)
between IID and Producer.

      8.2 The transmission rate shall be reviewed annually and may be revised.
Any revision of the rates shall be based on the methodologies in Exhibit I.A and
on the conditions in existence at the time of the revision. Producer shall have
the right to review any exhibits or work papers prepared by IID to revise the
rates.

      8.3 An initial monthly scheduling fee, as specified in Exhibit[s] II,
Transmission Service and revisions thereto specified in any subsequent Plant
Amendments, shall be paid by Producer to IID for those months in which there
were scheduled energy deliveries from the Plant(s). The initial scheduling fee
has been determined by IID pursuant to the methodology specified in Exhibit I.B.
The scheduling fee shall be reviewed annually and may be revised. Any revision
of the scheduling fee shall be based on the methodology in Exhibit I.B and on
the conditions in existence at the time of the revision. Producer shall



                                       11


have the right to review any exhibits or work papers prepared by IID to revise
the scheduling fee.

9.   BILLING AND PAYMENT:

      9.1 IID shall render bills to Producer, beginning in the month of the Date
of Initial Service, on or before the fifteenth (15th) day of each month for the
transmission service to be provided during the month. Producer shall pay such
bills within twenty (20) days after receipt thereof.

                      All payments by Producer shall be sent to:

                               Imperial Irrigation District
                               c/o Manager, Finance and Accounting
                               P.O. Box 937
                               Imperial, California 92251

                      All billings by IID shall be sent to:

                               Geo East Mesa Limited Partnership
                               P.O. Box 748
                               Holtville, CA 92250

      9.2 Either Party's Authorized Representative may at any time, by advance
written notice to the other Party's Authorized Representative, change the
address to which payments or billings shall be sent.

      9.3 Bills which are not paid in full by said due date shall thereafter
bear an additional charge of one and one-half percent (1-1/2%) per month, or the
maximum legal rate of interest, whichever is less, compounded monthly on the
unpaid amount prorated by days from the due date until payment is received by
IID.



                                       12


      9.4 In the event any portion of any bill is disputed, the disputed amount
shall be paid when due under protest. If the protested portion of the payment is
found to be incorrect by the Authorized Representatives, the disputed amount
shall be paid by IID to Producer, including interest at the rate of 1-1/2% per
month, or the maximum legal rate, whichever is less, compounded monthly from the
date of payment by Producer to the date the refund check or adjusted bill is
received by Producer.

      9.5 For a fractional part of a calendar month at the beginning or end of
the period for which the transmission service is provided hereunder, the charge
pursuant to Section 8.1 shall be proportionately adjusted by the ratio of days
that service is furnished by IID to Producer during such month to the total
number of days in such month.

      9.6 The charge for the transmission service pursuant to Section 8.1 shall
be proportionately reduced to the extent the duration of the interruptions or
curtailments of the transmission service which may occur pursuant to Section
6.5.1 or Section 6.5.2 exceed a cumulative total of twenty-four (24) hours
during any calendar month based on 730 hours per month representing the full
transmission service charge. The amount of such prorata reduction in any month
shall reflect the duration and amount of such interruptions or curtailments
which exceed said cumulative 24 hours. Such prorata reduction shall be reflected
as a credit to Producer as soon as possible in a subsequent monthly bill.



                                       13


      9.7 The charge for the transmission service shall not be reduced if IID
can deliver, but Edison's transmission system cannot receive, the hourly
scheduled energy deliveries independent of the duration of time this condition
exists.

10. LIABILITY:

      10.1 Except for any loss, damage, claim, costs, charge or expense
resulting from Willful Action, neither Party (the "released Party"), its
directors or other governing body, officers or employees shall be liable to the
other Party for any loss, damage, claim, cost, charge, or expense of any kind or
nature incurred by the other Party (including direct, indirect or consequential
loss, damage, claim, cost, charge or expense; and whether or not resulting from
the negligence of a Party, its directors or other governing body, officers,
employees or any person or entity whose negligence would be imputed to a Party)
from engineering, repair, supervision, inspection, testing, protection,
operation, maintenance, replacement, reconstruction, use or ownership of the
released Party's electrical system, Plant(s) or associated facilities in
connection with the implementation of this Agreement. Except for any loss,
damage, claim, cost, charge or expense resulting from Willful Action, each Party
releases the other Party, its directors or other governing body, officers and
employees from any such liability.

      10.2 For the purpose of this Section 10, Willful Action shall be defined
as action taken or not taken by a Party at the direction of its directors or
other governing body, officers or employees having management or administrative
responsibility affecting its performance under this Agreement, as follows:





                                       14


              10.2.1 Action which is knowingly or intentionally taken or not
taken with conscious indifference to the consequences thereof or with intent
that injury or damage would result or would probably result therefrom.

              10.2.2 Action which has been determined by final arbitration award
or final judgment or judicial decree to be a material default under this
Agreement and which occurs or continues beyond the time specified in such
arbitration award or judgment or judicial decree for curing such default or, if
no time to cure is specified therein, occurs or continues thereafter beyond a
reasonable time to cure such default.

              10.2.3 Action which is knowingly or intentionally taken or not
taken with the knowledge that such action taken or not taken is a material
default under this Agreement.

      10.3 Willful Action does not include any act or failure to act which is
merely involuntary, accidental or negligent.

      10.4 The phrase "employees having management or administrative
responsibility," as used in Section 10.2, means the employees of a Party who are
responsible for one or more of the executive functions of planning, organizing,
coordinating, directing controlling and supervising such Party's performance
under this Agreement with responsibility for results.

      10.5 Subject to the foregoing provisions of this Section 10, each Party
agrees to defend, indemnify and save harmless the other Party, its officers,
agents, or employees against all losses, claims, demands, costs or expenses for
loss of or damage to property,



                                       15


or injury or death of persons, which directly or indirectly arise out of the
indemnifying Party's performance pursuant to this Agreement; provided, however,
that a Party shall be solely responsible for any such losses, claims, demands,
costs or expenses which result from its sole negligence or Willful Action.

11.  AUDITING

      11.1 IID shall make its books, records, and other supporting information,
as requested, available to Producer or to Producer's designated contracted
representative(s) with a CPA firm, for the purpose of auditing any charges or
accounts to be kept by IID hereunder. All such audits shall be undertaken at
reasonable times and in conformance with generally-accepted auditing standards.

      11.2 If as a result of such audits Producer believes its charges or
accounts should be adjusted, the findings shall be presented to the Authorized
Representatives. If the Authorized Representatives agree that any audit finding
should result in a revision of charges or accounts, such revisions shall be
retroactive to the first billing for such charges and accounts and shall be made
as soon as practical after determination.

      11.3 The amount of any unresolved dispute shall accrue interest at the
rate of one and one-half percent (1-1/2%) per month, or the maximum legal rate,
whichever is less, compounded monthly for any amount of money ultimately
refunded to Producer.

12. AUTHORIZED REPRESENTATIVES: Within thirty (30) calendar days after the
Completion Date, as defined in Article I of the Funding and Construction
Agreement, each Party shall designate by written notice to the other Party a
representative who is



                                       16


authorized to act on its behalf in the implementation of this Agreement. Either
Party may at any time change the designation of its Authorized Representative by
written notice to the other Party.

13. NO DEDICATION OF FACILITIES: Any undertaking by one Party to the other Party
under any provision of this Agreement shall not constitute the dedication of the
system or any portion thereof of the Party to the public or to the other Party,
and it is understood and agreed that any such undertaking under any provision of
this Agreement by a Party shall cease upon the termination of its obligations
hereunder.

14. NON-WAIVER: None of the provisions of this Agreement shall be considered
waived by either Party except when such waiver is given in writing. The failure
of either Party to insist in any one or more instances upon strict performance
of any of the provisions of this Agreement or to take advantage of any of its
rights hereunder shall not be construed as a waiver of any such provisions or
the relinquishment of any such rights for the future, but the same shall
continue and remain in full force and effect.

15. NO THIRD PARTY RIGHTS: The Parties do not intend to create rights in or to
grant remedies to any Third Party or others as a beneficiary of this Agreement
or of any duty, covenant, obligation or undertaking established hereunder.

16. UNCONTROLLABLE FORCES: Neither Party shall be considered to be in default in
the performance of any of its obligations under this Agreement when a failure of
performance shall be due to an uncontrollable force. The term "uncontrollable
force" shall mean any cause beyond the control of the Party affected including,
but not restricted



                                       17


to, failure of or threat of failure of facilities which have been maintained in
accordance with generally-accepted engineering and operating practices in the
electrical utility industry, flood, drought, earthquake, tornado, storm, fire,
pestilence, lightning and other natural catastrophes, epidemic, war, riot, civil
disturbance or disobedience, strike, labor dispute, labor or material shortage,
sabotage, government priorities and restraint by court order or public authority
(whether valid or invalid) and actions or nonaction by or inability to obtain or
keep the necessary authorizations or approvals from any governmental agency or
authority, the failure or inability of Edison to receive the electric power to
be transmitted hereunder at the Point(s) of Delivery, which by exercise of due
diligence such Party could not reasonably have been expected to avoid and which
by exercise of due diligence it has been unable to overcome. Nothing contained
herein shall be construed as to require a Party to settle any strike or labor
dispute in which it may be involved. Either Party rendered unable to fulfill any
of its obligations under this Agreement by reason of an uncontrollable force
shall give prompt written notice of such fact to the other Party and shall
exercise due diligence to remove such inability with all reasonable dispatch.

17. ASSIGNMENTS:

      17.1 Any assignment by Producer of its interest in this Agreement which is
made without the written consent of IID (which shall not be unreasonably
withheld) shall not relieve Producer from its primary liability for any of its
duties and obligations hereunder, and in the event of any such assignment
Producer shall continue to remain primarily



                                       18


liable for payment of any and all money due IID hereunder and for the
performance and observance of all other covenants, duties and obligations to be
performed and observed hereunder by it to the same extent as though no
assignment has been made.

      17.2 Notwithstanding any provision of Section 17.1 to the contrary, prior
to the end of the Credit Installment Period, as defined in Article I of the
Funding and Construction Agreement, Producer's right to transmission service
under this Agreement with respect to one or more of the Plants may be assigned
only (i) to a purchaser or co-owner of such Plants or to a person who will
operate such Plants pursuant to a contract or other arrangement with such
purchaser and in either case only with the prior written consent of IID (which
shall not be unreasonably withheld) or (ii) for security purposes, to a bank or
other entity which provides financing for such Plants or any electrical
transmission facilities associated therewith. Producer and IID agree that
nothing in this Section 17.2 may be amended, modified or waived without the
prior written consent of each and every party to the Funding and Construction
Agreement (except for any parties in default thereunder).

      17.3 Whenever an assignment of Producer's interest in this Agreement is
made with the written consent of IID, Producer's assignee shall expressly assume
in writing the duties and obligations hereunder of Producer and, within thirty
(30) days after any such assignment and assumption of duties and obligations,
Producer shall furnish or cause to be furnished to IID a true and correct copy
of such assignment and assumption of duties and obligations.



                                       19


      17.4 Subject to the foregoing restrictions on assignments, all of the
terms of this Agreement shall be binding upon and inure to the benefit of both
of the Parties and their respective successors, permitted assigns and legal
representatives.

18. GOVERNING LAW: This Agreement shall be interpreted, governed by and
construed under the laws of the State of California or the laws of the United
States, as applicable.

19. NOTICES: Any notice, demand or request provided for in this Agreement, or
served, given or made in connection with it, shall be in writing and shall be
deemed properly served, given or made if delivered in person or sent by United
States mail, postage prepaid, to the persons specified below unless otherwise
provided for in this Agreement:

                                         Imperial Irrigation District
                                         c/o General Manager
                                         P.O. Box 937
                                         Imperial, California 92251

                                         Geo East Mesa Limited Partnership
                                         P.O. Box 748
                                         Holtville, California 92250

Either Party may at any time, by notice to the other Party, change the
designation or address of the person so specified as the one to receive notices
pursuant to this Agreement.



                                       20


20. SIGNATURE CLAUSE: The signatories hereto represent that they have been
appropriately authorized to enter into this IID-Geo East Mesa Limited
Partnership Transmission Service Agreement for Alternative Resources (Standard
Form) on behalf of the Party for whom they signed. This Agreement is hereby
executed as of the 21st day of March, 1989.

                                           IMPERIAL IRRIGATION DISTRICT

                                       By: /s/ Lester A. Bornt
                                           ------------------------------------
                                               President, Board of Directors




                                           GEO EAST MESA LIMITED PARTNERSHIP

                                       By: /s/ M.N. Brunano
                                           ------------------------------------



                                           3-8-89




                                                                 Exhibit 10.3.33


                                                                          89A. 1
                                                                        GE00C-T3
                                                                        03-02-89
                                                                  EXECUTION COPY






                         TRANSMISSION SERVICE AGREEMENT
                                     FOR THE
                        GEO EAST MESA LIMITED PARTNERSHIP
                                   UNIT NO. 3


                                     BETWEEN

                          IMPERIAL IRRIGATION DISTRICT

                                       AND

                        GEO EAST MESA LIMITED PARTNERSHIP











EXECUTION COPY
03 -02-89











                                TABLE OF CONTENTS





1.     PARTIES.....................................................................................1
2.     RECITALS....................................................................................1
3.     AGREEMENT...................................................................................1
4.     DEFINITIONS.................................................................................1
5.     TERM........................................................................................4
6.     TRANSMISSION SERVICE........................................................................4
7.     TRANSMISSION LOSSES.........................................................................9
8.     CHARGES....................................................................................10
9.     BILLING AND PAYMENT........................................................................11
10.    LIABILITY..................................................................................13
11.    AUDITING...................................................................................15
12.    AUTHORIZED REPRESENTATIVES.................................................................15
13.    NO DEDICATION OF FACILITIES................................................................15
14.    NON-WAIVER.................................................................................16
15.    NO THIRD PARTY RIGHTS......................................................................16
16.    UNCONTROLLABLE FORCES......................................................................16
17.    ASSIGNMENTS................................................................................17
18.    GOVERNING LAW..............................................................................18
19.    NOTICE.....................................................................................18
20.    SIGNATURE CLAUSE...........................................................................18





EXHIBIT I - DEVELOPMENTS AND METHODOLOGIES FOR TRANSMISSION SERVICE CHARGES AND
             SCHEDULING FEE



EXHIBIT II - TRANSMISSION SERVICE FOR GEO EAST MESA LIMITED PARTNERSHIP




1. PARTIES: The Parties to this Agreement are Imperial Irrigation District,
organized under the Water Code of the State of California ("IID") and Geo East
Mesa Limited Partnership, L. P. ("Producer"), hereinafter sometimes referred to
individually as "Party," and collectively as "Parties."

2. RECITALS: This Agreement is made with reference to the following facts, among
others:

         2.1 Producer has caused to be constructed or intends to construct an
alternative energy resource facility located in IID's service area.

         2.2 Producer and IID have entered into a Plant Connection Agreement.

         2.3 Producer desires to purchase, and IID desires to sell firm
transmission service of power from the Plant to Edison's Mirage Substation
subject to the terms and conditions specified herein.

         2.4 Producer and IID are parties to that certain Funding and
Construction Agreement dated June 29, 1987, providing for the funding and
construction of transmission lines within IID's service area.

3. AGREEMENT: The Parties agree as follows:

4. DEFINITIONS: The following terms, when used herein with initial
capitalization, whether in the singular or plural, shall have the meanings
specified:

         4.1 Agreement: This IID - Producer Transmission Service Agreement for
Alternative Resources between Geo East Mesa Limited Partnership, L. P. and IID,
and all Exhibits attached hereto, as such Agreement may subsequently be amended
for firm transmission service between each Plant and Edison's Mirage Substation.

         4.2 Authorized Representative: The representative of a party designated
in accordance with Section 12.


         4.3 Date of Initial Service: The date when the output from each Plant
is first available for delivery to Edison, as notified to IID pursuant to
Section 5.2.

         4.4 Edison: Southern California Edison Company.

         4.5 Funding and Construction Agreement: An agreement entered into by
IID and others dated June 29, 1987, providing for the funding and construction
of the Heber-Mirage Transmission Project, to which a form of this agreement is
attached as Exhibit III.

         4.6 Maximum Transmission Service Entitlement: The Maximum Transmission
Service Entitlement for each Plant, as specified in Exhibit(s) II, Transmission
Service, and in any subsequent Plant Amendments.

         4.7 Normal Transmission Capacity: The maximum transfer capability,
expressed in megawatts (NMW), from the Point of Receipt to the Point of
Delivery. Such transfer capability, as determined by IID, in its sole judgment,
shall be consistent with prudent operating procedures and with
generally-accepted engineering and operating practices in the electrical utility
industry.

         4.8 Operating Transmission Capability: The maximum transfer capability,
expressed in megawatts (MW), available to IID at any given time to transmit
power from Point of Receipt to Point of Delivery. Such transfer capability shall
be as determined by IID in its sole judgment, may vary from time-to-time
depending on system conditions, and shall be consistent with prudent operating
procedures and generally-accepted engineering and operating practices in the
electrical utility industry.

         4.9 Plant: An electrical generating alternative energy resource
facility developed by Producer for which IID shall provide transmission service,
as specified in Exhibit(s) II, Transmission Service, and in any subsequent Plant
Amendments.


         4.10 Plant Amendment: An agreement reached by the Parties, as an
amendment to this Agreement, for transmission service to be provided by IID for
a Plant added by Producer or for Producer's account subsequent to the execution
of this Agreement.

         4.11 Plant Connection Agreement: An agreement between IID and Producer
providing for the connection of a Plant to IID's electrical system, as specified
in Exhibit(s) II, Transmission Service, and in any subsequent Plant Amendments.

         4.12 Point(s) of Delivery: The 23D-kV switchrack at the Mirage
Substation site where Edison's 23O-kV facilities are attached to IID's 230-kV
Coachella-Mirage Line or other points as may be mutually agreed upon by the
Authorized Representatives.

         4.13 Point of Receipt: The point on the high voltage side of the
Plant's transformer where IID's metering equipment measures the delivery of
energy to the IID system.

         4.14 Transmission Service Entitlement: The amount of transmission
service, expressed in megawatts (MW), provided by IID for each Plant, from the
applicable Point of Receipt to the applicable Point(s) of Delivery.

5.  TERM:

         5.1 Unless otherwise agreed to by the Parties, this Agreement shall be
effective on the Completion Date for the transmission lines being constructed
pursuant to the Funding and Construction Agreement, as the term Completion Date
is defined in Article I thereof, and shall remain in effect until April 15,
2015. It is understood that if such Completion Date does not occur, this
Agreement shall be of no force or effect.

         5.2 The Transmission Service Entitlement to be provided by IID for each
Plant shall be contingent on a Plant Connection Agreement being in effect.
Transmission service for each Plant shall contingent on the Date of initial
Service of such Plant. Producer's Authorized


Representative shall give IID's Authorized Representative written notice of the
Date of Initial Service at least thirty (30) days before the Date of Initial
Service.

6. TRANSMISSION SERVICE:

         6.1 Subject to the terms of this Agreement, IID shall provide to
Producer and Producer shall purchase from IID transmission service over IID's
transmission system for each Plant. IID shall make arrangements with Edison to
provide, at Producer's or Edison's expense, for the transfer of the electrical
power to be delivered to Edison hereunder from IID's transmission system to
Edison's transmission system at the Point(s) of Delivery.

         6.2 The Transmission Service Entitlement for each Plant shall be the
Maximum Transmission Service Entitlement for such Plant specified in Exhibit(s)
II, Transmission Service, or any subsequent Plant Amendments, or such lesser
amount as may be established as follows. Beginning on the Date of Initial
Service for each Plant, Producer shall be entitled to specify a Transmission
Service Entitlement by advance written notice given to IID's Authorized
Representative at least thirty (30) days prior to the Date of Initial Service.
The Transmission Service Entitlement to be provided by IID subsequent to the
Date of Initial Service may be adjusted at six (6) month intervals thereafter
until two (2) years after the Date of Initial Service for such Plant (the "Trial
Period"). Such adjustments shall be made by having Producer's Authorized
Representative give IID's Authorized Representative a ninety (90) day advance
written notice as to the adjustment required. Beginning two (2) years after the
Date of Initial Service for such Plant, Producer shall be entitled to specify a
Transmission Service Entitlement for each successive two-year period during the
remaining term of this Agreement by written notice from Producer's Authorized
Representative to IID's Authorized Representative given at least ninety (90)
days prior to the beginning of each two-year period.


         6.3 The Transmission Service Entitlement selected by Producer for each
Plant in accordance with Section 6.2 may be any amount which is less than or
equal to the Maximum Transmission Service Entitlement for such Plant specified
in Exhibit[s] II, Transmission Service and in any subsequent Plant Amendments,
provided, however, that the following shall apply to each Plant after the Trial
Period for such Plant has elapsed.

         6.3.1 If (i) the sum of the Transmission Service Entitlements for all
Plants which are no longer in their Trial Periods is less than the sum of the
Maximum Transmission Service Entitlements for such Plants, as shown in
Exhibit(s) II, Transmission Service and in any subsequent Plant Amendments, (the
"Aggregate Maximum Transmission Service Entitlement") and (ii) provided that IID
requires additional capacity for transmitting electric power to Edison's
transmission system for another person (or, following the Credit Installment
Period as defined in the Funding and Construction Agreement, for itself) and
(iii) IID's use of such required capacity would be in conflict with Producer's
right as provided herein to increase the sum of the Transmission Service
Entitlements for such Plants to the Aggregate Maximum Transmission Service
Entitlement, then IID shall so notify Producer in writing, specifying in such
notice the portion, expressed in megawatts (MW), of the excess of the Maximum
Transmission Service Entitlement over the Transmission Service Entitlement for
each such Plant which it desires to use as stated above. Producer shall have
ninety (90) days after receipt of IID's notice to notify IID in writing that it
desires to increase the Transmission Service Entitlements of such Plants. To the
extent that Producer does not elect to increase the Transmission Service
Entitlement of each such Plant up to the Maximum Transmission Service
Entitlement for such Plant, IID shall be entitled to use such unclaimed capacity
to satisfy the transmission requirements specified in its notice to Producer,
and to the extent that IID does so, Producer shall thereafter be foreclosed from


increasing the Transmission Service Entitlement for such Plant in a manner which
would conflict with such usage by IID.

         6.3.2 IID shall treat Producer and each other person who has entered
into a transmission service agreement similar in substance to this Agreement in
a fair and nondiscriminatory manner in requesting additional transmission
capacity as provided in this Section 6.3. Without limiting the generality of the
foregoing, IID shall request additional transmission capacity from Producer and
such other persons on a pro rata basis, in proportion to the Aggregate Maximum
Transmission Service Entitlement for each person less the sum of the
Transmission Service Entitlements for each of such persons' generating plants
which is no longer in a Trial Period.

         6.4 In the event that the Original Capacity Nomination designated by
Producer (or the Participant associated with Producer) is adjusted pursuant to
Section 3.07 of the Funding and Construction Agreement, the Parties agree to
amend this Agreement in such a way that the sum of the Maximum Transmission
Service Entitlements for all Plants hereunder is equal to such Original Capacity
Nomination as so adjusted. As used in this Section 6.4, the terms Original
Capacity Nomination and Participant shall have the meanings assigned to them in
Article I of the Funding and Construction Agreement.

         6.5 IID reserves the right to interrupt or curtail the transmission
service provided hereunder as follows:

         6.5.1 If the Operating Transmission Capability is reduced to less than
Normal Transmission Capacity from a Point of Receipt to a Point of Delivery, and
when continuity of service within IID's service area is not being jeopardized,
IID may curtail the transmission service currently being provided from such
Point of Receipt to such Point of Delivery, to an


amount "A" determined by the following formula:

A = Operating Transmission Capability     x     Transmission Service Entitlement
    ---------------------------------
  Normal Transmission Capacity

         The transmission service for each Plant affected shall be curtailed by
multiplying the Transmission Service Entitlement in accordance with Exhibit[s]
II, Transmission Service and in any subsequent Plant Amendments by the same
percentage (expressed as a decimal) as used in the determination of "A."
However, any such curtailment shall occur only after IID has made all reasonable
efforts to eliminate the cause of the reduction in Operating Transmission
Capability, and IID shall then employ reasonable efforts to eliminate
expeditiously the cause of said reduction.

         6.5.2 If continuity of service within IID's control area is being
jeopardized, as determined by IID in its sole judgment, IID may interrupt or
curtail the transmission service provided hereunder to the extent necessary to
avoid or eliminate such jeopardy; provided that (i) such interruptions or
curtailments may be made so that IID may fully utilize all generating resources
owned by it or available to it under contract in order to avoid damage to IID's
electrical system caused by overloading, (ii) such interruption or curtailment
shall occur only after IID has made all reasonable efforts to avoid or eliminate
such jeopardy and (iii) to the extent feasible any curtailment of transmission
service provided hereunder from a Point of Receipt to a Point of Delivery shall
be made in accordance with the formula set forth in Section 6.5.1.

         6.6 If IID's efforts do not avoid or eliminate such jeopardy, the
Parties shall endeavor to develop some other arrangement to avoid or eliminate
such jeopardy and minimize the effects of IID's interruption or curtailment on
both parties.


         6.7 In the event of any curtailments or interruptions made pursuant to
Section 6.5.1 or Section 6.5.2, Producer shall, immediately after being orally
notified by IID, reduce the electrical output of the Plants by the amounts
requested by IID.

         6.8 The transmission service to be provided by IID and purchased by
Producer for each Plant shall not exceed the Transmission Service Entitlement
for that Plant.

         6.9 Subject to Section 6.5, IID shall, during the periods that IID has
agreed to provide the transmission service at the specified Transmission Service
Entitlements, accept hourly scheduled energy deliveries at each Point of Receipt
and simultaneously deliver the same amount of energy (less transmission losses
as provided herein) at the Point(s) of Delivery mutually agreed upon by the
Parties' dispatchers and/or schedulers.

         6.10 Hourly scheduled energy deliveries at each Point of Receipt shall
conform with the practices and procedures developed by the Parties' dispatchers
and schedulers and agreed to by the Authorized Representatives.

7. TRANSMISSION LOSSES:

         7.1 IID shall determine, by transmission power flow analysis, the
electrical losses (expressed as a percent amount of hourly scheduled energy
deliveries) associated with the electrical output from each Plant. Such analysis
shall be performed by IID at its sole expense. The initial percent amount, for
each Plant, representing the electrical losses as determined herein shall be as
specified in Exhibit(s) II, Transmission Service and in any subsequent Plant
Amendments.

         7.2 Unless otherwise agreed to by Producer's and IID's schedulers and
dispatchers, IID shall reduce the amount of all hourly scheduled energy
deliveries for Producer or Producer's



account by the percent amount of such hourly deliveries for each Plant in
accordance with Exhibit(s) II, Transmission Service and in any subsequent Plant
Amendments.

         7.3 If either Party believes that there has been a significant change
in IID's electrical system and the electrical losses associated with any Plant
should be redetermined, either Party's Authorized Representative may submit a
written request to the other Party's Authorized Representative that the
electrical losses be redetermined. Following such request, a transmission flow
analysis shall be performed by IID as approved by the Authorized Representatives
and paid for by the requesting Party. Whenever the percent amount for electrical
losses is redetermined, such percent amount shall become effective as of the
first day of the month following the date of such redetermination; provided,
that such a redetermination may be no sooner than twelve (12) months after the
most recent redetermination. Any redetermination of electrical losses made
pursuant to this Section 7 shall be based on conditions in existence at the time
of such redetermination.

         7.4 Along with the monthly billing pursuant to Section 9.1, for the
transmission service for each Plant, IID shall submit a monthly summary of
hourly scheduled energy deliveries and of electrical losses for each Plant.

8. CHARGES:

         8.1 For transmission service provided by IID, Producer shall pay IID at
aExhibit I.A. The initial rate is specified in Exhibit[s] II, Transmission
Service and revisions thereto will be specified in any subsequent Plant
Amendments. Any specific facility charge to Producer for connecting the Plant(s)
to the IID transmission system shall be included only In the Plant Connection
Agreement(s) between IID and Producer.


         8.2 The transmission rate shall be reviewed annually and may be
revised. Any revision of the rates shall be based on the methodologies In
Exhibit I.A and on the conditions in existence at the time of the revision.
Producer shall have the right to review any exhibits or work papers prepared by
IID to revise the rates.

         8.3 An initial monthly scheduling fee, as specified in Exhibit[s] II,
Transmission Service and revisions thereto specified in any subsequent Plant
Amendments, shall be paid by Producer to IID for those months In which there
were scheduled energy deliveries from the Plant(s). The initial scheduling fee
has been determined by IID pursuant to the methodology specified in Exhibit I.B.
The scheduling fee shall be reviewed annually and may be revised. Any revision
of the scheduling fee shall be based on the methodology in Exhibit I.B and on
the conditions in existence at the time of the revision. Producer shall have the
right to review any exhibits or work papers prepared by IID to revise the
scheduling fee.

9. BILLING AND PAYMENT:

         9.1 IID shall render bills to Producer, beginning in the month of the
Date of Initial Service, on or before the fifteenth (15th) day of each month for
the transmission service to be provided during the month. Producer shall pay
such bills within twenty (20) days after receipt thereof.

         All payments by Producer shall be sent to:

                  Imperial Irrigation District
                  c/o Manager, Finance and Accounting
                  P.O. Box 937
                  Imperial, California 92251


         All billings by IID shall be sent to:



                  Geo East Mesa Limited Partnership
                  P.O. Box 748
                  Holtville, CA 92250

         9.2 Either Party's Authorized Representative may at any time, by
advance written notice to the other Party's Authorized Representative, change
the address to which payments or billings shall be sent.

         9.3 Bills which are not paid in full by said due date shall thereafter
bear an additional charge of one and one-half percent (1-1/2%) per month, or the
maximum legal rate of interest, whichever is less, compounded monthly on the
unpaid amount prorated by days from the due date until payment is received by
IID.

         9.4 In the event any portion of any bill is disputed, the disputed
amount shall be paid when due under protest. If the protested portion of the
payment is found to be incorrect by the Authorized Representatives, the disputed
amount shall be paid by IID to Producer, including interest at the rate of
1-1/2% per month, or the maximum legal rate, whichever is less, compounded
monthly from the date of payment by Producer to the date the refund check or
adjusted bill is received by Producer.

         9.5 For a fractional part of a calendar month at the beginning or end
of the period for which the transmission service is provided hereunder, the
charge pursuant to Section 8.1 shall be proportionately adjusted by the ratio of
days that service is furnished by IID to Producer during such month to the total
number of days in such month.

         9.6 The charge for the transmission service pursuant to Section 8.1
shall be proportionately reduced to the extent the duration of the interruptions
or curtailments of the


transmission service which may occur pursuant to Section 6.5.1 or Section 6.5.2
exceed a cumulative total of twenty-four (24) hours during any calendar month
based on 730 hours per month representing the full transmission service charge.
The amount of such prorata reduction in any month shall reflect the duration and
amount of such interruptions or curtailments which exceed said cumulative 24
hours. Such prorata reduction shall be reflected as a credit to Producer as soon
as possible in a subsequent monthly bill.

         9.7 The charge for the transmission service shall not be reduced if IID
can deliver, but Edison's transmission system cannot receive, the hourly
scheduled energy deliveries independent of the duration of time this condition
exists.

10. LIABILITY:

         10.1 Except for any loss, damage, claim, costs, charge or expense
resulting from Willful Action, neither Party (the "released Party"), its
directors or other governing body, officers or employees shall be liable to the
other Party for any loss, damage, claim, cost, charge, or expense of any kind or
nature incurred by the other Party (including direct, indirect or consequential
loss, damage, claim, cost, charge or expense; and whether or not resulting from
the negligence of a Party, its directors or other governing body, officers,
employees or any person or entity whose negligence would be imputed to a Party)
from engineering, repair, supervision, inspection, testing, protection,
operation, maintenance, replacement, reconstruction, use or ownership of the
released Party's electrical system, Plant(s) or associated facilities in
connection with the implementation of this Agreement. Except for any loss,
damage, claim, cost, charge or expense resulting from Willful Action, each Party
releases the other Party, its directors or other governing body, officers and
employees from any such liability.


         10.2 For the purpose of this Section 10, Willful Action shall be
defined as action taken or not taken by a Party at the direction of its
directors or other governing body, officers or employees having management or
administrative responsibility affecting its performance under this Agreement, as
follows:

         10.2.1 Action which is knowingly or intentionally taken or not taken
with conscious indifference to the consequences thereof or with intent that
injury or damage would result or would probably result therefrom.

         10.2.2 Action which has been determined by final arbitration award or
final judgment or judicial decree to be a material default under this Agreement
and which occurs or continues beyond the time specified in such arbitration
award or judgment or judicial decree for curing such default or, if no time to
cure is specified therein, occurs or continues thereafter beyond a reasonable
time to cure such default.

         10.2.3 Action which is knowingly or intentionally taken or not taken
with the knowledge that such action taken or not taken is a material default
under this Agreement.

         10.3 Willful Action does not include any act or failure to act which is
merely involuntary, accidental or negligent.

         10.4 The phrase "employees having management or administrative
responsibility," as used in Section 10.2, means the employees of a Party who are
responsible for one or more of the executive functions of planning, organizing,
coordinating, directing controlling and supervising such Party's performance
under this Agreement with responsibility for results.

         10.5 Subject to the foregoing provisions of this Section 10, each Party
agrees to defend, indemnify and save harmless the other Party, its officers,
agents, or employees against all losses, claims, demands, costs or expenses for
loss of or damage to property, or injury or death of


persons, which directly or indirectly arise out of the Indemnifying Party's
performance pursuant to this Agreement; provided, however, that a Party shall be
solely responsible for any such losses, claims, demands, costs or expenses which
result from its sole negligence or Willful Action.

11. AUDITING

         11.1 IID shall make its books, records, and other supporting
information, as requested, available to Producer or to Producer's designated
contracted representative(s) with a CPA firm, for the purpose of auditing any
charges or accounts to be kept by IID hereunder. All such audits shall be
undertaken at reasonable times and in conformance with generally-accepted
auditing standards.

         11.2 If as a result of such audits Producer believes its charges or
accounts should be adjusted, the findings shall be presented to the Authorized
Representatives. If the Authorized Representatives agree that any audit finding
should result in a revision of charges or accounts, such revisions shall be
retroactive to the first billing for such charges and accounts and shall be made
as soon as practical after determination.

         11.3 The amount of any unresolved dispute shall accrue interest at the
rate of one and one-half percent (1-1/2%) per month, or the maximum legal rate,
whichever is less, compounded monthly for any amount of money ultimately
refunded to Producer.

12. AUTHORIZED REPRESENTATIVES: Within thirty (30) calendar days after the
Completion Date, as defined in Article I of the Funding and Construction
Agreement, each Party shall designate by written notice to the other Party a
representative who is authorized to act on its behalf in the implementation of
this Agreement. Either Party may at any time change the designation of its
Authorized Representative by written notice to the other Party.


13. NO DEDICATION OF FACILITIES: Any undertaking by one Party to the other Party
under any provision of this Agreement shall not constitute the dedication of the
system or any portion thereof of the Party to the public or to the other Party,
and it is understood and agreed that any such undertaking under any provision of
this Agreement by a Party shall cease upon the termination of its obligations
hereunder. 14. NON-WAIVER: None of the provisions of this Agreement shall be
considered waived by either Party except when such waiver is given in writing.
The failure of either Party to insist in any one or more instances upon strict
performance of any of the provisions of this Agreement or to take advantage of
any of its rights hereunder shall not be construed as a waiver of any such
provisions or the relinquishment of any such rights for the future, but the same
shall continue and remain in full force and effect.

15. NO THIRD PARTY RIGHTS: The Parties do not intend to create rights in or to
grant remedies to any Third Party or others as a beneficiary of this Agreement
or of any duty, covenant, obligation or undertaking established hereunder.

16. UNCONTROLLABLE FORCES: Neither Party shall be considered to be in default in
the performance of any of its obligations under this Agreement when a failure of
performance shall be due to an uncontrollable force. The term "uncontrollable
force" shall mean any cause beyond the control of the Party affected including,
but not restricted to, failure of or threat of failure of facilities which have
been maintained in accordance with generally-accepted engineering and operating
practices in the electrical utility industry, flood, drought, earthquake,
tornado, storm, fire, pestilence, lightning and other natural catastrophes,
epidemic, war, riot, civil disturbance or disobedience, strike, labor dispute,
labor or material shortage, sabotage, government priorities and restraint by
court order or public authority (whether valid or invalid) and actions or


nonaction by or inability to obtain or keep the necessary authorizations or
approvals from any governmental agency or authority, the failure or inability of
Edison to receive the electric power to be transmitted hereunder at the Point(s)
of Delivery, which by exercise of due diligence such Party, could not reasonably
have been expected to avoid and which by exercise of due diligence it has been
unable to overcome. Nothing contained herein shall be construed as to require a
Party to settle any strike or labor dispute in which it may be involved. Either
Party rendered unable to fulfill any of its obligations under this Agreement by
reason of an uncontrollable force shall give prompt written notice of such fact
to the other Party and shall exercise due diligence to remove such inability
with all reasonable dispatch.

17. ASSIGNMENTS:

         17.1 Any assignment by Producer of its interest in this Agreement which
is made without the written consent of IID (which shall not be unreasonably
withheld) shall not relieve Producer from its primary liability for any of its
duties and obligations hereunder, and in the event of any such assignment
Producer shall continue to remain primarily liable for payment of any and all
money due IID hereunder and for the performance and observance of all other
covenants, duties and obligations to be performed and observed hereunder by it
to the same extent as though no assignment has been made.

         17.2 Notwithstanding any provision of Section 17.1 to the contrary,
prior to the end of the Credit Installment Period, as defined in Article I of
the Funding and Construction Agreement, Producer's right to transmission service
under this Agreement with respect to one or more of the Plants may be assigned
only (i) to a purchaser or co-owner of such Plants or to a person who will
operate such Plants pursuant to a contract or other arrangement with such
purchaser and in either case only with the prior written consent of IID (which
shall not be unreasonably withheld) or (ii)


for security purposes, to a bank or other entity which provides financing for
such Plants or any electrical transmission facilities associated therewith.
Producer and IID agree that nothing in this Section 17.2 may be amended,
modified or waived without the prior written consent of each and every party to
the Funding and Construction Agreement (except for any parties in default
thereunder).

         17.3 Whenever an assignment of Producer's interest in this Agreement is
made with the written consent of IID, Producer's assignee shall expressly assume
in writing the duties and obligations hereunder of Producer and, within thirty
(30) days after any such assignment and assumption of duties and obligations,
Producer shall furnish or cause to be furnished to IID a true and correct copy
of such assignment and assumption of duties and obligations.

         17.4 Subject to the foregoing restrictions on assignments, all of the
terms of this Agreement shall be binding upon and inure to the benefit of both
of the Parties and their respective successors, permitted assigns and legal
representatives.

18. GOVERNING LAW: This Agreement shall be interpreted, governed by and
construed under the laws of the State of California or the laws of the United
States, as applicable.

19. NOTICE: Any notice, demand or request provided for in this Agreement, or
served, given or made in connection with it, shall be in writing and shall be
deemed properly served, given or made if delivered in person or sent by United
States mail, postage prepaid, to the persons specified below unless otherwise
provided for In this Agreement:

                                    Imperial Irrigation District
                                    c/o General Manager
                                    P.O. Box 937
                                    Imperial, California 92251

                                    Geo East Mesa Limited Partnership
                                    P.O. Box 748



                                    Holtville, California 92250


         Either Party may at any time, by notice to the other Party, change the
designation or address of the person so specified as the one to receive notices
pursuant to this Agreement. 20. SIGNATURE CLAUSE: The signatories hereto
represent that they have been appropriately authorized to enter Into this
IID-Geo East Mesa Limited Partnership Transmission Service Agreement for
Alternative Resources (Standard Form) on behalf of the Part/for whom they
signed. This Agreement is hereby executed as of the 21st day of March, 1989.

                                              IMPERIAL IRRIGATION DISTRICT

                                         By:  /s/ Lester A. Bornt
                                              ----------------------------------
                                                President, Board of Directors

                                               GEO EAST MESA LIMITED PARTNERSHIP
                                         By:
                                              /s/ M.N. Brunano
                                              ----------------------------------
                                              3-16-89



                                                                 Exhibit 10.3.34


                                                                      Schedule A
                                                                         Item 29





                                  IID - EDISON

                         TRANSMISSION SERVICE AGREEMENT

                            FOR ALTERNATIVE RESOURCES





                                     BETWEEN

                          IMPERIAL IRRIGATION DISTRICT

                                       AND

                       SOUTHERN CALIFORNIA EDISON COMPANY






                                TABLE OF CONTENTS

Section                             Title                                 Page

1        PARTIES                                                             1

2        RECITALS                                                            1

3        AGREEMENT                                                           2

4        DEFINITIONS                                                         2

5        TERM                                                                5

6        TRANSMISSION SERVICE                                                6

7        TRANSMISSION LOSSES                                                10

8        CHARGES                                                            11

9        BILLING AND PAYMENT                                                13

10       LIABILITY                                                          15

11       AUDITING                                                           18

12       AUTHORIZED REPRESENTATIVES                                         18

13       NO DEDICATION OF FACILITIES                                        19

l's      HON-WAIVER                                                         19

15       NO THIRD PARTY RIGHTS                                              19

16       UNCONTROLLABLE FORCES                                              19

17       ASSIGNMENTS                                                        21

18       GOVERNING LAW                                                      21

19       NOTICES                                                            21

20       SIGNATURE CLAUSE                                                   23



                                TABLE OF CONTENTS

                                                                          Page

EXHIBIT I  -               DEVELOPMENTS AND METHODOLOGIES FOR
                           TRANSMISSION AND SUBTRANSMISSION SERVICE
                           CHARGES AND SCHEDULING FEE (EI-1-EI-14)

EXHIBIT II  -              TRANSMISSION SERVICE FOR                      EI-15
                           THE BRAWLEY GEOTHERMAL POWER
                           PLANT UNIT NO. 1

EXHIBIT III  -             TRANSMISSION SERVICE FOR THE                   EI-16
                           SALTON SEA GEOTHERMAL POWER
                           PLANT UNIT NO. 1

EXHIBIT IV  -              TRANSMISSION SERVICE FOR THE                   EI-17
                           MAGMA EAST MESA GEOTHERMAL POWER
                           PLANT UNIT NO. I

EXHIBIT V  -               TRANSMISSION SERVICE FOR THE                   EI-18
                           HEBER GEOTHERMAL POWER
                           PLANT UNIT NO. 1

EXHIBIT VI  -              TRANSMISSION SERVICE FOR                       EI-19
                           THE VULCAN POWER GEOTHERMAL
                           POWER PLANT UNIT NO. 1

EXHIBIT VII  -             TRANSMISSION SERVICE FOR THE                   EI-20
                           WESTERN POWER GROUP BIOMASS POWER
                           PLANT UNIT NO. 1

EXHIBIT VIII-              TRANSMISSION SERVICE FOR                       EI-21
                           THE ORMESA GEOTHERMAL POWER
                           PLANT UNIT NO. 1






                                  IID - EDISON

                         TRANSMISSION SERVICE AGREEMENT

                            FOR ALTERNATIVE RESOURCES

         1. PARTIES: The Parties to this Agreement are Imperial Irrigation
District, organized under the Water Code of the State of California ("IID"), and
Southern California Edison Company, a California corporation ("Edison"),
hereinafter sometimes referred to individually as "Party," and collectively as
"Parties".

         2.  RECITALS:  This Agreement is made with reference to the following
facts, among others:

         2.1 Edison plans to develop its own alternative resource facilities
and/or purchase the electrical output from Third Party alternative resource
facilities located in IID's service area.

         2.2 Edison and the Third Parties require transmission service from IID
to deliver the output from such alternative resource facilities to Edison's
electrical system.

         2.3 In a Letter Agreement executed on November 22, 1983, the Parties
agreed to establish an intertie connecting the Parties' electrical systems to
facilitate exchanges of power. The Parties also agreed to develop and execute a
transmission service agreement to provide transmission for Edison's power to its
electrical system over IID's existing or upgraded electrical system.


         2.4 In a Letter Agreement executed on December 7, 1982, the Parties
agreed to develop certain transmission facilities at 230 kilovolts to provide
for the export of alternative resource facilities electrical output from the
Imperial Valley to Edison's electrical system.

         2.5 Edison desires to purchase transmission service for the electrical
output from the alternative resource facilities and IID is willing to sell said
service to Edison.

         3.  AGREEMENT:  The Parties agree as follows:

         4.  DEFINITIONS:  The following terms, when used herein with initial
capitalization, whether in the singular or the plural, shall have the meanings
specified:

         4.1.  Agreement:  This "IID-Edison Transmission Service Agreement for
Alternative Resources" between Southern California Edison Company and Imperial
Irrigation District, and all Exhibits, as such Agreement may subsequently be
amended.

         4.2  Authorized Representative:  The representative of a Party
designated in accordance with Section 12.

         4.3  Blythe Substation:  Western's electrical 161 kilovolt (kV)
substation at Blythe, California where IID's existing 161 kV "F" transmission
line terminates.

         4.4 Coachella-Mirage Line: Approximately 20.6 miles of 230 kV
transmission line that IID shall cause to be constructed and that shall be owned
by IID. Such line is to

                                       2


be constructed between Coachella Valley Substation and Mirage Substation. The
line is anticipated to be in operation on or before June 1, 1986, or as soon
thereafter as practicable.

         4.5  Coachella Valley Substation:  IID's electrical substation located
within its Control Area and scheduled to be a terminal point for the Coachella-
Mirage Line.

         4.6 Control Area: All or part of a Party's electrical generation
resources, transmission facilities and distribution facilities, or a combination
thereof with those of other utilities, agencies or poo1s to which a common
automatic generation control scheme is applied.

         4.7 Date of Initial Service: The date when the Plant output is first
available for delivery to Edison and as provided to IID pursuant to Section 5.2.
Such date shall be deemed to be May 1, 1986, for the Plants specified in
Exhibits II, III, and IV.

         4.8 Mirage Substation: Edison's electrical 230/115/92 kV substation
located approximately eight miles west of the City of Indio and one and one-half
miles north of Interstate Highway 10 where the Points of Interconnection are
located and where the Coachella-Mirage Line terminates.

         4.9 Normal Transmission Capacity: The maximum electrical power transfer
ability, expressed in megawatts (MW), available to IID to transmit IID's
electrical power and to provide the transmission service. Such transfer ability,
as determined by IID, in its

                                       3


sole judgment, shall be consistent with prudent operating procedures and with
generally-accepted engineering and operating practices in the electrical
utility industry.

         4.10 Operating Transmission Capability: The maximum electrical power
transfer ability, expressed in megawatts (MW), available to IID at any given
time to transmit IID's electrical power and to provide the transmission service.
Such transfer ability shall be as determined by IID in its sole judgment, may
vary from time-to-time depending on system conditions, and shall be consistent
with prudent operating procedures and generally-accepted engineering and
operating practices in the electrical utility industry.

         4.11 Plant(s): The electrical generating alternative resource
facilities developed by Edison or Third Parties for which IID shall provide
transmission service is specified in Exhibits II, III, IV, V, VI, VII, VIII and
in any subsequent Plant Amendment(s).

         4.12 Plant Amendment(s): The agreement(s) reached by the Parties, as
amendments to this Agreement, for transmission service to be provided by IID for
each Plant added by Edison or for Edison's account subsequent to the execution
of this Agreement.

         4.13 Plant Connection Agreement(s): The agreement(s) between IID and
Third Parties or Edison providing for the connection of the Plant(s) to IID's
electrical system as specified in Exhibits II, III, IV, V, VI, VII, VIII and in
any subsequent Plant Amendment(s).

                                       4


         4.14 Point of Delivery: The Points of Interconnection, Blythe
Substation or other points as agreed to by the Authorized Representatives as
delivery points and as specified in Exhibits II, III, IV, V, VI, VII, VIII and
in any subsequent Plant Amendments.

         4.15 Points of Interconnection: The 115/92 kV switchrack at the Mirage
Substation site where Edison's 115 kV facilities are attached to IID's 92 kV
facilities or the 230 kV switchrack where Edison's 230 kV facilities shall be
attached to the Coachella-Mirage Line.

         4.16 Point of Receipt: The point at which IID receives the electrical
output from each Plant for Edison or for Edison's account, as specified in
Exhibits Il, III, IV, V, VI, VII, VIII and in any subsequent Plant Amendments.

         4.17 Third Parties: Developers and/or operators of facilities using
alternative resources including biomas, waste, wind, solar, geothermal and water
to produce electrical energy. Such developers and/or operators are not
signatories to this Agreement.

         4.18  Transmission Service Entitlement:  The amount of transmission
service, expressed in megawatts (MW), provided by IID to Edison from a Point of
Receipt to the Point(s) of Delivery.

         4.19  Western:  The United States Department of Energy Western Area
Power Administration.

                                       5


         5.  TERM:

         5.1 Unless otherwise agreed to by the Parties, this Agreement shall be
effective upon execution by the Parties and shall remain in effect until the
earlier of December 31, 2015 or the termination date of the last Plant
Connection Agreement.

         5.2 The Transmission Service Entitlement to be provided by IID for each
Plant shall be contingent on a Plant Connection Agreement being in effect.
Transmission service shall commence on the Date of Initial Service of such
Plant(s). If not already specified in Section 4.7, Edison's Authorized
Representative shall provide the Date of Initial Service to IID's Authorized
Representative in a thirty (30) days' written notice in advance of the Date of
Initial Service.

         6.  TRANSMISSION SERVICE:

         6.1 Subject to the terms of this Agreement, IID shall provide to Edison
and Edison shall purchase from IID transmission service over IID's transmission
system for the Plant(s) herein.

         6.2 The Transmission Service Entitlement for each Plant shall be the
amount either specified In Exhibits II, III, IV, V, VI, VII, VIII and in any
subsequent Plant Amendment(s), or the amount provided to IID's Authorized
Representative by Edison's Authorized Representative in a thirty (30)-day
advance written notice prior to the Date of Initial Service. Except for the
Plants specified in Exhibits II, III and IV, the Transmission

                                       6



Service Entitlement to be provided by IID subsequent to the Date of Initial
Service may be adjusted semi-annually until the Plant(s) has/have operated for
two years. Such adjustment shall be made by having Edison's Authorized
Representative give IID'S Authorized Representative a ninety (90)-day advance
written notice as to the adjustment required. At the end or the two-year
operating period for such Plant(s), the Transmission Service Entitlement shall
remain as established or as redetermined by the Authorized Representatives and
shall subsequently be fixed for the remainder of the terms specified in Exhibits
II, III, IV, V, VI, VII, VIII and in any subsequent Plant Amendment(s). The
Transmission Service Entitlement shall not be changed unless otherwise agreed to
by the Authorized Representatives.

         6.3 IID reserves the right to interrupt or curtail the transmission
service provided hereunder as follows:

         6.3.1 If the Operating Transmission Capability is reduced to less than
normal Transmission Capacity from a Point of Receipt to a Point of Delivery, and
when continuity of service within IID's Control Area is not being jeopardized,


IID may curtail the transmission service currently being provided from such
Point of Receipt to such Point of Delivery, to an amount "A" determined by the
following formula:


A =  Operating Transmission Capability          x         Transmission Service
     ---------------------------------                          Entitlement
         Normal Transmission Capacity

                                       7


The transmission service for each Plant shall be curtailed by multiplying the
Transmission Service Entitlement in accordance with Exhibits II, III, IV, V, VI,
VII, VIII and in any subsequent Plant Amendments by the same percentage
(expressed as a decimal) as used in the determination of "A". However, any such
curtailment shall occur only after IID has made all reasonable efforts to
eliminate the cause of the reduction in Operating Transmission Capability, and
IID shall then employ reasonable efforts to eliminate expeditiously the cause of
said reduction.

         6.3.2 If continuity of service within IID's Control Area is being
jeopardized, as determined by IID in its sole judgment, IID may interrupt or
curtail the transmission service provided hereunder to the extent necessary to
avoid or eliminate such jeopardy; provided, (i) that such interruptions or
curtailments may be made so that IID may fully utilize all generating resources
owned by it or available to it under contract in order to avoid damage to IID's
electrical system caused by overloading, (ii) that no such interruption or
curtailment may be made by IID in order that IID may acquire all or any portion
of Edison's capacity or energy available to Edison under contract without
Edison's prior consent, and (iii) that such interruption or curtailment shall
occur only after IID has made all reasonable efforts to avoid or eliminate such
jeopardy.

         6.4 If IID's efforts do not avoid or eliminate such jeopardy, the
Parties shall endeavor to develop some other arrangements to avoid or eliminate
such jeopardy and minimize the effects of IID's interruption or curtailment to
both to Parties' Control Areas.

                                       8


         6.5 Subject to Section 6.8, and in the event of any curtailments or
interruptions made pursuant to Section 6.3.1 or Section 6.3.2, Edison shall,
immediately after being orally satisfied by IID, reduce its energy schedules by
the amounts requested by IID.

         6.6 The transmission service to be provided by IID and purchased by
Edison for each Plant shall not exceed the Transmission Service Entitlement.

         6.7 Subject to Section 6.3, IID shall, during the periods that IID has
agreed to provide the transmission service at the specified Transmission Service
Entitlements, accept hourly scheduled energy deliveries at the Point of Receipt
and simultaneously deliver the same amount of energy to Edison or for Edison's
account at the Point(s) of Delivery mutually agreed upon by the Parties'
dispatchers and/or schedulers. Unless otherwise agreed to by the Authorized
Representatives, the total sum of Transmission Service Entitlements to the
Points of Delivery specified below shall not exceed 150 MV. However, in no case
shall the Transmission Service Entitlement to a specified Point of Delivery
exceed the following:

                           Blythe Substation 161 kV:  110 MV
                           Mirage Substation 115/92 kV:  35 MW
                           Mirage Substation 230 kV:  150 MW'

         Edison shall provide IID an executed copy of its transmission service
agreement with Western.

                                       9


         6.8 Hourly scheduled energy deliveries shall be in accordance with the
provisions of this Agreement. The hourly schedules shall conform with the
practices and procedures developed by the Parties' dispatchers and schedulers
and agreed to by the Authorized Representatives. IID shall coordinate the hourly
scheduled energy deliveries from the Plant(s) until such time that dynamic
scheduling may be arranged and procedures for such may be agreed to by the
Authorized Representatives.

         7.  TRANSMISSION LOSSES:
             -------------------

         7.1 IID shall determine, by transmission power flow analysis, the
electrical losses (expressed as a percent amount of hourly scheduled energy
deliveries) associated with the electrical output from each Plant. Such analysis
may be performed by IID, at its sole expense, and as deemed necessary by
changing conditions on IID's electrical system. The initial percent amount, for
each Plant, representing the electrical losses as determined herein shall be as
specified in Exhibits II, III, IV, V, VI, VII, VIII and in any subsequent Plant
Amendment(s).

         7.2 Unless otherwise agreed to by Edison's and IID's schedulers and
dispatchers, IID shall reduce the amount of all hourly scheduled energy
deliveries to Edison or for Edison's account by the percent amount of such
hourly deliveries for each Plant in accordance with Exhibits II, III, IV, V, VI,
VII, VIII and in any subsequent Plant Amendment(s) plus a transformer loss
percent amount if delivered at the Mirage Substation 115/92 kV switchrack.

                                       10


         7.3 It either Party believes that there has been a significant change
in IID's electrical system and the electrical losses associated with any Plant
should be redetermined, either Party's Authorized Representative may submit a
written request ________ the other Party's Authorized Representative that the
electrical losses be redetermined. Following such request, a transmission flow
analysis may be performed by IID as approved by the Authorized Representatives
and paid for by the requesting Party. If the percent amount for electrical
losses is redetermined, such percent amount shall become effective as of the
first day of the month following the date of such redetermination; provided,
that such a redetermination may be no sooner than twelve (12) months after the
most recent redetermination. Any redetermination of electrical losses made
pursuant to this Section 7 shall be based on conditions in existence at the time
of such redetermination.

         7.4 Along with the monthly billing pursuant to Section 9.1, for the
transmission service for each Plant, IID shall submit a monthly summary of
hourly scheduled energy deliveries and of electrical losses for each Plant.

         8.  CHARGES:

         8.1 For transmission service provided by IID, Edison shall pay IID at
an initial rate of $1.14 per kilowatt per month for transmission service over
IID's 92 kV-161 kV- 230 kV transmission system plus the appropriate initial rate
specified in Exhibit I.B for transmission service over IID's 34.5 kV
subtransmission system as applicable. The total

                                       11


charge for transmission service shall be determined by the sum of the products
of such applicable rates times the Transmission Service Entitlements. The
initial rate for the 92 kV-161 kV-230 kV transmission system and the initial
rate for the 34.5 kV subtransmission system has been determined by IID pursuant
to the methodologies specified in Exhibit I.A and Exhibit I.B respectively. Any
specific facility charge to the Third Parties or to Edison for connecting the
Plant(s) to the IID transmission system(s) shall be included only in the Plant
Connection Agreement(s) between IID and the Third Parties or Edison.

         8.2 Both the 92 kV-161 kV-230 kV transmission and 34.5 kV
subtransmission system rates shall be reviewed annually and may be revised. Such
review and revision, if necessary, shall commence effective January 1, 1986. Any
revision of the rates shall be based on the methodologies in Exhibit I.A-2 and
Exhibit I.B.A and on the conditions in existence at the time of the revision.
Edison shall have the right to review any exhibits or work papers prepared by
IID to revise the rates prior to the effective date(s) of the revision.

         8.3 An initial monthly scheduling fee, as specified in Exhibits II,
III, IV, V, VI, VII, VIII and in any subsequent Plant Amendment(s), shall be
paid by Edison to IID for those months in which there were scheduled energy
deliveries from the Plant(s). The initial scheduling fee has been determined by
IID pursuant to the methodology specified in Exhibit I.C. The scheduling fee
shall be reviewed annually and may be revised. Such


                                       12


review and revision, if necessary, shall commence effective January 1, 1986. Any
revision of the scheduling fee shall be based on the methodology in Exhibit I.C
and on the conditions in existence at the time of the revision. Edison shall
have the right to review any exhibits or work papers prepared by IID to revise
the scheduling fee prior to the effective date of the revision.

         9.  BILLING AND PAYMENT:
             -------------------

         9.1 IID shall render bills to Edison, beginning in the month of the
Date of Initial Service, on or before the fifteenth (15th) day of each month for
the transmission service to be provided during the month. Edison shall pay such
bills within twenty (20) days after receipt thereof.

         All payments by Edison shall be sent to:

                  Imperial Irrigation District
                  c/c Manager, Finance & Accounting
                  P.O.  Box 937
                  Imperial, CA 92251

                  All billings by IID shall be sent to:

                  Southern California Edison Company
                  c/o Manager of Cogeneration and Small Power Development
                  P.O. Box 800
                  Rosemead, CA 91770

                                       13


         9.2 Either Party's Authorized Representative may at any time, by
advance written notice to the other Party's Authorized Representative, change
the address to which payments or billings shall be sent.

         9.3 Bills which are not paid in full by said due date shall thereafter
bear an additional charge of one and one-half percent (1 1/2%) per month, or the
maximum legal rate of interest, whichever is less, compounded monthly on the
unpaid amount prorated by days from the due date until payment is received by
IID.

         9.4. In the event any portion of any bill is disputed, the disputed
amount shall be paid when due under protest. If the protested portion of the
payment is found to be incorrect by the Authorized Representatives, the disputed
amount shall be paid by IID to Edison, including interest at the rate of 1-1/2%
per month, or the maximum legal rate, whichever is less, compounded monthly from
the date of payment by Edison to the date the refund check or adjusted bill is
received by Edison.

         9.5 For a fractional part of a calendar month at the beginning or end
of the period for which the transmission service is provided hereunder, the
charge pursuant to Section 8.1 shall be proportionately adjusted by the ratio of
days that service is furnished by IID to Edison during such month to the total
number of days in such month.

         9.6 The charge for the transmission service pursuant to Section 8.1
shall be proportionately reduced to the extent the duration of interruptions or
curtailments of the

                                       14



transmission service which may occur pursuant to Section 6.3.2 exceed a
cumulative total of twenty-four (24) hours during any calendar month based on
730 hours per month representing the full transmission service charge. The
amount of such prorata reduction in any month shall reflect the duration and
amount of such interruptions or curtailments which exceed said cumulative 24
hours. Such prorata reduction shall be reflected as a credit to Edison as soon
as possible in a subsequent monthly bill.

         9.7 The charge for the transmission service shall not be reduced if IID
can deliver, but Edison cannot receive the hourly scheduled energy deliveries
independent of the duration of time this condition exists.

         10.  LIABILITY:

         10.1 Except for any loss, damage, claim, cost, charge or expense
resulting from Willful Action, neither Party, its directors or other governing
body, officers or employees shall be liable to the other Party for any loss,
damage, claim, cost, charge, or expense of any kind or nature incurred by the
other Party (including direct, indirect or consequential loss, damage, claim,
cost, charge or expense; and whether or not resulting from the negligence of a
Party, its directors or other governing body, officers, employees or any person
or entity whose negligence would be imputed to such Party) from engineering,
repair, supervision, inspection, testing, protection, operation, maintenance,
replacement, reconstruction, use or ownership of such Party's electrical system
in connection with implementation of this Agreement. Except for any loss,
damage, claim, cost, charge or

                                       15


expense resulting from Willful Action, each Party releases the other Party, its
directors or other governing body, officers and employees from any such
liability.

         10.2 Except for liability resulting from Willful Action of the other
Party, a Party whose electrical customer shall make a claim or bring an action
for any death, injury, loss or damage arising out of delivery of, interruptions
to or curtailment of electrical service to such customer caused by performance
or nonperformance of a Party's obligations hereunder shall indemnify and hold
harmless the other Party, its directors or other governing body, officers and
employees from and against any liability for such death, injury, loss or damage.
As used in this Agreement, the term "electrical customer" shall mean an
electrical consumer, except an electrical utility system to whom power is
delivered for resale.

         10.3 For the purpose of this Section 10, Willful Action shall be
defined as action taken or not taken by a Party at the direction of its
directors or other governing body, officers or employees having management or
administrative responsibility affecting its performance under this Agreement, as
follows:

         10.3.1 Action which is knowingly or intentionally taken or failed to be
taken with conscious indifference to the consequences thereof or with intent
that injury or damage would result or would probably result therefrom.

                                       16


         10.3.2 Action which has been determined by final arbitration award or
final judgment or judicial decree to be a material default under this Agreement
and which occurs or continues beyond the time specified in such arbitration
award or judgment or judicial decree for curing such default or, if no time to
cure is specified therein, occurs or continues thereafter beyond a reasonable
time to cure such default.

         10.3.3 Action which is knowingly or intentionally taken or not taken
with the knowledge that such action taken or not taken is a material default
under this Agreement.

         10.4 Willful Action does not include any act or failure to act which
is merely involuntary, accidental or negligent.

         10.5 The phrase "employees having management or administrative
responsibility", as used in Section 10.3, means the employees of a Party who are
responsible for one or more of the executive functions of planning, organizing,
coordinating, directing, controlling and supervising such Party's performance
under this Agreement with responsibility for results.

         11.  AUDITING:

         11.1 IID shall make its books, records, and other supporting
information, as requested, available to Edison or to Edison's designated
contracted representative(s) with a CPA firm, for the purpose of auditing any
charges or accounts to be kept by IID


                                       17


hereunder. All such audits shall be undertaken at reasonable times and in
conformance with generally-accepted auditing standards.

         11.2 If as a result of such audits Edison believes its charges or
accounts should be adjusted, the findings shall be presented to the Authorized
Representatives. If the Authorized Representatives agree that any audit finding
should result in a revision of charges or accounts, such revisions shall be
retroactive to the first billing for such charges and accounts and shall be made
as soon as practical after determination.

         11.3 The amount of any unresolved dispute shall accrue interest at the
rate of one and one-half percent (1 1/2%) per month, or the maximum legal rate,
whichever is less, compounded monthly for any amount of money ultimately
refunded to Edison.

         12. AUTHORIZED REPRESENTATIVES: Within thirty (30) calendar days after
the date of execution of this Agreement, each Party shall designate by written
notice to the other Party a representative who is authorized to act on its
behalf in the implementation of' this Agreement. Either Party may at any time
change the designation of its Authorized Representative by written notice to the
other Party.

         13. NO DEDICATION OF FACILITIES: Any undertaking by one Party to the
other Party under any provision of this Agreement shall not constitute the
dedication of the system or any portion thereof of the Party to the public or to
the other Party, and it is

                                       18


understood and agreed that any such undertaking under any provision of this
Agreement by a Party shall cease upon the termination of its obligations
hereunder.

         14. NON-WAIVER: None of the provisions of this Agreement shall be
considered waived by either Party except when such waiver is given in writing.
The failure of either Party to insist in any one or more instances upon strict
performance of any of the provisions of this Agreement or to take advantage of
arty of its rights hereunder shall not be construed as a waiver of any such
provisions or the relinquishment of any such rights for the future, but the same
shall continue and remain in full force and effect.

         15.  NO THIRD PARTY RIGHTS:  The Parties do not intend to create rights
in or to grant remedies to any hird Party or others as a beneficiary of this
Agreement or of any duty, covenant, obligation or undertaking established
hereunder.

         16. UNCONTROLLABLE FORCES: Neither Party shall be considered to be in
default in the performance of any of its obligations under this Agreement where
a failure of performance shall be due to an uncontrollable force. The term
"uncontrollable force" shall mean any cause beyond the control of the Party
affected including, but not restricted to, failure of or threat of failure of
facilities which have been maintained in accordance with generally-accepted
engineering and operating practices in the electrical utility industry, flood,
drought, earthquake, tornado, storm, fire, pestilence, lightning and other
natural catastrophes, epidemic, war, riot, civil disturbance or disobedience,
strike, labor

                                       19


dispute, labor or material shortage, sabotage, government priorities and
restraint by court order or public authority (whether valid or invalid) and
action or nonaction by or inability to obtain or keep the necessary
authorizations or approvals from any governmental agency or authority, which by
exercise of due diligence such Party' could not reasonably have been expected to
avoid and which by exercise of due diligence it has been unable to overcome.
Nothing contained herein shall be construed as to require a Party to settle any
strike or labor dispute in which it may be involved. Either Party rendered
unable to fulfill any of its obligations under this Agreement by reason of an
uncontrollable force shall give prompt written notice of such fact to the other
Party and shall exercise due diligence to remove such inability with all
reasonable dispatch.

         17.  ASSIGNMENTS:

         17.1 Any assignment by Edison of its interest in this Agreement which
is made without the written consent of IID shall not relieve Edison from its
primary liability for any of its duties and obligations hereunder, and in the
event of any such assignment Edison shall continue to remain primarily liable
for payment of any and all money due IID hereunder and for the performance and
observance of all other covenants, duties and obligations to be performed and
observed hereunder by it to the same extent as though no assignment has been
made.

         17.2 Whenever an assignment of Edison's interest in this Agreement is
made with the written consent of' IID, Edison's assignee shall expressly assume
in writing the duties

                                       20


and obligations hereunder of Edison and, within thirty (30) days after any such
assignment and assumption of duties and obligations, Edison shall furnish or
cause to be furnished to IID a true and correct copy of such assignment and
assumption of duties and obligations.

         18.  GOVERNING LAW:  This Agreement shall be interpreted, governed by
and construed under the laws of the State of California or the laws of the
United States, as applicable.

         19. NOTICES: Any notice, demand or request provided for in this
Agreement, or served, given or made in connection with it, shall be in writing
and shall be deemed properly served, given or made or delivered in person or
sent by United States mail, postage prepaid, to the persons specified below
unless otherwise provided for in this Agreement:

                                    Imperial Irrigation District
                                    c/a General Manager
                                    P. 0. Box 937
                                    Imperial, California 92551

                                    Southern California Edison Company
                                    c/o Secretary
                                    P.0. Box 800
                                    Rosemead, California 91770

         Either Party may at any time, by notice to the other Party, change the
designation or address of the person so specified as the one to receive notices
pursuant to this Agreement.

                                       21


         20. SIGNATURE CLAUSE: The signatories hereto represent that they have
been appropriately authorized to enter into this IID-Edison Transmission Service
Agreement for Alternative Resources on behalf of the Party for whom they sign.
This Agreement is hereby executed as of the 26 day of September, 1985.

                                   IMPERIAL IRRIGATION DISTRICT


                                   By: /s/ Lloyd W. Allen
                                      -----------------------------
                                         Name:   Lloyd W. Allen
                                         President, Pro Tem Board of Directors


                                   SOUTHERN CALIFORNIA EDISON COMPANY


                                   By: /s/ Edward A. Myers, Jr.
                                      -----------------------------
                                         Name:     Edward A. Myers, Jr.
                                                   Vice President






                                       22



                                                                 Exhibit 10.3.35


                              PLANT AMENDMENT NO. 1
                                       TO
                                  IID - EDISON
                         TRANSMISSION SERVICE AGREEMENT
                            FOR ALTERNATIVE RESOURCES

                                     BETWEEN

                          IMPERIAL IRRIGATION DISTRICT

                                       AND

                       SOUTHERN CALIFORNIA EDISON COMPANY








                                TABLE OF CONTENTS



SECTION              TITLE                                               PAGE
-------              -----                                               ----

     1              PARTIES.............................................3
     2              RECITALS............................................3
     3              AGREEMENT...........................................4
     4              EFFECTIVE DATE......................................4
     5              AMENDMENTS TO SECTION 4.............................4
     6              AMENDMENT TO SECTION 6..............................4
     7              ADDITION OF EXHIBIT A...............................4
     8              EFFECT OF THIS PLANT AMENDMENT NO. 1................5
     9              SIGNATURE CLAUSE ...................................5


                    EXHIBIT A         -     TRANSMISSION SERVICE
                                            FOR THE ORMESA GEOTHERMAL
                                            POWER PLANT UNIT NO. 2






                            PLANT AMENDMENT NO. 1 TO
                                   IID-EDISON
                         TRANSMISSION SERVICE AGREEMENT
                            FOR ALTERNATIVE RESOURCES

     1. PARTIES: The Parties to this Plant Amendment No. 1, and to the
IID-Edison transmission Service Agreement for Alternative Resources
("Agreement"), executed by the Parties as of September 26, 1985, are the
Imperial Irrigation District, organized under the Water Code of the State of
California ("IID") and Southern California Edison Company, a California
corporation ("Edison"), hereinafter sometimes referred to individually as
"Party," and collectively as "Parties."

     2. RECITALS: This Plant Amendment No. 1 is made with reference to the
following facts, among others:

                  2.1 The Agreement provides for, among other things, Edison to
purchase transmission service from IID to deliver the electrical output from
alternative resource facilities located in IID's service area either directly to
Edison's electrical system or to a utility interconnected with IID's electrical
system for ultimate delivery to Edison.

                  2.2 The Agreement also provides for transmission service for
the output of additional alternative resource facilities added subsequent to the
execution of the Agreement. The transmission service for the subsequent
facilities is to be provided for by amending the Agreement.

                  2.3  On June 13, 1984, Edison and Ormat Systems, Inc. entered
into an agreement providing for the purchase by Edison of capacity and
associated energy from Ormat's Ormesa Geothermal Power Plant Unit No. 2.

                                       3


                  2.4 The Parties, therefore, desire to amend the Agreement to
enable Edison to purchase transmission service from IID for the electrical
output from the Ormesa Geothermal Power Plant Unit No. 2. IID is willing to sell
said service to Edison.

              3.  AGREEMENT:  The Parties agree as follows:

              4.  EFFECTIVE DATE:  This Plant Amendment No. 1 shall become
effective upon the date executed by the Parties.

              5.  AMENDMENTS TO SECTION 4:

                  5.1  Section 4.14 is hereby deleted and replaced with the
following:

                       "4.14 Point(s) of Delivery:  The Points of
Interconnection, Knob Substation, Blythe Substation, or any other points as
agreed to by the Authorized Representatives as delivery points."

                  5.2  Section 4.20 is hereby added as follows:

                        "4.20 Knob Substation:  The 161 kV electrical substation
located approximately ten (10) miles northwest of Yuma, Arizona which is owned
and operated by Western and where an electrical interconnection exists between
Western's and IID's electrical systems."



              6.  AMENDMENT TO SECTION 6:  That the portion of Section 6.7
listing the Points of Delivery and the maximum Transmission Service Entitlement
assigned thereto, shall be deleted and replaced with the following:

                  "Blythe Substation 161 kVs:                 110 MW

                  Mirage Substation 115/92 kVs:               35 MW
                  Mirage Substation 230 kV:                   150 MW
                  Knob Substation 161 kVs:                    20 MW"

              7.  ADDITION OF EXHIBIT A:  Exhibit A as attached hereto shall be
added to the Agreement as Exhibit IX.


                                       4



              8.  EFFECT OF THIS PLANT AMENDMENT NO. 1:  Except as amended
herein, all terms, covenants and conditions contained in the IID-Edison
Transmission Service Agreement for Alternative Resources shall remain in full
force and effect.

              9.  SIGNATURE CLAUSE:  The signatories hereto represent that they
have been appropriately authorized to enter into this Plant Amendment No. 1 on
behalf of the Party for whom they sign.  This Plant Amendment No. 1 to the IID-
Edison Transmission Service Agreement for Alternative Resources is hereby
executed as of the 25th day of August, 1987.


                                              IMPERIAL IRRIGATION DISTRICT

                                              By   /s/ Indecipherable
                                                  -----------------------------
                                                  President, Board of Directors


                                              SOUTHERN CALIFORNIA EDISON COMPANY

                                              By   /s/ Glenn J. Bjorklund
                                                  ----------------------------
                                                  Glenn J. Bjorklund
                                                  Vice President




                                       5




                                                                 Exhibit 10.3.36

                           LEYTE OPTIMIZATION PROJECT



                                  BOT AGREEMENT



                                     between





                       PNOC-ENERGY DEVELOPMENT CORPORATION



                                       and



                                      ORMAT







                                    CONTENTS


ARTICLE 1  DEFINITION OF TERMS.................................................2

1.1  DEFINITIONS...............................................................2
1.2  INTERPRETATION............................................................9

ARTICLE 2  PROJECT............................................................10

2.1  POWER FACILITY...........................................................10
2.2  ENERGY CONVERSION........................................................10
2.3  OWNERSHIP................................................................10
2.4  COMMENCEMENT AND PROSECUTION OF THE PROJECT..............................11

ARTICLE 3  GENERAL RESPONSIBILITIES OF THE OPERATOR...........................11

3.1  CONSTRUCTION PERFORMANCE SECURITY........................................11
3.2  RESPONSIBILITY FOR DAMAGE AND LOSSES.....................................12
3.3  ENVIRONMENT AND CHANGE OF LAWS...........................................13
3.4  ORGANIZATION.............................................................14

ARTICLE 4  CONSTRUCTION OF THE POWER PLANT....................................15

4.1  MILESTONE DATES..........................................................15
4.2  TRANSMISSION LINE, INTERCONNECTION AND GEOTHERMAL FLUID..................16
4.3  SITE PROVISION...........................................................16
4.4  INGRESS AND EGRESS RIGHTS OF OPERATOR....................................17
4.5  EQUIPMENT IMPORTATION....................................................17
4.6  PERMITS..................................................................18
4.7  DRAWINGS, DOCUMENTS, DATA & INSTRUCTIONS.................................18
        4.7.1 SUBMISSION OF DRAWINGS AND DATA.................................18
        4.7.2 MODIFICATION RIGHTS.............................................19
        4.7.3 FUTURE MODIFICATION.............................................20
        4.7.4 CONSTRUCTION SCHEDULE...........................................20
        4.7.5 MONITORING RIGHTS...............................................20
        4.7.6 DRAWINGS AND DOCUMENTS TO BE PROVIDED...........................21
4.8  DISCLAIMER...............................................................21
4.9  RESPONSIBILITY FOR UTILITIES.............................................22
4.10  DELAYS..................................................................22
4.11  PENALTY DUE TO DELAYS...................................................23
4.12  LIGHTS AND BARRIERS.....................................................23

ARTICLE 5  TESTING OF THE FACILITY............................................23

5.1  TESTING PROCEDURES.......................................................23
5.2  TEST SCHEDULES...........................................................24




5.3  NOTICE OF TESTS..........................................................24
5.4  TESTS BEFORE COMPLETION..................................................24
5.5  TESTS DURING COOPERATION PERIOD..........................................26

ARTICLE 6  OPERATION OF THE FACILITY..........................................27

6.1  COMPLETION DATE..........................................................27
6.2  POWER RATES FOR INITIAL DELIVERY.........................................27
6.3  DEDICATION OF FACILITY...................................................27
6.4  OPERATING PARAMETERS ....................................................27
6.5  DISPATCH PROCEDURE.......................................................28
6.6  ENGINEERING STANDARDS....................................................28
6.7  ENVIRONMENTAL STANDARDS..................................................28
6.8  PROTECTIVE DEVICES.......................................................28
6.9  INTEGRITY LOSS...........................................................28
6.10  SETTINGS OF PROTECTIVE DEVICES..........................................29
6.11  SERVICE COMMITMENT......................................................29
6.12  MAINTENANCE DURING EMERGENCY............................................29
6.13  ANNUAL CAPACITY NOMINATION..............................................29
6.14  MAINTENANCE SCHEDULE....................................................29
6.15  APPROVAL OF MAINTENANCE SCHEDULE........................................30
6.16  APPROVAL OF OVERHAULS...................................................30
6.17  COMPLIANCE WITH APPROVED MAINTENANCE SCHEDULE...........................30
6.18  UNSCHEDULED OUTAGE .....................................................30
6.19  DAILY OPERATING REPORT..................................................30
6.20  OPERATING RECORDS.......................................................30
6.21  PNOC-EDC ACCESS TO THE POWER PLANT......................................31

ARTICLE 7  GEOTHERMAL FLUIDS..................................................31

7.1  GEOTHERMAL FLUID SUPPLY..................................................31
7.2  NON-CONDENSIBLE GASES & NON-GEOTHERMAL WASTE.............................31
7.3  SURPLUS CONDENSATE.......................................................32
7.4  OTHER GEOTHERMAL WASTE...................................................32
7.5  ENERGY MANAGEMENT........................................................32

ARTICLE 8  DELIVERY OF CAPACITY AND ENERGY....................................32

8.1  OBLIGATIONS OF THE PARTIES...............................................32
8.2  METERING.................................................................33
       8.2.1 METER MAINTENANCE AND OWNERSHIP..................................33
       8.2.2 PLANT MONITORING EQUIPMENT.......................................33
       8.2.3 METER SEALS AND INSPECTION.......................................34
       8.2.4 METER TESTS......................................................34
       8.2.5 METER ACCURACY...................................................34



8.3  TERMS OF PAYMENT.........................................................34
       8.3.1 CAPACITY PAYMENTS................................................34
       8.3.2 ENERGY FEE.......................................................36
       8.3.3 ESCALATION.......................................................38
8.4  BILLING PROCEDURES.......................................................38
8.5  DISPUTES.................................................................39
8.6  TAXES....................................................................39
8.7  PAYMENT PROCEDURES.......................................................40

ARTICLE 9 BUYOUT..............................................................40

9.1  BUYOUT CONDITIONS........................................................40
9.2  BUYOUT PRICE.............................................................41
9.3  PAYMENT TERMS............................................................42
9.4  TRANSFER PROVISION.......................................................42

ARTICLE 10 REPRESENTATIONS & WARRANTIES OF THE PARTIES........................43

10.1  CORPORATE EXISTENCE.....................................................43
10.2  AUTHORIZATIONS..........................................................43
10.3  WARRANTY AGAINST CORRUPTION.............................................43
10.4  NO SOVEREIGN IMMUNITY...................................................44
10.5  GEOTHERMAL SERVICES CONTRACT............................................44

ARTICLE 11 INDEMNIFICATION....................................................44

11.1  OPERATOR INDEMNIFICATION................................................44
11.2  PNOC-EDC INDEMNIFICATION................................................45

ARTICLE 12 INSURANCE..........................................................45

12.1  APPLICABLE TERMS........................................................45
12.2  INSURANCE DURING CONSTRUCTION...........................................45
12.3  INSURANCE DURING COOPERATION PERIOD.....................................46
12.4  APPROVAL BY PNOC-EDC....................................................46
12.5  EQUITABLE ADJUSTMENT....................................................46

ARTICLE 13 TRANSFER OF OWNERSHIP..............................................47

13.1.  TRANSFER OF TITLE......................................................47
13.2.  DOCUMENTATION COSTS....................................................47
13.3  TRAINING OF PNOC-EDC STAFF..............................................47
13.4  CONDITION OF POWER PLANT ON TRANSFER....................................48

ARTICLE 14 FORCE MAJEURE......................................................48

14.1  FORCE MAJEURE...........................................................48
14.2  EFFECT OF FORCE MAJEURE.................................................49



14.3  REMEDIES................................................................50

ARTICLE 15 SUSPENSION, TERMINATION AND ABANDONMENT............................51

15.1  TERMINATION PRIOR TO EFFECTIVITY DATE...................................51
15.2  TERMINATION FOR DEFAULT AND SUSPENSION OF DELIVERY......................53
15.3  SUSPENSION OF PAYMENT...................................................54
15.4  ABANDONMENT.............................................................54
        15.4.1 ABANDONMENT DURING CONSTRUCTION................................54
        15.4.2 ABANDONMENT DURING COOPERATION PERIOD..........................55

ARTICLE 16 SEVERAL OBLIGATIONS................................................56

ARTICLE 17 COMMUNICATIONS AND NOTICES.........................................56

17.1  COORDINATION MEETINGS...................................................56
17.2  COMMUNICATIONS AMONG PARTIES............................................57
17.2  NOTICES.................................................................57

ARTICLE 18 NON-WAIVER.........................................................58

ARTICLE 19 ASSIGNMENT.........................................................58

ARTICLE 20 PRIVATIZATION ASSURANCES ..........................................59

ARTICLE 21 DISPUTE RESOLUTION; JURISDICTION...................................60

ARTICLE 22 ENTIRE AGREEMENT AND SEPARABILITY .................................61

ARTICLE 23 GOVERNING LAW......................................................61

ARTICLE 24 LIMITATION OF LIABILITY............................................61

ARTICLE 25 DURATION OF THE AGREEMENT .........................................62

25.1  TERM....................................................................62
25.2  SURVIVABILITY...........................................................62

ARTICLE 26 EFFECTIVITY........................................................62

26.1  PNOC-EDC CONDITIONS ON THE OPERATOR.....................................62
26.2  OPERATOR CONDITIONS ON PNOC-EDC.........................................62

26.3  OTHER CONDITIONS........................................................64
26.4  FULFILLMENT OR WAIVER...................................................65



                           LEYTE OPTIMIZATION PROJECT

                                  BOT AGREEMENT

This Agreement made and executed on this 4th day of August, 1995 by and between:

     1. PNOC-ENERGY DEVELOPMENT CORPORATION, hereinafter referred to as
     PNOC-EDC, a wholly-owned subsidiary of the Philippine National Oil Company,
     a corporation created and organized under Presidential Decree No. 334, as
     amended, with principal office address at PNPC Complex, Merritt Road, Fort
     Bonifacio, Makati, Metro Manila, Philippines, herein represented by its
     President Mr. NAZARIO C. VASQUEZ, who is duly authorized to represent it in
     this Agreement.

     2. ORMAT INC., hereinafter referred to as the Operator, a private
     corporation duly organized and existing under the laws of the State of
     Delaware, U. S. A. licensed to do business in the Republic of the
     Philippines through its branch office at 8th Fl., Solid Bank Bldg., 777
     Paseo de Roxas, Makati, Metro Manila, Philippines, represented herein by
     its Vice President, Mr. Jacob Menahem, who is duly authorized to represent
     it in this Agreement.

WITNESSETH THAT

     WHEREAS, Republic Act 6957 dated July 9, 1990 as amended by RA 7718 (BOT
     Law) authorized government infrastructure agencies, including PNOC-EDC, to
     enter into contracts with private contractors for the financing,
     construction, operation and maintenance of infrastructure projects;

     WHEREAS, NAPOCOR and PNOC-EDC have previously executed a Memorandum of
     Understanding for the Development of Geothermal Power Plants in PNOC-EDC
     Projects, including the geothermal resources of the Leyte Power
     Optimization Project Areas, where PNOC-EDC holds an existing Geothermal
     Service Contract.

     WHEREAS, PNOC-EDC has invited several contractors to submit proposals for
     the design, construction, operation and maintenance of geothermal power
     plants on a build-operate-transfer (BOT) basis for the Leyte Geothermal
     Power Optimization Project Geothermal Service Contract Area, and these
     power plants will convert PNOC-EDC's geothermal energy into electricity for
     sale to NAPOCOR; and



     WHEREAS, the Operator wishes to design, construct, own and operate
     geothermal electricity generating plants, utilizing the geothermal
     resources of the Leyte Geothermal Power Optimization Project Area and with
     a Contracted Capacity of 49.00 MW net and wishes to deliver electricity
     exclusively on behalf of PNOC-EDC on such terms and conditions as are set
     forth herein.

NOW, THEREFORE, for and in consideration of the foregoing presents and the
mutual covenants hereinafter set forth, the Operator and PNOC-EDC have agreed as
follows:

ARTICLE 1 DEFINITION OF TERMS

1.1  DEFINITIONS

When used in this Agreement, the terms below shall have the following meanings:

ACCESSION UNDERTAKING: The accession undertaking to be executed in accordance
with Subsection 19(c) and in the form of Annex E.

AGREEMENT: This Agreement including attachments, as may be amended from time to
time.

ATMOSPHERIC CONDITIONS: The atmospheric conditions specified in the Interface
Data attached hereto as Annex C.

BILLING PERIOD: The time interval from 10:00 AM on the twenty-fifth (25th) day
of the current month to 10:00 AM on the twenty fifth (25th) day of the following
month where the Operator shall read meters and accumulate data needed for the
purpose of billing capacity and energy delivered to NAPOCOR on behalf of
PNOC-EDC.

BOI: The Board of Investments of the Republic of the Philippines.

BUYOUT DATE: The meaning specified in Section 9.3.

CAPACITY PAYMENT: The total capacity payments made pursuant to Section 8.3.1.

COMMERCIAL OPERATION DATE: The first day of the Billing Period following the
Completion Date of each Plant as defined in Section 4.1(a).

COMMISSIONING PERIOD: The period of three months prior to the scheduled
Completion Date of Plant 4. The period of four months prior to the scheduled
Completion Date of Plants 1, 2 and 3.

COMPLETION DATE: With respect to each Plant, the day upon which the Operator
certifies to PNOC-EDC that such Plant is capable of operating in accordance with
the Operating Parameters


                                       2


and has successfully completed testing in accordance with Article 5 or the date
that such Plant is deemed completed in accordance with Section 5.4.

CONSTRUCTION PERFORMANCE SECURITY: The Performance Security described in Section
3.1(a).

CONTRACTED CAPACITY: Thirty-five and sixty-five hundredths (35.65) MW (net) for
the period after the Completion Date for Plants 1, 2 and 3 and before the
Completion Date of Plant 4 and forty-nine (49.00) MW (net) for the period after
the Completion Date of Plant 4 and thereafter for any year during the
Cooperation Period. Contracted Capacity contemplates availability for the
duration of the Cooperation Period and assumes the continuous delivery and
acceptance of Geothermal Fluid by PNOC-EDC as specified in the Geothermal Fluid
Specifications. Said power shall be the aggregate power of all Plants measured
per Plant at (a) the Interconnection Point MP1 for NAPOCOR Power and (b) the
Interconnection Point MP2 for Steamfield Power, each as indicated in Figures C.1
- C.4 in Annex C and Annex C.

CONTRACT CAPACITY PRICE: The basic capacity purchase price per kilowatt (kW) per
month for electric capacity nominated by the Operator consisting of the Contract
Capacity Rate for Capital Costs (CCR), the Contract Capacity Rate for Fixed
Operating Costs (OCR), and the Service Fee Rate to reflect Return on Investments
(SFR).

CONTROL: To establish the electrical output of the Plants through dispatching
procedures including shut-down and start-up.

COOPERATION PERIOD: The period of ten (10) years of commercial operation
starting from the last Commercial Operation Date of Plants 1, 2 and 3 and
continuing until the 10th anniversary of that Commercial Operation Date.

CORRECTION CURVES: The curves, set forth in Annex B, used to adjust the Power
Plant performance for variation in the Geothermal Fluids and Atmospheric
Conditions from those specified in the Geothermal Fluid Specifications and the
Interface Data.

EFFECTIVITY DATE: The date upon which PNOC-EDC and the Operator agree that all
conditions precedent set forth in Article 26 have been either duly fulfilled or
waived to the satisfaction of the relevant Party.

ELECTIVE MODIFICATIONS: Modifications to the Operator's design of the Power
Plant requested by PNOC-EDC that are not solely for the purpose of correcting
design errors made by the Operator in its design of the Power Plant.

EMERGENCY: A condition or situation which in NAPOCOR's sole judgment affects
NAPOCOR's ability to maintain safe, adequate, and continuous electrical service.

                                       3


ENERGY DELIVERED: An amount of energy expressed in kilowatt hours (kWh)
generated by the Power Plant which are delivered to NAPOCOR on behalf of
PNOC-EDC at the Point of Interconnection plus those delivered to PNOC-EDC for
its own use (points MP1 and MP2 as indicated in Figures C.1 - C.4 in Annex C).

ENERGY FEE: The fees payable pursuant to Subsection 8.3.2.

FORCE MAJEURE: An event specified in Section 14.1.

GENERATING UNIT: A single turbine generator unit, together with its associated
auxiliaries and ancillary plant required to enable it to generate electricity
and to be connected to and operate in parallel with NAPOCOR's electricity
transmission system.

GEOTHERMAL FLUID: The geothermal steam to be supplied to the Operator by
PNOC-EDC and the condensed steam and low pressure steam to be received from the
Operator by PNOC-EDC.

GEOTHERMAL FLUID SPECIFICATIONS: The design point and other Interface Data
specifications for and quantities of Geothermal Fluid set forth in Annex C
including, without limitation, PNOC-EDC's undertakings to accept low pressure
steam and to accept condensed steam from the Plants for reinjection and/or other
proper disposal.

GOVERNMENT: The government of the Republic of the Philippines including all of
its political subdivisions and the agencies and instrumentalities of the
foregoing.

GUARANTEED COMMERCIAL OPERATION DATE: The dates set forth in Section 4.1 for
each Plant opposite the terms "Guaranteed Commercial Operation Date", as such
dates may be extended pursuant to this Agreement.

GUARANTEED NET PLANT STEAM RATE: With respect to each Plant, the Net Plant Steam
Rate guaranteed by the Operator, which, for any year during the Cooperation
Period, is the amount set forth in Annex I corresponding to such year, as
corrected for variations in Atmospheric Conditions and in the Geothermal Fluid
provided by PNOC-EDC using the Correction Curves.

INTERCONNECTION FAILURE: Any event, circumstance or state of facts located
beyond the Power Plant side of the Points of Interconnection which curtails or
eliminates the ability of NAPOCOR or PNOC-EDC to request and utilize power from
the Power Plant including, without limitation, problems in interconnection or
transmission equipment located beyond the Points of Interconnection described in
Annex C.

NAPOCOR: The National Power Corporation.

NAPOCOR ELECTRIC SYSTEM INTEGRITY: Operation of NAPOCOR's electric system in a
manner which minimizes risks of injury to persons and/or property and enables
NAPOCOR to provide


                                       4


adequate and reliable electric service to its customers, all in accordance with
generally and internationally-accepted utility practice.

NAPOCOR POWER: An amount of energy (in kWh) delivered to NAPOCOR on behalf of
PNOC-EDC measured in each one of the Plants at the high voltage side of the
transformer (MP1) at the relevant Point of Interconnection as indicated in
Figures C.1.-C.4 in Annex C.

NET PLANT STEAM RATE: For each Plant, it is the total Geothermal Fluid flow into
the that Plant over a given period of time, expressed in kilograms, divided by
the Energy Delivered over the same period expressed in kWh. Any measurement of
Net Plant Steam Rate shall be corrected for variations in the Atmospheric
Conditions and in the Geothermal Fluid provided by PNOC-EDC during such period
of time from the Geothermal Fluid Specifications using the Correction Curves.

NEWCO: The company organized under the laws of the Republic of the Philippines
which will be a party to this Agreement by and under the terms of the Accession
Undertaking.

NOMINATED CAPACITY: The capacity or amount of power that the Operator guarantees
in accordance with Section 6.13 to deliver to NAPOCOR on behalf of PNOC-EDC for
a period of one year, including the Steamfield Power.

OPERATING PARAMETERS: The operating parameters set forth in Annex B4 attached
hereto.

OPERATING REPRESENTATIVE: Individual(s) appointed by each Party and by NAPOCOR
for the purpose of securing effective cooperation and interchange of information
between the Parties and NAPOCOR in connection with administration and technical
matters related to this Agreement and the Power Purchase Agreement.

OPERATION PERFORMANCE SECURITY: The Performance Security described in Section
3.1(d).

OUTAGE: The inability of the Operator to meet a capacity up to the Nominated
Capacity when requested by NAPOCOR, provided, that no Outage shall occur if:

     (a)  the capacity adjusted per the Correction Curves which the Operator
          makes available to NAPOCOR is at least equal to current Nominated
          Capacity less Steamfield Power; or

     (b)  PNOC-EDC fails to deliver or to accept Geothermal Fluid from any Plant
          or the Geothermal Fluid delivered to or accepted from any Plant varies
          from the Geothermal Fluid Specifications and such variation is outside
          the range of the Correction Curves, except that in as far as
          acceptance of Geothermal Fluid from the Operator is concerned,
          PNOC-EDC's obligation under the Geothermal Fluid Specifications is
          limited to the steam exit pressure only; or

                                       5


     (c)  an Interconnection Failure has occurred; or

     (d)  the inability of the Operator is due to Force Majeure; or

     (e)  the inability of the Operator is due to Scheduled Maintenance provided
          that the number of hours in any one year under this clause (e) shall


          not be considered an Outage, if it does not exceed the number of
          Scheduled Maintenance hours stated for that year; or

     (f)  the failure by PNOC-EDC or NAPOCOR to request or utilize power from
          the Power Plant is due to any dispute between PNOC-EDC and NAPOCOR
          (under the Power Purchase Agreement or otherwise) which did not arise
          from any default of the Operator under this Agreement, including
          termination or expiration of the Power Purchase Agreement,

               OUTAGE HOUR: Any hour in which, due to Outage, the Operator
               failed, for a continuous period of thirty (30) minutes, to
               deliver power adjusted per the Correction Curves at a level of at
               least ninety five percent (95%) of the Nominated Capacity. For
               the purpose of defining Outage Hour, if NAPOCOR requests dispatch
               of capacity in excess of the amount defined in Subsection (a) of
               the definition of Outage, failure to deliver such excess amount
               shall not constitute an Outage Hour. For purpose of calculating
               the Total Outage Hours (TOH) for any given period (including
               Billing Period), the following formula shall be used:

                           n 0.95 x NC - (ACi + NRCi)

                TOH = (Sigma) ----------------------------------- x Wi

                      i=l0.95 x NC

where:

TOH    =   Total outage hours in any Billing Period.

NC     =   Nominated Capacity for that Billing Period expressed in kW.

n      =   The number of hours in that Billing Period.

ACi    =   The total power delivered during hour i expressed in kW adjusted

           per the Correction Curves.

                                       6


NRCi   =   NC less power requested by NAPOCOR in hour i, expressed in kW.

wi     =   Variable for hour i defined as follows:



if,



1)  (ACi  +  NRCi)  (greater than or equal to) 0.95 x NC; or

2)  (ACi  +  NRCi)  (less than) 0.95 x NC for a period shorter than 30 continues
                                minutes in hour i;

                         or

3)  Any of the events defined in Subsections (a), (b), (c), (d), (e) and (f) of
    the definition of Outage occurs during hour i,

then   wi = 0

otherwise   wi = 1

PARTIES: The contracting parties in this Agreement, referring to the Operator
and PNOC-EDC.

PERFORMANCE SECURITY: The Construction Performance Security required to be
posted by the Operator to guarantee its performance during the construction of
the Power Plant and to be converted into the Operation Performance Security to
guarantee Operator's performance during the Cooperation Period in accordance
with Section 3.1 hereof.

PLANT: Each of the power plants as described in Annex B and Annex C and
identified as follows: Plant 1 is the power plant in Mahanagdong "A" Area; Plant
2 is the power plant in Mahanagdong "B" Area; Plant 3 is the power plant in
Tongonan 1 Area; and Plant 4 is the power plant in Malitbog Area.

POINT OF INTERCONNECTION: The point at the interconnection facilities where the
transfer and metering of electrical energy among PNOC-EDC, NAPOCOR and the
Operator takes place, which point shall be the transformer high side terminals
at each Plant.

POLITICAL FM: An event specified in Section 14.1(b).

POWER PLANT: The Operator's generating equipment consisting of four (4) Plants
including all of the step-up transformers and switching facilities, together
with all protective and other associated


                                       7


equipment and improvements, necessary to produce electrical energy at the Point
of Interconnection of each Plant excluding associated land, land rights and
interests in land, which equipment shall include the proposed Generating Units
with a total gross capacity of 49.59 MW, conforming to the technical
specifications set forth in Annex B and Annex C.

POWER PURCHASE AGREEMENT: The contractual agreement dated March 04, 1994 and
addendum agreement dated May 06, 1994 between NAPOCOR and PNOC-EDC for the sale
by PNOC-EDC of electric capacity and energy from the Leyte project including
this Power Plant to NAPOCOR.

PROTECTIVE APPARATUS: The equipment and apparatus installed by the Operator
and/or NAPOCOR pursuant to Sections 6.8 hereof.

SCHEDULED MAINTENANCE: The maintenance referred to in Section 6.14 and approved
in accordance with section 6.15 and 6.16.

SCHEDULED OUTAGE: A planned interruption of the Power Plant's generating
capability that has been scheduled with PNOC-EDC in accordance with Sections
6.14 and 6.15 and is for maintenance, testing, inspection, repair, overhauls,
replacement, improvement or similar activity.

SITE: The land located at the Leyte Power Project Expansion Geothermal
Reservation to be provided by PNOC-EDC for the construction and operation (and
purposes incidental thereto including all other areas reasonably required to
perform the construction and operation) of the Power Plant as more particularly
described in Annex A.

STEAMFIELD POWER: An amount of energy (in kWh) delivered to PNOC-EDC and
measured in each one of the Plants at the relevant Points of Interconnection as
indicated in Figures C.1 - C.4 of Annex C.

T-BILL RATE: The rate per annum, on any day, at which Philippine Treasury Bills
(with terms of thirty (30) days or if no such bill with a term of thirty (30)
days is issued such bill which is issued having the term nearest to thirty (30)
days) were issued by the Government on the Friday immediately preceding such
day, or, if no such bills were issued on such Friday then the day immediately
preceding such Friday on which such bills were issued.

TERMINATION DATE: The date upon which this Agreement is terminated pursuant to
Article 9 or 15.

TRANSFER DATE: The day following the last day of the Cooperation Period;
provided, however, that in case of termination of this Agreement pursuant to
Article 9, the Transfer Date shall be the date following full payment of the
Buyout Price as defined in Section 9.2.

TRANSMISSION LINE: Has the meaning specified in Section 4.2.

                                       8


1.2  INTERPRETATION

     In this Agreement:

     (a)  any reference to an "Article", "Section", or "Clause" is a reference
          to an article or section hereof or an annex hereto or a clause or
          section in an annex hereto;

     (b)  the headings and sub-headings appear as a matter of convenience and
          shall not affect the construction of this Agreement;

     (c)  the singular includes the plural and vice versa, and words importing
          any gender include the other genders;

     (d)  a reference to a person includes a reference to a body corporate and
          to an unincorporated body of persons; and

     (e)  references to any Party include the successors and any permitted
          assigns of that Party.

1.3  ABBREVIATIONS

     In this Agreement:

     (a)  "$" and "dollar(s)" and "cents" denote lawful currency of the United
          States of America;

     (b)  "Ps" and "peso(s)" denote lawful currency of the Republic of the
          Philippines;

     (c)  "MW" denotes a megawatt;

     (d)  "MWh" denotes a megawatt hour;

     (e)  "kW" denotes a kilowatt;

     (f)  "kwh" denotes a kilowatt hour;

     (g)  "kV" denotes kilovolt;

     (h)  "DC" denotes direct current; and

     (i)  "AC" denotes alternating current.

                                       9


ARTICLE 2 PROJECT

2.1  POWER FACILITY

     The Operator shall be responsible for the finance, design, supply,
     construction, testing operation and maintenance of four (4) Plants with an
     aggregate gross capacity of approximately 51.00 MW to be installed on the
     Site, whose net generation (exclusive of the Steamfield Power) shall be
     delivered to NAPOCOR on behalf of PNOC-EDC during the Cooperation Period.
     The Power Plant shall be located on the Site which shall be made available
     by PNOC-EDC at no cost to the Operator and subject to the provisions of
     Subsection 4.3.

2.2  ENERGY CONVERSION

     PNOC-EDC, at no cost to the Operator, shall supply and deliver all
     Geothermal Fluid and receive all Geothermal Fluid in conformity to the
     Geothermal Fluid Specifications needed by the Operator for each Plant to
     generate the electric capacity and energy required by NAPOCOR and PNOC-EDC
     for Steamfield Power up to the Nominated Capacity. The Operator shall
     convert such Geothermal Fluid and, on behalf of PNOC-EDC, deliver all
     electrical capacity and energy generated by the Power Plant to NAPOCOR less
     (i) energy required by the Operator for auxiliary purposes; and (ii) the
     Steamfield Power. PNOC-EDC shall pay the Operator conversion fees as
     provided in Section 5.4 or Article 8, as the case may be. It is the
     intention of the Parties, without creating a contractual obligation under
     this Agreement, thatPNOC-EDC shall exercise its best effort to increase the
     Geothermal Fluid inlet pressure to Plants 1,2 and 3 as per Geothermal Fluid
     Specifications to allow, to the extent possible, an increase in the
     Contracted Capacity of the Power Plant.

2.3  OWNERSHIP

     (a)  From the Effectivity Date until the Transfer Date, the Operator shall
          own the Power Plant and all the fixtures, fittings, machinery and
          equipment on the Site and used in connection with the Power Plant
          which have been supplied by it or at its cost, and the Operator shall
          operate and manage the Power Plant for the purpose of converting the
          Geothermal Fluid delivered by PNOC-EDC in accordance with this
          Agreement into electric capacity and energy.

     (b)  On the Transfer Date, ownership, management and operation of the Power
          Plant shall be transferred by the Operator to PNOC-EDC in accordance
          with Article 9 or 13 or 15, as applicable.

                                       10


     (c)  Ownership of the Site shall remain with PNOC-EDC at all times during
          the term of this Agreement.

2.4  COMMENCEMENT AND PROSECUTION OF THE PROJECT

     The Operator shall develop and construct the Power Plant, with such
     resources, construction equipment and temporary facilities as, in the
     judgment of the Operator, are sufficient to complete the Power Plant on or
     before the corresponding Guaranteed Commercial Operation Date. The capacity
     of the construction equipment and temporary facilities, sequence of
     operations, method of operations, and resources employed shall be such, in
     the judgment of the Operator, as to insure that the Commercial Operation
     Date of each Plant occurs on or before the relevant Guaranteed Commercial
     Operation Date.

ARTICLE 3 GENERAL RESPONSIBILITIES OF THE OPERATOR

3.1  CONSTRUCTION PERFORMANCE SECURITY

     (a)  To guarantee the faithful performance by the Operator of its
          obligation to completely construct the Power Plant in accordance with
          the terms and conditions of this Agreement, within ten (10) days of
          the Effectivity Date the Operator shall post and deliver the
          Construction Performance Security in a form acceptable to PNOC-EDC in
          a sum equivalent to One Hundred Dollars (US$100) per kilowatt (kW) of
          total Contracted Capacity for all the Plants or its equivalent in
          Philippine Pesos or other currencies. Prior to such delivery, the
          Operator shall ensure that the Bid Security required under the bid
          documents shall be extended until such time the Construction
          Performance Security shall have been posted and delivered; provided
          that, in the event that the Effectivity Date does not occur on or
          before March 01, 1996, the Parties shall discuss and agree on any
          further extension of the Bid Security. PNOC-EDC shall have recourse to
          the Construction Performance Security to satisfy the final judgment in
          an arbitral proceeding in accordance with Article 21.

     (b)  The Construction Performance Security shall be in any of the following
          forms: (i) cash; (ii) irrevocable letter of credit issued in a form
          and by a bank acceptable to PNOC-EDC, provided that if the letter of
          credit is issued by a foreign bank it must be confirmed by an
          acceptable local bank or offshore banking unit; (iii) a bank draft
          guarantee issued by an accredited local bank, or if the issuing bank
          is a foreign bank, such guarantee shall be confirmed by a local bank
          acceptable to PNOC-EDC; or, (iv) surety bond, callable on demand, from
          the Government Service Insurance System (GSIS). All foreign banks
          issuing a letter of credit or bank guarantee shall be required to
          submit itself to the jurisdiction of Philippine courts.

                                       11


     (c)  This Construction Performance Security shall be valid and in effect
          from ten (10) days after the Effectivity Date until the earlier of (i)
          the Guaranteed Commercial Operation Date plus six (6) months
          thereafter or (ii) such time it is converted into the Operation
          Performance Security..

     (d)  Effective on the Completion Date, the Operator shall either convert
          the Construction Performance Security into or post and deliver an
          Operation Performance Security which shall be in any of the forms
          provided above for the Construction Performance Security in an amount
          equivalent to Sixty-Six Dollars ($66) per kilowatt (kW) of Contracted
          Capacity, or its equivalent in Philippine pesos or other currencies.
          The Operation Performance Security shall guarantee the faithful
          performance by the Operator of its obligations during the Cooperation
          Period and, in case of abandonment, shall be forfeited in full in
          favor of PNOC-EDC.

     (e)  If any security furnished in connection with this Agreement
          subsequently becomes unacceptable to PNOC-EDC in its reasonable
          discretion, or if the issuing company fails to furnish reports as to
          its financial condition from time to time as requested by PNOC-EDC,
          the Operator shall promptly furnish an additional security or a
          replacement security as may be required to protect the interests of
          PNOC-EDC in the Project.

3.2  RESPONSIBILITY FOR DAMAGE AND LOSSES

     (a)  The Operator shall be responsible for and shall promptly repair all
          damage to property belonging to PNOC-EDC, NAPOCOR, private parties or
          the Government caused by the negligent acts or omissions of Operator,
          its employees, agents, representatives, contractors and
          subcontractors.

     (b)  Except as set forth herein, any and all losses and damages to the
          Power Plant, due to any cause or causes, whatsoever, that are the
          responsibility of the Operator, its employees, agents,
          representatives, contractors and subcontractors during the prosecution
          of the Agreement shall not relieve the Operator from any of its
          obligations under this Agreement.

     (c)  Except as otherwise provided for in this Agreement and except for
          causes attributable to PNOC-EDC, PNOC-EDC shall not be responsible for
          any damage due to any increased difficulty in the performance of the
          obligations under this Agreement on account of any hindrance or delay
          due to any cause whatsoever in the progress of the development,
          construction, operation or maintenance of the Power Plant. Except as
          otherwise set forth herein or to the extent arising from causes
          attributable to PNOC-EDC, no adjustment in the prices as set forth in



                                       12


          Article 8 shall be made on account of any such damage, increased
          difficulty, hindrance or delay, but said hindrance or delay may
          entitle the Operator to an extension of time for completing the
          construction of the Power Plant as herein provided.

3.3  ENVIRONMENT AND CHANGE OF LAWS

     (a)  Prior to the Effectivity Date, the Operator and PNOC-EDC shall
          mutually agree upon which requirements of the Environmental Compliance
          Certificate issued in respect of the Power Plant are to be performed
          by the Operator, and which requirements are to be performed by
          PNOC-EDC. The Operator shall keep the Site in a sanitary condition and
          in compliance with the environmental requirements and mitigation
          measures to be performed by the Operator pursuant to such
          Environmental Compliance Certificate, Authority to Construct, Permit
          to Operate, and in accordance with the laws of the Republic of the
          Philippines in effect as of the date hereof.

          The costs for compliance with the environmental requirements shall be
          charged to the account of the Operator except that (i) with respect to
          H2S emissions, if any control of such emissions will be required from
          Operator, then Operator will charge all costs related to the
          installation of necessary equipment and facilities for such control as
          well as all additional costs of operation and maintenance, to PNOC-EDC
          who agrees to pay Operator all such additional costs and PNOC-EDC
          shall have the right to approve the manner, method and associated
          proposed costs of compliance with such requirements and (ii) the
          Operator will comply with any environmental or non-environmental laws,
          rules and regulations (and official interpretations thereof) affecting
          the construction, operation or maintenance of the Power Plant or the
          Operator's costs that are adopted or changed after the date of this
          Agreement; provided that if such compliance would:

          (i)    result in the Plants being unable to operate at the Guaranteed
                 Net Plant Steam Rate in accordance with the Operating
                 Parameters, or otherwise in accordance with the specifications
                 set forth in this Agreement; or

          (ii)   result in the interest of the Operator in the Power Plant
                 and/or the Operator's expectation of its economic return (net
                 of tax or other imposition) on its investment being reduced or
                 otherwise adversely affected; or

          (iii)  result in the scheduled Completion Date being delayed;

                                       13


          PNOC-EDC shall pay to the Operator the additional capital costs and
          expenses necessary to comply with such new requirements and PNOC-EDC
          shall have the right to approve the manner, method and associated
          proposed costs of compliance with such requirements. With respect to
          any disagreement or to other impacts resulting therefrom the Parties
          shall meet and endeavor to agree on amendments to this Agreement and
          if after sixty (60) days no such approval or agreement has been
          reached, then the provisions of Article 9 shall apply.

     (b)  If it is necessary, in the development, construction, operation or
          maintenance of the Power Plant, to interrupt or obstruct the natural
          flow of rivers or streams, the drainage of the surface, or the flow of
          artificial drains, the Operator shall provide adequate measures to
          prevent damage to either public or private properties. The Operator
          shall be liable for all damages caused by its negligence or willful
          misconduct with respect to such interruption or obstruction.

     (c)  Subject to Section 3.3 (a) and except for any liability which may
          arise from emissions of H2S prior to the installation of any H2S
          abatement system, the Operator shall assume responsibility for any
          costs and liabilities arising from any adverse environmental damage or
          health impacts that are caused by the Operator's negligence or willful
          misconduct in the construction, operation, and maintenance of the
          Plants and their related facilities.

3.4  ORGANIZATION

     (a)  The Operator shall maintain at the Site an efficient and capable
          organization with an adequate capacity and amount of construction,
          operating and maintenance equipment and facilities to satisfactorily
          develop, construct, operate or maintain the Power Plant in a safe,
          efficient, environmentally sound and professional manner.

     (b)  The Operator shall assign to the Site English-speaking foreign
          personnel. Any interpreters required shall be provided by the Operator
          at its expense.

     (c)  The Operator shall employ an engineer(s) appropriately licensed to


          practice in the Philippines who shall participate in the supervision
          of the development, construction, operation or maintenance of the
          Power Plant.

                                       14


ARTICLE 4 CONSTRUCTION OF THE POWER PLANT

4.1  MILESTONE DATES

     (a)  The Operator shall in good faith use all reasonable efforts to
          construct the Power Plant in accordance with the following schedule:

          Activity                                 Date

          Target Effectivity Date                  March 1, 1996

          Ordering of long lead items              the later of (i) July 1, 1996
          (turbogenerators)                        or (ii) 120 days after the
                                                   Effectivity Date

          Start of Commissioning Period of         May 1, 1997
          Plants 1, 2, and 3.

          Start of Commissioning Period of         October 1, 1997
          Plant 4

          Scheduled Completion Date for            September 1, 1997
          Plants l, 2, and 3

          Scheduled Completion Date for            January 1, 1998
          Plant 4


          Guaranteed Commercial Operation Date     September 25, 1997
          for Plants 1, 2 and 3

          Guaranteed Commercial Operation Date     January 25, 1998
          for Plant 4

          If the Commercial Operation Date of any Power Plant does
          not occur on or before the relevant Guaranteed Commercial
          Operation Date, the Operator shall be subject to the
          penalty provisions set forth in Section 4.11.

     (b)  Each of the dates set forth in Section 4.1(a) shall be extended by the
          duration of any event of Force Majeure or any breach by PNOC-EDC of
          any of its obligations under this Agreement or any delays as a result
          of requirements upon the Operator by PNOC-EDC or by any relevant
          Government authority to install an H28 abatement system. In addition,
          if the date for ordering the long-lead items is after July 1, 1996 as
          provided in clause (a) above, each of the dates set


                                       15


          forth in Section 4.1(a) shall be extended day for day for the period
          between July 1, 1996 and such date.

4.2  TRANSMISSION LINE, INTERCONNECTION AND GEOTHERMAL FLUID

     (a)  PNOC-EDC shall ensure that on or before each of the dates specified in
          Section 4.1(a), for the Start of Commissioning of each Plant as such
          dates may be extended pursuant to Section 4.1(b) for reason of Force
          Majeure, a 230 kV transmission line, including all interconnection
          facilities up to and including the Point of Interconnection for such
          Plant on the side of the transmission line (collectively, the
          "Transmission Line"), is installed and is capable of being connected
          to the Plants and receiving all power generated by those Plants which
          are about to be commissioned, plus any Plants already in operation.

     (b)  PNOC-EDC shall likewise ensure that on each of the dates specified in
          Subsection 4.1(a) for the Start of Commissioning Period for each Plant
          Geothermal Fluid and the acceptance of the down stream Geothermal
          Fluid from the Plants complying with the Geothermal Fluid
          Specifications are made available to the Operator.

     (c)  The Operator shall construct and maintain all interconnection
          facilities on the Plants' side of the Point of Interconnection.

4.3  SITE PROVISION

     (a)  PNOC-EDC shall make the Site available exclusively to the Operator for
          the purpose of building and operating the Power Plant, free and clear
          of liens and encumbrances that could interfere with the Operator's
          construction or operation of the Plants and at no cost to the
          Operator, and the Operator shall have the right to possess, use and
          enjoy the Site for the period from the Effectivity Date until the
          Transfer Date. The inability of PNOC-EDC to comply with its
          obligations under this Section 4.3 shall constitute a Political Force
          Majeure. Ownership and administration of the Site shall remain with
          PNOC-EDC throughout the effectivity of this Agreement. PNOC-EDC shall
          be responsible for, and hold the Operator and its successors and
          assigns harmless from, all claims by third parties relating to the
          land provided for the Site, including, without limitation, claims
          under colour of ownership of any interest in such land, real estate
          and other taxes or other claims that might give rise to any lien on
          the land or any improvements to it (other than those claims arising
          out of the Operator's construction, operation or maintenance of the
          Power Plant). If PNOC-EDC fails to duly satisfy such claims on a
          timely basis, the Operator


                                       16


          may do so (at his sole discretion and upon prior consultation with
          PNOC-EDC) and PNOC-EDC shall promptly reimburse such expenses.

     (b)  The Operator shall not obstruct any existing road or drainage or
          disturb existing structures and facilities on the land so furnished
          for construction purposes unless and until given written permission by
          appropriate authorities. Unreasonable withholding or delay of such
          permission shall constitute Force Majeure.

     (c)  PNOC-EDC shall make available to the Operator, free and clear of liens
          and encumbrances that could interfere with the Operator's construction
          or operation of the Plants and at no cost to the Operator, all other
          lands, easements, and rights-of-way for developing, constructing,
          operating, or maintaining the Plants (including areas and temporary
          access for the disposal of spoils) or such other purposes which the
          Parties agree are necessary in the implementation of this Agreement
          for the period from the Effectivity Date until the Transfer Date.

4.4  INGRESS AND EGRESS RIGHTS OF OPERATOR

     PNOC-EDC shall ensure that all necessary access to and from the Site is
     made available to the Operator, its employees, contractors, subcontractors
     and advisers, at no cost to the Operator, for the period from the date of
     this Agreement until the Transfer Date.

4.5  EQUIPMENT IMPORTATION

     (a)  The Operator shall be responsible for the importation and
          transportation to the Site of all equipment for development and
          operation of the Power Plant, and construction of the Power Plant. It
          is the responsibility of the Operator to secure from the Government,
          its agencies and instrumentalities, the necessary permits, licenses,
          and other documents for the importation of the Operator-owned
          construction or maintenance equipment that it may decide to bring into
          the country for use in connection with this Agreement. PNOC-EDC shall
          use its best efforts in assisting the Operator to obtain all such
          licenses and documents.

     (b)  PNOC-EDC shall use its best efforts to cause the Government to grant
          the Operator exemptions from all custom duties or other importation or
          exportation tax in respect of all items of plant, machinery and
          ancillary items, including consumables and spare parts, required for
          the construction, operation, maintenance and repair of the Power
          Plant, provided however that if such exemptions are not obtained, the
          provisions of Section 8.6 shall apply.

                                       17


     (c)  Any delays caused by meeting customs procedures for material equipment
          and supplies or in obtaining necessary permits, licenses, and other
          documents caused by an event of Force Majeure and to the extent that
          they affect the Operator's ability to undertake its performance under
          this Agreement shall extend the project milestone dates set forth in
          Subsection 4.1(a) equivalent to the period of the delay in obtaining
          such permits, licenses and other documents. The Operator or PNOC-EDC
          shall promptly notify the other Party of each such delay, and the
          Parties shall cooperate to promptly satisfy the relevant authority and
          remove the cause of the delay. Any delay in excess of sixty (60) days
          after notification by the Operator to PNOC-EDC shall cause Article 9
          to apply. The Operator shall not be subject to delay penalties as a
          result of such a delay.

4.6  PERMITS

     Following the Effectivity Date, the Operator, at no cost to PNOC-EDC, shall
     be responsible for securing from the Government all requisite
     authorizations, licenses and permits not previously provided under the
     provisions of Article 26 for the construction and operation of the Plants,
     their associated facilities, and related waste management facilities,
     except the Environmental Compliance Certificate, which shall be obtained by
     PNOC-EDC. PNOC-EDC shall cooperate with and use its best efforts to assist
     the Operator in obtaining such authorization, licenses and permits.

     Any delays, caused by an event of Force Majeure and to the extent that they
     materially affect the Operator's ability to undertake its performance under
     this Agreement, caused in obtaining requisite authorizations, licenses and
     permits shall extend the Completion Date and other benchmark dates day for
     day. The Operator or PNOC-EDC shall promptly notify the other Party of each
     such delay, and the Parties shall cooperate to promptly satisfy the
     relevant Authority and remove the cause of delay. Any delay in excess of
     sixty (60) days after notification shall cause Article 9 to apply. The
     Operator shall not be subject to delay penalties as a result of such a
     delay.

4.7  DRAWINGS, DOCUMENTS, DATA & INSTRUCTIONS

     The Operator shall comply with the following on matters of drawings and
     other documentary information, and PNOC-EDC rights thereto:

     4.7.1 SUBMISSION OF DRAWINGS AND DATA

          The Operator shall submit to PNOC-EDC copies of all drawings, plans,
          calculations, operating and maintenance instructions and, in general,
          copies of all material documents related to the Power Plant reasonably
          requested for reference and information. Prior to the start of
          construction,


                                       18


          within thirty (30) working days following receipt thereof, PNOC-EDC
          shall describe to the Operator in writing any flaws perceived by
          PNOC-EDC in the designs. Failure by PNOC-EDC to describe any flaws in
          such designs within such thirty (30) day period shall be deemed
          PNOC-EDC's waiver of its right to describe such flaws.

          The Operator shall also advise PNOC-EDC of the names of potential
          suppliers of material components or material services who have been
          shortlisted by the Operator. Within thirty (30) working days following
          receipt of such advice, PNOC-EDC shall advise the Operator of any such
          potential suppliers to which PNOC-EDC objects, together with the
          reasons for objection and may request the Operator to exclude such
          suppliers from the shortlist. The Operator shall comply with such
          requests by PNOC-EDC as it shall deem reasonable.

          Following the start of construction by the Operator on the Site, and
          in any case not earlier than 120 days after the Effectivity Date, the
          above-mentioned thirty (30) working days periods shall be reduced to
          fifteen (15) working days.

     4.7.2 MODIFICATION RIGHTS

          During the same thirty (30) or fifteen (15) working day period
          following the receipt of the documents or list of such suppliers under
          Section 4.7.1, PNOC-EDC shall have the right to require modifications
          to the design as it deems necessary within the scope of work set forth
          in Annex B and Annex C for proper and safe operation of the Power
          Plant as it affects the operation of the PNOC-EDC geothermal fluid
          collection and disposal system and the NAPOCOR power system. In the
          event PNOC-EDC requests any Elective Modifications, then the Parties
          shall negotiate in good faith (i) to adjust the Contract Capacity
          Price to maintain the Operator's economic return on its investment as
          if no such Elective Modifications were performed and (ii) adjust the
          dates set forth in Section 4.1 to reflect any delays in designing such
          Elective Modifications and any additional time required by the
          Operator to complete such Elective Modifications; provided that the
          Operator shall not be required to make such Elective Modifications if
          such Elective Modifications would likely impair the Operator's ability
          to perform its obligations hereunder. In the event the Parties are
          unable to reach agreement on such adjustments within sixty (60) days
          following PNOC-EDC's request, PNOC-EDC may withdraw such request.
          Thereafter, if such request is not withdrawn, the Operator shall
          either comply with such request or terminate this


                                       19


          Agreement by giving written notice of termination to the PNOC-EDC;
          provided, however, that if the Operator gives such a written notice of
          termination to PNOC-EDC, PNOC-EDC shall have five (5) working days
          following delivery of such notice of termination to again withdraw its
          request. If such request is withdrawn by PNOC-EDC such written notice
          of termination will be of no effect. Upon such termination, the
          provisions of Article 9 shall apply. If, following the process as
          described in this Subsection 4.7.2, in the Operator's reasonable
          judgment a delay has been caused to its construction schedule, and
          such a delay is not due to a flaw in the Operator's drawings, the
          dates set forth in Subsection 4.1(a) shall be extended and adjusted
          proportionally to such a delay.

     4.7.3 FUTURE MODIFICATION

          All changes to the design of the Power Plant desired by the Operator
          shall be subject to the review and approval of PNOC-EDC and such
          approval shall not be unreasonably withheld. Except as set forth in
          Section 4.7.2 and this section, neither Party shall have the right to
          make or require any changes in the design of the Power Plant without
          the prior written consent of the other Party.

     4.7.4 CONSTRUCTION SCHEDULE

          The Operator shall submit to PNOC-EDC a detailed construction schedule
          of the Power Plant within three (3) months following the Effectivity
          Date. This schedule shall contain, in particular, dates for the
          submission of all drawings, documents and data, acceptance thereof,
          witnessing of tests and the overall procurement schedule. PNOC-EDC
          shall have the right to review and approve, which approval shall not
          be unreasonably withheld, the construction schedule of the Power
          Plant. Failure to disapprove such schedule within thirty (30) days
          following receipt of the same shall be deemed PNOC-EDC's approval of
          the same.

     4.7.5 MONITORING RIGHTS

          PNOC-EDC shall be entitled at its own cost to monitor the progress and
          quality of the construction and installation work. For this purpose,
          the Operator shall:

     (a)  submit to PNOC-EDC a monthly progress report in such detail and format
          as may be reasonably requested by PNOC-EDC;

                                       20


     (b)  ensure that PNOC-EDC and any experts appointed by PNOC-EDC in
          connection with the Power Plant are afforded reasonable access to the
          Site at times to be agreed with PNOC-EDC provided that such access
          does not materially interfere with the development, construction,
          operation or maintenance of the Power Plant or expose any person on
          the Site to any danger; and

     (c)  make available for inspection at the Site copies of all plans and
          designs.

     4.7.6 DRAWINGS AND DOCUMENTS TO BE PROVIDED

          The Operator shall furnish PNOC-EDC drawings and technical details
          that are prepared by or on behalf of the Operator such as, but not
          limited to, the following:

     (a)  arrangement plans for the general layout of machinery and equipment;

     (b)  general and detailed drawings and specifications for electromechanical
          works;

     (c)  general and detailed drawings and specifications for civil and
          architectural works; and

     (d)  operation and maintenance manuals

          in accordance with the construction schedule as submitted and approved
          in accordance with Section 4.7.4.

          Within six (6) months following the Commercial Operation Date of the
          last Plant, the Operator shall supply PNOC-EDC with three (3) copies
          of all "as built" plans, drawings, and design calculations related to
          construction and the performance of the Power Plant as well as quality
          assurance records, one of which copies shall be reproducible.

4.8  DISCLAIMER

     The following disclaimer shall be recognized in this Agreement:

     (a)  Any engineering review by PNOC-EDC of the Power Plant is solely for
          its information. By making such review PNOC-EDC makes no
          representation as to the engineering soundness of the Power Plant.

     (b)  The Operator shall in no way represent to any third party the
          engineering soundness of the Power Plant as a result of the review
          made by PNOC-EDC.

                                       21


     (c)  Subject to the other provisions of this Agreement, the Operator is
          solely responsible for the economic and technical feasibility,
          operational capability and reliability of the Power Plant.

     (d)  PNOC-EDC shall not be liable to the Operator for, and the Operator
          shall defend, hold harmless, and indemnify PNOC-EDC from, any claim,
          cost, loss, damage, or liability arising from any contrary
          representation made by the Operator concerning the effect of
          PNOC-EDC's engineering review of the Power Plant.

4.9  RESPONSIBILITY FOR UTILITIES

     The Operator and PNOC-EDC shall be each responsible for the provision of
     needed utilities, such as electric service, water, communications and the
     like, necessary during the construction and operation of the Power Plant
     according to the requirements of Annex B2.3 and Annex B3 respectively.

4.10 DELAYS

     Should the Operator be obstructed or delayed at any time in the progress of
     the construction work due to any of the following causes:

          (i)    Failure of the Operator to obtain the necessary access to the
                 Site, or failure of PNQC-EDC to deliver and accept geothermal
                 fluid meeting the Geothermal Fluid Specifications; or the
                 failure of PNOC-EDC to fulfill any of its other obligations
                 that at Operator's reasonable judgment will cause a delay in
                 the scheduled Completion Date; or the failure of the Operator,
                 for reasons not attributable to the Operator, to obtain the
                 Authorization to Construct and Permit to Operate; or

          (ii)   Any delay described in Sections 4.5 and 4.6, or any delay
                 caused by a PNOC-EDC directed modification in accordance with
                 Subsection 4.7.2 other than a modification which is
                 necessitated by a flaw in the Operator's drawings or any delays
                 as a resultof requirements upon the Operator by PNOC-EDC or by
                 any relevant Government authority to install an H2S abatement
                 system; or

          (iii)  Delays due to Force Majeure conditions:

     the Operator shall promptly notify PNOC-EDC of such delay, including
     details and supporting documents reasonably calculated to describe the
     problem, steps taken to resolve it and any proposed cooperative solution.
     Any delay under the terms of this


                                       22


     Section 4,10 shall extend day for day, unless otherwise agreed between the
     Parties, the Guaranteed Commercial Operation Date and all other related
     target dates directly related to the delay and within the responsibility of
     Operator.

4.11 PENALTY DUE TO DELAYS

     (a)  In the event the Commercial Operation Date of any individual Plant
          does not occur on or before the relevant Guaranteed Commercial
          Operation Date (as the same may be extended pursuant to this Agreement
          or by mutual agreement), the Operator shall pay PNOC-EDC an amount as
          defined in Annex 13. If the Operator fails to pay such amount within
          five (5) working days after due, PNOC-EDC shall have the right to draw
          on the Construction Performance Security to the extent of the amount
          defined in Annex E. In no event shall the aggregate amount of
          penalties for delay exceed the sum of $5,700,000.

     (b)  In the event that the Commercial Operation Date of any Plant does not
          occur within one hundred fifty (150) calendar days following the
          Guaranteed Commercial Operation Date for that Plant (as the same may
          be extended pursuant to this Agreement or by mutual agreement) then
          Section 15.4.1 shall apply.

4.12 LIGHTS AND BARRIERS

     During construction, the Operator shall put up and maintain at the Site
     such danger lights and barriers as the Operator deems reasonably necessary
     to prevent all accidents in consequence of the development or construction
     of the Power Plant. If work is done at night, the Operator shall maintain
     from sunset to sunrise during the performance of such work such adequate
     lighting on or about the Site and on the work area as the Operator deems
     necessary for the safety of the construction forces and for the proper
     observance and inspection of the construction and erection activities.

ARTICLE 5 TESTING OF THE FACILITY

5.1  TESTING PROCEDURES

     The procedures for the testing of the Power Plant set forth in Annex F
     shall be followed by the Operator.

5.2  TEST SCHEDULES

     (a)  The Operator and PNOC-EDC shall agree on test schedules and schedules
          of Geothermal Fluid requirements for the tests for the Power Plants.
          The schedules shall take into consideration the operational
          requirements of PNOC-


                                       23


          EDC and NAPOCOR, provided, however, that the Operator shall not be
          delayed by more than 7 calendar days in his proposed test schedules.

     (b)  In so far as Plants 1,2 and 3 are concerned, the Operator agrees to
          accept Geothermal fluid for a total period of three (3) months during
          the commissioning period. Over these three (3) months the Operator, at
          Operator's request, shall be entitled to two (2) months of Geothermal
          Fluid supply for plant 3 and two (2) months of Geothermal Fluid supply
          for Plants 1 and 2.

5.3  NOTICE OF TESTS

     The Operator shall notify PNOC-EDC at least fifteen (15) calendar days
     prior to carrying out any tests on the Power Plant and prior to:

     (a)  the initial parallel operation of each of the Operator's Plants; and

     (b)  all testing of the Protective Apparatus.

5.4  TESTS BEFORE COMPLETION

     (a)  PNOC-EDC reserves the right to witness all tests, including equipment
          testing at the Operator's or other subcontractor's or equipment
          supplier's premises during the course of this Agreement. NAPOCOR shall
          have the right to have a representative present at all tests of the
          Protective Apparatus.

     (b)  The representatives of PNOC-EDC shall have the right to be present
          during any test activity done by the Operator on the Power Plant.
          Tests conducted without the presence of PNOC-EDC's representative
          shall not be valid for the purposes of this Agreement; provided that
          if the Operator has complied with the notice provisions of Section 5.3
          and PNOC-EDC representative fails to be available for such tests at
          the scheduled time, the Operator may conduct such tests and such tests
          shall be valid for the purpose of this Agreement and the Operator
          shall have the right to issue, without need of PNOC-EDC's concurrence,
          the certificates required by Section 5.4(c).

     (c)  Upon completion of any test, the Operator and PNOC-EDC shall jointly
          issue a certificate that testing has been done on each Plant and that
          agreed testing procedures shown in Annex F had been followed.

     (d)  The Operator shall use best efforts to demonstrate the Power Plant's
          ability to provide to NAPOCOR on behalf of PNOC-EDC the Contracted
          Capacity. If, pursuant to the tests performed pursuant to this Article
          5, any Plant is unable to demonstrate a capacity equal to its
          proportional portion of the Contracted


                                       24


          Capacity, then the Operator shall perform the tests required by this
          Article 5 at such other capacity as the Operator elects. Upon
          completion of such tests, the Parties shall certify the Completion
          Date for the relevant Plant.

     (e)  No later than seven (7) calendar days after the Completion Date of
          each Plant, the Operator shall notify PNOC-EDC of the adjusted
          Nominated Capacity of the Power Plant for the first year of operation.
          The total Nominated Capacity of the Power Plant for the first year of
          operation shall be adjusted upon the Completion Date of each Plant in
          order to include the proportional portion of the Nominated Capacity
          related to that completed Plant.

     (f)  All costs, excluding Geothermal Fluid, incurred during the testing of
          the Power Plant shall be borne by the Operator.

     (g)  Energy generated during testing shall be delivered to NAPOCOR on
          behalf of PNOC-EDC and paid for by PNOC-EDC at fifty percent (50%) of
          the rate actually paid by NAPOCOR to PNOC-EDC. The Operator shall bill
          PNOC-EDC for such energy in accordance with Section 8.4.

     (h)  Notwithstanding anything to the contrary in this Agreement, in the
          event that, from and after the date set forth in Section 4.1 for the
          start of commissioning of a Plant, that Plant is capable of being
          tested, but performance tests required under Section 5.4(d) cannot be
          performed because of:

          (i)    an Interconnection Failure; or

          (ii)   PNOC-EDC's failure to deliver or accept Geothermal Fluid as
                 specified in the Geothermal Fluid Specifications; or

          (iii)  the Operator's failure to receive all permits, licenses, other
                 governmental approvals and utilities required for operation of
                 the Power Plant, notwithstanding its reasonable efforts to
                 obtain the same, and assuming the Operator has complied with
                 the scope of work set forth in Annex B; or

          (iv)   PNOC-EDC or NAPOCOR's failure to provide any personnel or
                 resource necessary to witness and approve such testing; or

          (v)    any dispute between PNOC-EDC and NAPOCOR (under the Power
                 Purchase Agreement or otherwise) which did not arise from any
                 default of the Operator under this Agreement, including the
                 termination or expiration of the Power Purchase Agreement,
                 then, in any such events, the Completion Date for such Plant(s)
                 shall be deemed to have occurred and


                                       25


                 PNOC-EDC shall be obligated to commence payments of the
                 Capacity Payments and the Energy Fee to the Operator on and
                 from the Completion Date provided, however, that Completion
                 Date for such payments shall not occur prior to August 1, 1997.
                 The capacity for purposes of calculating the Capacity Payments
                 payable under this Subsection shall be deemed to be delivery of
                 Nominated Capacity equal to the Contracted Capacity of such
                 Plant(s).

     At such time when all events described in subparagraphs (i), (ii), (iii),
     (iv) and (v), above have been cured and no longer exist regarding the
     affected Plant, the Operator shall perform the performance tests required
     under Section 5.4(d) and advise PNOC-EDC of the adjusted Nominated Capacity
     of the Power Plant and thereafter shall receive Capacity Payments based on
     the adjusted Nominated Capacity.

     In the event that the Operator is unable to pass all of the Plant's
     performance tests as set forth herein and provided that such tests are
     conducted within six (6) months from the Completion date of the affected
     Plant, the Operator will be obligated to refund or credit against future
     capacity made available and actually delivered to PNOC-EDC that amount of
     Capacity Payment actually received by the Operator prior to and during such
     tests which exceeds the amount of Capacity Payment which the Operator would
     have been paid at the lower capacity rating actually demonstrated in
     testing the Plant.

     In the event there is a difference of opinion about test results before or
     during the Cooperation Period, which cannot be resolved by the Parties
     within seven (7) days, the controversy shall be resolved by a reputable
     engineering firm chosen in advance as provided herein after. The Operator
     shall propose the engineering firm, acceptable to PNOC-EDC which acceptance
     shall not be unreasonably withheld, and the Parties will agree on such
     engineering firm not later than six (6) months prior to the estimated start
     of the Commissioning Period for the first Plant. The Parties shall equally
     share any costs associated with this procedure.

5.5  TESTS DURING COOPERATION PERIOD

     The net plant capacity and the Net Plant Steam Rate shall be tested every
     year in the presence of PNOC-EDC personnel following the procedures set
     forth in Annex F. This test shall be performed at the Operator's election
     within six (6) months after completion of the annual maintenance on each
     individual Plant and shall form the basis for determining the Nominated
     Capacity for the following year under Section 6.13. The Operator shall be
     entitled to repeat any of the aforesaid tests. If any of the events
     described in Subsection 5.4(h) affect the results of any such tests, the
     provisions of Subsection 5.4(h) shall apply for purposes of determining
     Nominated Capacity for such year.

                                       26


ARTICLE 6 OPERATION OF THE FACILITY

6.1  COMPLETION DATE

     (a)  Upon the substantial completion of the Power Plant and subject to
          confirmation by PNOC-EDC (which confirmation shall not be unreasonably
          withheld), the Operator may certify that the Completion Date of the
          Power Plant has occurred notwithstanding that the Power Plant is
          unable to produce the Contracted Capacity adjusted per the Correction
          Curves or to achieve the Guaranteed Net Plant Steam Rate, but in that
          event adjustments shall be made to the Capacity Payments in accordance
          with the penalty provisions of Subsection 8.3.1; provided, however,
          that such certification may not be made if the Power Plant is unable
          to produce at least seventy percent (70%) of the Contracted Capacity,
          after application of the Correction Curves.

     (b)  On the Completion Date of the Power Plant, the Operator shall commence
          the delivery of electric capacity and energy to NAPOCOR on behalf of
          PNOC-EDC and shall be paid for such delivery in accordance with the
          provisions of Section 8.3. All other related provisions on the
          operation of the Power Plant and the tariffs, discounts, bonuses, and
          penalties on the regular sale of electric capacity and energy shall
          also take effect on this date.

6.2  POWER RATES FOR INITIAL DELIVERY

     In the event that the Completion Date of any Plant falls on a date other
     than the Commercial Operation Date, PNOC-EDC shall pay the Contract
     Capacity Price for the Power Plant to the Operator on a prorated basis
     based on the number of days elapsed from the Completion Date.

6.3  DEDICATION OF FACILITY

     The Operator shall operate and dedicate all energy and capacity of the
     Power Plant (net of Operator's and PNOC-EDC's usage allowed hereunder) to
     NAPOCOR.

6.4  OPERATING PARAMETERS

     The Operator shall operate the Power Plant following the Operating
     Parameters as stipulated in Annex B(4).

                                       27


6.5  DISPATCH PROCEDURE

     It is the expectation of the Parties that the Plant(s) will be operated as
     base-load plant(s). However, the Operator shall Control and operate the
     Plant(s) consistent with NAPOCOR's dispatch requirements and the Plant(s)
     shall be so capable.

6.6  ENGINEERING STANDARDS

     The Power Plant shall be designed, operated and maintained by the Operator
     in accordance with prudent industry standards and good engineering
     practices.

6.7  ENVIRONMENTAL STANDARDS

     Subject to the provisions of Section 3.3(a), the Power Plant shall be
     designed, constructed, operated and maintained by the Operator in
     accordance with R.A. 6969 and DENR Administrative Orders 14, 34 and 35, and
     other applicable environmental standards and regulations, and in particular
     with the requirements of the Environmental Compliance Certificate, the
     Authority to Construct, and the Permit to Operate issued in respect of the
     Power Plant. In case of any changes in law or official interpretation of
     law, Section 3.3 shall apply.

6.8  PROTECTIVE DEVICES

     The Operator shall install Protective Apparatus in accordance with general
     specifications for such equipment and as approved by PNOC-EDC, NAPOCOR and
     the Operator conforming to the specifications set forth in Annex B and
     Annex C, to ensure the NAPOCOR Electrical System Integrity. The Power Plant
     shall be operated by the Operator with all of the Protective Apparatus in
     service whenever it is connected to or is operated in parallel with the
     NAPOCOR electric system.

6.9  INTEGRITY LOSS

     If, at any time, NAPOCOR reasonably doubts the integrity of any of the
     Operator's Protective Apparatus and reasonably suspects that such loss of
     integrity would be hazardous to the NAPOCOR Electric System integrity, the
     Operator shall demonstrate, to NAPOCOR's and PNOC-EDC's reasonable
     satisfaction, the correct calibration and operation of the equipment in
     question. If not so reasonably satisfied, NAPOCOR shall have the right to
     disconnect the Operator and refuse to receive the energy delivered by the
     Power Plant and, for the duration of such disconnection, the Power Plant
     shall be deemed to have suffered an Outage for billing purposes. The
     inability of the Operator to meet capacity by reason of any demonstration
     made by the Operator under this


                                       28


     Section 6.9 shall not be an Outage if the Operator is able to show correct
     calibration and operation of Protective Apparatus.

6.10 SETTINGS OF PROTECTIVE DEVICES

     All settings of all Protective Apparatus shall be subject to the reasonable
     approval of NAPOCOR. Tests and calibration of this Protective Apparatus
     shall be at the expense of the Operator.

6.11 SERVICE COMMITMENT

     At NAPOCOR's request, the Operator shall make all reasonable efforts on
     behalf of PNOC-EDC to deliver energy during periods of Emergency.

6.12 MAINTENANCE DURING EMERGENCY

     In the event that the Scheduled Maintenance coincides with an Emergency,
     the Operator shall make all reasonable efforts to reschedule such Scheduled
     Maintenance.

6.13 ANNUAL CAPACITY NOMINATION

     (a)  The Nominated Capacity of the Power Plant shall be specified by the
          Operator for the second year and each subsequent year of the
          Cooperation Period no later than thirty (30) calendar days prior to
          the anniversary of the first Commercial Operation Date of the Power
          Plant.

     (b)  If, for a particular year, the Operator fails to specify a Nominated
          Capacity, then the lower of the Contracted Capacity, the last
          Nominated Capacity or the last capacity demonstrated in testing in
          accordance with Section 5.5 adjusted per Correction Curves shall be
          the Nominated Capacity for that particular year.

6.14 MAINTENANCE SCHEDULE

     The Operator shall submit a written maintenance schedule for the necessary
     overhaul, maintenance, inspection and repair of the Power Plant no later
     than one hundred (100) calendar days prior to the start of each calendar
     year following the Commercial Operation Date of the Power Plant setting
     forth the Operator's proposed Scheduled Maintenance for such year provided,
     however, that each Plant shall not be scheduled for Scheduled Maintenance
     for more than twenty-one (21) days per year in which a major overhaul of
     that Plant occurs, and seven (7) days per year in which no major overhaul
     occurs, and the interval between major overhauls of each Plant shall not be
     less than a cycle of two years.

                                       29


6.15 APPROVAL OF MAINTENANCE SCHEDULE

     PNOC-EDC shall notify the Operator, within forty-five (45) calendar days
     after receipt of each maintenance schedule from the Operator, whether the
     requested maintenance schedule is approved, which approval shall not be
     unreasonably withheld. If not approved, the Parties shall promptly and in
     good faith negotiate an alternative mutually-agreeable maintenance
     schedule.

6.16 APPROVAL OF OVERHAULS

     The Operator shall not schedule major overhauls without the prior approval
     of PNOC-EDC and such approval shall not be unreasonably withheld or
     delayed.

6.17 COMPLIANCE WITH APPROVED MAINTENANCE SCHEDULE

     The Operator shall perform Scheduled Maintenance on the Power Plant during
     the periods set forth in the maintenance schedule approved pursuant to
     Section 6.15, unless such other times are approved by PNOC-EDC, and such
     approval shall not be unreasonably withheld.

6.18 UNSCHEDULED OUTAGE

     The Operator shall immediately notify PNOC-EDC, and NAPOCOR on behalf of
     PNOC-EDC, of any unscheduled Outage and the estimated duration of such
     Outage.

6.19 DAILY OPERATING REPORT

     For record purposes, the Operator shall keep PNOC-EDC and NAPOCOR's power
     management center regularly informed as to the daily results of operation
     and generation capability of the Power Plant, including, without
     limitation, any Outages.

6.20 OPERATING RECORDS

     The Operator shall maintain an operating log for each Plant with records
     of:

     (a)  real and reactive power production,

     (b)  changes in operating status,

     (c)  Outages,

     (d)  Protective Apparatus operations, and

                                       30


     (e)  any unusual conditions found during inspections.

     Changes in the setting of Protective Apparatus shall also be logged. In
     addition, the Operator shall maintain customary records applicable to the
     Power Plant, including maintenance and overhaul records, the electrical
     characteristics of the generator and settings or adjustments of the
     generator control equipment and Protective Apparatus. At the end of the
     Cooperation Period, such records shall be turned over to PNOC-EDC at no
     cost.

6.21 PNOC-EDC ACCESS TO THE POWER PLANT

     Upon at least twenty four (24) hours advance notice under normal
     circumstances, PNOC-EDC shall have rights of access to the Power Plant at
     mutually agreed upon times for the purpose of monitoring the Operator's
     operation and maintenance of the Power Plant, subject only to any
     reasonable restrictions that the Operator may impose for reasons of
     personnel and equipment safety and to avoid any impairment to the
     operations or maintenance of the Power Plant. However, in the event of an
     emergency, no advance notice shall be required provided that PNOC-EDC
     representative shall be accompanied by the Operator's representative. The
     Operator shall make the necessary arrangements to allow free access at any
     time to PNOC-EDC equipment.

ARTICLE 7 GEOTHERMAL FLUIDS

7.1  GEOTHERMAL FLUID SUPPLY

     (a)  PNOC-EDC shall supply and accept at no cost to the Operator the total
          Geothermal Fluid requirements and output of the Power Plant. Such
          Geothermal Fluid shall conform to the Geothermal Fluid Specifications.

     (b)  If neither Party shall have reason to believe that any Geothermal
          Fluid delivered to or accepted from the Site do not comply with the
          Geothermal Fluid Specifications, that Party shall promptly notify the
          other Party. Such notice shall be reasonably detailed and focused on
          possible solutions to the problem.

7.2  NON-CONDENSIBLE GASES & NON-GEOTHERMAL WASTE

     Except as provided for in Sections 3.3 and 11.2, the Operator shall be
     responsible for disposal of non-condensible gases resulting from the
     operation of Plant 4 and all non-Geothermal Fluid related waste arising
     from the Operator's construction, operation or maintenance of the Power
     Plant. If requested by the Operator, PNOC-EDC shall dispose of such waste
     at the Operator's cost, such disposal to be in accordance with applicable
     law. The disposal activities of PNOC-EDC on behalf of Operator shall be
     subjected to a


                                       31


     separate Waste Disposal Agreement between PNOC-EDC and the Operator. This
     disposal shall be in accordance with the requirements of the Environmental
     Compliance Certificate issued in respect of the Power Plant and attached
     hereto as Annex L.

7.3  SURPLUS CONDENSATE

     The Operator shall deliver to PNOC-EDC and PNOC-EDC shall accept for
     disposal at no cost to the Operator all surplus condensed geothermal steam,
     including cooling tower blowdown; provided, however, such surplus
     condensate complies with the specifications set forth in Annex C.

7.4  OTHER GEOTHERMAL WASTE

     Except as set forth in Section 7.2, PNOC-EDC shall be responsible at no
     cost to the Operator for the disposal of all waste products related to the
     Geothermal Fluid and/or steam supplied by PNOC-EDC for the operation or
     testing of the Power Plant. This disposal shall be in accordance with the
     requirements of the Environmental Compliance Certificate issued in respect
     of the Power Plant and attached hereto as Annex L.

7.5  ENERGY MANAGEMENT

     The Operator shall use its reasonable efforts to optimize steam and
     electricity use and shall exercise due diligence in the operation and
     management of main and auxiliary machinery so as to minimize energy
     consumption and waste.

ARTICLE 8 DELIVERY OF CAPACITY AND ENERGY

8.1  OBLIGATIONS OF THE PARTIES

     (a)  The Operator hereby agrees to convert PNOC-EDC's Geothermal Fluid into
          electric energy and PNOC-EDC hereby agrees to sell to NAPOCOR, at the
          Point of interconnection, the Nominated Capacity and energy delivered
          by the Operator to NAPOCOR on behalf of PNOC-EDC during the
          Cooperation Period less any Steamfield Power. PNOC-EDC agrees to pay
          the Operator for the Nominated Capacity and energy delivered by the
          Operator at the Points of Interconnection for NAPOCOR Power and
          Steamfield Power.

     (b)  During the testing prior to the Completion Date of each Plant, the
          Operator shall not receive any payments for Contracted Capacity or
          Nominated Capacity for that Plant but shall receive payments for
          energy as set forth in Section 5.4(g).

     (c)  From and after the Completion Date of each Plant, the Operator shall
          make available electric capacity of that Plant and shall deliver
          energy in accordance with


                                       32


          this Agreement and receive the Capacity Payments and receive or make
          the Energy Fee described in Section 8.3.2.

8.2  METERING

     8.2.1 METER MAINTENANCE AND OWNERSHIP

     (a)  PNOC-EDC shall supply, own and maintain as part of the interconnection
          facilities at the Point of Interconnection and at the point of supply
          of the Steamfield Power, meters and related equipment reasonably
          satisfactory to the Operator for the measurement of electricity.
          Billing under this Agreement shall use the readings of these meters.

     (b)  NAPOCOR may also supply, own and maintain as part of the
          interconnection facilities at the Point of Interconnection, meters and
          related equipment for the measurement of electric power and energy.

     (c)  PNOC-EDC shall supply, own and maintain meters and related equipment
          reasonably satisfactory to the Operator for the measurement of
          Geothermal Fluid flow. These meters and equipment shall be located in
          the Geothermal Fluid piping upstream of the interface point of
          Geothermal Fluid supply from PNOC-EDC to the Operator. Billing under
          this Agreement shall use the readings of these meters

     (d)  The Operator shall supply, own and maintain equipment for the
          measurement, calculation and recording of those parameters required
          for the application of the Correction Curves. The equipment used for
          measuring Atmospheric Conditions shall be located close to the air
          intake of the cooling tower of Plant 4, in accordance with the Cooling
          Tower Institute (CTI) Standards.

     8.2.2 PLANT MONITORING EQUIPMENT

          For the purpose of monitoring the Power Plant's operation, the
          Operator shall make reasonable provisions for the installation of
          other metering and telemetering devices at the generation side of the
          step-up transformers at the Point of Interconnection as part of the
          PNOC-EDC Supervisory Control and Data Acquisition (SCADA) system.

     8.2.3 METER SEALS AND INSPECTION

          PNOC-EDC's meters shall be sealed and the seals shall be broken only
          when the meters are to be inspected or tested by PNOC-EDC. The
          Operator shall be given reasonable notice of such occasions and shall
          have the right to have a representative present at such tests.

                                       33


     8.2.4 METER TESTS

     (a)  PNOC-EDC's electricity meters, installed in pursuance to this
          Agreement, shall be tested by PNOC-EDC at its own expense every six
          months. Other tests may be conducted at any reasonable time upon
          request by either Party, at the requesting Party's expense (subject to
          the next sentence). If the Operator makes such request, the Operator
          shall reimburse said expense to PNOC-EDC within thirty (30) days after
          presentation of a bill therefore, unless such tests demonstrate that
          such meters are not 100% accurate plus or minus one percent (1%), in
          which case PNOC-EDC shall bear the expense for such tests.

     (b)  The Operator's equipment for the calculation and recording of
          theoretical Geothermal Fluid consumption shall be tested by the
          Operator at its own expense, in the presence of PNOC-EDC, every six
          months.

     8.2.5 METER ACCURACY

          Electric metering equipment found to be inaccurate pursuant to Section
          8.2.4 or otherwise shall be repaired, adjusted, or replaced by
          PNOC-EDC such that the accuracy of said equipment shall be within 100%
          plus or minus one percent (1%). Should the inaccuracy exceed plus or
          minus one percent (1%), the correct amount of energy delivered during
          the current and previous Billing Periods shall be estimated by
          PNOC-EDC subject to agreement by the Parties. Adjustments for meter
          inaccuracy shall be made only for the current Billing Period and the
          Billing Period immediately preceding it except when such meter
          inaccuracy is due to fraud.

8.3. TERMS OF PAYMENT

     8.3.1 CAPACITY PAYMENTS

          The total Capacity Payments shall be the sum of the Capital Cost
          Recovery Fee, the Fixed Operating Cost Recovery Fee, and the Service
          Fee to reflect Return on Investment. The Capacity Payments shall be
          computed on the basis of the following formulae:

     (a)  Capital Cost Recovery Fee (A) to be paid in Dollars.

            A = [(CCR x NC)(l - TOH/Nh)] - [(y x O.2)(CCR)(CC - NC)]

     (b)  Fixed Operating Cost Recovery Fee (B) to be paid in Philippine Peso
          and Dollars.

            B = [(OCR x NC)(1 - TOH/Nh)] - [(y x 0.2)(OCR)(CC - NC)]

                                       34


     (c)  Service Fee for Return on Investment (C) stated in Dollars and
          payable, at the option of PNOC-EDC, either in Dollars or in equivalent
          Philippine Pesos using the same day telegraphic transfer selling rate
          for Dollars of the Philippine National Bank at the time of payment. In


          no case shall the Service Fee be lower than 8% of the sum of the
          Capital Cost Recovery Fee and the Fixed Operating Cost Recovery Fee.

            C = {[(SFR x NC) (1 - TOH/Nh)] - [(y x 0.2)(SFR)(CC-NC)]}

          where,

          A      =     Capacity Payment to recover capital cost for the Billing
                       Period.

          B      =     Capacity Payment to recover fixed operating cost for the
                       Billing Period.

          C      =     Capacity Payment to reflect return on investment of the
                       Operator for the Billing Period

          CCR    =     $10.42 per kW per month.

          OCR    =     Ps28.90 per kW per month and $l.97 per kW per month.

          SFR    =     $6.42 per kW per month.

          CC     =     Contracted Capacity, in kW.


          TOH    =     Total Outage Hours in the Billing Period.

          Nh     =     Total number of hours in the Billing Period.

          NC     =     Nominated Capacity for the year, in kW.

          y      =     variable, defined as follows:

          if 0.95 x CC (less than) NC (less than) 1.05 x CC, then y = 0

          otherwise y = 1

     8.3.2 ENERGY FEE

          Energy Fee (D) shall be computed on the basis of the following formula
          and be paid in Philippine Pesos. (Energy Fee will be paid by PNOC-EDC




                                       35


          to the Operator in case D is positive and by the Operator to PNOC-EDC
          in case D is negative.)

                            4
          D        =     (Sigma)  Ui  (Vgi  - Vti) x Zi
                           i=l

          where:

          D        =     Energy Fee for the Billing Period.

          Ui       =     Steam Price for Plant as set forth in Annex I.

          Vgi      =     Cumulative theoretical steam consumption of Plant i
                         during Relevant Hours for the Billing Period in metric
                         tons computed on the basis of the Guaranteed Net Plant
                         Steam Rate for each hour (SRg), using the formula:

                                       n
                         Vgi  =  O  (Sigma)EDij  x  SRgij
                                      j=1

                         where:

                         j     =    Any Relevant Hours during the Billing
                                    Period.

                         n     =    Number of Relevant Hours hours in the
                                    Billing Period.

                         EDij  =    Energy Delivered during the Billing Period
                                    from Plant i in hour j expressed in kilowatt
                                    hours (kWh).

                         Srgij =    Guaranteed Net Plant Steam Rate of Plant i
                                    for each hour j adjusted for variations from



                                    Geothermal Fluid Specifications, Atmospheric
                                    Conditions and load change using the
                                    formula:



                                    Guaranteed Net Plant Steam Rate

                                       36


                         Srgij=     ___________________________________

                                    F1ij x F2ij x F3ij x Faij  x Fgij

                         where:

                         F1ij   =   Steam pressure correction factor per
                                    Correction Curves for Plant i in hour j.

                         F2ij   =   Partial load correction factor per
                                    Correction Curves for Plant i in hour j.

                         F3ij   =   Steam flow correction factor per Correction
                                    Curves for Plant i in hour j.

                         Faij   =   Ambient wet bulb temperature correction
                                    factor per Correction Curves for Plant 4 in
                                    hour j.

                                    Faij = 1 for Plants 1, 2, and 3.

                         Fgij   =   NCG content in steam flow correction factor
                                    per Correction Curves for Plant i in hour j.

          Vti      =     Measured steam consumption of Plant i for the Billing
                         Period in metric tons minus steam consumed by Plant i
                         during Non Relevant Hour in metric tons.

          Non Relevant Hour   =     (a) Any hour in which, for Plants 1, 2 and 3
                                        only, the Plant is in partial load
                                        operation mode (75% of that Plant's
                                        portion of the Contracted Capacity or
                                        less, when the load reduction is
                                        achieved by throttling the supply of
                                        steam to one or more of the Generating
                                        Units which are then delivering
                                        electricity) due to dispatch and: (i)
                                        the steam inlet pressure is different
                                        from the Geothermal Fluid Specifications
                                        by 2% or more; or (ii) the steam outlet
                                        pressure is different from the
                                        Geothermal Fluid Specifications by 3% or
                                        more; or

                                    (b) Any hour in which an event described in

                                        sub-paragraph (b) of the definition of


                                        Outage Hour occurs.

          Relevant Hour       =     Any hour other than Non Relevant Hour.

                                       37



          Zi       =     Variable for Plant i, defined as follows:

                         if 0.95 x Vgi (less than) Vti (less than) 1.05 x Vgi

                         then Zi = 0

                         otherwise Zi = 1

     8.3.3 ESCALATION

          In the Billing Periods commencing January 25th and July 25th of each
          year (using the indices for the prior months of December and June,
          respectively), the amount of :

     (i)  Fixed Operating Cost Recovery Fee (OCR); and

     (ii) Service Fee for Return on Investment (SFR)

          shall be increased proportionately by the increase in the index
          applicable to each component, as specified in Annex K as appropriate,
          as from the levels of such indices prevailing in January 1995.

8.4  BILLING PROCEDURES

     The Operator shall bill PNOC-EDC for the delivery of electric power and
     energy as adjusted on a monthly basis until the termination of this
     Agreement.

     Operator shall arrange its billing schedule in accordance with the billing
     system of PNOC-EDC. The Billing Period shall cover the period from 10:00 AM
     on the twenty-fifth (25) day of the current month to 10:00 AM of the
     twenty-fifth (25th) day of the following month. Any changes in the billing
     system of PNOC-EDC shall be followed by the Operator in billing PNOC-EDC.
     The Operator shall send PNOC-EDC its bills within five (5) days reckoned
     from the last day of the Billing Period. PNOC-EDC shall be required to
     settle its monthly bills to the Operator within thirty (30) days from
     receipt of billing to avoid penalties.

8.5  DISPUTES

     If PNOC-EDC disputes the amount specified in any invoice it shall so inform
     the Operator within seven (7) days following receipt of such invoice. If
     the dispute is not resolved by the due date PNOC-EDC shall pay the
     undisputed amount on or before such date and the disputed amount shall be
     resolved as soon as is reasonably practicable following the due date for
     such invoice.

                                       38


8.6  TAXES

     (a)  All payments made to the Operator pursuant to this Agreement shall be
          paid together with all taxes, duties, fees, levies and other
          assessments to be paid by the Operator in respect of such payments,
          the Power Plant or this Agreement, including "value added taxes" and
          all other taxes but excluding national income taxes assessed after the
          expiration of the tax holiday that would be applicable to the Operator
          if it were granted pioneer enterprise status under the Omnibus
          Investments Code of 1987 (whether or not the Operator is granted such
          pioneer enterprise status) and excluding Philippine withholding taxes
          imposed on the Operator not in excess of fifteen percent (15%) (which
          shall be separately stated in all invoices) in dollars in respect of
          the dollar portion and in pesos in respect of the peso portion and
          each sum payable shall be increased so as to ensure that after
          PNOC-EDC has deducted therefrom any and all taxes or charges required
          to be deducted therefrom by PNOC-EDC there remains a sum equal to the
          amount that would have been payable to the Operator had there been no
          requirement to deduct or withhold such taxes or other charges.

     (b)  PNOC-EDC shall promptly reimburse the Operator upon demand for all
          custom duties, national internal revenue taxes, value added taxes and
          other taxes actually paid by the Operator with respect to the
          importation of capital equipment, or spare parts related to the Power
          Plant, provided that the Operator shall avail of the applicable import
          incentives granted to it by the Board Of Investment.

     (c)  PNOC-EDC shall be responsible for the payment of all taxes imposed by
          the Government on the Operator or the Power Plant during the period of
          construction and Cooperation Period including without limitation,
          value added taxes, real estate taxes in respect of the Site and the
          buildings and other improvements thereon, including the Power Plant,
          but except as set forth in Sections 8.6(a) and (e) or elsewhere in
          this Agreement not (i) corporate 4.7 or 14.3 (or any other applicable
          provisions of this Agreement) make Article 9 applicable or, in the
          reasonable opinion of PNOC-EDC or the income tax on the Operator, (ii)
          taxes on dividends or prof its remitted from the Philippines by the
          Operator, and (iii) reasonable construction and permit fees and
          charges not exceeding $50,000, and (iv) any and all taxes, fees,
          documentary stamps and charges, as well as all costs and expenses,
          incurred and paid by the Operator in connection with or arising from
          any loan or financing agreement, mortgages and security interests. The
          Capacity Payments do not include custom duties, national internal
          revenue taxes, value added taxes and other taxes with respect to the
          importation of capital equipment or spare parts related to the Power
          Plant by the Operator.

                                       39


     (d)  PNOC-EDC will be responsible for covering any new or increased taxes
          due to changes in the Omnibus Investments Code of 1987, the BOI rules
          and future regulations, or due to new or amended laws, rules and
          regulations.

     (e)  The Operator shall apply for and shall use good-faith efforts to
          obtain all exemptions from any such taxes available to the Operator.

8.7  PAYMENT PROCEDURES

     All payments to be made to the Operator under this Agreement shall be paid
     in the applicable currency as specified in this Agreement without any
     deductions for set-off or counterclaims and shall be wire transferred in
     immediately available same Day funds not later than 11:00 AM on the due
     date to the account(s) within or outside the Republic of the Philippines as
     designated by the Operator from time to time by notice given in accordance
     with Subsection 17.3. Without limiting any other rights of the Operator,
     any payments not paid by PNOC-EDC to the Operator when due under this
     Agreement shall bear interest at the rate equal to "one month Libor" for
     Dollar + 3%, determined and compounded daily, from the date due until the
     date paid.

ARTICLE 9 BUYOUT

9.1  BUYOUT CONDITIONS

     If,

     (a)  during the Cooperation Period in the reasonable opinion of PNOC-EDC or
          the Operator, changes in or adoption of new policies, laws and
          regulations, including taxes, or any interpretations thereof of the
          Government adversely affect the operation or maintenance of the Power
          Plant or the after tax cash flow of the Operator, or

     (b)  prior to the Cooperation Period, the provisions of Subsections 3.3(a),
          4.5, 4.6, 4.7 or 14.3 (or any other applicable provisions of this
          Agreement) make this Article 9 applicable or, in the reasonable
          opinion of PNOC-EDC or the Operator, changes in or adoption of new
          policies, laws and regulations, including taxes, or any
          interpretations thereof of the Government adversely affect the
          construction of the Power Plant or the after tax cash flow of the
          Operator; or

     (c)  PNOC-EDC fails to make any payments when due to the Operator under
          this Agreement including without limitation the Capacity Payments and
          the Energy Fees; or

                                       40


     (d)  at any time during the effectivity of this Agreement, PNOC-EDC or
          NAPOCOR is privatized in whole or in part or reorganized, or the
          events defined in Article 20 shall occur,

     then PNOC-EDC or the Operator as the case may be shall notify the other
     Party of the occurrence of any of the foregoing events and the Parties
     shall promptly meet and endeavor to make amendments to the Agreement and
     agree to such amendments. If, after ninety (90) calendar days or sixty (60)
     calendar days in case of Section 9.1(c), since the occurrence of such
     events, no such agreement has been reached, either party may require a
     buyout of the Operator's Power Plant by PNOC-EDC. If either Party
     determines that such an impasse has been reached, that Party may deliver
     written notice to the other Party requiring a buyout under this Article 9
     provided that for purposes of Section 9.1(a) above an adverse effect on the
     Operator's after-tax cash flow (after taxes) for any taxable year, as
     confirmed by an independent auditor agreeable to both Parties and provided
     that in case of Section 9.1(c) above, only the Operator shall have the
     right to require a buyout. If the Parties cannot promptly reach a
     definitive, written agreement embodying the terms of a buyout (notably the
     Buyout Price and payment terms Article 21 shall apply.

9.2  BUYOUT PRICE

     The purchase price (Buyout Price), payable in Dollars, of the Power Plant
     as a result of the buyout shall be

     (a)  If the provisions of Sections 9.1 or 15.4.1 apply prior to the
          Commercial Operation Date of the last Plant, the purchase price
          payable, in United States dollars, shall be an amount equal to the
          aggregate of all the costs and expenses (including without limitation
          accrued interest and other costs incurred in financing the development
          of the Power Plants) incurred by the Operator in connection with the
          performance of its obligations under this Agreement as estimated by an
          independent accountant jointly appointed by the Parties plus an amount
          equal to ten percent (10%) of such aggregate costs.

     (b)  During the Cooperation Period the net present value of the remaining
          stream of payments for the Capacity Payments less Fixed Operating Cost
          Recovery fees for the rest of the Cooperation Period on the basis of
          the last Nominated Capacity, and using an annual discount rate equal
          to the last published Commercial Interest Reference Rate (CIRR) having
          the shortest maturity term for United States dollars published by the
          Organization for Economic Cooperation and Development (OECD) provided
          however that such discount rate shall not exceed nine point two six
          percent (9.26%) per annum.

                                       41


In calculating aggregate costs in accordance with clause (a), amounts disbursed
by lenders shall be prima facie evidence of actual disbursements of costs and
interest accrued (whether or not paid) shall be deemed actual disbursements. The
actual rates of interest payable to lenders shall be the interest rate
attributable to that portion of the Buyout Price.

9.3  PAYMENT TERMS

     (a)  Completion of a buyout pursuant to Sections 9.1 or 15.4.1 shall take
          place on the date that is sixty (60) days following delivery of the
          notice specified in this Agreement (the "Buyout Date") at which time
          (i) PNOC-EDC will pay to the Operator the purchase price calculated in
          accordance with Section 9.2 and payable in United States dollars and
          return all security held by PNOC-EDC in connection with this
          Agreement, including any bid securities, the Performance Security,
          letters of credit and bank guarantees, and (ii) the Operator shall
          transfer to PNOC-EDC all of the Operator's rights, title and interest
          in the Power Plant and shall warrant that upon such buyout the Power
          Plant shall be free from any lien or encumbrance created by the
          Operator.

     (b)  In the event that the provisions of Sections 9.1 or 15.4.1 apply as a
          result of Section 14.3(c), then there shall be deducted from the sum
          payable pursuant to Section 9.2 an amount equal to the value, if any,
          of any insurance proceeds received by the Operator in respect of such
          event of Force Majeure, but only to the extent that such insurance
          proceeds were not used by the Operator in an attempt to correct the
          damage caused by such event of Force Majeure.

9.4  TRANSFER PROVISION

     In respect of any transfer of ownership of the Power Plant pursuant to the
     conditions stated above, the provisions on transfer of ownership in Article
     13 hereof shall apply thereto.

ARTICLE 10 REPRESENTATIONS & WARRANTIES OF THE PARTIES

10.1 CORPORATE EXISTENCE

     (a)  The Operator represents for itself that it is a corporation duly
          organized and existing under and by virtue of the laws of the state of
          Delaware, U.S.A. licensed to do business in the Philippines through
          its branch office and that it has the corporate power and authority to
          execute, deliver and carry out the terms and conditions of this
          Agreement.

                                       42


     (b)  PNOC-EDC represents that it is a wholly-owned subsidiary of the
          Philippine National Oil Company, a corporation created and organized
          under Presidential Decree No. 334, as amended, and that it has the
          power and authority to execute, deliver and carry out the terms and
          conditions of this Agreement.

10.2 AUTHORIZATIONS

     (a)  The Operator represents and warrants for itself that it has taken all
          necessary corporate action to enter into this Agreement and to perform
          its obligations hereunder with the exception that it has not obtained
          final approval of the terms of this Agreement from its Board of
          Directors prior to signing the Agreement. The Operator represents that
          it will use its best efforts to obtain such approval in the shortest
          possible time following signature.

     (b)  PNOC-EDC represents and warrants for itself that it has taken all
          necessary corporate action to enter into this Agreement and to perform
          its obligations hereunder.

10.3 WARRANTY AGAINST CORRUPTION

     The Operator hereby warrants for itself that it or its representative
     acting on behalf of it has not given or promised to give any money or gift
     to any employee or official of PNOC-EDC to influence the decision regarding
     the awarding of this Agreement, nor has it and/or its representatives
     acting on behalf of it exerted or utilized any unlawful influence to
     solicit or secure this Agreement through any agreement to pay a commission,
     percentage, brokerage or contingent fee. The Operator agrees that breach of
     this warranty shall be sufficient ground for the Philippine National Oil
     Company or its affiliate to deduct, at its discretion, such commission,
     percentage, brokerage or contingent fees from the contract price without
     prejudice to it or any person's civil or criminal liability under the
     Anti-Graft Law and other applicable laws.

10.4 NO SOVEREIGN IMMUNITY

     PNOC-EDC acknowledges and agrees that this Agreement, the Accession
     Undertaking and the consent of PNOC-EDC specified in the last sentence of
     Section 19(a) and the transactions contemplated thereby and hereby
     constitute commercial activities of PNOC-EDC in respect of which PNOC-EDC
     is subject to set-off, suit, judgment and execution. PNOC-EDC acknowledges
     and agrees that it does not have, nor is it entitled to, any immunity,
     whether characterized as sovereign immunity or otherwise, from any legal
     proceedings, whether in the United States of America or elsewhere, to
     enforce or collect upon such agreements (including without limitation
     immunity from service of process, immunity from jurisdiction of any court
     or tribunal, and immunity of any of its property


                                       43


     from attachment prior to entry of judgment and from attachment in aid of
     execution, or from execution upon a judgment) in respect of itself or its
     property.

10.5 GEOTHERMAL SERVICES CONTRACT

     PNOC-EDC represents and warrants that it is a party to the Geothermal
     Services Contract, dated May 14, 1981, between PNOC-EDC and the Republic of
     the Philippines, which sets forth the rights of the parties thereto to the
     Site. PNOC-EDC agrees to take any and all actions necessary to ensure that
     the Operator's right to use the Site (and the interests of any secured
     parties or the Operator in the Site) are not adversely affected by the
     rights and obligations of PNOC-EDC under the Geothermal Services Contract,
     as amended from time to time.

ARTICLE 11 INDEMNIFICATION

11.1 OPERATOR INDEMNIFICATION

     (a)  The Operator shall hold free and harmless and defend PNOC-EDC its
          officers, contractors, and employees from any and all claims,
          liabilities and suits for losses and damages to properties of third
          parties arising from the negligence of the Operator in the prosecution
          of the Agreement, except to the extent caused by the negligence, gross
          negligence or willful misconduct of PNOC-EDC.

     (b)  The Operator shall hold free and harmless and defend PNOC-EDC, its
          officers, contractors and employees from liabilities, damages or
          obligations of any nature or kind, including costs and expenses, on
          account of any copyrighted or uncopyrighted composition, secret
          process, patented or unpatented invention, article, method or
          appliance manufactured or used by the Operator in the performance of
          the Agreement.

     (c)  Any fines or other penalties incurred by the Operator or its officers,
          employees or contractors for non-compliance by the Operator, its
          officers, its employees, or contractors with the laws, rules,
          regulations or ordinances of the Republic of the Philippines shall be
          the exclusive responsibility of the Operator.

11.2 PNOC-EDC INDEMNIFICATION

     PNOC-EDC shall hold free and harmless and defend the Operator, its
     officers, employees and contractors harmless against any claims of any
     person who directly or indirectly suffers or is injured by the performance
     by the Operator or its officers, employees or contractors of the
     obligations under this Agreement, including damage or injury as a result of
     an interruption of electricity supply or Geothermal Fluid delivery or
     acceptance


                                       44


     or any other disruption or surge of electricity supply or Geothermal Fluid
     delivery or acceptance (including without limitation interruptions or
     disruptions related to plants operating upstream or downstream from the
     Power Plant) or emissions of H2S prior to the installation of any H2S
     abatement system in accordance with Section 3.3(a), and the Operator's, its
     officers', employees' or contractors' actions or omissions in connection
     therewith, except to the extent caused by the negligence, gross negligence
     or willful misconduct of the Operator.

ARTICLE 12 INSURANCE

12.1 APPLICABLE TERMS

     The Operator shall, at its own expense, obtain and maintain in force
     insurances as specified in Sections 12.2 and 12.3. The Operator shall
     provide to PNOC-EDC evidence of these insurances. In particular, evidence
     of the insurance specified to be held during the Cooperation Period shall
     be furnished prior to commencing initial testing of the Power Plant.

12.2 INSURANCE DURING CONSTRUCTION

     From the applicable date that the exposure to the subject risk being
     insured under such coverage arises until the commissioning of the Power
     Plant, the Operator shall, at own expense, obtain and maintain in force the
     following insurances:

     (a)  All Risks Marine Insurance for the full value of each plant and
          equipment to be imported into the Philippines;

     (b)  All Risks "Builder's Risk Insurance" to cover the full value of the
          entire works from any and all kinds of damages customarily covered;
          and, covering at least the Contractor's All Risk (CAR) Insurance for
          civil works, electro mechanical works and transformer installations.

     (c)  "Third Party Liability Insurance" to cover injury to or death of
          persons including those of PNOC-EDC or physical damage to tangible
          property including those of PNOC-EDC caused by the works or by the
          Operator's vehicles, tools and/or equipment or personnel including its
          subcontractors.

     Such insurance shall provide for at least the following recoveries:

     a)  Bodily Injury     Ps 250,000 per person
                           Ps 250,000 per incident


                                       45


     b)  Property Damage   Ps 1,000,000 per property
                           Ps 1,000,000 per incident

12.3 INSURANCE DURING COOPERATION PERIOD

     From the completion of the Power Plant, the Operator, at its own expense,
     shall keep the Power Plant insured against accidental damage from all
     normal risks and to a level normal for prudent operators of facilities
     similar to the Power Plant. In addition, the Operator shall secure adequate
     insurance cover for its employees as may be required by law.

     The insurance coverages that the Operator shall secure and maintain should
     at least include an All-Risks Insurance (All Natural Perils including
     Fire), and Comprehensive General Liability and a Machinery Breakdown
     Coverage during the last year of the Cooperation Period.

12.4 APPROVAL BY PNOC-EDC

     Certified true copies of insurance policy certificates for all the above
     coverages and official receipts of premium payments on the above shall be
     filed with PNOC-EDC within fifteen (15) working days from the issuance of
     the policies or of the receipts of premium payments and shall be subject to
     PNOC-EDC's approval as to the enumeration of items covered under Sections
     12.2 and 12.3.

12.5 EQUITABLE ADJUSTMENT

     PNOC-EDC agrees that it shall not unreasonably withhold its consent to any
     amendments to this Agreement which are proposed by the Operator in order to
     make equitable adjustments to this Agreement in the event that as a result
     of the application of insurance proceeds (including without limitation such
     application pursuant to a security assignment by the Operator contemplated
     by the last sentence of Section 19(a)) such proceeds are not made available
     to the Operator to repair or restore the Power Plant.

ARTICLE 13 TRANSFER OF OWNERSHIP

13.1. TRANSFER OF TITLE

     Title to the Power Plant shall automatically vest to PNOC-EDC on the
     Transfer Date provided that PNOC-EDC has made (i) a payment equivalent to
     the net present value of the remaining Capacity Payments less Fixed
     Operating Cost Recovery Fees for Plant 4 for the period commencing on the
     Transfer Date until the date which is one hundred twenty (120) months from
     the Commercial Operation Date for Plant 4 on the basis of the last
     Nominated Capacity of Plant 4, and using an annual discount rate equal to
     the last


                                       46


     published Commercial Interest Reference Rate (CIRR) having the shortest
     maturity term for United States dollars published by the OECD, provided,
     however, that such discount rate shall not exceed nine point two six
     percent (9.26%) per annum, and (ii)all other payments required to be made
     by it pursuant to this Agreement, and returned to the Operator all security
     held by PNOC-EDC in connection with this Agreement, including any bid
     securities, the Performance Security, letters of credit and bank
     guarantees. The Operator shall execute such documents as may be necessary
     to effect the transfer of the title to PNOC-EDC, including, without
     limitation, assignments of all contract rights, claims and other rights
     related to the Power Plant that are being assigned by the Operator to
     PNOC-EDC.

13.2. DOCUMENTATION COSTS

     The Parties shall pay their own costs and expenses, including but not
     limited to documentation, fees and taxes, incurred in connection with the
     transfer referred to in Section 13.1 hereof. In no event shall the Operator
     be obligated to pay more than $50,000 under this Section 13.2.

13.3 TRAINING OF PNOC-EDC STAFF

     (a)  During a minimum period of twelve (12) months prior to the Transfer
          Date, the Operator shall provide training in operation and maintenance
          of the Power Plant for PNOC-EDC's staff. This training shall be
          provided in accordance with a program to be agreed between PNOC-EDC
          and the Operator and shall be provided at no cost to PNOC-EDC.

     (b)  PNOC-EDC shall endeavor to offer to the Operator that PNOC-EDC take
          over the employment of such of the Operator's operating and
          maintenance staff employed on the Power Plant at the end of the
          Cooperation Period as PNOC-EDC may, at its sole discretion, consider
          suitable for employment with PNOC-EDC and under such terms and
          conditions of employment as PNOC-EDC shall consider acceptable.

13.4 CONDITION OF POWER PLANT ON TRANSFER

     (a)  Within a period of six (6) months prior to the Transfer Date, the
          Operator shall undertake performance and efficiency testing of the
          Power Plant as specified in Annex F to demonstrate the condition of
          the Power Plant at the Transfer Date.

     (b)  Notwithstanding any testing performed pursuant to Section 13.4(a), the
          Power Plant and all other equipment transferred pursuant to this
          Agreement shall be transferred on an "as is" basis and any warranties
          which would otherwise be


                                       47


          implied by statute or otherwise, including, without limitation,
          warranties as to its fitness for the purpose, the absence of patent or
          inherent defects, description or otherwise of whatsoever nature will
          be excluded; provided, however, that upon transfer the Operator shall
          warrant that, on the Transfer Date, the Power Plant will be free from
          all liens and encumbrances created by the Operator. After the Transfer
          Date, the Operator shall be under no liability whatsoever to PNOC-EDC
          the respect of the operation or otherwise of the Power Plant by
          PNOC-EDC or a person designated by PNOC-EDC and PNOC-EDC shall
          indemnify and keep indemnified the Operator against any liability to
          any person or damage to any property arising from the use or operation
          of the Power Plant after the Transfer Date, provided, however, that
          the Operator shall subrogate or assign to PNOC-EDC any and all rights
          and benefits which it is able to subrogate or assign of any unexpired
          warranties in respect of the building, plant and equipment of the
          Power Plant under applicable laws or otherwise.

ARTICLE 14 FORCE MAJEURE

14.1 FORCE MAJEURE

     (a)  Force Majeure" means any event or circumstance beyond the reasonable
          control of a Party which affects the performance by such Party of its
          obligations hereunder including but not limited to any war, declared
          or not, or hostilities, or belligerence, blockade, revolution,
          insurrection, riot, public disorder, expropriation, requisition,
          confiscation or nationalization, export or import restrictions by any
          governmental authorities, closing of harbors, docks, canals, or other
          assistances to or adjuncts of shipping or navigation of or within any
          place, rationing or allocation, whether imposed by law, decree or
          regulation by, or with the compliance of industry at the insistence of
          any governmental authority, or fire, unusual flood, earthquake,
          volcanic activity, storm, typhoons, lightning, tide (other than normal
          tides), tsunamis, perils of the sea, accidents of navigation or
          breakdown or injury of vessels, accidents to harbors, docks, canals,
          or other assistances to or adjuncts of shipping or navigation,
          epidemic, quarantine, strikes or combination of workmen, lockouts or
          other labor disturbances, or any other event, matter or thing,
          wherever occurring, which shall not be within the reasonable control
          of the Party affected thereby.

     (b)  "Political FM" means any event of Force Majeure to the extent such
          event satisfies the following requirements: war, declared or not, or
          hostilities occurring in or involving the Republic of the Philippines,
          or belligerence, blockade, revolution, insurrection, riot, public
          disorder, expropriation, requisition, confiscation or nationalization
          by or involving and occurring in the Republic of the Philippines,
          export or import restrictions by any governmental authorities,


                                       48


          regional or municipal authorities of or within the Republic of the
          Philippines, closing of harbors, docks, canals, or other assistances
          to or adjuncts of shipping or navigation of or within the Republic of
          the Philippines, rationing or allocation, whether imposed by law,
          decree or regulation by, or with the compliance of industry at the
          insistence of any governmental authority of or within the Republic of
          the Philippines, or any other event, matter or thing, wherever
          occurring, which shall be within the reasonable control of PNOC-EDC or
          the Government.

14.2 EFFECT OF FORCE MAJEURE

     (a)  Neither Party shall be responsible nor liable for nor deemed in breach
          or default hereof or give rise to any claim by any Party against any
          other Party (including without limitation any claims to pay damages or
          penalties for delays) because of their respective failure or omission
          to perform or delay in the performance of their respective obligations
          hereunder due to Force Majeure provided that:

          (i)    The non-performing Party gives the other Party within
                 forty-eight (48) hours or as soon thereafter as reasonably
                 practicable a written notice describing the particulars of the
                 occurrence;

          (ii)   The suspension of performance and the extension of scheduled
                 and guaranteed dates are of no greater scope and of no longer
                 duration than is required by the Force Majeure;

          (iii)  The affected Party uses reasonable efforts to remedy its
                 inability to perform; and

          (iv)   When the affected Party is able to resume performance of its
                 obligations under this Agreement, that Party shall give the
                 other Party written notice to that effect.

     (b)  Notwithstanding anything to the contrary in Section 14.2(a), PNOC-EDC
          shall not be excused from any of its obligations under this Agreement
          including its obligation to make the Capacity Payments, the Energy Fee
          and any other payments to the Operator under this Agreement by the
          occurrence of any Political FM, an Interconnection Failure or any
          condition or event that affects the ability of PNOC-EDC to deliver or
          accept Geothermal Fluid from any Plant as provided under this
          Agreement, including any dispute between PNOC-EDC and NAPOCOR (under
          the Power Purchase Agreement or otherwise) which did not arise from
          any default of the Operator under this Agreement, including
          termination or expiration of the Power Purchase Agreement.

                                       49


     (c)  Notwithstanding Section 8.3.1, and subject to Sections 14.2(b) and
          14.3(c), PNOC-EDC shall be relieved of its obligations to make
          Capacity Payments in respect of any Power Plant which is unable to
          deliver energy due to a Force Majeure affecting that Power Plant for
          the duration of such Force Majeure; provided, however, that in such an
          event the Cooperation Period shall be extended by the same number of
          days as the duration of such Force Majeure.

14.3 REMEDIES

     (a)  Except as otherwise provided, in no event shall any condition of Force
          Majeure extend this Agreement beyond its stated term.

     (b)  The Parties shall consult with each other and take all reasonable
          steps to minimize the losses of or delays incurred by either Party
          resulting from Force Majeure.

     (c)  If any one or more conditions of Force Majeure delay a Party's
          performance for a time period that is: (i) if before the Completion
          Date, greater than ninety (90) days in the aggregate in any twelve
          (12) consecutive months, or (ii) if after the Completion Date, greater
          than (x) ninety (90) consecutive days, or (y) one hundred twenty (120)
          days in the aggregate during any twelve (12) consecutive months where
          the interval between the occurrence of any two (2) consecutive events
          of Force Majeure conditions is not more than six (6) months, either
          Party may, after such period, either (a) suspend this Agreement by
          giving written notice of suspension to the other Party or (b) upon
          thirty (30) days written notice, terminate this Agreement and the
          provisions of Article 9 shall apply. Except that in case of such delay
          as a result of conditions of Force Majeure after the Completion Date,
          the parties agree that during the required thirty (30) day notice
          period as provided for under this Subsection 14.3(c) (ii) (b), each
          party has the right to initiate a consultation between the Parties, to
          take place during such thirty (30) day notice period, in order to try
          and agree on conditions for eventual waiving of the recourse to the
          provisions of Article 9 and provided that if an agreement can not be
          reached during same thirty (30) day notice period, the provisions of
          Article 9 shall apply at the end of such 30 day notice period. (The
          period set forth above for termination shall satisfy the ninety (90)
          day period specified in the second sentence of Section 9.1.

ARTICLE 15 SUSPENSION, TERMINATION AND ABANDONMENT

15.1 TERMINATION PRIOR TO EFFECTIVITY DATE

     (a)  Each Party shall use good-faith efforts to cause the conditions set
          forth in Article 26 to be satisfied as promptly as practicable after
          the date of this Agreement and


                                       50


          each Party will exercise reasonable discretion in electing to
          terminate this Agreement pursuant to this Section 15.1.

     (b)  If the Effectivity Date has not occurred by March 1, 1996, or within
          such longer period as the Parties may agree to, due to a failure of
          the conditions set forth in Section 26.1 to have been satisfied prior
          to such date, if such conditions have not been waived in writing by
          PNOC-EDC, the Parties shall consult with each other in good faith with
          the view to achieving the Effectivity Date. If a mutually acceptable
          arrangement is not reached and implemented within fifteen (15) days
          thereafter, either Party shall have the right to terminate this
          Agreement by giving written notice to the other Party. Upon such
          termination, PNOC-EDC shall return to the Operator all security held
          by PNOC-EDC in connection with this Agreement, including any bid
          securities, letters of credit and bank guarantees, the Operator shall
          reimburse PNOC-EDC for all costs and expenses incurred by PNOC-EDC as
          of the date of and in connection with this Agreement except those of
          PNOC-EDC related to the preparation of the request for proposals and
          the bid evaluation until such termination, and thereafter, neither
          Party shall have any further liability to the other and this Agreement
          shall immediately and automatically become null and void.
          Notwithstanding anything to the contrary in this Agreement, this
          provision shall become effective upon execution of this Agreement and
          shall remain effective until the Effectivity Date.

     (c)  If the Effectivity Date has not occurred by March 1, 1996, or within
          such longer period as the Parties may agree to, due to a failure of
          the conditions set forth in Section 26.2 to have been satisfied prior
          to such date, if such conditions have not been waived in writing by
          the Operator, the Parties shall consult with each other in good faith
          with the view to achieving the Effectivity Date. If a mutually
          acceptable arrangement is not reached and implemented within fifteen
          (15) days thereafter, either Party shall have the right to terminate
          this Agreement by giving written notice to the other Party. Upon such
          termination, PNOC-EDC shall return to the Operator all security held
          by PNOC-EDC in connection with this Agreement, including any bid
          securities, letters of credit and bank guarantees, PNOC-EDC shall
          reimburse the Operator for all costs and expenses incurred by the
          Operator as of the date of and in connection with this Agreement, and
          thereafter, neither Party shall have any further liability to the
          other and this Agreement shall immediately and automatically become
          null and void. Notwithstanding anything to the contrary in this
          Agreement, this provision shall become effective upon execution of
          this Agreement and shall remain effective until the Effectivity Date.

     (d)  If the Effectivity Date has not occurred by March 1, 1996, or within
          such longer period as the Parties may agree to, due to a failure of
          the conditions set forth in


                                       51


          Section 26.3 to have been satisfied prior to such date, if such
          conditions have not been waived in writing by both Parties, the
          Parties shall consult with each other in good faith with the view to
          achieving the Effectivity Date. If a mutually acceptable arrangement
          is not reached and implemented within fifteen (15) days thereafter,
          each Party shall bear its own costs and expenses. In the event,
          however, of the failure of the condition in Section 26.3 (a) (ii)
          other than for reasons due to adverse economic or political conditions
          in the Philippines, and the Parties do not waive the fulfillment of
          this condition, either Party may terminate this Agreement by giving
          written notice to the other Party, and the Operator shall reimburse
          PNOC-EDC for all costs and expenses incurred by PNOC-EDC as of the
          date of and in connection with this Agreement except those of PNOC-EDC
          related to the preparation of the request for proposals and the bid
          evaluation until such termination. Neither Party shall have any
          further liability to the other and this Agreement shall immediately
          and automatically become null and void. Notwithstanding anything to
          the contrary in this Agreement, this provision shall become effective
          upon execution of this Agreement and shall remain effective until the
          Effectivity Date.

     (e)  Costs and expenses referred to in this Section 15.1 shall not include
          any consequential or special damages (including without limitation
          lost profits, lost revenues, increased operating costs or loss of
          revenues from the Power Plant), whether such liability arises in
          contract, warranty, tort (including negligence) or otherwise.

     (f)  The amount of costs and expenses to be reimbursed by either Party to
          the other Party under this Section 15.1 shall be estimated by an
          independent accountant jointly appointed by the Parties and the costs
          associated with such estimation shall be paid by the Party making the
          reimbursement.

15.2 TERMINATION FOR DEFAULT AND SUSPENSION OF DELIVERY

     (a)  PNOC-EDC may temporarily suspend receipt of electricity from the
          Operator for:

          (i)    Tampering with meters by the Operator; or

          (ii)   A condition on the Operator's side of the Point of
                 Interconnection, dangerous to life or property.

                 Such condition shall be subject to confirmation by an
                 independent third party expert satisfactory to both Parties. If
                 so confirmed, PNOC-EDC shall be excused payment of capacity and
                 energy charges for the duration


                                       52


                 of such suspension and such suspension shall cease on
                 rectification of the initiating condition.

     (b)  Subject to the Operator's cure rights set forth in paragraph (c)
          below, upon the material breach by the Operator of any of its
          obligations hereunder, PNOC-EDC may, as its sole remedy, terminate
          this Agreement. Upon such termination, (i) if termination occurs prior
          to the Commercial Operation Date, the entire proceeds of the
          Construction Performance Security shall be forfeited in favor of
          PNOC-EDC and the Operator shall transfer, at no cost, all of the
          Operators right, title and interest in the Power Plants to PNOC-EDC
          and (ii) if termination occurs after the Commercial Operation Date of
          the Power Plant, the Operator shall transfer, at no cost all of the
          Operator's right, title and interest in the Power Plants to PNOC-EDC.
          Upon such termination and forfeiture and/or transfer, as the case may
          be, the Operator shall have no further liability hereunder.

     (c)  No such termination shall be made by PNOC-EDC without thirty (30) days
          (or longer pursuant to this paragraph) prior written notice to the
          Operator. Such notice shall be delivered, personally or by registered
          mail, stating in particular the provision of this Agreement which has
          been violated. If the Operator fails to correct any default within the
          thirty (30) day period from its receipt of the notice, or such period
          exceeding thirty (30) days as reasonably necessary to accomplish such
          cure provided the Operator has commenced curing such default within
          such thirty (30) day period and continues to diligently proceed to
          cure such default until cured, PNOC-EDC may terminate this Agreement;
          provided, however, that any dispute by the Operator in good faith as
          to the correctness of any bill from PNOC-EDC shall not be a cause to
          terminate this Agreement. Any suspension of the deliveries of
          electricity to NAPOCOR on behalf of PNOC-EDC or termination of this
          Agreement upon any authorized grounds shall in no way relieve the
          Operator of its liability to compensate PNOC-EDC for any amounts owed
          by the Operator to PNOC-EDC under this Agreement less any amounts owed
          by PNOC-EDC to Operator under this Agreement.

15.3 SUSPENSION OF PAYMENT

     Subject to the provisions of Section 14, payments under this Agreement,
     upon written request of the Operator, and for a period reasonably required
     to replace or repair the Power Plant, may be suspended if the Operator is
     temporarily unable to produce the electric capacity or energy contracted
     for due to physical destruction of or damage to the Power Plant.

                                       53


15.4 ABANDONMENT

     15.4.1 ABANDONMENT DURING CONSTRUCTION

     The construction of any or all of the Plants shall be deemed abandoned to
     the extent set forth below under any of the following circumstances:

     (a)  If the Operator, through a written notice to PNOC-EDC, terminates
          construction of the Plants other than by reason of Force Majeure or
          for reasons not attributable to the Operator with the intent that such
          termination be permanent;

     (b)  If the Operator fails (other than by reason of Force Majeure or for
          reasons not attributable to the Operator) to place a confirmed order
          for the long lead items in turbo-generators) within one hundred twenty
          (120) days period following the Effectivity Date;

     (c)  If the Operator fails (other than by reason of Force Majeure or for
          reasons not attributable to the Operator) to resume work (i) within
          one hundred twenty (120) calendar days following receipt of insurance
          proceeds relating to, and in amounts sufficient to cover loss or
          damage arising from, a Force Majeure situation affecting one or more
          of the Plants provided, however, that in case of release to the
          Operator of partial insurance proceeds, the Operator shall resume work
          to the extent of the amounts so collected, or (ii) in case no material
          damage to such Plants has occurred, within one hundred twenty (120)
          calendar days following the termination or cessation of such Force
          Majeure situation, provided that a notice of such termination or
          cessation was given by PNOC-EDC to the Operator; or

     (d)  Subject to the provisions of Section 14 and except for reasons not
          attributable to the Operator, if the Commercial Operation Date of any
          Plant does not occur within one hundred fifty (150) calendar days
          following the relevant Guaranteed Commercial Operations Date (as the
          same may be adjusted in accordance with this Agreement or by mutual
          agreement).

     If construction of one or more Plants is deemed abandoned as set forth
     above, PNOC-EDC may terminate this Agreement by giving the Operator not
     less than fifteen (15) days prior written notice of its intention to so
     terminate this Agreement. If the Operator has not commenced work under
     clause (b) or (c), as the case may be, of this Section 15.4.1 before the
     expiration of such fifteen (15) day period, this Agreement shall
     immediately and automatically terminate. Upon such termination, the
     Operator shall forfeit the portion of the Construction Performance Security
     relating to such abandoned Plants to PNOC-EDC and transfer, upon payment by
     PNOC-EDC of a purchase price calculated pursuant to Section 9.2 for the
     Plants not so abandoned, all of the Operator's right, title


                                       54


     and interest in the Power Plant to PNOC-EDC. Upon such termination,
     forfeiture and transfer, the Operator shall have no further liability
     hereunder.

     15.4.2 ABANDONMENT DURING COOPERATION PERIOD

     The Power Plant shall be deemed abandoned during the Cooperation Period
     under the following circumstances:

     (a)  If the Operator, through a written notice to PNOC-EDC terminates
          operation of the Power Plant with the intent that the termination be
          permanent except for (i) Force Majeure or (ii) reasons not
          attributable to the Operator;

     (b)  If the Operator fails to deliver energy to NAPOCOR on behalf of
          PNOC-EDC for a period of one hundred twenty (120) consecutive calendar
          days other than as a result of an Outage, without written notice of
          temporary suspension, except for (i) Force Majeure or (ii) reasons not
          attributable to the Operator; or

     (c)  Subject to the provisions of Section 14 and except for reasons not
          attributable to the Operator, if within one hundred twenty (120)
          calendar days following receipt of insurance proceeds relating to, and
          in an amount sufficient to cover loss or damage arising from, a Force
          Majeure situation, the Operator fails to resume reconstruction of the
          damaged Plants provided, however, that in case of release to the
          Operator of partial insurance proceeds, the Operator shall resume work
          to the extent of the amounts so collected, or, in case no material
          damage to the Plants has occurred; within one hundred twenty (120)
          days following the termination or cessation of a Force Majeure
          situation, the Operator fails to resume delivery of energy to NAPOCOR
          on behalf of PNOC-EDC, provided that a notice of such termination or
          cessation shall have been given by PNOC-EDC to the Operator.

     If the Plants are deemed abandoned during the Cooperation Period as set
     forth above, PNOC-EDC may terminate this Agreement by giving the Operator
     not less than fifteen (15) days prior written notice of its intention to so
     terminate this Agreement. If the Operator has not commenced work under
     clause (b) or (c), as the case may be, of this Section 15.4.2 before the
     expiration of such fifteen (15) day period, this Agreement shall
     immediately and automatically terminate. Upon such termination, the
     Operator shall transfer, at no cost to PNOC-EDC, all of the Operator's
     right, title and interest in the Power Plant to PNOC-EDC. Upon such
     termination and transfer, the Operator shall have no further liability
     hereunder.

                                       55


ARTICLE 16 SEVERAL OBLIGATIONS

     Except where specifically stated in this Agreement to be otherwise, the
     duties, obligations, and liabilities of the Parties are intended to be
     several and not joint or collective. Nothing contained in this Agreement
     shall ever be construed to create an association, trust, partnership, or
     joint venture among the Parties. Each Party shall be liable individually
     and severally for its own obligations under this Agreement.

ARTICLE 17 COMMUNICATIONS AND NOTICES

17.1 COORDINATION MEETINGS

     (a)  Coordination meetings between the Operator, PNOC-EDC and NAPOCOR
          personnel shall be conducted for purposes of clarifying problems that
          may arise during the prosecution of the construction work and
          throughout the Cooperation Period.

     (b)  The site of such meetings shall be mutually agreed upon by all
          Parties. All expenses to be incurred by any Party shall be at such
          Party's own account.

17.2 COMMUNICATIONS AMONG PARTIES

     All orders and formal communications shall be made in writing.

17.3 NOTICES

     Any notice or communication required to be in writing hereunder shall be
     given by: registered mail, telex, telefax, courier or personal delivery.
     Such notice or communication shall be sent to the respective Parties at the
     address listed below. Any notice given by registered mail shall be
     considered sent upon posting and the same shall be considered received upon
     its acknowledgment.

     In the case of Operator to:

     Mr. Nessim Forte
     Resident Manager
     Ormat Inc. Manila Branch
     Solid Bank Building, 8th Floor
     777 Paseo de Roxas
     Makati City 1200
     Metro Manila
     The Philippines
     Telefax No. (632) 812-5638

                                       56


     with a copy to:

     Ormat Inc.
     Attn: Ms. Y. Bronicki President (or such other officer of Operator as may
     be authorized by her in writing and notified to PNOC-EDC)
     980 Greg Street
     Sparks, NV 89431-6039
     U.S.A.
     Telefax No. (702) 356.9039

     In the case of PNOC-EDC to:

     Mr. Nazario C. Vasquez
     President (or such other officer of PNOC-EDC as may be authorized by him in
     writing and notified to the Operator)
     PNOC-Energy Development Corporation
     Merritt Road
     Fort Bonifacio
     Makati City
     Metro Manila
     The Philippines
     Telex No. 22666 EDC PH
     Telefax No. (632)815-2747

     Either Party may, by written notice to the other, change the representative
     or the address to which such notices and communications are to be sent.

ARTICLE 18 NON-WAIVER

     None of the provisions of this Agreement shall be considered waived by
     either Party except when such waiver is given in writing. The failure of
     either Party to insist, in any one or more instances, upon strict
     performance of any of the provisions of this Agreement or to take advantage
     of any of its rights hereunder shall not be construed as a waiver of any
     such provisions or the relinquishment of any such rights for the future,
     but the same shall continue and remain in full force and effect.

ARTICLE 19 ASSIGNMENT

     (a)  Except as set forth in paragraphs (b) or (c) below, the Operator shall
          not assign or transfer any or all of its rights and obligations under
          this Agreement without the written consent of PNOC-EDC. Any such
          assignment or


                                       57


          transfer made without such written consent shall be null and void.
          Consent for such assignment or transfer shall not be unreasonably
          withheld, provided that, in the opinion of PNOC-EDC, the assignee or
          transferee possesses all the legal, financial and technical
          qualifications required to operate and maintain the Power Plant.

     (b)  Notwithstanding the foregoing, the Operator may assign or create a
          security interest over its rights and interests in this Agreement for
          the purpose of financing the design, construction, ownership and
          operation of the Power Plant. PNOC-EDC agrees to execute such consents
          to or acknowledgements of such assignments as the Operator or its
          lenders reasonably require and under such terms and conditions
          acceptable to PNOC-EDC. In addition, PNOC-EDC agrees to reasonably
          cooperate with the Operator's proposed lenders and agrees to amend
          this Agreement as reasonably required by such lenders provided such
          amendments do not materially increase PNOC-EDC's obligations or
          materially decrease PNOC-EDC's rights hereunder.

     (c)  All obligations under this Agreement which the Operator agrees to be
          responsible for hereunder shall be assumed by NEWCO which shall
          undertake to perform the Operator's obligations to perform such work
          and in consideration of which shall be paid all fees payable to the
          Operator under this Agreement. NEWCO, in carrying out such work and
          receiving the fees payable to the Operator under this Agreement, shall
          act on its own behalf and for its own benefit, and not as an agent or
          representative of the Operator. For such purpose, PNOC-EDC, the
          Operator and NEWCO shall execute and deliver the Accession
          Undertaking, upon the effectiveness of which NEWCO shall become a
          party hereto without the need of any further action on the part of the
          Operator and the rights and obligations of PNOC-EDC and the Operator
          under this Agreement shall be transferred and amended in accordance
          with the terms of the Accession Undertaking, as fully as if NEWCO had
          executed this Agreement as amended by the terms of the Accession
          Undertaking.

     (d)  Without limiting the generality of Subsection 19(b), PNOC-EDC shall in
          the consent of PNOC-EDC specified in the Subsection 19(b) acknowledge
          and agree that (i) it has been informed of and consents to the
          execution, delivery and performance of the assignment and security
          agreements between the Operator and the lenders, and the terms thereof
          including any provisions relating to the assignment and application of
          the proceeds of insurance policies described in the Agreement and (ii)
          to give the lenders notice of any default under or breach by the
          Operator of any provision of this Agreement or the Accession
          Undertaking and of any abandonment under Article 15 of this Agreement
          and agree to not terminate this Agreement or the Accession Undertaking
          on the basis of such breach, default or abandonment without providing
          the lenders designated in such consent with at least ninety (90) days
          within which to cure such breach, default or abandonment,


                                       58


          which period will commence on the later of (x) the lenders' receipt of
          the aforesaid notice and (y) expiration of the period provided in this
          Agreement for the cure of such breach, default or abandonment by the
          Operator.

ARTICLE 20 PRIVATIZATION ASSURANCES

     In the event that either of the common stock or other equity interests in
     PNOC-EDC, or NAPOCOR, or any other portion of their assets or business
     activities are sold or otherwise transferred or announced to be sold or
     otherwise transferred, or any merger or other corporate reorganization (or
     a series of any of the above):

          (i)    results in a real or purported assignment of rights or
                 assumption of obligation under this Agreement; or

          (ii)   substantially and adversely changes the net assets, projected
                 profits, projected net cash flow from operations, or otherwise
                 would prompt a reasonable person to conclude that the ability
                 if the relevant entity to duly perform its obligations
                 hereunder on timely basis had been materially and adversely
                 affected;

     then the Operator shall have the right to request reasonable assurances
     from PNOC-EDC, NAPOCOR and the Government that the Operator's rights and
     net economic returns under this Agreement are preserved and that PNOC-EDC's
     ability to fully and satisfactorily comply with its obligations under this
     Agreement is not impaired. If no mutually agreed, written resolution of the
     issues is reached within ninety (90) days, then the provisions of Article 9
     shall apply. Without limiting PNOC-EDC's obligation to make such buyout if
     the ability of PNOC-EDC to fund any resulting buyout is in question,
     PNOC-EDC shall exercise any rights it may have to cause NAPOCOR or other
     third-party to assume PNOC-EDC's rights and obligations under this
     Agreement, paying the proceeds directly to the Operator.

ARTICLE 21 DISPUTE RESOLUTION; JURISDICTION

     (a)  As much as possible, all disputes shall be settled amicably between
          the Parties. The Parties each hereby elect binding arbitration as
          their sole and exclusive remedy for any claim arising under this
          Agreement or in any way related to the Project.

     (b)  The Parties agree that in the event that there is any dispute or
          difference between them arising out of this Agreement or in the
          interpretation of any of the provisions hereof, they shall endeavor to
          meet together in an effort to resolve such dispute by discussion
          between them. But failing such resolution, the Chief executives of


                                       59


          PNOC-EDC and the Operator shall meet to resolve such dispute or
          difference, and the joint decision of such Chief Executives shall be
          binding upon the parties hereto. In the event that a settlement of any
          such dispute or difference is not reached pursuant to this subclause,
          then arbitration under the next following subclause shall apply.

     (c)  Where any dispute is not resolved as provided for in the preceding
          subclause, then the Parties shall enter into binding arbitration
          procedures under the rules of conciliation and arbitration of the
          International Chamber of Commerce. Such arbitration shall take place
          in Paris, France before a tribunal of three arbitrators, one to be
          chosen by each of the Operator and PNOC-EDC, and the third to be
          chosen by the two first selected. The arbitration proceedings shall be
          conducted in the English language.

     (d)  To the extent that in any jurisdiction of (i) PNOC-EDC may claim for
          itself or its assets or revenues immunity from suit, execution,
          attachment or other legal process or (ii) there may be attributed to
          PNOC-EDC or its assets or revenues such immunity (whether or not
          claimed), PNOC-EDC agrees not to claim and unconditionally and
          irrevocably waives such immunity to the full extent permitted by the
          laws of such jurisdiction. PNOC-EDC consents generally in respect of
          the enforcement of any judgment against it in any such proceedings in
          any jurisdiction to the giving of any relief or the issue of any
          process in connection with such proceedings (including, without
          limitation, the making, enforcement or execution against any property
          of PNOC-EDC).

ARTICLE 22 ENTIRE AGREEMENT AND SEPARABILITY

     This Agreement constitutes the entire agreement between the Parties hereto
     and supersedes all prior negotiations and agreements, whether written or
     oral. If any part or parts of this Agreement shall be declared invalid by
     competent courts, the other parts hereof shall not thereby be affected or
     impaired.

ARTICLE 23 GOVERNING LAW

     This Agreement shall be governed and construed in accordance with
     Philippine Law.

ARTICLE 24 LIMITATION LIABILITY

     Except for the penalty provisions in respect of Capacity Payments and
     Energy Fee, any claim under the Bid Security, the Construction Performance
     security and the Operation Performance Security pursuant to this Agreement
     and the penalty described in Annex E, the Operator and its contractors and
     subcontractors shall not be liable for any


                                       60


     consequential or special damages (including without limitation lost
     profits, lost revenue, increased operating costs or loss revenues from the
     Power Plant), whether such liability arises in contract, warranty, tort
     (including negligence) or otherwise. Further, except as expressly set forth
     in this Agreement, the Operator make no warranties or guarantees, express
     or implied, with regard to the Power Plant and PNOC-EDC hereby waives any
     and all implied warranties imposed under applicable Law.

ARTICLE 25 DURATION OF THE AGREEMENT

25.1 TERM

     Except as set forth in Section 15.1, this Agreement shall be effective from
     the Effectivity Date up to the Transfer Date or Termination Date, whichever
     comes first.

25.2 SURVIVABILITY

     Notwithstanding anything to the contrary contained in this Agreement, (i)
     the rights and obligations of the Parties set out in Articles 9, 11, 13,
     15, 21, and 24, shall survive the termination of this Agreement, and (ii)
     the rights and obligations set out in Section 8.3 shall survive the
     termination of this Agreement until all amounts to be paid by PNOC-EDC
     and/or the Operator pursuant to this Agreement have been paid.

ARTICLE 26 EFFECTIVITY

26.1 PNOC-EDC CONDITIONS ON THE OPERATOR

     It shall be a condition precedent to the effectivity of this Agreement that
     the following are submitted by or on behalf of the Operator to PNOC-EDC
     (except for such documents the submission of which is waived by PNOC-EDC).

     (a)  a copy of the license to do business in the Philippines issued to the
          Operator by the Securities and Exchange Commission, as certified by an
          authorized officer of the Operator in a manner satisfactory to
          PNOC-EDC.

     (b)  a copy of the certificate of registration of NEWCO with the Board of
          Investments, as certified by an authorized officer of the Operator in
          a manner satisfactory to PNOC-EDC.

     (c)  a copy of the Articles of Incorporation of NEWCO as registered with
          the Securities and Exchange Commission, certified by the corporate
          secretary of NEWCO in a manner satisfactory to PNOC-EDC.

                                       61


26.2 OPERATOR CONDITIONS ON PNOC-EDC

     It shall be a condition precedent to the effectivity of this Agreement that
     the following are submitted by or on behalf of PNOC-EDC to the Operator
     (except for such documents the submission of which is waived by the
     Operator):

     (a)  copies of the Articles of Incorporation and By-Laws of PNOC-EDC, and
          of resolutions of its Board of Directors authorizing the execution,
          delivery and performance by PNOC-EDC of this Agreement and the
          Accession Undertaking, each certified by the corporate secretary of
          PNOC-EDC in a manner satisfactory to the Operator;

     (b)  a certificate of the corporate secretary of PNOC-EDC confirming that
          all necessary corporate and other approvals and action have been duly
          obtained and taken for the execution, delivery and performance by
          PNOC-EDC of this Agreement and the Accession Undertaking;

     (c)  a true copy of the Power Purchase Agreement executed between PNOC-EDC
          and NAPOCOR, less such sections that PNOC-EDC deems to be of a
          confidential nature and do not relate or pertain to the rights of the
          Operator under this Agreement;

     (d)  copies of resolutions of the Board of Directors of each of PNOC-EDC
          and NAPOCOR authorizing the execution, delivery and performance by
          each of PNOC-EDC and NAPOCOR of the Power Purchase Agreement;

     (e)  confirmation that PNOC-EDC has ownership of or the right to use the
          Site and that the Operator has the right to use the Site from the
          Effectivity Date to the Transfer Date;

     (f)  copies of such consents, licenses, permits, approvals and registration
          by or with the Government may be necessary to ensure the validity and
          enforceability of this Agreement and to permit PNOC-EDC to perform its
          obligations of this Agreement, including

          (i)    a Performance Undertaking executed on behalf of the Republic of
                 the Philippines by the Secretary or any of the Undersecretaries
                 of Finance named in the President of the Republic of the
                 Philippines' Full Powers Authorization, to guarantee the
                 performance by PNOC-EDC of its obligations under this
                 Agreement, such Performance Undertaking to be substantially in
                 the form of Annex K and acceptable to the Operator;

                                       62


          (ii)   an opinion by the Department of Justice confirming the
                 validity, enforceability and binding effect of the Performance
                 Undertaking;

          (iii)  Registration of this Agreement and the Power Plant project with
                 the Bangko Sentral ng Pilipinas ("Central Bank");

          (iv)   the Environmental Compliance Certificate issued by the
                 Department of Environment and Natural Resources for the Leyte
                 project covering the Power Plant;

          (v)    registration of PNOC-EDC as a Block Power Production Facility
                 under Executive Order No. 215;

          (vi)   an opinion by the National Electrification Administration and
                 the Energy Regulatory Board confirming that the operation by
                 the Operator of the Power Plant will not constitute a public
                 utility so as to require a franchise, certificate of public
                 convenience and other similar license;

          (vii)  National Economic Development Authority certification that the
                 project is a high priority economic project for power
                 development which is financed by or through foreign funds;

          (viii) an endorsement by the City or Regional Development Council for
                 the City or Region of the Power Plant project and endorsement
                 of the Power Plant project by the relevant local government
                 unit.

26.3 OTHER CONDITIONS

     It shall be a condition precedent to the effectivity of this Agreement that
     the following is obtained or delivered by:

     (a)  The Operator:

          (i)    Board of Investments registration of NEWCO as a pioneer
                 enterprise, approval for the incentives set forth in Annex J
                 and endorsement to by the Department of Justice for foreign
                 nationals to be employed in supervisory, technical and advisory
                 positions in the Power Plant.

          (ii)   confirmation by the Operator of the availability of financing
                 or funding, at terms and conditions acceptable to the Operator,
                 such as written commitments or letters of intent, in accordance
                 with the practice of each lender and of insurance for the
                 Operator's equity investments.

                                       63


          (iii)  Central Bank approval for the Operator to establish offshore
                 dollar accounts for the purpose of receiving payments under
                 this Agreement and for any foreign currency loans to be made by
                 financial institutions for the purpose of repaying any bridge
                 loans extended to the Operator and for meeting the capital
                 requirements of the Power Plant project.

     (b)  by PNOC-EDC:

          (i)    NEDA Board/Investment Coordinating Committee approval of this
                 Agreement.

26.4 FULFILLMENT OR WAIVER

     (a)  Upon the fulfillment or waiver of each individual condition precedent
          enumerated in Sections 26.1, 26.2 and 26.3, each of PNOC-EDC and the
          Operator shall certify in writing within seven (7) days the
          fulfillment or waiver of such a condition precedent.

     (b)  Upon the fulfillment or waiver of all the conditions precedent
          enumerated in Sections 26.1, 26.2, and 26.3, each of PNOC-EDC and the
          Operator shall certify in writing that all the conditions enumerated
          in Section 26.1 (in the case of PNOC-EDC) and Sections 26.2 and 26.3
          (in the case of the Operator) have been fulfilled or waived.

     (c)  In the event that the BOI denies NEWCO/Operator's registration as a
          pioneer enterprise, including its availment of tax incentives under
          the Omnibus Investments Code of 1987, for causes not attributable to
          the Operator, and the Parties agree to waive such condition under
          Section 26.3, PNOC-EDC shall pay all national income taxes of the
          Operator for a period of six (6) years from the Commercial Operation
          Date.

IN WITNESS WHEREOF, the parties hereto have set their hands this 4th day of
August, 1995 at Makati, Metro Manila, Philippines.


ORMAT INC.                                   PNOC-Energy Development Corporation
(Operator)                                   (PNOC-EDC)

/s/ Jacob Menahem                            /s/ Nazario C. Vasquez
--------------------------------             -----------------------------------
By:  JACOB MENAHEM                           By:  NAZARIO C. VASQUEZ
Its: Vice President                          Its: President


                                       64




                            Signed in the Presence of


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



                                       65



                                 ACKNOWLEDGMENT

                           Republic of the Philippines

     BEFORE ME this 4th day of August 1995, in Makati, M.M., Philippines
personally appeared NAZARIO C. VASQUEZ with Res. Cert. No. 9598088 issued on
March 8, 1995 at Mandaluyong, M.M.; and JACOB MENAHEM WITH Passport No. 404937
issued on 28.9.93 at Belgigue representing their respective companies; known to
me to be the same persons who executed the foregoing agreement and they
acknowledged to me that the same is their free corporate act and deed.

     This instrument, consisting of 314 pages, including all annexes and page on
which this acknowledgment is written has been signed above their respective
names on page 66 by the parties and their witnesses and initialed on the left
hand margin of the other pages.

     IN WITNESS WHEREOF, I have hereunto set my hand, the day, year and place
above written.

                                  NOTARY PUBLIC

                       My commission ends on Dec. 31, 199_

Doc. No.
Page No.
Book No.
Series of 1995


----------------------------
Jose Jesus G. Laurel
Notary Public
until Dec. 31, 1995
PTR No. 2491927
issued at Makati, Metro Manila
on January 3, 1995




                                       66



                                                                 Exhibit 10.3.37


           FIRST AMENDMENT TO LEYTE OPTIMIZATION PROJECT BOT AGREEMENT

     THIS FIRST AMENDMENT to LEYTE OPTIMIZATION PROJECT BOT AGREEMENT (this
"Amendment") is made as of February 29, 1996, between PNOC-ENERGY DEVELOPMENT
CORPORATION, a wholly owned subsidiary of the Philippine National Oil Company,
organized and existing under Philippine law ("PNOC-EDC") and ORMAT LEYTE CO.
LTD. a Philippine limited partnership ("Operator").

     A. PNOC-EDC and ORMAT INC. a Delaware Corporation executed that certain
Leyte Optimization Project BOT Agreement dated August 4, 1995 which has been
assigned to the Operator (the "Original Agreement"), concerning the development
and operation of a 49 MW (net) geothermal power production facilities in Leyte
Province, the Philippines. All capitalized terms not defined herein shall have
the meanings given them in the Original Agreement.

     B. PNOC-EDC and Operator each acknowledge that some but not all of the
conditions to "Effectivity" of the Original Agreement set forth in Sections
26.1, 26.2 and 26.3 of the Original Agreement have been fulfilled.

     C. PNOC-EDC and Operator recognize that additional time is needed in order
to fulfill the remaining conditions to Effectivity set forth in Sections 26.1,
26.2 and 26.3 of the Original Agreement.

     D. Section 15.1 of the Original Agreement provides, inter alia, that if by
the Effectivity Date of March 1, 1996, one or more of the conditions set forth
in Sections 26.1, 26.2 and 26.3 have not been fulfilled or waived by PNOC-EDC or
the Operator, as the case may be, the parties shall consult in good faith with a
view to achieving Effectivity. Furthermore, Section 3.1(a) states that if the
Effectivity Date does not occur on or before March 01, 1996, the parties shall
discuss and agree on any further extension of the Bid Security.

     E. PNOC-EDC and Operator wish to amend the Original Agreement and the Bid
Security as more fully set forth in this Amendment.

     NOW THEREFORE, the parties hereto, intending to be legally bound, and to
bind their successors and assigns, agree as follows:

     1. Amendment of Section 3.1(a) of the Original Agreement.

     Section 3.1(a) of the Original Agreement is hereby amended to read in its
entirety as follows:



     (a) To guarantee the faithful performance by the Operator of its obligation
to completely construct the Power Plant in accordance with the terms and
conditions of this Agreement, within ten (10) days of the Effectivity Date the
Operator shall post and deliver the Construction Performance Security in a form
acceptable to PNOC-EDC in a sum equivalent to One Hundred Dollars (US $100) per
kilowatt (kW) of total Contracted Capacity for all the Plants or its equivalent
in Philippine Pesos or other currencies. Prior to such delivery, the Operator
shall ensure that the Bid Security required under the bid documents shall be
extended until such time the Construction Performance Security shall have been
posted and delivered; provided that, in the event that the Effectivity Date does
not occur on or before April 10, 1996, the parties shall discuss and agree on
any further extension of the Bid Security. PNOC-EDC shall have recourse to the
Construction Performance Security to satisfy the final judgment in an arbitral
proceeding in accordance with Article 21.

     2. Amendment of Section 4.1(a) of the Original Agreement

     Section 4.1(a) of the Original Agreement is hereby amended to read in its
entirety as follows:

     (a) The Operator shall in good faith use all reasonable efforts to
construct the Power Plant in accordance with the following schedule:

Activity                                  Date
Target Effectivity Date                   April 10, 1996

Ordering of long lead items               the latter of (i) July 1, 1996 or (ii)
(turbogenerators)                         120 days after the Effectivity Date

Start of Commissioning Period             May 1, 1997
of Plants 1, 2 and 3

Start of Commissioning Period of          October 1, 1997
Plant 4

Scheduled Completion Date for             September 1, 1997
Plants 1, 2 and 3

Scheduled Completion Date for             January 1, 1998
Plant 4

Guaranteed Commercial Operation           September 25, 1997
Date for Plants 1, 2 and 3

                                       2


Guaranteed Commercial Operation           January 25, 1998
Date for Plant 4

If the Commercial Operation Date of any Power Plant does not occur on or before
the relevant Guaranteed Commercial Operation Date, the Operator shall be subject
to the penalty provisions set forth in Section 4.11. The Operator, however, may
request for an extension of the relevant milestone dates.

     3. Amendment of Section 15.1(b) of the Original Agreement

     Section 15.1(b) of the Original Agreement is hereby amended to read in its
entirety as follows:

     (b) If the Effectivity Date has not occurred by April 10, 1996, or within
such longer period as the parties may agree to, due to a failure of the
conditions set forth in Section 26.1 to have been satisfied prior to such date,
if such conditions have not been waived in writing by PNOC-EDC, the parties
shall consult with each other in good faith with the view to achieving the
Effectivity Date. If a mutually acceptable arrangement is not reached and
implemented within fifteen (15) days thereafter, either party shall have the
right to terminate this Agreement by giving written notice to the other party.
Upon such termination, PNOC-EDC shall return to the Operator all security held
by PNOC-EDC in connection with this Agreement, including any bid securities,
letters of credit and bank guarantees, the Operator shall reimburse PNOC-EDC for
all costs and expenses incurred by PNOC-EDC as of the date of and in connection
with this Agreement except those of PNOC-EDC related to the preparation of the
request for proposals and the bid evaluation until such termination, and
thereafter, neither party shall have any further liability to the other and this
Agreement shall immediately and automatically become null and void.
Notwithstanding anything to the contrary in this Agreement, this provision shall
become effective upon execution of this Agreement and shall remain effective
until the Effectivity Date.

     4. Amendment of Section 15.1(c) of the Original Agreement

     Section 15.1(c) of the Original Agreement is hereby amended to read in its
entirety as follows:

     (c) If the Effectivity Date has not occurred by April 10, 1996, or within
such longer period as the parties may agree to, due to a failure of the
conditions set forth in Section 26.2 to have been satisfied prior to such date,
if such conditions have not been waived in writing by the Operator, the parties
shall consult each other in good faith with the view to achieving the
Effectivity Date. If a mutually acceptable arrangement is not reached and
implemented within fifteen (15) days thereafter, either party shall have the


                                       3


right to terminate this Agreement by giving written notice to the other party.
Upon such termination, PNOC-EDC shall return to the Operator all security held
by PNOC-EDC in connection with this Agreement, including any bid securities,
letters of credit and bank guarantees, PNOC-EDC shall reimburse the Operator for
all costs and expenses incurred by the Operator as of the date of and in
connection with this Agreement, and thereafter, neither party shall have any
further liability to the other and this Agreement shall immediately and
automatically become null and void. Notwithstanding anything to the contrary in
this Agreement, this provision shall become effective upon execution of this
Agreement and shall remain effective until the Effectivity Date.

     5. Amendment of Section 15.1(d) of the Original Agreement

     (d) If the Effectivity Date has not occurred by April 10, 1996, or within
such longer period as the parties may agree to, due to a failure of the
conditions set forth in Section 26.3 to have been satisfied prior to such date,
if such conditions have not been waived in writing by both parties, the parties
shall consult each other in good faith with the view to achieving the
Effectivity Date. If a mutually acceptable arrangement is not reached and
implemented within fifteen (15) days thereafter, either party shall bear its own
costs and expenses. In the event, however, of the failure of the condition in
Section 26.3(a)(ii) other than for reasons due to adverse economic or political
conditions in the Philippines, and the parties do not waive the fulfillment of
this condition, either party may terminate this Agreement by giving written
notice to the other party, and the Operator shall reimburse PNOC-EDC as of the
date of and in connection with this Agreement except those of PNOC-EDC related
to the preparation of the request for proposals and the bid evaluation until
such termination. Neither party shall have any further liability to the other
and this Agreement shall immediately and automatically became null and void.
Notwithstanding anything to the contrary in this Agreement, this provision shall
become effective upon execution of this Agreement and shall remain effective
until the Effectivity Date.

     6. General Ratification. Except as expressly amended hereby, all the terms
and provisions of the Original Agreement are hereby ratified and confirmed and
remain in full force and effect.

     IN WITNESS WHEREOF, the parties have executed this First Amendment to Leyte
Optimization Project BOT Agreement as of the date first above written.

PNOC-ENERGY DEVELOPMENT CORPORATION,
a wholly-owned subsidiary of the
Philippine National Oil Company

By:

                                       4


    /s/ Nazario C. Vasquez
    -------------------------------
    Name:  Nazario C. Vasquez
    Title: President

ORMAT LEYTE CO. LTD.
a Philippine limited partnership



By: /s/ Nessim Forte
    -------------------------------
    Name:  Nessim Forte
    Title: Authorized Representative





                                       5


                                                                 Exhibit 10.3.38


                            SECOND AMENDMENT TO LEYTE
                       OPTIMIZATION PROJECT BOT AGREEMENT


     THIS SECOND AMENDMENT to LEYTE OPTIMIZATION PROJECT BOT AGREEMENT (this
"Amendment") is made as of April 1, 1996, between PNOC-ENERGY DEVELOPMENT
CORPORATION, a wholly owned subsidiary of the Philippine National Oil Company,
organized and existing under Philippine law ("PNOC-EDC") and ORMAT LEYTE CO.
LTD. a Philippine limited partnership ("Operator").

     A. PNOC-EDC and ORMAT LEYTE CO. LTD., a Philippine Partnership executed
that certain Leyte Optimization Project BOT Agreement dated August 4, 1995 which
has been assigned to the Operator (the "Original Agreement"), concerning the
development and operation of a 49 MW (net) geothermal power production
facilities in Leyte Province, the Philippines. All capitalized terms not defined
herein shall have the meanings given them in the Original Agreement.

     B. PNOC-EDC and Operator each acknowledge that some but not all of the
conditions to "Effectivity" of the Original Agreement set forth in Sections
26.1, 26.2 and 26.3 of the Original Agreement have been fulfilled.

     C. PNOC-EDC and Operator recognize that additional time is needed in order
to fulfill the remaining conditions to Effectivity set forth in Sections 26.1,
26.2 and 26.3 of the Original Agreement.

     D. Section 15.1 of the Original Agreement and its First Amendment provides,
inter alia, that if by the Effectivity Date of April 10, 1996, one or more of
the conditions set forth in Sections 26.1, 26.2 and 26.3 have not been fulfilled
or waived by PNOC-EDC or the Operator, as the case may be, the parties shall
consult in good faith with a view to achieving Effectivity. Furthermore, Section
3.1(a) states that if the Effectivity Date does not occur on or before April 10,
1996, the parties shall discuss and agree on any further extension of the Bid
Security.

     E. PNOC-EDC and Operator wish to amend the Original Agreement and the Bid
Security as more fully set forth in this Amendment.

     NOW THEREFORE, the parties hereto, intending to be legally bound, and to
bind their successors and assigns, agree as follows:

     1. Amendment of Section 3.1(a) of the Original Agreement. Section 3.1(a) of
the Original Agreement is hereby amended to read in its entirety as follows:



     (a) To guarantee the faithful performance by the Operator of its obligation
to completely construct the Power Plant in accordance with the terms and
conditions of this Agreement, within ten (10) days of the Effectivity Date the
Operator shall post and deliver the Construction Performance Security in a form
acceptable to PNOC-EDC in a sum equivalent to One Hundred Dollars (US $100) per
kilowatt (kW) of total Contracted Capacity for all the Plants or its equivalent
in Philippine Pesos or other currencies. Prior to such delivery, the Operator
shall ensure that the Bid Security required under the bid documents shall be
extended until such time the Construction Performance Security shall have been
posted and delivered; provided that, in the event that the Effectivity Date does
not occur on or before April 22, 1996, the parties shall discuss and agree on
any further extension of the Bid Security. PNOC-EDC shall have recourse to the
Construction Performance Security to satisfy the final judgment in an arbitral
proceeding in accordance with Article 21.

     2. Amendment of Section 4.1(a) of the Original Agreement Section 4.1(a) of
the Original Agreement is hereby amended to read in its entirety as follows:

     (a) The Operator shall in good faith use all reasonable efforts to
construct the Power Plant in accordance with the following schedule:

Activity                                      Date
Target Effectivity Date                       April 22, 1996

Ordering of long lead items                   the later of (i) July 1, 1996 or
(turbogenerators)                             (ii) 120 days after the
                                              Effectivity Date

Start of Commissioning Period                 May 1, 1997
of Plants 1, 2 and 3

Start of Commissioning Period                 October 1, 1997
of Plant 4

Scheduled Completion Date                     September 1, 1997
for Plants 1, 2 and 3

Scheduled Completion Date                     January 1, 1998
for Plant 4

Guaranteed Commercial Operation               September 25, 1997
Date for Plants 1, 2 and 3

Guaranteed Commercial Operation               January 25, 1998
Date for Plant 4

                                       2



If the Commercial Operation Date of any Power Plant does not occur on or before
the relevant Guaranteed Commercial Operation Date, the Operator shall be subject
to the penalty provisions set forth in Section 4.11. The Operator, however, may
request for an extension of the relevant milestone dates.

     3. Amendment of Section 15.1(b) of the Original Agreement Section 15.1(b)
of the Original Agreement is hereby amended to read in its entirety as follows:

          (b) If the Effectivity Date has not occurred by April 22, 1996, or
within such longer period as the parties may agree to, due to a failure of the
conditions set forth in Section 26.1 to have been satisfied prior to such date,
if such conditions have not been waived in writing by PNOC-EDC, the parties
shall consult with each other in good faith with the view to achieving the
Effectivity Date. If a mutually acceptable arrangement is not reached and
implemented within fifteen (15) days thereafter, either party shall have the
right to terminate this Agreement by giving written notice to the other party.
Upon such termination, PNOC-EDC shall return to the Operator all security held
by PNOC-EDC in connection with this Agreement, including any bid securities,
letters of credit and bank guarantees, the Operator shall reimburse PNOC-EDC for
all costs and expenses incurred by PNOC-EDC as of the date of and in connection
with this Agreement except those of PNOC-EDC related to the preparation of the
request for proposals and the bid evaluation until such termination, and
thereafter, neither party shall have any further liability to the other and this
Agreement shall immediately and automatically become null and void.
Notwithstanding anything to the contrary in this Agreement, this provision shall
become effective upon execution of this Agreement and shall remain effective
until the Effectivity Date.

     4. Amendment of Section 15.1(c) of the Original Agreement Section 15.1(c)
of the Original Agreement is hereby amended to read in its entirety as follows:

          (c) If the Effectivity Date has not occurred by April 22, 1996, or
within such longer period as the parties may agree to, due to a failure of the
conditions set forth in Section 26.2 to have been satisfied prior to such date,
if such conditions have not been waived in writing by the Operator, the parties
shall consult each other in good faith with the view to achieving the
Effectivity Date. If a mutually acceptable arrangement is not reached and
implemented within fifteen (15) days thereafter, either party shall have the
right to terminate this Agreement by giving written notice to the other party.
Upon such termination, PNOC-EDC shall return to the Operator all security held
by PNOC-EDC in connection with this Agreement, including any bid securities,
letters of credit and bank guarantees, PNOC-EDC shall reimburse the Operator for
all costs and expenses incurred by the Operator as of the date of and in
connection with this Agreement, and


                                       3


thereafter, neither party shall have any further liability to the other and this
Agreement shall immediately and automatically become null and void.
Notwithstanding anything to the contrary in this Agreement, this provision shall
become effective upon execution of this Agreement and shall remain effective
until the Effectivity Date.

     5. Amendment of Section 15.1(d) of the Original Agreement Section 15.1 (d)
of the Original Agreement is hereby amended to read in its entirety as follows:

          (d) If the Effectivity Date has not occurred by April 22, 1996, or
within such longer period as the parties may agree to, due to a failure of the
conditions set forth in Section 26.3 to have been satisfied prior to such date,
if such conditions have not been waived in writing by both parties, the parties
shall consult each other in good faith with the view to achieving the
Effectivity Date. If a mutually acceptable arrangement is not reached and
implemented within fifteen (15) days thereafter, either party shall bear its own
costs and expenses. In the event, however, of the failure of the condition in
Section 26.3(a)(ii) other than for reasons due to adverse economic or political
conditions in the Philippines, and the parties do not waive the fulfillment of
this condition, either party may terminate this Agreement by giving written
notice to the other party, and the Operator shall reimburse PNOC-EDC as of the
date of and in connection with this Agreement except those of PNOC-EDC related
to the preparation of the request for proposals and the bid evaluation until
such termination. Neither party shall have any further liability to the other
and this Agreement shall immediately and automatically become null and void.
Notwithstanding anything to the contrary in this Agreement, this provision shall
become effective upon execution of this Agreement and shall remain effective
until the Effectivity Date.

     6. General Ratification. Except as expressly amended hereby, all the terms
and provisions of the Original Agreement are hereby ratified and confirmed and
remain in full force and effect.

     IN WITNESS WHEREOF, the parties have executed this Second Amendment to
Leyte Optimization Project BOT Agreement as of the date first above written.

PNOC-ENERGY DEVELOPMENT CORPORATION,
a wholly-owned subsidiary of the
Philippine National Oil Company

By: /s/ Nazario C. Vasquez
    ------------------------------
    Name:  Nazario C. Vasquez
    Title: President


                                       4


ORMAT LEYTE CO. LTD.
a Philippine limited partnership

By: /s/ Nessim Forte
    ------------------------------
    Name:  Nessim Forte
    Title: Authorized Representative



                                       5



                             EFFECTIVITY CERTIFICATE

     Reference is made to (i) the Leyte Optimization Project - BOT Agreement
dated August 4, 1995 (the "BOT Agreement") between PNOC Energy Development
Corporation ("PNOC EDC") and Ormat, Inc., and (ii) the Accession Undertaking
dated as of February 15, 1996 between PNOC EDC, Ormat, Inc. and Ormat Leyte Co.
Ltd. (the "Operator"). All capitalized terms used but not defined herein have
the respective meanings assigned to such terms in the BOT Agreement.

     1.   PNOC EDC, does hereby certify, that each of the conditions set forth
          in Section 26.1 (PNOC EDC Conditions on Operator) and Section 26.3(a)
          [Other Conditions] of the BOT Agreement have been satisfied by the
          Operator or waived by PNOC EDC.

     2.   The Operator does hereby certify, that each of the conditions set
          forth in Section 26.2 (Operator Conditions on PNOC EDC) and Section
          26.3(b) [Other Conditions] of the BOT Agreement have been satisfied by
          PNOC-EDC or waived by the Operator.

     3.   The BOT Agreement is hereby declared effective in accordance with its
          terms and the Effectivity Date is hereby declared to be April 30,
          1996.

     4.   Notwithstanding the above Effectivity Date, the milestones and
          commitments of the Operator referred to under Section 4.1 of the BOT
          Agreement remain unchanged.

     IN WITNESS WHEREOF, PNOC EDC and Ormat Leyte Co. Ltd have signed this
certificate as of this 30th day of April, 1996.

                                            PNOC Energy Development Corporation

                                            By:    /s/ Raul S. Manglapus
                                                   -----------------------------
                                            Name:  Raul S. Manglapus
                                            Title: Chairman


                                            Ormat Leyte Co. Ltd.
                                            By:    Orleyte Company
                                            Its:   General Partner


                                            By:    /s/ Nessim J. Forte
                                                   -----------------------------
                                            Name:  Nessim J. Forte
                                            Title: Authorized Representative

Exhibit 10.4.1

Ormesa
BLM Geothermal Resources Lease
CA 966

Form 3200-21
(May 1974)

UNITED STATES Serial Number: CA 966
DEPARTMENT OF THE INTERIOR USGS - KGRA Determination:
BUREAU OF LAND MANAGEMENT
EAST MESA KGRA
GEOTHERMAL RESOURCES LEASE
[X] Competitive [ ] Noncompetitive

In consideration of the terms and conditions contained herein, and the grant
made hereby, this lease is entered into by the UNITED STATES OF AMERICA
(hereinafter called the "Lessor"), acting through the Bureau of Land Management
(hereinafter called the "Bureau") of the Department of the Interior (hereinafter
called the "Department"), and REPUBLIC GEOTHERMAL INC. and CITY OF BURBANK, each
as to an undivided 1/2 interest (hereinafter called the "Lessee").

This Lease is made pursuant to the Geothermal Steam Act of 1970 (84 Stat. 1566;
30 U.S.C. 1001--1025) (hereinafter called "the Act") to be effective on August
1, 1974 (hereinafter called the "effective date"). It is subject to all the
provisions of the Act and to all the terms, conditions, and requirements of (a)
all regulations promulgated by the Secretary of the Interior (hereinafter called
"the Secretary") in existence upon the effective date, specifically including,
but not limited to, 43 CFR Parts 3000 and 3200 and 30 CFR Parts 270 and 271, (b)
all geothermal resources operational orders (hereinafter called "GRO orders")
issued pursuant thereto, all of which are incorporated herein and by reference
made a part hereof, and (c) any regulations hereafter issued by the Secretary
(except those inconsistent with any specific provisions of this lease other than
regulations incorporated herein by reference) all of which shall, be upon their
effective date, incorporated herein and, by reference, made a part hereof.

Sec. 1. GRANT - The Lesser hereby grants and leases to the Lessee the exclusive
right and privilege to drill for, extract, produce, remove, utilize, sell, and
dispose of geothermal steam and associated geothermal resources, (hereinafter
called "geothermal resources"), in or under the following described lands
situated within the County of IMPERIAL, State of California.

------------------------------------------------------- -----------------------------------------------------
National Resource Lands Acquired Lands
T. ; R. ; Meridian T. ; R. ; Meridian

EAST MESA KGRA
T. 15 S., R. 16 E., SB Mer.
Sec. 23, E1/2SE1/4;
Sec. 24, S1/2;
Sec. 25, All;
Sec. 26, E1/2NE1/4.

T. 15 S., R. 17 E., SB Mer.
Sec. 19, S1/2;
Sec. 20, SW1/4;
Sec. 29, W1/2;
Sec. 30, All.

Total Area 2549.09 Total Area
------------------------------------------------------- -----------------------------------------------------

Containing 2549.09 acres (hereinafter called the "leased area" or "leased
lands"), together with:

(a) The nonexclusive right to conduct within the leased area geological and
geophysical exploration in accordance with applicable regulations; and

(b) The right to construct or erect and to use, operate, and maintain
within the leased area, together with ingress and egress thereupon all wells,
pumps, pipes, pipelines, buildings, plants, sumps, brine pits, reservoirs,
tanks, waterworks, pumping stations, roads, electric power generating plants,
transmission lines, industrial facilities, electric, telegraph or telephone
lines, and such other works and structures and to use so much of the surface of
the lend as may be necessary or reasonably convenient for the production,
utilization, and processing of geothermal resources or to the full enjoyment of
the rights granted by this lease, subject to compliance with applicable laws and
regulations; Provided that, although the use of the leased area for an electric
power generating plant or transmission facilities or a commercial or industrial
facility is authorized hereunder, the location of such facilities and the terms
of occupancy therefor shall be under separate instruments issued under any
applicable laws and regulations; and

(c) The nonexclusive right to drill potable water wells in accordance
with state water laws within the leased area and to use the water produced
therefrom for operations on the leased lands free of cost, provided that such
drilling and development

are conducted in accordance with procedures approved by the Supervisor of the
Geological Survey (hereinafter called "Supervisor"); and

(d) The right to convert this lease to a mineral lease under the Mineral
Leasing Act of February 25, 1920, as amended, and supplemented (30 U.S.C.
181--287) or under the Mineral Leasing Act for Acquired Lands (30 U.S.C.
351--359), whichever is appropriate, if the leasehold is primarily valuable for
the production of one or more valuable by-products which are leasable under
those statutes, and the lease is incapable of commercial production or
utilization of geothermal steam: Provided that, an application is made therefor
prior to the expiration of the lease extension by reason of by-product
production as hereinafter provided, and subject to all the terms and conditions
of said appropriate Acts. The Lessee is also granted the right to locate mineral
deposits under the mining laws (30 U.S.C. 21-54), which would constitute
by-products if commercial production or utilization of geothermal steam
continued, but such a location to be valid must be completed within ninety (90)
days after the termination of this lease. Any conversion of this lease to a
mineral lease or a mining claim is contingent on the availability of such lands
for this purpose at the time of the conversion. If the lands are withdrawn or
acquired to aid of a function of any Federal Department or agency, the mineral
lease or mining claim shall be subject to such additional terms and conditions
as may be prescribed by such Department or agency for the purpose of making
operations thereon consistent with the purposes for which these lands are
administered; and

(e) The right without the payment of royalties hereunder, to reinject into
the leased lands geothermal resources and condensates to the extent that such
resources and condensates are not utilized, but their reinjection is necessary
for operations under this lease in the recovering or processing of geothermal
resources. If the Lessee, pursuant to any approved plan, disposes of the
unusable brine and produced waste products into underlying formations, he may do
so without the payment of royalties.

Sec. 2. TERM

(a) This lease shall be for a primary term of ten (10) years from the
effective date and so long thereafter as geothermal steam is produced or
utilized in commercial quantities but shall in no event continue for more then
forty (40) years after the end of the primary term. However, if at the end of
that forty-year period geothermal steam is being produced or utilized in
commercial quantities, and the leased lands are not needed for other purposes,
the Lessee shall have a preferential right to a renewal of this lease for a
second forty-year term in accordance with such terms and conditions as the
Lessor deems appropriate.

(b) If actual drilling operations are commenced on the leased lands or
under an approved plan or agreement on behalf of the leased lands prior to the
end of the

primary term, and are being diligently prosecuted at the end of the primary
term, this lease shall be extended for five (5) years and so long thereafter,
but not more than thirty-five (35) years, as geothermal steam is produced or
utilized in commercial quantities. If at the end of such extended term
geothermal steam is being produced or utilized in commercial quantities, the
Lessee shall have a preferential right to a renewal for a second term as in (a)
above.

(c) If the Lessor determines at any time after the primary term that this
lease is incapable of commercial production and utilization of geothermal steam,
but one or more valuable by-products are or can be produced in commercial
quantities, this lease shall be extended for so long as such by-products are
produced in commercial quantities but not for more than five (5) years from the
date of such determination.

Sec. 3. RENTALS AND ROYALTIES

(a) Annual Rental - For each lease year prior to the commencement of
production of geothermal resources in commercial quantities on the leased lands,
the Lessee shall pay the Lessor on or before the anniversary date of the lease a
rental of $2.00 for each acre or fraction thereof.

(b) Escalating Rental - Beginning with the sixth lease year and for each
year thereafter until the lease year beginning on or after the commencement of
production of geothermal resources in commercial quantities, the Lessee shall
pay on or before the anniversary date of the lease an escalated rental in an
amount per acre or fraction thereof equal to the rental per acre for the
preceding year and an additional sum of one (1) dollar per acre or fraction
thereof. If the lease is extended beyond ten (10) years for reasons other than
the commencement of production of geothermal resources in commercial quantities,
the rental for the eleventh year and for each lease year thereafter until the
lease year beginning on or after the commencement of such production will be the
amount of rental for the tenth lease year. If any expenditures are made in any
lease year for diligent exploration on the leased lands in excess of the minimum
required expenditures for that year, the excess may be credited against any
rentals in excess of $6.00 per acre or fraction thereof due the Lessor for that
or any future year.

(c) Royalty - On or before the last day of the calendar month after the
month of commencement of production in commercial quantities of geothermal
resources and thereafter on a monthly basis, the Lessee shall pay to the Lessor:

(1) A royalty of 10 percent on the amount or value of steam, or any
other form of heat or other associated energy produced, processed, removed,
sold, or utilized from this lease or reasonably susceptible to sale or
utilization by the Lessee.

(2) A royalty of 5 percent of the value of any by-product derived from
production under this lease, produced, processed, removed, sold, or utilized
from this lease or reasonably susceptible of sale or utilization by the Lessee,
except that as to any by-product which is a mineral named in Sec. 1 of the
Mineral Leasing Act of February 25, 1920, as amended, (30 U.S.C. 181), the rate
of royalty for such mineral shall be the same as that provided in that statute
and the maximum rate of royalty for such mineral shall not exceed the maximum
royalty applicable under that statute.

(3) A royalty of 5 percent of the value of commercially demineralized
water which has been produced from the leased lands, and has been sold or
utilized by the Lessee or is reasonably susceptible of sale or utilization by
the Lessee. In no event shall the Lessee pay to the Lessor, for the lease year
beginning on or after the commencement of production in commercial quantities on
the leased lands or any subsequent lease year, a royalty of less than two (2)
dollars per acre or fraction thereof. If royalty paid on production during the
lease year has not satisfied this requirement, the Lessee shall pay the
difference on or before the expiration date of the lease year for which it is
paid.

(d) Waiver and Suspension of Rental and Royalties - Rentals or royalties
may be waived, suspended, or reduced pursuant to the applicable regulations on
the entire leasehold or any portion thereof in the interest of conservation or
for the purpose of encouraging the greatest ultimate recovery of geothermal
resources if the Lessor determines that it is necessary to do so to promote such
development, or because the lease cannot be successfully operated under the
terms fixed herein.

(e) Undivided Fractional Interests - Where the interest of the Lessor in
the geothermal resources underlying any tract or tracts described in Sec. 1 is
an undivided fractional interest, the rentals and royalties payable on account
of each such tract shall be in the same proportion to the rentals and royalties
provided in this lease as the individual fractional interest of the Lessor in
the geothermal resources underlying such tract is to the full fee interest.

(f) Readjustments - Rentals and royalties hereunder may be readjusted in
accordance with the Act and regulations to rates not in excess of the rates
provided therein, and at not less than twenty (20) year intervals beginning
thirty-five (35) years after the date geothermal steam is produced from the
lease as determined by the Supervisor.

Sec. 4. PAYMENTS - It is expressly understood that the Secretary may establish
the values and minimum values of geothermal resources to compute royalties in
accordance with the applicable regulations. Unless otherwise directed by the
Secretary, all payments to the Lessor will be made as required by the
regulations. If there is no well on the leased

lands capable of producing geothermal resources in commercial quantities, the
failure to pay rental on or before the anniversary date shall cause the lease to
terminate by operation of law except as provided by Sec. 3244.2 of the
regulations. If the time for payment falls on a day on which the proper office
to receive payment is closed, payment shall be deemed to be made on time if made
on the next official working day.

Sec. 5. BONDS - The Lessee shall file with the Authorized Officer of the Bureau
(hereinafter called the "Authorized Officer") shall maintain at all times the
bonds required under the regulations to be furnished as a condition to the
issuance of this lease or prior to entry on the leased lands in the amounts
established by the Lessor and to furnish such additional bonds or security as
may be required by the Lessor upon entry on the lands or after operations or
production have begun.

Sec. 6. WELLS

(a) The Lessee shall drill and produce all wells necessary to protect the
leased land from drainage by operations on lands not the property of the Lessor,
or other lands of the Lessor leased at a lower royalty rate, or on lands as to
which royalties and rentals are paid into different funds from those into which
royalties under this lease are paid. However, in lieu of any part of such
drilling and production, with the consent of the Supervisor, the Lessee may
compensate the Lessor in full each month for the estimated loss of royalty
through drainage in the amount determined by said Supervisor.

(b) At the Lessee's election, and with the approval of the Supervisor, the
Lessee shall drill and produce other wells in conformity with any system of well
spacing or production allotments affecting the field or area in which the leased
lands are situated, which is authorized by applicable law.

(c) After due notice in writing, the Lessee shall diligently drill and
produce such wells as the Supervisor shall require so that the leased lands may
be properly and timely developed and for the production of geothermal steam and
its by-products, including commercially demineralized water for beneficial uses
in accordance with applicable state laws. However, the Supervisor may waive or
modify the requirements of this subparagraph (c) in the interest of conservation
of natural resources or for economic feasibility or other reasons satisfactory
to him. If the products or by-products of geothermal production from wells
drilled on this lease are susceptible of producing commercially demineralized
water for beneficial uses, and a program therefor is not initiated with due
diligence, the Lessor may at its option elect to take such products or
by-products and the Lessee shall deliver all or any portion thereof to the
Lessor at any point in the Lessee's geothermal gathering or disposal system
without cost to the Lessee, if the Lessee's activities, under the lease, would
not be impaired and such delivery would otherwise be consistent with field and
operational requirements. The retention of this

option by the Lessor shall in no way relieve the Lessee from the duty of
producing commercially demineralized water where required to do so by the
Lessor, except when the option is being exercised and then only with respect to
wells where it is being exercised, or limit the Lessor's right to take any
action under Sec. 25 to enforce that requirement.

Sec. 7. INSPECTION - The Lessee shall keep open at all reasonable times for the
inspection of any duly authorized representative of the Lessor the leased lands
and all wells, improvements, machinery, and fixtures thereon and all production
reports, maps, records, books, and accounts relative to operations under the
lease, and well logs, surveys, or investigations of the leased lands.

Sec. 8. CONDUCT OF OPERATIONS - The Lessee shall conduct all operations under
this lease in a workmanlike manner and in accordance with all applicable
statutes, regulations, and GRO orders, and all other appropriate directives of
the Lessor to prevent bodily injury, danger to life or health, or property
damage, and to avoid the waste of resources, and shall comply with all
requirements which are set forth in 43 CFR Group 3200, including, but not
limited to, Sub-part 3204, or which may be prescribed by the Lessor pursuant to
the regulations, and with the special stipulations which are attached to the
lease, all of which are specifically incorporated into this lease. A breach of
any term of this lease, including the stipulations attached hereto, will be
subject to all the provisions of this lease with respect to remedies in case of
default. Where any stipulation is inconsistent with a regular provision of this
lease, the stipulation shall govern.

Sec. 9. INDEMNIFICATION

(a) The Lessee shall be liable to the Lessor for any damage suffered by the
Lessor in any way arising from or connected with the Lessee's activities and
operations conducted pursuant to this lease, except where damage is caused by
employees of the Lessor acting within the scope of their authority.

(b) The Lessee shall indemnify and hold harmless the Lessor from all claims
arising from or connected with the Lessee's activities and operations under this
lease.

(c) In any case where liability without fault is imposed on the Lessee
pursuant to this section, and the damages involved were caused by the action of
a third party, the rules of subrogation shall apply in accordance with the law
of the jurisdiction where the damage occurred.

Sec. 10. CONTRACTS FOR SALE OR DISPOSAL OF PRODUCTS - The Lessee shall file with
the Supervisor not later than thirty (30) days after the effective date thereof
any

contract, or evidence of other arrangement for the sale or disposal of
geothermal resources.

Sec. 11. ASSIGNMENT OF LEASE OR INTEREST THEREIN - Within ninety (90) days from
the date of execution thereof, the Lessee shall file for approval by the
Authorized Officer any instruments of transfer made of this lease or of any
interest therein, including assignments of record title and working or other
interests.

Sec. 12. REPORTS AND OTHER INFORMATION - At such times and in such form as the
Lessor may prescribe, the Lessee shall comply with all reporting requirements of
the geothermal resources leasing, operating, and unit regulations and shall
submit quarterly reports containing the data which it has collected through the
monitoring of air, land, and water quality and all other data pertaining to the
effect on the environment by operations under the lease. The Lessee shall also
comply with such other reporting requirements as may be imposed by the
Authorized Officer or the Supervisor. The Lessor may release to the general
public any reports, maps, or other information submitted by the Lessee except
geologic and geophysical interpretations, maps, or data subject to 30 CFR 270.79
or unless the Lessee shall designate that information as proprietary and the
Supervisor or the Authorized Officer shall approve that designation.

Sec. 13. DILIGENT EXPLORATION - In the manner required by the regulations, the
Lessee shall diligently explore the leased lands for geothermal resources until
there is production in commercial quantities applicable to this lease. After the
fifth year of the primary term the Lessee shall make at least the minimum
expenditures required to qualify the operations on the leased lands as diligent
exploration under the regulations.

Sec. 14. PROTECTION OF THE ENVIRONMENT (LAND, AIR AND WATER) AND IMPROVEMENTS -
The Lessee shall take all mitigating actions required by the Lessor to prevent:
(a) soil erosion or damage to crops or other vegetative cover on Federal or
non-Federal lands in the vicinity; (b) the pollution of land, air, or water; (c)
land subsidence, seismic activity, or noise emissions; (d) damage to aesthetic
and recreational values; (e) damage to fish or wildlife or their habitats; (f)
damage to or removal of improvements owned by the United States or other
parties; or (g) damage to or destruction or loss of fossils, historic or
prehistoric ruins, or artifacts. Prior to the termination of bond liability or
at any other time when required and to the extent deemed necessary by the
Lessor, the Lessee shall reclaim all surface disturbances as required, remove or
cover all debris or solid waste, and, so far as possible, repair the offsite and
onsite damage caused by his activity or activities incidental thereto, and
return access roads or trails and the leased lands to an acceptable condition
including the removal of structures, if required. The Supervisor or the
Authorized Officer shall prescribe the steps to be taken by Lessee to protect
the surface and the environment and for the restoration of the leased lands and
other lands affected by operations on the leased lands and

improvements thereon, whether or not the improvements are owned by the United
States. Timber or mineral materials may be obtained only on terms and conditions
imposed by the Authorized Officer.

Sec. 15. WASTE - The Lessee shall use all reasonable precautions to prevent
waste of natural resources end energy, including geothermal resources, or of any
minerals, and to prevent the communication of water or brine zones with any oil,
gas, fresh water, or other gas or water bearing formations or zones which would
threaten destruction or damage to such deposits. The Lessee shell monitor noise,
air, and water quality conditions in accordance with any orders of the
Supervisor.

Sec. 16. MEASUREMENTS - The Lessee shall gauge or otherwise measure all
production, sales, or utilization of geothermal resources and shall record the
same accurately in records as required by the Supervisor. Reports on production,
sales, or utilization of geothermal resources shall be submitted in accordance
with the terms of this lease and the regulations.

Sec. 17. RESERVATIONS TO LESSOR - All rights in the leased area not granted to
the Lessee by this lease are hereby reserved to the Lessor. Without limiting the
generality of the foregoing such reserved rights include:

(a) Disposal - The right to sell or otherwise dispose of the surface of the
leased lands or any resource in the leased lands under existing laws, or laws
hereafter enacted, subject to the rights of the Lessee under this lease;

(b) Rights-of-way - The right to authorize geological and geophysical
explorations on the leased lands which do not interfere with or endanger actual
operations under this lease, and the right to grant such easements or
rights-of-way for joint or several use upon, through or in the leased area for
steam lines and other public or private purposes which do not interfere with or
endanger actual operations or facilities constructed under this lease;

(c) Mineral Rights - The ownership of and the right to extract oil,
hydrocarbon gas, and helium from all geothermal steam and associated geothermal
resources produced from the leased lands;

(d) Casing - The right to acquire the well and casing at the fair market
value of the casing where the Lessee finds only potable water, and such water is
not required in lease operations; and

(e) Measurements - The right to measure geothermal resources and to sample
any production thereof.

Sec. 18. ANTIQUITIES AND OBJECTS OF HISTORIC VALUE - The Lessee shall
immediately bring to the attention of the Authorized Officer any antiquities or
other objects of historic or scientific interest, including but not limited to
historic or prehistoric ruins, fossils, or artifacts discovered as a result of
operations under this lease, and shall leave such discoveries intact. Failure to
comply with any of the terms and conditions imposed by the Authorized Officer
with regard to the preservation of antiquities may constitute a violation of the
Antiquities Act (16 U.S.C. 431-433). Prior to operations, the Lessee shall
furnish to the Authorized Officer a certified statement that either no
archaeological values exist or that they may exist on the leased lands to the
best of the of the Lessee's knowledge and belief and that they might be impaired
by geothermal operations. If the Lessee furnishes a statement that
archaeological values may exist where the land is to be disturbed or occupied,
the Lessee will engage a qualified archaeologist, acceptable to the Authorized
Officer, to survey and salvage, in advance of any operations, such
archaeological values on the lands involved. The responsibility for the cost for
the certificate, survey, and salvage will be borne by the Lessee, and such
salvaged property shall remain the property of the Lessor or the surface owner.

Sec. 19. DIRECTIONAL DRILLING - A directional well drilled under the leased area
from a surface location on nearby land not covered by the lease shall be deemed
to have the same affect for all purposes of this lease as a well drilled from a
surface location on the leased area. In such circumstances, drilling shall be
considered to have been commenced on the nearby land for the purposes of this
lease, and production of geothermal resources from the leased area through any
directional well located on nearby land, or drilling or reworking of any such
directional well shall be considered production or drilling or reworking
operations (as the case may be) on the leased area for all purposes of this
lease. Nothing contained in this section shall be construed as granting to the
Lessee any right in any land outside the leased area.

Sec. 20. OVERRIDING ROYALTIES - The Lessee shall not create overriding royalties
of less than one-quarter (1/4) of one percent of the value of output nor in
excess of 50 percent of the rate of royalty due to the Lessor specified in Sec.
3 of this lease except as otherwise authorized by the regulations. The Lessee
expressly agrees that the creation of any overriding royalty which does not
provide for a prorated reduction of all overriding royalties so that the
aggregate rate of royalties does not exceed the maximum rate permissible under
this section, or the failure to suspend an overriding royalty during any period
when the royalties due to the Lessor have been suspended pursuant to the terms
of this lease, shall constitute a violation of the lease terms.

Sec. 21. READJUSTMENT OF TERMS AND CONDITIONS - The terms and conditions of this
lease other then those related to rentals and royalties may be readjusted in
accordance with the Act at not less than ten-year intervals beginning ten (10)
years

after the date geothermal steam is produced from the leased premises as
determined by the Supervisor.

Sec. 22. COOPERATIVE OR UNIT PLAN - The Lessee agrees that it will on its own,
or at the request of the Lessor where it is determined to be necessary for the
conservation of the resource or to prevent the waste of the resource, subscribe
to and operate under any reasonable cooperative or unit plan for the development
and operation of the, area, field, or pool, or part thereof embracing the lands
subject to this lease as the Secretary may determine to be practicable and
necessary or advisable in the interest of conservation. In the event the leased
lands are included within a unit, the terms of this lease shall be deemed to be
modified to conform to such unit agreement. Where any provision of a cooperative
or unit plan of development which has been approved by the Secretary, and which
by its terms affects the leased area or any part thereof, is inconsistent with a
provision of this lease, the provisions of such cooperative or unit plan shall
govern.

Sec. 23. RELINQUISHMENT OF LEASE - The Lessee may relinquish this entire lease
or any officially designated subdivision of the leased area in accordance with
the regulations by filing in the proper BLM office a written relinquishment, in
triplicate, which shall be effective as of the data of filing. No relinquishment
of this lease or any portion of the leased area shall relieve the Lessee or its
surety from any liability for breach of any obligation of this lease, including
the obligation to make payment of all accrued rentals and royalties and to place
all wells in the leased lands to be relinquished in condition for suspension or
abandonment, and to protect or restore substantially the surface or subsurface
resources in a manner satisfactory to the Lessor.

Sec. 24. REMOVAL OF PROPERTY ON TERMINATION OR EXPIRATION OF LEASE

(a) Upon the termination or expiration of this lease in whole or in part,
or the relinquishment of the lease in whole or in part, as herein provided, the
Lessee shall within a period of ninety (90) days (or such longer period as the
Supervisor may authorize because of adverse climatic conditions) thereafter
remove from the leased lands, no longer subject to the lease all structures,
machinery, equipment, tools, and materials in accordance with applicable
regulations and orders of the Supervisor. However, the Lessee shall, for a
period of not more then six (6) months, continue to maintain any such property
needed in the relinquished area, as determined by the Supervisor, for producing
wells or for drilling or producing geothermal resources on other leases.

(b) Any structures, machinery, equipment, tools, appliances, and materials,
subject to removal by the Lessee, as provided above, which are allowed to remain
on the leased lands shall become the property of the Lessor on expiration of the
90-day period or any extension of that period which may be granted by the
Supervisor. If the Supervisor

directs the Lessee to remove such property, the Lessee shall do so at its own
expense, or if it fails to do so within a reasonable period, the Lessor may do
so at the Lessee's expense.

Sec. 25. REMEDIES IN CASE OF DEFAULT

(a) Whenever the Lessee fails to comply with any of the provisions of the
Act, or the terms and stipulations of this lease, or of the regulations issued
under the Act, or of any order issued pursuant to those regulations, and that
default shall continue for a period of thirty (30) days after service of notice
by the Lessor, the Lessor may (1) suspend operations until the requested action
is taken to correct the noncompliance, or (2) cancel the lease in accordance
with Sec. 12 of the Act (30 U.S.C. 1011). However, the 30-day notice provision
applicable to this lease under Sec. 12 of the Act shall also apply as a
prerequisite to the institution of any legal proceedings by the Lessor to cancel
this lease while it is in a producing status. Nothing in this subsection shall
be construed to apply to, or require any notice with respect to any legal action
instituted by the Lessor other than an action to cancel the lease pursuant to
Sec. 12 of the Act.

(b) Whenever the Lessee fails to comply with any of the provisions of the
Act, or of this lease, or the regulations, or of any GRO Orders, or other
orders, and immediate action is required, the Lessor without waiting for action
by the Lessee may enter on the leased lends and take such measures as it may
deem necessary to correct the failure, including a suspension of operations or
production, all at the expense of the Lessee.

(c) A waiver of any particular violation of the provisions of the Act, or
of this lease, or of any regulations promulgated by the Secretary under the Act,
shall not prevent the cancellation of this lease or the exercise of any other
remedy or remedies under paragraphs (a) and (b) of this section by reason of any
other such violation, or for the same violation occurring at any other time.

(d) Nothing herein shall limit or effect the Lessee's right to a hearing
and appeal as provided in Sec. 12 of the Act and in the regulations promulgated
thereunder.

(e) Upon cancellation, the Lessee shall remove all property in accordance
with Sec. 24 hereof, and shall restore the leased lands in a manner acceptable
to the Lessor or as may be otherwise required by the Lessor.

Sec. 26. HEIRS AND SUCCESSORS IN INTEREST - Each obligation hereunder shall
extend to and be binding upon, and every benefit hereof shall inure to, the
heirs, executors, administrators, successors, or assigns, of the respective
parties hereto.

Sec. 27. UNLAWFUL INTEREST - No Member of, or Delegate to Congress, or Resident
Commissioner, after his election or appointment, either before or after he has
qualified, and during his continuance in office, and no officer, agent, or
employee of the Department shall be admitted to any share or part in this lease
or derive any benefit that may arise therefrom; and the provisions of Sec. 3741
of the Revised Statutes (41 U.S.C. Sec. 22), as amended, and Sections 431, 432,
and 433 of Title 18 of the United States Code, relating to contracts made or
entered into, or accepted by or on behalf of the United States, form a part of
this lease so far as the same may be applicable.

Sec. 28. MONOPOLY AND FAIR PRICES - The Lessor reserves full power and authority
to protect the public interest by promulgating and enforcing all orders
necessary to insure the sale of the production from the leased lands at
reasonable prices, to prevent monopoly, and to safeguard the public interest.

Sec. 29. EQUAL OPPORTUNITY CLAUSE - The Lessee agrees that, during the
performance of this contract:

(1) The Lessee will not discriminate against any employee or applicant for
employment because of race, color, religion, sex, or national origin. The Lessee
will take affirmative action to ensure that applicants are employed, and that
employees are treated during employment, without regard to their race, color,
religion, sex, or national origin. Such action shall include, but not be limited
to the following: employment, upgrading, demotion, or transfer; recruitment or
recruitment advertising, layoff or termination; rates of pay or other forms of
compensation; and selection for training, including apprenticeship. The Lessee
agrees to post in conspicuous places, available to employees and applicants for
employment, notices to be provided by the Lessor setting forth the provisions of
this Equal Opportunity clause.

(2) The Lessee will, in all solicitations or advertisements for employees
placed by or on behalf of the Lessee, state that all qualified applicants will
receive consideration for employment without regard to race, color, religion,
sex, or national origin.

(3) The Lessee will send to each labor union or representative of workers
with which Lessee has a collective bargaining agreement or other contract or
understanding, a notice, to be provided by the Lessor, advising the labor union
or workers' representative of the Lessee's commitments under this Equal
Opportunity clause, and shall post copies of the notice in conspicuous places
available to employees and applicants for employment.

(4) The Lessee will comply with all provisions of Executive Order No. 11246
of September 24, 1965, as amended, and of the rules, regulations, and relevant
orders of the Secretary of Labor.

(5) The Lessee will furnish all Information and reports required by
Executive Order No. 11246 of September 24, 1965, as amended, and by the rules,
regulations, and orders of the Secretary of Labor, or pursuant thereto, and will
permit access to its books, records, and accounts by the Secretary of the
Interior and the Secretary of Labor for purposes of investigation to ascertain
compliance with such rules, regulations, and orders.

(6) In the event of the Lessee's noncompliance with the Equal Opportunity
clause of this lease or with any of said rules, regulations, or orders, this
lease may be canceled, terminated or suspended in whole or in part and the
Lessee may be declared ineligible for further Federal Government contracts or
leases in accordance with procedures authorized in Executive Order No. 11246 of
September 24, 1965, as amended, and such other sanctions as may be imposed and
remedies invoked as provided in Executive Order No. 11246 of September 24, 1965,
as amended, or by rule, regulation, or order of the Secretary of Labor, or as
otherwise provided by law.

(7) The Lessee will include the provisions of Paragraphs (1) through (7) of
this Section (29) in every contract, subcontract or purchase order unless
exempted by rules, regulations, or orders of the Secretary of Labor Issued
pursuant to Section 204 of Executive Order No. 11246 of September 24, 1965. as
amended, so that such provisions will be binding upon each contractor,
subcontractor, or subcontract, or purchase order as the Secretary may direct as
a means of enforcing such provisions including sanctions for noncompliance;
provided, however, that in the event the Lessee becomes involved in, or is
threatened with, litigation with a contractor, subcontractor, or vendor as a
result of such direction by the Secretary, the Lessee may request the Lessor to
enter into such litigation to protect the interests of the Lessor.

Sec. 30. CERTIFICATION OF NONSEGREGATED FACILITIES - By entering into this
lease, the Lessee certifies that it does not and will not maintain or provide
for its employees any segregated facilities at any of its establishments, and
that it does not and will not permit its employees to perform their services at
any location, under its control, where segregated facilities are maintained. The
Lessee agrees that a breech of this certification is a violation of the Equal
Opportunity clause of this lease. As used in this certification, the term
"segregated facilities" means, but is not limited to, any waiting rooms, work
areas, rest rooms and wash rooms, or restaurants or other eating areas, time
clocks, or locker rooms, and other storage or dressing rooms, parking lots,
drinking fountains, recreation or entertainment areas, transportation, and
housing facilities provided for employees which are segregated by explicit
directive, or are in fact segregated on the basis of race, color, religion, or
national origin because of habit, local

custom, or otherwise. Lessee further agrees that (except where it has obtained
identical certifications from proposed contractors and subcontractors for
specific time periods) it will obtain identical certifications from proposed
contractors and subcontractors prior to the award of contracts or subcontracts
exceeding $10,000 which are not exempt from the provisions of the Equal
Opportunity clause; that it will retain such certifications in its files; and
that it will forward the following certification to such proposed contractors
and subcontractors (except where the proposed contractor or subcontractor has
submitted identical certifications for specific time periods); it will notify
prospective contractors and subcontractors of requirement for certification of
nonsegregated facilities. A Certification of Nonsegregated Facilities, as
required by the May 9, 1967 Order (32 F.R. 7439, May 19, 1967) on Elimination of
Segregated Facilities, by the Secretary of Labor, must be submitted prior to the
award of a contract or subcontract exceeding $10,000 which is not exempt from
the provisions of the Equal Opportunity clause. The certification may be
submitted either for each contract and subcontract or for all contracts and
subcontracts during a period (i.e., quarterly, semiannually, or annually).

Sec. 31. SPECIAL STIPULATIONS - (stipulations, if any, are attached hereto and
made a part hereof)

Attachment "A"

ATTEST:

/s/ Evelyn L. Haley
------------------------------------
Evelyn L. Haley, City Clerk

In witness whereof the parties have executed his lease.

Lessee:

REPUBLIC GEOTHERMAL, INC.

BY:

/s/ Timothy M. Evans
------------------------------------
Timothy M. Evans

CITY OF BURBANK, A MUNICIPAL CORP.

BY: /s/ Joseph N. Baker
---------------------------------
Joseph N. Baker, City Manager

July 1, 1974
[SEAL]

THE UNITED STATES OF AMERICA, Lessor:

BY: /s/ Indecipherable
---------------------------------
Chief, Branch of Lands and Minerals Operations,
Division of Technical Services
Sacramento, California 95825

July 10, 1975



                                                                  Exhibit 10.4.2

                                     Ormesa

                    BLM License for Electric Power Plant Site

                                    CA 24678



                                  UNITED STATES
                           DEPARTMENT OF THE INTERIOR
                            BUREAU OF LAND MANAGEMENT
                                  STATE OFFICE
                         E-2845 Federal Office Building
                                2800 Cottage Way
                          Sacramento, California 95825

                                                           Serial No. CACA 24678

                      LICENSE FOR ELECTRIC POWER PLANT SITE

                         UTILIZING GEOTHERMAL RESOURCES

This license, entered into on September 18, 1989, by the United States of
America, the Licensor, through the Bureau of Land Management (BLM), and Ormesa
Geothermal, the Licensee, is hereby issued under the Geothermal Steam Act of
1970 (30 U.S.C. 1001-1025) and is subject to all applicable Federal, State, and
local laws and regulations including Title 43 CFR Group 3200.

SECTION 1. RIGHTS UNDER LICENSE

This license confers the right to construct, operate, and maintain a 10 MW
electric generating plant and related facilities or appurtenant structures in
accordance with the terms and conditions of this license, the approved plan of
utilization, and the applicable regulations, on those certain lands situated in
the County of Imperial, State of California,



described below excepting that prior to commencing any surface disturbance
activities allowed under this license, a permit to construct a utilization
facility shall be obtained from the authorized officer as required by 43 CFR
3250.6-1(b):

                  Geothermal Power Plant Site Land Description

     That portion of the Southeast one quarter of Section 6, Township 16
     South, Range 17 East, San Bernardino Meridian, County of Imperial;
     State of California, being more particularly described as follows:

     Beginning at Southeast corner of said Section 6:

     Thence along the East line of said Southeast one quarter Section 6
     North 00(0)06' 54" West 712.00 feet to a point;

     Thence leaving said East line North 89(0) 59' 18" West 33.00 feet to a
     point, said point being the true point of beginning;

     Thence continuing North 89(0)59' 18" West 890.80 feet to an angle
     point;

     Thence North 00(0)00' 00" East 552.75 feet to an angle point;

     Thence South 89(0)49' 44" East 382.80 feet to an angle point;

     Thence North 00(0)01' 00" West 86.96 feet to an angle point;

     Thence North 89(degree)55' 13" East 289.76 feet to an angle point;

     Thence South 00(degree)04' 47" East 66.00 feet to an angle point;

     Thence North 89(degree)55' 13" East 125.00 feet to the beginning of a
     tangent 92.08 foot radius curve concave Southwesterly;

     Thence Easterly and Southeasterly along said curve through a central
     angle of 89(0) 57' 53" an arc distance of 144.58 feet to a point, said
     point being 33.00 feet Westerly of the East line of of said Southeast
     one quarter of Section 6.

     Thence along a line parallel with and 33.00 feet Westerly of said East
     line South 00(0) 06' 54" East 481.44 feet to the true point of
     beginning.


                                  2


     Containing 11.93 acres, more or less.

This license is for a primary term of 30 years, with a preferential right of
renewal of such license under such terms and conditions as the Licensor may deem
appropriate, provided that the license may be terminated as provided in Section
7 hereof.

SECTION 2. OPERATIONS

     A.   License shall comply with the regulations of the Secretary of the
          Interior as set forth in 43 CFR Part 3250.

     B.   Licensee shall comply with the provisions of the operating regulations
          in 43 CFR Part 3260 and all orders issued pursuant thereto. Copies of
          the operating regulations may be obtained from the Authorized Officer.

     C.   Prior to commencement of any activities relating to plant operations,
          the Licensee shall file with the Authorized Officer a copy of any
          utility commission license or other Federal, State, or local license
          or permit incident to the operation of the facilities authorized
          herein.

     D.   Licensee shall allow inspection of the premises and operations by duly
          authorized representatives of the Department of the Interior or other
          Federal agency administering the lands and shall provide for the
          ingress or egress of government officers, and for users of the lands
          under authority of the United States.

     E.   Licensee hereby agrees to hold harmless and indemnify the United
          States, its officers, agents, employees, successors, or assigns from
          and against all claims,


                                       3


          demands, costs, losses, causes of action, damages, or liability of
          whatsoever kind or nature arising out of or resulting from the
          utilization of the property by the Licensee hereunder. The United
          States shall not be liable for any damages or injuries to persons or
          property in, or about, said premises from any cause other than the
          negligent acts or omissions of its officers, agents, or employees.

SECTION 3. RENTALS

The Licensee shall pay to the Licensor a rental of $1200.00 on or before the
date of issuance of the license and on each anniversary thereafter. Said rental
shall be reassessed at the discretion of the Authorized Officer at not less than
ten-year intervals beginning with the tenth year of the term of this license.

SECTION 4. BOND

The Licensee shall file with the Authorized Officer and shall maintain at all
times the bond required under the regulations to be furnished as a condition to
the issuance of this license in the amount established by the Licensor and to
furnish such additional bond or security as may be required by the Licensor upon
entry on the lands or after operations have begun.

SECTION 5. EQUAL OPPORTUNITY CLAUSE

This license is subject to the provisions of Executive Order No. 11246 of
September 24, 1965, as amended, which sets forth the nondiscrimination clauses.
A copy of this Order may be obtained from the Authorized Officer.

6.  ASSIGNMENTS AND TRANSFERS

                                       4


     A.   This license shall be binding upon and inure to the benefit of the
          successors and assigns of the parties hereto. Any proposed transfer in
          whole or in part of any right, title, or interest in the licensed
          plant or facility or this license must be filed with the Authorized
          Officer. The application for transfer must be accompanied by the same
          showing of qualifications of the transferee as is required of the
          applicant, and must be supported by a stipulation that the assignee
          will comply with and must be bound by all the terms and conditions of
          this license. No transfer will be valid unless and until it is
          approved in writing by the Authorized Officer.

     B.   An application for approval of an assignment or transfer shall be
          accompanied by a nonrefundable fee as specified by the regulations at
          43 CFR 3250.8(b).

SECTION 7. TERMINATION AND RELINQUISHMENT

     A.   The Licensee may surrender this license by filing a written
          relinquishment, in triplicate, with the Authorized Officer. The
          relinquishment shall include a statement as to whether the land
          covered by the license has been disturbed and, if so, whether it has
          been restored as prescribed by the terms and conditions of the
          license. The relinquishment will not be accepted until the
          requirements for reclamation of the land have been met.

     B.   The license may be cancelled upon written order of the Authorized
          Officer for violation of the terms and conditions hereof, or of any of
          the regulations or


                                       5


          orders applicable hereto, subject to notice and a right of appeal as
          provided in the regulations.

     C.   Following relinquishment, expiration, or cancellation, the Licensee
          shall within one year following the termination of the license remove
          all structures, machinery, and other equipment from the above
          described lands, and restore the land in accordance with Section 7(D)
          of this license. Additional time may be granted by the Authorized
          Officer upon a showing of good cause by the Licensee. The bond
          required by this license shall not be released until the reclamation
          process has been completed to the satisfaction of the Authorized
          Officer.

     D.   Prior to the termination of bond liability and to the extent deemed
          necessary by the Licensor, the Licensee shall reclaim all surface
          disturbances as required, remove or cover all debris or solid waste,
          and, so far as possible, repair the offsite and onsite damage caused
          by its activity or activities incidental thereto, and return access
          roads or trails and the licensed lands to an acceptable condition,
          including the removal of structures, if required. The Authorized
          Officer shall prescribe the steps to be taken by the Licensee to
          protect the surface and the environment and for the restoration of the
          licensed lands and other lands affected by operations on; the licensed
          lands and improvements thereon, whether or not the improvements are
          owned by the United States.


                                       6


SECTION 8. UNLAWFUL INTEREST

No Member of, or Delegate to, Congress or Resident Commissioner, after his
election or appointment, or either before or after he has qualified and during
his continuance in office, and no officer, agent, or employee of the Department
of the Interior, except as provided in 43 CFE 7.3(a)(1), shall be admitted to
any share or part in this license or derive any benefit that may arise
therefrom; and the provisions of Section 3741 of the Revised Statutes of the
United States, as amended (41 U.S.C. Sec. 22) and Sections 431, 432, and 433,
Title 18 U.S.C., relating to contracts, enter into and form a part of this
license so far as the same may be applicable.

SECTION 9. CERTIFICATION OF NONSEGREGATED FACILITIES

By entering into this license, the Licensee certifies that Licensee does not and
will not maintain or provide for Licensee's employees any segregated facilities
at any of Licensee's establishments, and that Licensee does not and will not
permit Licensee's employees to perform their services at any location, under
Licensee's control, where segregated facilities are maintained. The Licensee
agrees that a breach of this certification is a violation of the Equal
Opportunity Clause of this license. As used in this certification, the term
"segregated facilities" means, but is not limited to, any waiting rooms, work
rooms, work areas, rest rooms and wash rooms, restaurants and other eating
areas, time clocks, locker rooms and other storage or dressing areas, parking
lots, drinking fountains, recreation or entertainment areas, transportation, and
housing facilities provided for employees which are segregated by explicit
directive or are in fact


                                       7


segregated on the basis of race, color, religion, or national origin, because of
habit, local custom, or otherwise. Licensee further agrees that (except where
Licensee has obtained identical certification from proposed contractors and
subcontractors for specific time periods) Licensee will obtain identical
certifications from proposed contractors and subcontractors prior to the award
of contracts or subcontracts exceeding $10,000 which are not exempt from the
provisions of the Equal Opportunity Clause; that Licensee will retain such
certifications in Licensee's files; and that Licensee will forward the following
notice to such proposed contractors and subcontractors (except where the
proposed contractor or subcontractor has submitted identical certifications for
specific time periods); Licensee will notify prospective contractors and
subcontractors of the requirement for certification of nonsegregated facilities.
A Certification of Nonsegregated Facilities, as required by the May 9, 1967,
Order (32 F.R. 7439, May 19, 1967) on Elimination of Segregated Facilities, of
the Secretary of Labor, must be submitted prior to the award of a contract or
subcontract exceeding $10,000 which is not exempt from the provisions of the
Equal Opportunity Clause. The certification may be submitted either for each
contract and subcontract or for all contracts and subcontracts during a period
(i.e. quarterly, semi-annually, or annually).

SECTION 10. STIPULATIONS

Affixed hereto as Exhibit "A"


                                       8


                                       THE UNITED STATES OF AMERICA

                                       By /s/ Fred O'Ferrall
                                          --------------------------------------
                                          Chief, Leasable Minerals Section

                                       Date  SEP 18 1989
                                             -----------------------------------

WITNESS TO SIGNATURE OF LICENSEE       Ormesa Geothermal

                                       By Ormat Geothermal, Inc.
                                          --------------------------------------
/s/ Barbara L. Bressler                   Managing Partner
----------------------------------        --------------------------------------

                                       By /s/ Indecipherable
                                          --------------------------------------
                                          (Signature)

                                          Vice President
                                          --------------------------------------
                                              (Title)

                                       Date September 13, 1989
                                            ------------------------------------


--------------------------------------------------------------------------------
If this license is executed by a corporation, it must bear the corporate seal.


                                       9



                                                                  Exhibit 10.4.3








                                                                    CONFIDENTIAL
RECORDATION REQUESTED:
AFTER RECORDATION, RETURN TO:
RETURN BY:  MAIL (  )  PICKUP (  )
--------------------------------------------------------------------------------






                                 STATE OF HAWAII

                    DEPARTMENT OF LAND AND NATURAL RESOURCES

                    GEOTHERMAL RESOURCES MINING LEASE NO. R-2







                                 STATE OF HAWAII

                    DEPARTMENT OF LAND AND NATURAL RESOURCES

                        GEOTHERMAL RESOURCES MINING LEASE


                                TABLE OF CONTENTS



                                                                     Page No.
                                                                     --------

1.       LEASE.....................................................      1

2.       RESERVATIONS TO LESSOR....................................      3

         A.       Disposal.........................................      3

         B.       Rights-of-Way....................................      3

         C.       Certain Mineral Rights...........................      4

         D.       Casing...........................................      4

         E.       Measurements.....................................      4

3.       TERM......................................................      4

         A.       Primary Term, Extended Term, Maximum Term........      4

         B.       Extension of Lease Beyond Primary Term
                  by Drilling Operations...........................      5

         C.       Shut-in Production...............................      5

         D.       Drilling or Reworking Operations After
                  Cessation of Production..........................      6

4.       RENTALS...................................................      6

         A.       Amount and Time of Payment.......................      6

         B.       Credits Against Royalties........................      7

5.       ROYALTIES.................................................      7

         A.       For Period of Initial Thirty-Five Years..........      7

                                       i


                                                                      Page No.
                                                                      --------

         B.       Readjustment After Thirty-Five Years.............      8

         C.       Deadline for Royalty Payments....................      8

         D.       Royalties-Production (Absolute Open-Flow
                  Potential).......................................      9

         E.       Geothermal By-Products Testing...................     10

         F.       Interest and Penalties...........................     10

6.       REQUIREMENT TO COMMENCE MINING OPERATIONS.................     11

7.       TAXES.....................................................     12

         A.       Real Property Taxes..............................     12

         B.       Other Taxes......................................     12

8.       UTILITY SERVICES..........................................     13

9.       SANITATION................................................     13

10.      WASTE: USE OF PREMISES....................................     13

11.      COMPLIANCE WITH LAWS......................................     14

12.      INSPECTION OF PREMISES AND RECORDS........................     15

13.      GEOTHERMAL OPERATIONS.....................................     16

         A.       Removal of Derrick...............................     16

         B.       Operating-Sites..................................     16

         C.       Site Selection...................................     16

         D.       Drilling Operations..............................     17

         E.       Water Quality - Waste Disposal...................     17

         F.       Fish and Game Notice - Interference..............     18

         G.       Damage to Terrain................................     18

         H.       Pollution........................................     18

         I.       Filled Lands.....................................     19

                                       ii


                                                                     Page No.
                                                                     --------

         J.       Road Maintenance.................................     20

         K.       Timber Damaged...................................     21

         L.       Improvements - Protection from Damage............     21

         M.       Damages - Payment................................     21

         N.       Damages to Surface or Condition of Land..........     21

         0.       Power Plants.....................................     22

         P.       Agreement with Surface Owner.....................     23

         Q.       Drilling Mud.....................................     23

         P.       Facility Sites...................................     24

         S.       Construction of Terms............................     24

         T.       Spacing, Production, Etc.........................     24

         U.       Drilling - Notice - Plan.........................     25

         V.       Drilling, Etc. - Circulating Medium..............     25

         W.       Generating Plants - Approval.....................     25

14.      LIENS.....................................................     26

15.      ASSIGNMENT OF SUBLEASE....................................     26

16.      INDEMNITY.................................................     27

17.      LIABILITY INSURANCE.......................................     28

18.      BOND REQUIREMENTS.........................................     29

19.      REVOCATION................................................     30

20.      SURRENDER.................................................     31

21.      ACCEPTANCE OF RENT AND ROYALTIES NOT A WAIVER.............     33

22.      EXTENSION OF TIME OF PERFORMANCE..........................     33

23.      NO WARRANTY OF TITLE......................................     34



                                      iii

                                                                      Page No.
                                                                      --------

24.      COMMINGLED PRODUCTION - PLANS - APPROVAL -
         ACCURACY..................................................     35

25.      SUSPENSION OF OPERATIONS..................................     36

26.      DILIGENT OPERATIONS REQUIRED..............................     37

27.      PRODUCTION OF BY-PRODUCTS.................................     37

28.      RECORDS AND REPORTS.......................................     38

29.      FORCE MAJEURE.............................................     40

30.      UNIT OR COOPERATIVE PLANS.................................     41

31.      NOTICES...................................................     41

32.      RESTORATION OF PREMISES...................................     42

33.      HEADINGS..................................................     42

34.      REFERENCE.................................................     42

35.      INSOLVENCY................................................     42

36.      SUBSIDENCE................................................     43

37.      WORKMEN'S COMPENSATION INSURANCE..........................     43

38.      SUCCESSORS................................................     43

39.      SEVERABILITY..............................................     44

40.      GEOTHERMAL OWNERSHIP......................................     44

41.      LEASE TERMS: V. REGULATION 8..............................     44



                                       iv




                                 STATE OF HAWAII

                   DEPARTMENT OF LAND AND NATURAL - RESOURCES

                    GEOTHERMAL RESOURCES MINING LEASE NO. R-2



         THIS INDENTURE OF LEASE, made this 20th day of February, 1981, pursuant
to Chapter 182, Hawaii Revised Statutes, and the rules and regulations
promulgated thereunder, by and between the STATE OF HAWAII, by its Board of Land
and Natural Resources, hereinafter called the "Lessor", and KAPOHO LAND
PARTNERSHIP, a Hawaii Limited Partnership, whose business and post office
address is P.O. Box 374, Hilo, Hawaii 96720 respectively, hereinafter called the
"Lessee",

                              W I T N E S S E T H:
                              - - - - - - - - - --

         1. LEASE

              Subject to the provisions of paragraph 23 entitled "No Warranty of
Title", Lessor, in consideration of the royalties, rental, and other monetary
considerations, agreements and stipulations herein contained, does hereby lease
unto the Lessee the right to develop geothermal resources and geothermal
by-products in and under that certain parcel of land, hereinafter designated as
the "leased lands", described in Exhibit "A" containing approximately 815.7997
acres situated at Kapoho, Puna, Hawaii, as shown on the map marked Exhibit "B",
which exhibits are attached and made a part hereof.

              The Lessee shall have the sole and exclusive right to drill for,
produce and take geothermal resources from the leased lands and occupy and use
so much of the surface of the leased lands as may be reasonably required
pursuant to the provisions of section 182-3 of the Hawaii Revised Statutes and
section 6.1 of the regulations. Lessee agrees to comply with these provisions
and to save and hold the Lessor harmless with respect to the claims made under
said



statute and regulations by the owners and occupiers of the surface of the leased
lands. This Lease does include the right to reinject beneath the leased lands
geothermal fluids subject to the prior written approval of the Lessor and upon
such terms and conditions as the Lessor considers to be in the public interest
and include any other right as may be necessary to produce the geothermal
resources. This Lease does not confer upon the Lessee the privilege or right to
store hydrocarbon gas beneath the leased lands; nor does this Lease confer upon
the Lessee any other privilege or right not expressly given herein.

              This Lease is entered into with the agreement that its purposes
are and its administration shall be consistent with the principle of multiple
use of public lands and resources; this Lease shall allow co-existence of other
permits or leases of the same lands for deposits of other minerals under
applicable laws, and the existence of this Lease shall not preclude other uses
of the leased lands. However, operations under such other permits or leases or
other such uses shall not unreasonably interfere with or endanger operations
under this Lease, nor shall operations under this Lease unreasonably interfere
with or endanger operations under any permit, lease, or other entitlement for
use issued or held pursuant to the provisions of any other law. Nor shall this
Lease be construed as superseding the authority which the head of any State
department or agency has with respect to the management, protection, and
utilization of the State lands and resources under his jurisdiction. The State
may prescribe in its rules and regulations those conditions it deems necessary
for the protection of resources.

         2. RESERVATION TO LESSOR

              All rights in the leased lands not granted to the Lessee by this
Lease are hereby reserved to the Lessor. Without limiting the generality of the
foregoing such reserved rights include:

                                       2


              A. Disposal - If the State owns the surface of the land, the right
to sell or otherwise dispose of the surface of the leased lands owned by the
State or to sell or dispose of any other resource in the leased lands under
existing laws, or laws hereafter enacted subject to the rights of the Lessee
under this Lease. Nothing provided herein shall be construed to authorize or
provide for the sale or disposition of the surface of reserved or other
privately owned lands.

              B. Rights-of-way - The right to authorize geological and
geophysical explorations on the leased lands which do not interfere with or
endanger present operations or reasonable prospective operations under this
Lease, and if the State owns the surface of the land the right to grant such
easements or rights-of-way for joint or several use upon, through or in the
leased lands for steam lines and other public or private purposes which do not
interfere with or endanger present operations or reasonable prospective
operations or facilities constructed under this Lease. Nothing provided herein
shall be construed as a grant or the right to grant an easement or right-of-way
upon reserved or other privately owned lands.

              C. Certain Mineral Rights - The right to extract at its sole cost
and expense and own oil, hydrocarbon gas, and helium from all geothermal steam
and associated geothermal resources produced from the leased lands; provided,
however that such extraction and ownership rights shall be exercised by Lessor
in such manner as will not unduly interfere with the rights of Lessee under this
Lease.

              D. Casing - If the State owns the surface of the land, the right
to acquire the well and casing when the Lessee finds only potable water, and
such water is not required in lease operations; and

                                       3


              E. Measurements - The right to measure geothermal resources and to
sample any production thereof.

         3. TERM

              A. Primary Term, Extended Term, Maximum Term

              This Lease shall be for a term of ten (10) years from and after
the effective date of this Lease pursuant to Rule 3.11 of the Regulations,
(hereinafter referred to as the "primary term"), and for so long thereafter as
geothermal resources are produced or utilized in commercial quantities, provided
that the maximum term of this Lease shall not exceed sixty-five (65) years;
provided, however, that if the primary term or the maximum term for geothermal
leases should be extended by statute, retroactively, such extended terms shall
be applicable to this Lease, or should said terms be extended generally by
statute, such extended terms may be made applicable to this Lease upon such
other terms and conditions as the Board may determine. Production or utilization
of geothermal resources in commercial quantities shall be deemed to include the
completion of one or more wells capable of producing geothermal resources for
delivery to or utilization by a facility or facilities not yet installed but
scheduled for installation not later than fifteen (15) years from the date of
commencement of the primary term of this Lease.

              B. Extension of Lease Beyond Primary Term by Drilling Operations

              If at the expiration of the primary term hereof geothermal
resources in commercial quantities are not being produced from the leased lands,
but the Lessee is actively engaged in drilling operations designed to drill
below the depth of 1,000 feet, or, to a production zone at a lesser depth in a
diligent manner, this Lease shall be continued for so long thereafter as such
operations are continued with no cessation thereof for more than 180 days, but
not to exceed a period of five (5) years, and if such drilling operations are
successful, as long thereafter

                                       4


as geothermal resources are being produced or utilized in commercial quantities
except for the sixty-five (65) year limit provided above.

              C. Shut-in Production

              If the Lessee has voluntarily shut-in production for lack of a
market, but is proceeding diligently to acquire a contract to sell or to utilize
the production or is progressing with installations needed for production, this
Lease shall continue in force upon payment of rentals for the duration of the
primary term or for five (5) years after shut-in, whichever is longer. The
Chairman shall continue to review this Lease every five (5) years until
production in commercial quantities occurs or this Lease is terminated by Lessor
for Lessee's lack of due diligence or is surrendered by the Lessee. When
production and sale or utilization of geothermal resources in commercial
quantities has been established, the term of this Lease shall continue as
provided in Paragraph A of this paragraph 3.

              D. Drilling or Reworking Operations After Cessation of Production

              If production of geothermal resources should cease by reason of a
deadline in the productive capacity of existing wells after expiration of the
primary term, or before the end of the primary term if production has commenced,
this Lease shall continue so long as Lessee actively and continuously engages in
drilling or reworking operations which shall be commenced within One Hundred
Eighty (180) days after cessation of production. Continuous drilling or
reworking operations shall be deemed to have occurred where not more than One
Hundred Eighty (180) days elapse between cessation of operations on one well and
commencement of operations on the same or another well. If such operations are
continued and if they are successful, this Lease shall continue as long
thereafter as geothermal resources are being produced in commercial quantities,
except for the sixty-five (65) year limit provided above.

                                       5


         4. RENTALS

              A. Amount and Time of Payment

              The first year's annual rent shall be paid pursuant to Rule 3.12.
Thereafter, Lessee shall pay to Lessor at the Department, in advance each year
on or before the anniversary date hereof, the annual rental of EIGHT HUNDRED AND
SIXTEEN DOLLARS ($816.00)

              B. Credits Against Royalties

              The annual rental due and paid for each year shall be credited
against any production royalties due and accrued during the same year. Annual
rentals paid for a given year shall not be credited against production royalties
due in future years.

         5. ROYALTIES

              A. For Period of Initial Thirty-five Years

              For the primary ten (10) year term and during the first
twenty-five (25) years thereafter Lessee shall pay to Lessor the following
royalties on production measured and computed in accordance with the
regulations:

              1    Geothermal Resources (Excluding Geothermal By-products)
                   A royalty of ten (10%) percent of the gross proceeds received
                   by the Lessee from the sale or use of geothermal resources
                   produced from the leased lands and measured at the wellhead
                   without any deduction for treating, processing and
                   transportation cost, notwithstanding Rule 3.13b. of
                   Regulation 8.

              2.   Geothermal By-Products
                   Five (5%) percent of the gross proceeds received by the
                   Lessee from the sale of any such by-product produced under
                   this Lease, including demineralized or desalted water, after
                   deducting the treating, processing and transportation costs
                   incurred.

              In the event that geothermal resources hereunder is not sold to a
third party but is used or furnished to a plant owned or controlled by the
Lessee, the gross proceeds of such production for the purposes of computing
royalties hereunder shall be that which is reasonably

                                       6


equal to the gross proceeds being paid to other geothermal producers for
geothermal resources of like quality under similar conditions without deducting
any treating, processing and transportation costs incurred, notwithstanding Rule
3.l3b. of Regulation 8.

              No payment of royalty will be required on water if it is used in
plant operation for cooling or generation of electric energy or is reinjected
into the sub-surface. No royalty shall be paid for geothermal by-products used
or consumed by Lessee in his production operations.

              Gross proceeds shall not be deemed to include excise, production,
severance or sales taxes or other taxes imposed on the Lessee by reason of the
production, severance or sale of geothermal resources or geothermal by-products.

              B. Readjustment After Thirty-five Years

              Royalty rates on geothermal resources and geothermal by-products
shall be readjusted, subject to the limitations specified in the regulations and
in accordance with the procedures prescribed therein at the expiration of the
thirty-fifth (35th) and fiftieth (50th) years of the Lease; provided, however,
that such readjustment shall be only as to the royalty rate and not as to the
basis for determining payment to the Lessor.

              If the royalty rates for any ensuing period have not been
determined prior to the expiration of the preceding period, the Lessee shall
continue to pay the royalty rates effective for the previous period, but the
Lessee shall, within thirty (30) days after the new royalty rates have been so
determined, pay the deficiency, if any.

              C. Deadline for Royalty Payments

              The Lessee shall make payments of royalties to the Lessor within
thirty (30) days after the end of each calendar month following such production
and accompany such payment with a certified true and correct written statement
by the Lessee, showing the amount of geothermal resource and geothermal
by-product produced, sold, used and/or otherwise disposed

                                       7


of and the basis for computation and determination of royalties. The Lessee
shall furnish such other data as may be necessary to enable the Lessor to audit
and verify all royalties due and payable to the Lessor.

              D. Royalties-Production (absolute open flow potential)

              If the Lessee supplies steam to any electrical generating facility
from wells on both the leased lands and other lands and there is producible from
all such wells in aggregate a quantity of steam greater than the maximum
quantity utilizable by said electrical generating facility, Lessee agrees to
produce and sell or use steam from the leased lands in a proportion no less than
the proportion that the absolute open flow potential (the absolute open flow
potential as used herein is the rate of flow in pounds of steam per hour that
would be produced by a well if the only pressure against the face of the
producing formation in the well bore were atmospheric pressure) of the wells on
the leased lands bears to the total absolute open flow potential of all such
wells from which Lessee supplies steam to such electrical generating facility.
For purposes of this section it shall be deemed that the Lessee supplies steam
from a well to an electrical generating facility when such well is capable of
producing geothermal resources in commercial quantities to such facility. The
absolute open flow potential of all such wells whether on the leased lands or
other lands shall be determined by the Lessor and shall be based upon tests
performed by the Lessee as prescribed by the Lessor. In this regard, Lessee
shall, upon completion of each of such wells, and prior to the placing of such
wells on commercial production, perform, and deliver to the Lessor the results
of, the following tests:

              1. Pressure Test - Pressure-buildup tests to determine static
         reservoir pressure and well bore conditions. If pressure-buildup tests
         are based on shut-in wellhead data, then static well bore temperature
         surveys must also be conducted:

                                       8


              2. Isochronal Flow Tests - Isochronal flow tests or two rate flow
         tests to establish a back pressure curve and the absolute open flow
         potential;

              3. Other Tests-Static Reservoir Pressure - Other tests as deemed
         to be necessary by the Lessor.

              After commencement of commercial production from each of such
         wells, Lessee shall annually, or more frequently if requested by the
         Lessor, determine static reservoir pressure and complete any other
         tests as specified by the Lessor.

              E. Geothermal By-Products Testing

              The Lessee shall furnish the Chairman the results of periodic
tests showing the content of by-products in the produced geothermal resources.
Such tests shall be taken as specified by the Chairman and by the method of
testing approved by him, except that tests not consistent with industry practice
shall be conducted at the expense of the Lessor.

              F. Interest and Penalties

              1. Interest - It is agreed by the parties hereto that any
royalties, rentals, or other monetary considerations arising under the
provisions of this Lease and not paid when due as provided in this Lease, shall
bear interest from the day on which such royalties, rentals, or other monetary
consideration were due at the rate of 12% per annum or such higher rates as may
be permitted by law until such royalties, rentals, or other monetary
considerations shall be paid to the Lessor.

              2. Penalty - It is agreed by the parties hereto that any
royalties, rentals or other monetary considerations arising under the provisions
of this Lease and not paid when due as provided in this Lease, shall be subject
to a five (5%) percent penalty on the amount of any such royalties, rentals,
percentage of net profits, or other monetary considerations arising under the
provisions of this Lease.

                                       9


              3. Definition of Royalties, etc. - It is agreed by the parties
hereto that, for the purpose of this section, "royalties, rentals or other
monetary considerations arising under the provisions of this Lease and not paid
when due" includes but is not limited to any amounts determined by the Lessor to
have been due to the Lessor if, in the judgment of the Lessor, an audit by the
Lessor of the accounting statement required by paragraph 28 below shows that
inaccurate, unreasonable or inapplicable information contained or utilized in
the statement resulted in the computation and payment to the Lessor of less
royalties, rentals, or other monetary considerations than actually were due to
the Lessor.

         6. REQUIREMENT TO COMMENCE MINING OPERATIONS

              Lessee shall commence mining operations upon the leased lands
within three years from the effective date of this Lease, excluding any research
period which has been granted; provided, that so long as the Lessee is actively
and on a substantial scale engaged in mining operations on at least one
geothermal resources mining lease, the covenant to commence mining operations
shall be suspended as to all other leases held by the Lessee, covering lands on
the same island.

         7. TAXES

              A. Real Property Taxes

              Lessee shall pay any real property taxes levied on that portion of
the surface of the leased lands utilized by Lessee, according to the value
allocated thereto by Lessor or other appropriate State or County agency based on
the use of the surface of the portion of the land by Lessee and the use of the
remainder of the land by others entitled thereto. Lessee shall also pay any real
property taxes levied on the structures and improvements placed thereon and
utilized by Lessee; provided that all subsurface rights and any geothermal
resources underlying the leased lands under this Lease shall be deemed to have
only nominal value for real property tax

                                       10


assessment purposes until such time, if any, as specifically authorized by law.
If Lessor has exercised its rights under paragraph 2 herein, said taxes shall be
prorated according to Lessee's interests.

              B. Other Taxes

              Royalties paid hereunder shall be in lieu of any severance or
other similar tax on the extracting, producing, winning, beneficiating,
handling, storage, treating or transporting of geothermal resources or any
product into which the same may be processed in the State of Hawaii;
nevertheless, if any such tax should be assessed, then such tax shall be
deducted from any royalties otherwise due hereunder. As to any and all other
taxes of any nature assessed upon geothermal resources or geothermal by-products
therefrom or assessed on account of the production or sale of geothermal
resources or geothermal by-products from the leased land, Lessor and Lessee each
shall bear such tax in proportion to its respective fractional share of the
value of such production.

         8. UTILITY SERVICE

              Lessee shall be responsible for all charges, duties and rates of
every description, including water, electricity, sewer, gas, refuse collection
or any other charges, arising out of or in connection with Lessee's operations
hereunder.

         9. SANITATION

              Lessee shall keep its operations and improvements in a strictly
clean, sanitary and orderly condition.

         10. WASTE: USE OP PREMISES

              a. Lessee shall not commit, suffer or permit to be committed any
waste, nuisance, strip mining or unlawful use of the leased lands or any part
thereof.

                                       11


              b. Negligence - Breach - Non-Compliance - Lessee shall use all
reasonable precautions to prevent waste of, damage to, or loss of natural
resources including but not limited to gasses, hydrocarbons and geothermal
resources, or reservoir energy on or in the leased lands, and shall be liable to
the Lessor for any such waste, damage or loss to the extent that such waste,
damage, or loss is caused by (1) the negligence of Lessee, its employees,
servants, agents or contractors; (2) the breach of any provision of this Lease
by Lessee, its employees, servants, agents or contractors, or non-compliance
with applicable federal, state or county statutes or rules and regulations;
provided, however, that nothing herein shall diminish any other rights or
remedies which the Lessor may have in connection with any such negligence,
breach or non-compliance. With respect to any other such waste damage or loss,
Lessee agrees to indemnify, save the Lessor harmless and, at the option of the
Lessor, defend the Lessor from any and all losses, damages, claims, demands or
actions caused by, arising out of, or connected with the operations of the
Lessee hereunder as more specifically provided under paragraph 16 hereof. Lessee
shall not be obligated to defend the Lessor's title to geothermal resources.

         11. COMPLIANCE WITH LAWS

              Lessee shall comply with all valid requirements of all municipal,
state and federal authorities and observe all municipal, state and federal laws
and regulations pertaining to the leased lands and Lessee's operations
hereunder, now in force or which may hereafter be in force, including, but not
limited to, all water and air pollution control laws, and those relating to the
environment; provided, however, no revision or repeal of the regulations as
defined in paragraph 34 subsequent to the effective date hereof shall change the
rental, royalty rate, term, or otherwise substantially change the economic terms
under this Lease; provided, further, however, that the State of Hawaii, acting
in its governmental capacity, may by such regulations or amendments thereto made
at any time regulate the drilling, location, spacing, testing, completion,
production,

                                       12


operation, maintenance and abandonment of a well or wells or similar activity as
well as the construction, operation and maintenance of any power plant or other
facilities in the exercise of its police powers to protect the public health,
welfare and safety as provided in the regulations.

              Lessee shall have the right to contest or review, by legal
procedures or in such other manner as Lessee may deem suitable, at its own
expense, any order, regulation, direction, rule, law, ordinance, or requirement,
and if able, may have the same cancelled, removed, revoked, or modified. Such
proceeding shall be conducted promptly and shall include, if Lessee so decides,
appropriate appeals. Whenever the requirements become final after a contest,
Lessee shall diligently comply with the same. Lessee also agrees that in its
employment practices hereunder it shall not discriminate against any person
because of race, color, religion, sex, ancestry or national origin.

         12. INSPECTION OP PREMISES AND RECORDS

              Lessor, or persons authorized by the Lessor, shall have the right,
at all reasonable times, to go upon the leased lands for the purpose of
inspecting the same, for the purpose of maintaining or repairing said premises,
for the purpose of placing upon the leased lands any usual or ordinary signs,
for fire or police purposes, to protect the premises from any cause whatever, or
for purposes of examining and inspecting at all times the operations of Lessee
with respect to wells, improvements, machinery, and fixtures used in connection
therewith, all without any rebate of charges and without any liability on the
part of the Lessor for any loss of occupation or quiet enjoyment of the premises
thereby occasioned.

              Lessor or its agents may at reasonable times inspect the books and
records of Lessee with respect to matters pertaining to the payment of royalties
to Lessor. Complete information shall be made available to Lessor. In addition,
qualified representatives and/or consultants designated by Lessor may examine
the reports specified in this Lease and all other

                                       13


pertinent data and information regarding wells on the leased lands and
production therefrom. In the event of surrender of all or a part of the leased
lands Lessee shall furnish Lessor all data with respect to such surrendered
lands including interpretations of such data for use in future lease
negotiations with third parties. Lessee agrees on written request to furnish
copies of such information to Lessor's qualified representatives or consultants.

         13. GEOTHERMAL OPERATIONS

              Lessee shall carry on all work hereunder with due regard for the
preservation of the property covered by this Lease and with due regard to the
safety and environmental impact of its operations and in accordance with the
following terms and conditions:

              A. Removal of Derrick. Lessee shall remove the derrick and other
equipment and facilities within sixty (60) days after Lessee has ceased making
use thereof in its operations.

              B. Operating Sites. All permanent operating sites shall be
landscaped or fenced so as to screen them from public view to the maximum extent
possible, as required in the discretion of the Department of Land and Natural
Resources. Such landscaping or fencing shall be approved in advance by the
Lessor and kept in good condition.

              C. Site Selection. Prior to commencing a particular operation on
the surface of the leased lands, Lessee will consult with the occupier and
submit the details concerning the proposed operation, such as the location or
route of any drill site, facility site, installation site, surface area, road,
pond, pipeline, power line, or transmission line, as the case may be, to the
occupier by certified mail for the occupier's approval. If the occupier does not
approve such proposal, occupier will submit within thirty (30) days an alternate
written proposal. If occupier does not submit an alternate proposal, Lessee may
proceed with its operation as originally proposed, subject to the provisions of
paragraph 23. If the occupier and Lessee cannot agree, the matter will be
submitted to arbitration.

                                       14


              D. Drilling Operations. All drilling ahd production operations
shall be conducted in such manner as to eliminate as far as practicable dust,
noise, vibration, or noxious odors. The operating site shall be kept neat, clean
and safe. Drilling dust shall be controlled to prevent widespread deposition of
dust. Detrimental material deposited on trees and vegetation shall be removed.
Lessee will take such steps as may be required to prevent damage to crops. The
determination as to what is detrimental will be made by the Lessor.

              No well shall be drilled within five hundred (500) feet of any
residence or building on the leased lands without first obtaining the occupier's
written consent.

              In any well drilled by Lessee hereunder sufficient casing shall be
set and cemented so as to seal off surface and subsurface waters, any of which
would be harmful to agricultural or other operations.

              E. Water Quality - Waste Disposal. Lessee shall file with the
Lessor a report of any proposed waste discharge.

              Wastes shall be discharged in accordance with requirements and
prohibitions prescribed by the Lessor. The Lessor and any other state agency
having jurisdiction over the affected lands shall also approve the place and
manner of such waste disposal.

              F. Fish and Game Notice - Interference. Lessee shall communicate
with the Division of Fish and Game prior to any operations which may adversely
affect fish and wildlife resources. Lessee shall conduct its operations in a
manner which will not interfere with the right of the public to fish upon and
from the public lands of the State and in the waters thereof or will not
preclude the right of the public to use of public lands and waters.

              G. Damage to Terrain. Any operations disturbing the soil surface,
including road building and construction and movement of heavy equipment in
support of or relating to specific

                                       15


geothermal exploration or development activities shall be conducted in such
manner as will not result in unreasonable damage to trees and plant cover, soil
erosion, or in degradation of waters of the State, including fish and aquatic
life habitat. Lessee will conduct its operations in a manner that will not
unreasonably interfere with the enjoyment of the leased lands by the occupier or
persons residing on or near the leased lands.

              H. Pollution. Pollution of the ocean and tidelands, rivers, or
other bodies of water, and all impairment of and interference with bathing,
fishing, or navigation in the waters of the ocean or any bay or inlet thereof is
prohibited, and no brine, minerals, or any refuse of any kind from any well or
works shall be permitted to be deposited on or pass into waters of the ocean,
any bay or inlet thereof, rivers, lakes or other bodies of water, without
specific written State authorization.

              No Leased Substances which may be produced from any well drilled
upon the leased lands shall be blown, flowed, or allowed to escape into the open
air or on the ground in such a manner as to create a nuisance, which shall
specifically include but not be limited to noise, air or other pollution, and
other activities which disturb the occupier's or his Tenant's use of the leased
lands. Subject to the foregoing, Lessee may bleed Leased Substances to the
atmosphere so long as such operations are lawfully and prudently conducted in
accordance with good geothermal drilling and production practices and are not
otherwise violative of the provisions of this Lease.

              I. Filled Lands. No permanent filled lands, piers, platforms, or
other fixed or floating structures in, on, or over any tide and submerged lands
covered by this Lease or otherwise available to Lessee shall be permitted to be
constructed, used, maintained, or operated without obtaining any and all permits
required under applicable State and Federal law, rules and

                                       16


regulations, and complying with all valid ordinances of cities and counties
applicable to Lessee's operations, and without securing the written permission
of the Lessor specifically authorizing the activity.

              J. Road Maintenance. Lessee will take such steps at Lessee' s own
expense as are necessary to insure that its roads, well sites, plant sites and
other operation areas will be kept as dust free as is practicable so that dust
will not decrease the market value of adjacent growing crops or interfere with
the occupier's or his tenant's uses.

              Lessee will use existing roads where such are available for its
operations. All roads, bridges and culverts used by Lessee will be maintained by
it and roads surfaced or treated in a manner that will prevent dust from
interfering with agricultural or residential use of the leased lands. Lessee
shall be responsible for the maintenance of and repair of damages caused to
roads used by Lessee on or serving the leased lands. The occupier and Lessor and
their agents, tenants and licensees shall have the full use of roads constructed
by Lessee but shall be responsible for the repair of any unusual damage caused
to such roads by their use. In constructing roads, Lessee shall install
necessary culverts or bridges so as not to interfere with the irrigation or
drainage of the leased lands.

              K. Timber Damaged. In the absence of any agreement to the
contrary, timber damaged, destroyed, or used on the leased lands shall be
compensated for at market value to the surface owner. Borrow pit material shall
not be obtained from the leased lands without permission and payment of market
value to the surface owner.

              L. Improvements - Protection from Damage. Improvements,
structures, telephone lines, trails, ditches, pipelines, water developments,
fences, crops and other property of

                                       17


the State or surface owners, other lessees or permittees shall be protected from
damage and repaired or replaced by Lessee when damaged by Lessee.

              M. Damages - Payment. In the event any buildings or personal
property or crops shall be damaged or destroyed because of Lessee's operations
on the leased lands, then Lessee shall be liable for all damages occasioned
thereby. Lessee in its operations on the leased lands shall at all times have
due and proper regard for the rights and convenience, and the health, welfare
and safety of the occupier and of all tenants and persons lawfully occupying the
leased lands. In the event that Lessee's operations result in any condition,
including but not limited to water table or deposition of chemicals, or harmful
substances, which adversely affects the continued production of crops or then
beneficial uses and purposes of the land, occupier at his option may require
Lessee to reimburse the occupier, his tenants and persons lawfully occupying the
leased lands as to the affected acreage in accordance with subparagraphs N 1 and
2 of this paragraph 13.

              N. Damages to Surface or Condition of Land. Lessee shall pay the
surface owner for the surface of each acre of land or fraction thereof utilized,
taken or used or rendered substantially unusable by the Lessee in its
operations, pursuant to the terms of this Lease, for farming or stock raising
operations or other uses or purposes for which the land is then being used or
for which the surface owner had made other plans, which shall include, but not
be limited to, the lands occupied by drill sites, facility sites, roadways
constructed by Lessee, ponds, pipelines, utility lines, power and transmission
lines, production facilities, and other facilities and structures, together with
other uses of the surface, save and except certain plants and buildings provided
for in subparagraph O below, in accordance with one of the following methods to
be elected by surface owner.

                                       18


              1. Lessee shall pay the surface owner annually from the date of
acquisition a rental equivalent to the fair rental value which is being paid
each year for like property.

              2. Lessee shall pay surface owner severance damages if any to the
surrounding land and purchase the surface acreage required by Lessee for its
fair market value with right of surface reverter in the surface owner when no
longer utilized by Lessee in its operations.

              O. Power Plants. In the event Lessee, or a public utility,
pursuant to Lessee's operations hereunder, desires to construct any plant or
building site and is required to have fee title for such purpose, then Lessee
shall pay occupier the fair market value for the surface of such plant or
building site and the severance damages, if any, to the parcel from which such
plant or building site is taken.

              P. Agreement with Surface Owner. In the event that the Lessor does
not own the surface of the leased lands and if the geothermal developer who is
responsible for developing the resources on the leased lands enters into a lease
with the surface owner, then the provisions of such lease from the surface owner
shall supercede the foregoing paragraphs 13.K. through 13.0 and 14 relating to
surface use, and such paragraphs shall thereafter have no force and effect where
it is inconsistent with the lease with the surface owner.

              Q. Drilling Mud. Drilling mud shall be ponded in a safe manner and
place, and where required by the Lessor, posted with danger signs, and fenced to
protect persons, domestic animals, and wildlife. Upon completion of drilling,
the mud shall be disposed of, or after drying in place, covered with a
protective layer of soil.

              Lessee agrees to fence all sump holes and excavations and all
other improvements, works, or structures which might interfere with or be
detrimental to the activities

                                       19


of the occupier or other adjacent or nearby users of the land, and to build
sumps and to take all reasonable measures to prevent pollution of surface or
subsurface waters on or in the leased lands. Upon abandonment of any well on the
leased lands, or on the termination of this Lease, or upon quitclaim or reverter
of any leased land by Lessee, then as to such leased land Lessee shall level and
fill all sump holes and excavations shall remove all debris, and shall leave
those areas of the leased lands used by Lessee in a clean and sanitary condition
suitable for farming or in the condition it was at the inception of this Lease
if its use was other than farming, and shall pay the occupier for all damages to
occupier's buildings, structures, or other property caused by Lessee.

              R. Facility Sites. Areas cleared and graded for drilling and
production facility sites shall be kept to a reasonable number and size, and be
subject to Lessor's approval.

              Unless economic and technological considerations will not permit,
wells will be drilled directionally in order to minimize the number of drill
sites required. Well sites and facility sites will be shaped and located to the
extent practicable to interfere as little as possible with the occupier's
operations including the spacing, location and operation of the occupier's
improvements, planned and contemplated uses, grading, utility and drainage
systems, and roads, and to prevent undue interference or danger to the
occupier's or his tenant's farming and other operations. Where economically and
technologically feasible, wells shall be drilled directionally from a single
well site. Drill sites may also be located on unused portions of the leased
lands. The drill sites will not ordinarily exceed five (5) acres in size but
will vary in accordance with the number of wells drilled from such site and the
amount of production equipment placed thereon. Plant or facility sites will be
limited in size to approximately ten (10) acres per site.

              S. Construction of Terms. The above are in addition to, and not to
be construed as limitations upon, all other

                                       20


rules, regulations, restrictions, mitigation measures and all other measures
designed to restrict, limit, modify or minimize the environmental impact of
operations carried out pursuant to this Lease as set forth in this Lease.

              T. Spacing, Production, Etc. The Lessor may determine the spacing
of wells and the rate of development and production of such wells to prevent the
waste of geothermal resources and to promote the maximum economic recovery from,
and the conservation of reservoir energy in, each zone or separate underground
source of geothermal resources. Such determination shall be based on recognized
engineering standards and shall be consistent with prevailing economic and
market conditions.

              U. Drilling - Notice - Plan - Lessee, before commencing the
drilling of a well, shall notify the Lessor of its intention to drill, and such
notice shall contain the location and elevation above sea level of derrick,
proposed depth, bottom hole location, casing program, proposed completion
program and the size and shape of drilling site, excavation and grading planned,
and location of existing and proposed access roads. Where the surface of the
leased lands is under the jurisdiction of a State agency other than the
Department of Land and Natural Resources, Lessee shall provide at the same time
such information listed above as is pertinent to that agency.

              V. Drilling, etc. - Circulating Medium - All drilling, redrilling,
perforating, or work-over operations within the leased lands shall be done with
an accepted circulating medium.

              W. Generating Plants - Approval - No generating plants, buildings,
structures, production equipment, metering systems, pipelines or roads for the
production, sale or use of geothermal resources (hereinafter referred to as
"geothermal facilities") shall be installed or constructed except on prior
Lessor's approval and the approval of any other governmental agency having
jurisdiction over such installation or construction. Any contract entered into
by Lessee

                                       21


with a Public Utility or any other person or entity for the installation or
construction of geothermal facilities shall contain provisions requiring the
Public Utility, or other person or entity to obtain the approval of the Lessor
and other governmental agencies before installation or construction of
geothermal facilities.

         14. LIENS

              Lessee will not commit or suffer any act or neglect whereby the
estate of the Lessor or the surface owner or occupier of the leased lands shall
become subject to any attachment, lieu, charge or encumbrance whatsoever, and
shall indemnify and hold harmless the Lessor, surface owner and occupier,
against all such attachments, liens, charges and encumbrances and all expenses
resulting from any such act or neglect on the part of the Lessee.

              Lessee will, before commencing construction of any improvements or
any drilling operations or laying any pipe lines or doing any other work on or
within the leased lands, deposit with Lessor, surface owner and occupier of such
lands a bond or certificate thereof naming Lessor, said surface owner and
occupier as obligees in a penal sum of not less than one hundred per cent (l00%)
of the cost of such construction, drilling or pipe line work and in form and
with surety satisfactory to Lessor, the surface owner and occupier guaranteeing
the completion of such work free and clear of all mechanics' and materialmen
liens.

         15. ASSIGNMENT OR SUBLEASE

              Lessee shall have the right to transfer this lease to any person
qualified under the applicable law and regulations by assignment, sublease, or
other transfer, of any nature including the creation of security interests in
Lessee's interest in this Lease and Lessee's rights hereunder, in whole or in
part, and as to all or a part of the leased lands, subject to the approval of
the Lessor, which approval will not unreasonably be withheld. Upon approval,
Lessor may release

                                       22


the transferor from any liabilities or duties except for any liability or duty
which arose prior to such approval.

         16. INDEMNITY

              The Lessee agrees to hold harmless and indemnify the State of
Hawaii and its divisions, departments, agencies, officers, agents and employees,
together with the owner or lessee of the surface of the leased lands, if any,
from any and all liabilities and claims for damages and/or suits for or by
reason of death or injury to any person or damage to property of any kind
whatsoever, whether the person or property of Lessee, his agents, employees,
contractors, or invitees, or third persons, from any cause or causes whatsoever
caused by any occupancy, use, operation or any other activity on the leased
lands or its approaches, carried on by the Lessee, his agents, employees,
contractors, or invitees, in connection therewith; and the Lessee agrees to
indemnify and save harmless the State of Hawaii, the Board, the Chairman, the
Department, owner or lessee of the surface if there be one, and their officers,
agents, and employees from all liabilities, charges, expenses (including counsel
fees) and costs on account of or by reason of any such death or injury, damage,
liabilities, claims, suits or losses.

              The foregoing indemnity specified in this Lease and in the
regulations is not intended to nor shall it be construed to require the Lessee
to defend the Lessor's title to geothermal resources and in case of litigation
involving the titles of the Lessee and the Lessor, Lessee and the Lessor will
join in defending their respective interests, each bearing the cost of its own
defense.

         17. LIABILITY INSURANCE

              Prior to entry upon the leased lands the Lessee or transferee
shall obtain, at its own cost and expense, and maintain in force during the
entire term of this Lease, a policy or policies of comprehensive general public
liability and property damage insurance from any

                                       23


company licensed to do business in the State of Hawaii covering liability for
injuries to persons, wrongful death, and damages to property caused by any
occupancy, use, operations or any other activity on leased lands carried on by
Lessee or transferee, its agents or contractors in connection therewith, in the
following minimum amounts:

              a.   Comprehensive General Bodily Injury Liability - $300,000.00
                   each occurrence, $1,000,000.00 aggregate.

              b.   Comprehensive General Property Damage $50,000.00 each
                   occurrence, $100,000.00 aggregate.

              Liability coverage for injury or damage to persons or property
caused by explosion, collapse and underground hazards are to be included prior
to initiation of operations to drill a well for geothermal discovery, evaluation
or production. Lessee shall evidence such additional coverage to the Chairman
prior to initiation of drilling operations. If the land surface and improvements
thereon covered by this Lease are owned or leased by a person other than the
State of Hawaii, the owner and lessee, if any, of the surface and improvements
shall be a named insured. The State of Hawaii, the Hawaii State Board of Land
and Natural Resources, the Chairman of the Board of Land and Natural Resources,
and the Department of Land and Natural Resources, shall also be named insureds.

              No cancellation provision in any insurance policy shall release
the Lessee of the duty to furnish insurance during the term of this Lease. A
signed and complete certificate of insurance, containing the special endorsement
prescribed in the regulations and indicating the coverage required by this
paragraph, shall be submitted to the Chairman prior to entry upon the leased
lands. At least thirty (30) days prior to the expiration of any such policy, a
signed and


                                       24


complete certificate of insurance, indicating the coverage required by this
paragraph, showing that such insurance coverage has been renewed or extended,
shall be filed with the Chairman.

         18. BOND REQUIREMENTS

              The Lessee and every assignee, sublessee or transferee hereof
shall file with the Board, a bond in the amount of $10,000.00 in a form approved
by the Board and made payable to the State of Hawaii, conditioned upon faithful
performance of all requirements of Chapter 182, Hawaii Revised Statutes, the
regulations thereunder and of this Lease, and also conditioned upon full payment
by the Lessee of all damages suffered by the occupiers of the leased lands for
which Lessee is legally liable. If the Lessee holds more than one (1) geothermal
resources mining lease from the State of Hawaii, it may file with the Board, in
lieu of separate bonds for each lease, a blanket bond in the amount of
$50,000.00.

         19. REVOCATION

              This Lease may be revoked by the Board if the Lessee fails to pay
rentals and/or royalties when due or fails to comply with any of the other terms
of this Lease, law, or regulations, or if the Lessee wholly ceases all mining
operations for a period of one year without the written consent of the Board for
reasons other than force majeure or the production of less than commercial
quantities of geothermal resources or by-products. However, before revocation of
this Lease for defaults other than the failure to pay rents and/or royalties
when due, the Board shall give the Lessee written notice of the claimed default
and an opportunity to be heard within thirty(30) days of such notice. The Lessee
shall be allowed sixty (60) days to correct such default or, if the default is
one that cannot be corrected within sixty (60) days, to commence in good faith
and thereafter proceed diligently to correct such default, following written
notice of a determination after hearing by the Board that such default exists.
Failure to comply with the foregoing shall be deemed sufficient cause for
revocation. Defaults arising because of failure to

                                       25


pay rents and/or royalties when due must be cured within sixty (60) days of a
written notice of default; otherwise this Lease may be revoked. In the
alternative the Lessee may surrender this Lease as hereinafter provided.

              Upon the revocation of this Lease, Lessor shall have the right to
retain the improvements or require the Lessee to remove the same and restore the
leased lands to a similar condition prior to any development or improvements, to
the extent reasonably possible and, upon failure by the Lessee to do so, the
Lessor may recover the cost thereof, in addition to imposing any penalties as
provided by law or regulations.

         20. SURRENDER

              If Lessee has complied fully with all the terms, covenants and
conditions of this Lease and the Regulations, Lessee may surrender, at any time
and from time to time, this Lease in its entirety or with respect to any portion
of the land described in this Lease. For the purposes hereof, if there are no
deficiencies with respect to the land to be surrendered pertaining to public
health, safety, conservation of resources and preservation of the environment,
Lessee will be deemed to have complied fully with all of the terms, covenants
and conditions of this Lease and the Regulations if Lessee shall have paid all
rents and royalties due hereunder and an additional two years' rent for all of
the leased lands or, in the event of a partial surrender, two years' rent
prorated by reference to that portion of land described in this Lease which is
to be surrendered. No deficiencies shall be deemed to exist unless, within sixty
(60) days after delivery of the document of surrender, the Lessor has notified
the Lessee in writing of any deficiency claimed to exist. If there are no
deficiencies as aforesaid, such surrender shall be effective as of the delivery
to Lessor of the document of surrender executed by Lessee describing this Lease
or that portion of the leased lands which is to be surrendered. If there are
claimed deficiencies with respect to the land to be surrendered pertaining to
public health, safety, conservation of resources and

                                       26


preservation of the environment at the time of delivery of the
document, such surrender shall not become fully effective until such time as
such deficiencies have been corrected or determined not to exist. However,
provided that if Lessee corrects such deficiencies within sixty (60) days of
notification thereof, or if the deficiencies cannot be corrected within sixty
(60) days, commences in good faith and thereafter proceeds diligently to correct
such deficiencies, then, in such case, although the surrender shall not be fully
effective upon delivery of the document of surrender, the Lessee shall be
relieved of any other or further obligations and liability as to this Lease or
as to that portion of the leased lands which has been submitted for surrender,
whether such liabilities or duties arise out of this Lease or the Regulations,
including, without limiting the generality of the foregoing, all obligations to
pay rent, to commence mining operations or to be diligent in exploration or
development of geothermal resources. During the notification and correction
periods above described, this Lease shall not be subject to revocation by the
Lessor except for a failure by the Lessee after notification to correct such
deficiencies within the time period and in the manner hereinabove described or a
breach of the terms of this Lease as to any of the remaining leased lands or
rights retained by the Lessee; provided, however, that should Lessee contest the
validity of any claimed deficiency, the Lessee's obligations to correct shall be
suspended pending appeal to and determination by a court of final jurisdiction.
Except as aforesaid, nothing herein contained shall constitute a waiver of any
liability or duty the Lessee may have with respect to the land or Lease
surrendered as a result of any activity conducted on the leased land or under
this Lease prior to such surrender. Upon the surrender of this Lease as to all
or any portion of the land covered thereby, or upon any other termination of
this Lease except by revocation, the Lessee shall be entitled to all equipment,
buildings, and plants placed in and on the leased lands and the Lessor may
require the Lessee to remove the same and restore

                                       27


the premises to a similar condition prior to any development or improvements, to
the extent reasonably possible. This Lease may also be surrendered if as a
result of a final determination by a court of competent jurisdiction, the Lessee
is found to have acquired no rights in or to the minerals on reserved lands, nor
the right to exploit the same, pursuant to this Lease, and, in such event, the
Lessor shall pay over to the person entitled thereto the rentals, royalties and
payment paid to the Lessor pursuant to this Lease.

         21. ACCEPTANCE OF RENT AND ROYALTIES NOT A WAIVER

              The acceptance of rent or royalties by the Lessor shall not be
deemed a waiver of any breach by the Lessee of any term, covenant or condition
of this Lease, nor of the Lessor's right to give notice of default and to
institute proceedings to cancel this Lease in the manner set out in paragraph
19, and the failure of the Lessor to insist upon strict performance of any such
term, covenant or condition, or to exercise any option conferred, in any one or
more instances, shall not be construed as a waiver or relinquishment of any such
term, covenant, condition or option.

         22. EXTENSION OF TIME OF PERFORMANCE

              That notwithstanding any provision contained herein to the
contrary wherever applicable, the Lessor may for good cause, as determined by
the Board, allow additional time beyond the time or times specified herein to
the Lessee, in which to comply, observe and perform any of the terms,
conditions, and covenants contained herein.

         23. NO WARRANTY OF TITLE

              The Lessor does not warrant title to the leased lands or the
geothermal resources and geothermal by-products which may be discovered thereon;
this Lease is issued only under such title as the State of Hawaii may have as of
the effective date of this Lease or may thereafter acquire. If the interest
owned by the State in the leased lands includes less than the entire

                                       28


interest in the geothermal resources and geothermal by-products, for which
royalty is payable, as determined by the courts or otherwise, then the bonus, if
any, rentals, royalties and other monetary considerations paid or provided for
herein shall be paid to the Lessor only in the proportion which its interest
bears to said whole for which royalty is payable, and the Lessor shall be liable
to such persons for any prior payments made and adjudged by the courts or
otherwise; provided, however, that the Lessor shall not be liable for any
damages sustained by the Lessee.

              This Lease is issued subject to all existing valid rights at the
date hereof and such rights shall not be affected by the issuing of this Lease.
In the event the leased lands have been sold by the State, subject to mineral
reservation, Lessee agrees to follow such conditions and limitations prescribed
by law providing for the State, and persons authorized by the State to drill
for, produce and take geothermal resources, and occupy and use so much of the
surface of the leased lands as may be required for all purposes reasonably
connected therewith. Without limiting the effects of the foregoing, where Lessee
is not the surface owner, Lessee agrees that before entering, occupying, or
using any of the surface of the leased lands, for any or all purposes authorized
by this Lease, Lessee will first secure the written consent or waiver of the
owner of the surface of the leased lands or occupier; second, make payment of
the damages to crops or other tangible improvements to the owner thereof; or
third, in lieu of either of the foregoing provisions, execute a good and
sufficient bond or undertaking, payable to and in an amount specified by the
Lessor for the use and benefit of the surface owner or occupier of such land, to
secure payment of such damages to the crops or tangible improvements of the
surface owner or occupier of said land as may be determined and fixed in an
action brought upon the bond or undertaking in a court of competent jurisdiction
against the principal and sureties

                                       29


thereon, such bond or undertaking to be in the form and in accordance with the
rules and regulations. In the event that the State owns only the mineral
resources, this Lease is issued subject to any and all right, title and interest
of the purchaser, title holder or owner of the surface of the leased lands, and
any successor in interest to any such purchaser, title holder or owner of the
leased lands, any other provision in this Lease to the contrary notwithstanding.

         24. COMMINGLED PRODUCTION - PLANS - APPROVALS - ACCURACY

              Subject to testing the absolute open flow potential of wells,
whether on the leased lands or other lands, as set forth in paragraph 5D hereof,
geothermal resources from any two or more wells, regardless of whether such
wells are located on the leased lands, may be commingled when the metering
system used to measure geothermal resources has been approved by the Lessor.
Prior to the installation of the metering system, Lessee shall submit for
approval a schematic drawing of the proposed system and specifications of the
major equipment components. The Lessor will determine if acceptable standards of
accuracy for measuring geothermal resources have been obtained, and may approve
commingling of geothermal resources. The metering equipment shall be maintained
and operated in such a manner as will meet acceptable standards of accuracy. Use
of the equipment shall be discontinued at any time upon determination by the
State that standards of measurement accuracy or quality are not being
maintained, with such commingling stopped until measurement accuracy has been
obtained. In the event that the quality and composition of the geothermal
resources to be commingled are substantially different, it shall not be approved
by the Lessor until acceptable standards and methods of payments are
established. If less than the total flow is to be utilized in a plant or
facility, then the reduction in flow for each well shall be in the proportion
which the total open flow of each contributing well bears to the total open
flows of all contributing wells.

                                       30


         25. SUSPENSION OF OPERATIONS

              In the event of any disaster or pollution, or likelihood of
either, having or capable of having a detrimental effect on public health,
safety, welfare, or the environment caused in any manner or resulting from
operations under this Lease, the Lessee shall suspend any testing, drilling and
production operations, except those which are corrective, or mitigative, and
immediately and promptly notify the Chairman. Such drilling and production
operations shall not be resumed until adequate corrective measures have been
taken and authorization for resumption of operations has been made by the
Chairman.

         26. DILIGENT OPERATIONS REQUIRED

              The Lessee shall be diligent in the exploration and development of
the geothermal resources on the leased lands. Failure to perform diligent
operations may subject this Lease to revocation by the Board. Diligent
operations mean exploratory or development operations on the leased lands
including without limitation geothermal surveys, heat flow measurements, core
drilling, or the drilling of a well for discovery, evaluation, or production of
geothermal resources.

              The provisions hereof shall be construed and applied with
reference and in relation to geological and engineering determinations and
economic and market conditions with respect to geothermal resources in the area
or field in which the leased lands is situated. In the event Lessor believes,
based on reasonable cause, that Lessee has failed to perform diligently, Lessee
may request a hearing and determination, in accordance with paragraph 19 hereof,
of the particulars in which Lessee has failed to conduct diligent operations,
and if after such hearing Lessee is found not to be diligent in its operations,
then if Lessee does not, within ninety (90) days thereafter, commence and in
good faith continue remedying such finding of lack of diligence, Lessor may
revoke this Lease as herein provided.

                                       31


         27. PRODUCTION OP BY-PRODUCTS

              Lessee shall have no obligation to save or process any geothermal
by-products unless such saving or processing, independent of revenues or value
received from the production of other geothermal resources, including other
geothermal by-products, is economically feasible.

         28. RECORDS AND REPORTS

              (a) Accounting Data. No later than the twenty-fifth (25th) day of
every calendar month following the effective date of this Lease, Lessee shall
submit a detailed accounting statement for lease operations specifying all
charges paid and credits received under this Lease, including but not limited to
information showing the amount of gross revenue derived from all geothermal
resources produced, shipped, used or sold and the amount of royalty due. The
Lessee shall, at the option of the Lessor, provide more detailed statements and
explanatory materials to aid the Lessor in interpreting and evaluating Lessee's
accounting statement. All such statements are subject to audit and revision by
the Lessor and Lessee agrees that the Lessor may inspect all Lessee's books,
records and accounts relating to operations under this Lease, including but not
limited to the development, production, sale, use or shipment of geothermal
resources at all reasonable times. Any statutory or other rights that Lessee may
have to object to such inspection by the Lessor are hereby waived.

              (b) Exploration Data. Lessee agrees to supply to the Lessor within
thirty (30) days of the completion thereof, or the completion of any recorded
portion thereof, all physical and factual exploration results, logs, surveys and
any other data in any form resulting from operations under this Lease or from
any surveys, tests, or experiments conducted on the leased lands by Lessee or
any person or entity acting with the consent of Lessee or with information or
data provided by Lessee. Lessee agrees to supply to the Lessor within thirty
(30) days of the completion thereof, or the completion of any recorded portion
thereof, the results of all

                                       32


geological, geophysical or chemical tests, experiments, reports and studies,
including but not limited to reservoir studies and tests, experiments, reports
or studies relating to reinjection or reservoir depletion irrespective of
whether the result of such tests, experiments, reports or studies contain
sensitive or proprietary or confidential information or trade secrets. Lessee
further agrees that any statutory or other rights or objections it may have to
prevent disclosure of any such tests, experiments, reports or studies referred
to in this paragraph by the Lessor are hereby waived. Notwithstanding any
provisions hereof, however, all data and documents supplied by Lessee pursuant
to this section shall be deemed to have been "obtained in confidence" and may be
disclosed to other persons only with the written consent of Lessee or upon a
determination by the Lessor that such disclosure is in the public interest or as
otherwise provided by law or regulation.

              (c) Waiver by Lessee. Lessee hereby waives any and all rights and
objections it may have to prevent an examination of the books and records at
reasonable times of any individual, association, or corporation which has
transported for, or received from Lessee, any geothermal resources produced from
the leased lands. Further, Lessee waives any and all rights and objections it
may have to prevent an examination and inspection of the books and records, at
reasonable times, of any such individual, association or corporation with
respect to such individual's, association's, or corporation's, or to Lessee's
operations, wells, improvements, machinery and fixtures used on or in connection
with the leased lands.

              Lessee does hereby waive any statutory or other right or objection
to prevent disclosure to the Lessor or a duly authorized employee or
representative of the Lessor of any information, reports, data, or studies of
any kind, filed by Lessee with any public agency, federal, state or local,
relating to the leased lands, the geothermal resources thereunder, or any
operations

                                       33


carried out in connection with this Lease irrespective of whether such
information, reports, data, or studies of any kind contain sensitive or
proprietary or confidential information or trade secrets. Any and all such
information, reports, data, or studies of any kind filed by Lessee with any
public agency, federal, state or local, including all information filed with the
Lessor pursuant to any paragraph of this Lease, shall be available at all times
for the use of the Lessor or its duly authorized representatives for any
purpose. Notwithstanding any provisions hereof, however, any information,
reports, data or studies obtained by the Lessor from any public agency and which
are not public records shall be deemed to have been "obtained in confidence" and
may be disclosed to other persons only with the written consent of Lessee or
upon a determination by the Lessor that such disclosure is in the public
interest.

         29. FORCE MAJEURE

              If the Lessee is rendered unable to wholly or in part by force
majeure to carry out its obligations under this Lease, Lessee shall give to
Lessor prompt written notice of the force majeure. Thereupon, any obligations of
the Lessee to perform so far as they are affected by the force majeure shall be
suspended during the continuance of the force majeure and the primary term or
any continuation period shall be extended for a period equal to the period of
suspended performance caused by the force majeure. Lessee shall use all possible
diligence to remove or correct the force majeure, but this shall not require the
settlement of strikes, lockouts or other labor difficulties. In no event shall
any extension affect the sixty-five (65) year maximum term of this Lease.

         30. UNIT OR COOPERATIVE PLANS

              The Lessee may, with the written consent of the Board, utilize the
leased lands or portions thereof under a unit, cooperative or other plan of
development or operation with other

                                       34


State, Federal or privately owned lands for the drilling and production of one
or more wells in accordance with Rule No. 3.15 of the Regulations.

         31. NOTICES

              Pursuant to Rule 8.2 of the Regulations, Lessor may give any
notice or deliver any document hereunder to Lessee by mailing the same by
registered mail addressed to Lessee at P.O. Box 374, Hilo, Hawaii 96720 or by
delivering the same in person to any officer of Lessee. Lessee may give any
notice or deliver any document hereunder to Lessor by mailing the same by
registered mail addressed to Lessor at P.O. Box 621, Honolulu, Hawaii 96709 or
by delivering the same to Lessor in person. For the purposes of this paragraph,
either party may change its address by written notice to the other. In case of
any notice or document delivered by registered mail, the same shall be deemed
delivered when deposited in any United States Post Office, property addressed as
herein provided, with postage fully prepaid.

         32. RESTORATION OF PREMISES

              Upon the revocation, surrender or expiration of this Lease, the
Lessor or surface owner may require the Lessee to restore the leased lands to
their original condition insofar as it is reasonable to do so within ninety (90)
days thereof, except for such roads, excavations, alterations or other
improvements which may be designated for retention by the surface owner, the
Lessor or its agency having jurisdiction over said lands. When determined by the
Lessor, surface owner or such State agency, cleared sites and roadways shall be
replanted with grass, shrubs, or trees by the Lessee.

         33. HEADINGS

              The paragraph headings throughout this Lease are for the
convenience of the Lessor and the Lessee and are not intended to construe the
intent or meaning of any of the provisions thereof.

                                       35


         34. REFERENCE

              Unless specifically indicated otherwise, the regulations referred
to in and governing this Lease shall be Regulation No. 8 relating to Regulations
on Leasing of Geothermal Resources and Drilling for Geothermal Resources in
Hawaii approved and adopted by the Board on March 10, 1978, and all terms used
herein shall be given the meaning as set out in Rule 1.5 of said Regulation 8.

         35. INSOLVENCY

              In the event the Lessee at any time during the term hereof is
insolvent under any of the provisions of the Federal Bankruptcy Act, or makes a
voluntary assignment of his assets for the benefit of creditors, or is adjudged
a bankrupt, either upon Lessee's voluntary petition in bankruptcy, or upon the
involuntary petition of Lessee's creditors, or any of them, or should an
attachment be levied and permitted to remain for any unreasonable length of time
upon or against the interest, rights or privileges of Lessee in or to any
geothermal resources produced from the wells drilled by Lessee upon the leased
lands, then, upon election by the Lessor, all of the interests, rights, and
privileges of Lessee in and to all geothermal resources produced and saved from
the leased lands by reason of Lessee's operations thereon, shall terminate upon
receipt of written notice from the Lessor advising that the State has so
elected. In such event the Lessor shall have, and Lessee, by the acceptance
hereof, hereby gives the Lessor the right, option and privilege to cancel and
terminate this Lease and all of the terms and provisions granted hereby, and all
of the rights and privileges of Lessee in and to or upon the leased lands and in
and to any geothermal resources produced and saved from the leased lands by
reason of Lessee's operations thereon, and all of Lessee's rights and privileges
granted by this Lease shall terminate immediately upon receipt of written notice
from the Lessor that the Lessor has so exercised its option.

                                       36


         36. SUBSIDENCE. Any subsidence to the leased or adjacent lands shall be
considered pursuant to 7.7 of Regulation 8.

         37. WORKMEN'S COMPENSATION INSURANCE

              Lessee shall at all times in any and all operations under this
Lease and in any and all work in and upon the leased lands carry full and
complete Workmen's Compensation Insurance covering all employees.

         38. SUCCESSORS

              The term "Lessor" herein shall mean and include Lessor, its legal
successors and assigns, and the term "Lessee" herein or any pronoun used in
place thereof shall mean and include the masculine or feminine, the singular or
plural number, and jointly and severally individuals, firms or corporations, and
their and each of their respective heirs, successors, personal representatives
and permitted assigns, according to the context hereof.

         39. SEVERABILITY

              If any provision herein is judicially determined, to be invalid,
it shall be considered deleted herefrom and shall not invalidate the remaining
provisions.

         40. GEOTHERMAL OWNERSHIP

              If the Lessee hereunder is the surface landowner it is mutually
agreed that issuance of this Lease by the Lessor and acceptance thereof by the
Lessee shall not be deemed or construed to be a waiver of, and shall be without
prejudice to, any claim of ownership to the geothermal resources by the Lessee
and Lessor incidental thereto.

         41. LEASE TERMS VS. REGULATION 8

              Unless indicated otherwise herein, Regulation 8 shall supersede
any of the lease provisions herein which conflicts with said Regulation.

                                       37


              AND KAPOHO LAND AND DEVELOPMENT CO., LTD., a Hawaii corporation,
and fee simple owner of the land described in Exhibit "A" attached hereto does
hereby consent to the issuance of the foregoing Lease to the Lessee, pursuant to
an assignment of its occupier's rights to the Lessee.

              IN WITNESS WHEREOF, the parties hereto have caused these presents
to be executed the 20th day of February, 1981.

                                         STATE OF HAWAII

APPROVED BY THE BOARD OF LAND            By /s/ Indecipherable
AND NATURAL RESOURCES AT ITS                ----------------------------------
MEETINGS HELD ON
                                            Chairman and Member
    December 17, 1980                       Board of Land and
----------------------------------          Natural Resources

                                         By /s/ Roland Higashi
                                            ----------------------------------
/s/ George R. Ariyoshi                      Member
----------------------------------          Board of Land and
GEORGE R. ARIYOSHI                          Natural Resources
Governor of Hawaii
                                                                        LESSOR
                                         KAPOHO LAND PARTNERSHIP, a
                                         Hawaii Limited Partnership.
                                         By Kapoho Management Co.,
                                         Inc., a Hawaii Corporation,
                                         as its General Partner

                                         By  /s/ C. Arthur Lyman
                                             ----------------------------------
                                             Its Pres

                                         By  /s/ Jane T.K. Lyman
                                             ----------------------------------
                                             Its VP

                                         By  /s/ Albert S. Lyman
                                             ----------------------------------
                                             Its Sec. Treas.






                                       38


                                                                        LESSEE
                                          KAPOHO LAND AND DEVELOPMENT
                                          CO., LTD.

                                          By /s/ C. Arthur Lyman
                                             ----------------------------------
                                             Its V.P.

                                          By /s/ Albert S. Lyman
                                             ----------------------------------
                                             Its Asst. Sec. Treas.
APPROVED AS TO FORM:

Deputy Attorney General



/s/ Indecipherable
----------------------
Dated: 2/9/81





                                       39



CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.





                                                                  Exhibit 10.4.4


                                                                          SBS-10
                                                                        Original

                                GEOTHERMAL LEASE

     THIS LEASE AND AGREEMENT entered into this 20th day of OCTOBER, 1975 by and
between RUTH WALKER COX, A Married Woman, and BETTYE M. SMITH, A Widow,
(hereinafter called "Lessor" whether one or more) and GULF OIL CORPORATION, a
Pennsylvania corporation (hereinafter called "Lessee");

                             W I T N E S S E T H :

     Lessor, in consideration of the sum of Ten Dollars ($10.00) cash in hand
paid, the receipt and sufficiency of which is hereby acknowledged, and of the
covenants and agreements hereinafter contained on the part of the Lessee to be
paid, kept and performed, does hereby grant, demise, lease and let unto the
Lessee the following described land together with any reversionary right therein
(hereinafter called the "Leased Land") situated in the County of WASHOE, State
of NEVADA, and containing approximately 142.71 acres:

     For a description of the demised premises, see Exhibit A.





     For the purpose of and together with the sole and exclusive right and
privilege of exploring, drilling for, producing, extracting, removing,
utilizing, selling and disposing of Geothermal Resources and of extracting
minerals therefrom (hereinafter called "Extractable Minerals") and artificially
injecting fluids and gases into the Leased Land; and constructing, erecting,
using, operating and maintaining upon the Leased Land any and all Facilities as
the Lessee may deem necessary in order to produce, save, utilize and process
Geothermal Resources and Extractable Minerals and in order to generate
electricity from Geothermal Resources; together with ingress and egress upon the
Leased Land in order to exercise any of the rights granted herein. For the
purpose of this Lease "facilities" shall include but not be limited to, wells,
pumps, pipes, pipelines, buildings, plants, sumps, tanks, brine pits,
reservoirs, watertanks, pumping stations, roads, electric power generation
plants, transmission lines, electric, telegraph and telephone lines.

     For the purpose of this Lease: (a) The term "Geothermal Resources" shall
mean all products of geothermal processes, embracing indigenous steam, hot water
and hot brines; steam and other gases, hot water and hot brines resulting from
water, gas, or other fluids artificially introduced into geothermal formations;
and heat or other associated energy found in geothermal formations. (b) The term
"Extractable Minerals" shall mean any mineral or minerals (exclusive of oil and
hydrocarbon gases) which are produced in solution with Geothermal Resources from
any well drilled by Lessee on the Leased Land. Seven (Please Initial) (7) RWC

     This Lease shall be for a term of xxxxxx30 years from the date hereof
(herein called "Primary Term") and so long thereafter as Geothermal Resources or
Extractable Minerals are



being produced in commercial quantities or drilling operations are conducted
either on the Leased Land or on land pooled therewith; all subject to the
following terms and conditions:

     1. Lessee shall pay to the Lessor on or before the last day of the calendar
month after the month of commencement of production in commercial quantities of
Geothermal Resources or Extractable Minerals or both and thereafter on a monthly
basis: (a) A royalty of ***% of the value of the *** produced from the Leased
Land or allocated thereto; and (b) A royalty of ***% of the value of the ***
produced from the Leased Land or allocated thereto.

     It is agreed that "value" shall be deemed to be the gross proceeds from the
sale of the Geothermal Resources or Extractable Minerals, or, if not sold, their
fair market value at the well head if they are used by the Lessee for commercial
purposes other than in the producing or processing of other Geothermal Resources
or Extractable Minerals. If the Lessee elects to process any Extractable
Minerals prior to sale, then the Lessor's royalty shall bear its proportionate
share of the cost of such processing.

     2. Lessee has paid to Lessor the rental in full for a period of one (1)
year from the date hereof. Commencing with the second year of the term hereof
and on each anniversary date thereafter during the Primary Term, if during the
preceding year Lessee has not conducted drilling operations on or if there was
no production from the Leased Land or land pooled therewith then, subject to the
provisions of paragraph 4 hereof, Lessee shall pay or tender to Lessor annually,
in advance, as rental, the sum of See Exhibit "B" (Par. 16) Dollars ($RWC).
For the purposes of calculating any payments hereunder based on acreage, Lessee
may act as if the Leased Land contains the number of acres set forth above
unless the Lessor or Lessee shall obtain a final adjudication that the acreage
is different at which time Lessee shall, as of the next due date, adjust his
payments accordingly but without retroactive obligation. Lessee shall make any
payments hereunder by mailing or delivering a check or draft to Lessor at 105 E.
Edgewater Avenue, Balboa, Ca. 92661.

     3. If Geothermal Resources or Extractable Minerals are found in commercial
quantities in any well or wells drilled on the Leased Land or land pooled
therewith, Lessee may, at any time and from time to time, either before or after
production, suspend or shut-in the operations of such well or wells and
production therefrom. If operations are not being conducted hereunder or if
there is no paying production attributable to this Lease, then commencing with
the first day of the calendar month following the expiration of thirty (30) days
from the date of such suspension or shut-in and on each Lease anniversary date
thereafter, Lessee shall pay Lessor annually an amount equal to the rental
provided for in paragraph 2 above, based upon the number of acres then covered
by this Lease in absence of pooling or unitization, as shut-in royalty until
such time as the operation of one such well is resumed or operations or paying
production attributable to this Lease take place, whichever shall first occur.
The maximum payment for such shut-in royalty in any Lease year shall in no event
be greater than the amount computed for rental in paragraph 2 above regardless
of the number of wells shut-in or suspended in any Lease year. Such shut-in
royalty shall be deemed to be an advance royalty to be repaid to Lessee from
royalties thereafter payable to Lessor hereunder. Any shut-in well for which the
foregoing payment is being paid shall be considered under all the provisions of
this Lease as a producing well.

*** Confidential material redacted and filed separately with the Commission.

                                       2


     4. Lessee may at any time release or surrender this Lease in whole or in
part or as to any zone, strata or depth, by placing of record a release or
quitclaim deed in the county office where this Lease is recorded, and thereupon
Lessee shall be released of all further obligations and duties as to the portion
of the Leased Land so surrendered or released; and thereafter all payments to
Lessor provided for herein, except royalties on actual production, shall be
reduced in the same proportion that the acreage covered hereby is reduced. All
land so surrendered or released shall remain subject to rights-of-way and
easements for facilities necessary or convenient for Lessee's operations on the
Leased Land retained or on land pooled therewith.

     5. No well shall be drilled nearer than 300 feet to any house, barn or
structure now existing on the Leased Land, without the prior written consent of
Lessor. Lessee shall pay for damages caused by its operation to growing crops
and presently existing buildings and roads on the Leased Land. Lessee shall have
the right at any time to remove all facilities placed on the Leased Land
including the right to draw and remove casing. In addition to the right to
produce Geothermal Resources and Extractable Minerals, Lessee shall have the
right to use such water or water rights in, on, produced from or appurtenant to
or crossing the Leased Land as Lessee may reasonably require in connection with
its operations, provided that such use by Lessee of any water or water rights,
as aforesaid, existing as of the date hereof, shall not interfere with Lessor's
requirements for Lessor's own use thereof for domestic or agricultural purposes
on the Leased Land and shall not be in violation of any applicable governmental
law or regulation. Any brine, fluid or surplus water resulting from Lessee's
activities or operations may be disposed of by reinjection or may be utilized or
dealt with by Lessee in such lawful manner as Lessee shall deem appropriate.

     6. Lessee shall pay all taxes levied against its improvements on the Leased
Land. All Taxes assessed against the Geothermal Resources and Extractable
Minerals covered by this Lease, and all taxes, assessments or charges of
whatever kind now or hereafter assessed, levied or collected by reason of the
production, sale or removal of Geothermal Resources or Extractable Minerals from
the Leased Land shall be borne by the parties hereto in the proportion of the
royalty share by Lessor and the remainder by Lessee. Lessor shall pay, before
delinquency, all other taxes and assessments on the Leased Land and improvements
thereon.

     7. Lessee may, at any time and from time to time during the Primary Term
hereof, pool and combine the Leased Land, or any portion thereof, into an
operating unit with other lands in the vicinity, another lease or other leases,
or any portion thereof, when, in the Lessee's judgment, it is necessary or
advisable to do so in order to properly explore or develop or operate the Leased
Land or to prevent waste or to avoid drilling unnecessary wells or to comply
with applicable governmental laws, regulations or orders, provided that the
total acreage in such pooled unit shall not exceed 2,560 acres. Such pooling
shall be effected by Lessee executing and filing in the office where this Lease
is recorded an instrument describing and identifying the pooled acreage. The
production of Geothermal Resources or Extractable Minerals so pooled, and the
development of and operation on any portion of the pooled unit shall be
considered and construed and shall have the same effect, except for the payment
of royalties, as production, development and operation on the Leased Land under
the terms of this Lease. The royalties herein provided shall accrue and be paid
to Lessor on pooled substances produced from any unit in the proportion that
Lessor's interest in the land covered hereby and placed in the unit bears to the
total acreage placed in each unit.


                                       3


     8. Lessee shall have the right at any time to commingle for the purpose of
utilizing, storing, selling or processing Geothermal Resources or Extractable
Minerals produced from the Leased Land or land pooled therewith with like
substances produced from other lands or units.

     9. Upon the violation of any of the terms or conditions of this Lease, by
Lessee and the failure to begin to remedy the same with due diligence within
ninety (90) days after written notice from Lessor so to do, then, at the option
of Lessor, this Lease shall forthwith cease and terminate, and all rights of
Lessee in and to the Leased Land shall be at an end, saving and excepting the
drill site for each producing well in respect of which Lessee is not in default,
and saving and excepting rights-of-way necessary for Lessee's operations The
drill site referred to shall consist of a tract, designated by Lessee, of forty
(40) acres, if there be so much, surrounding each producing well.

     10. The obligations of Lessee hereunder shall be suspended while Lessee is
prevented from complying therewith, in whole or in part, by strike, lockout,
action of the elements, accidents, rules and regulations of the federal, state,
municipal, or other governmental agencies, inability to obtain materials or
supplies in the open market, or other matters or conditions beyond the control
of Lessee, whether similar to matters or conditions herein specifically
enumerated or not.

     11. If Lessor owns less than the entire and undivided fee simple interest
in the Leased Land or the Geothermal Resources and Extractable Minerals, then
royalties and rentals shall be paid to Lessor only in the proportion that his
interest bears to the whole and undivided fee. If Lessor hereafter acquires any
additional interest in the Leased Land, then this Lease shall cover such
after-acquired interest, provided that Lessor's share of rentals shall be
increased to cover the interest so acquired at the next succeeding rental paying
date after Lessee has been notified of such after-acquired interest or of any
reversion having occurred. Any interest in the production from the Leased Land
to which the interest of Lessor may be subject shall be deducted from the
royalties provided for herein.

     12. Lessor hereby warrants and agrees to defend the title to the Leased
Land and agrees that Lessee may at its option pay and discharge any mortgage,
taxes, assessments, or liens or encumbrances existing, levied or assessed upon
the Leased Land and be subrogated to the rights of the holder thereof, and
Lessee shall have the right to apply to Lessee's repayment any rentals or
royalties accruing to the Lessor hereunder.

     13. Any notice from Lessor to Lessee shall be given by sending the same by
registered or certified mail, addressed to Lessee at Gulf Building, 1730 So.
Bellaire St., Denver, Colo. 80222, Attn: Geothermal Operations and any notice
from Lessee to Lessor shall be given by sending the same by registered or
certified mail, addressed to Lessor at 105 E. Edgewater, Balboa, Cal. 92661. The
address of either party may be changed by written notice as provided for above.

     14. If the estate of either party hereto is assigned, and the privilege of
assigning in whole or in part or as to any zone, strata or to any depth is
expressly allowed, the covenants hereof shall extend to such assignee, his
heirs, devisees, executors, administrators, successors, and assigns, but no
change in the ownership of the Leased Land or assignment of rentals or

                                       4


royalties shall be binding on the Lessee until thirty (30) days after Lessee has
been furnished with a written transfer or assignment or certified copy thereof.
Rentals hereunder shall not be apportioned upon an assignment as to a particular
zone, strata or depth, but shall continue as a single obligation to be paid by
either party. In the event of any partial assignment, production in commercial
quantities on any portion of the Leased Land shall continue the Lease in force
as a whole to the same extent as if no assignment had been made. Any assignment
shall, as to the extent of the assignment, relieve and discharge Lessee of all
obligations hereunder and, should the assignee default in any of the obligations
of this Lease, such default shall not operate to invalidate or affect this Lease
insofar as it covers any part of the Leased Land or interest therein not
included in the assignment.

     15. This Lease shall be binding upon the parties hereto, their heirs,
devisees, executors, administrators, successors and assigns, and may be executed
in any number of counterparts with the same force and effect as if all parties
had executed the same instrument. The failure of any person owning an interest
in the Leased Land to execute a geothermal lease covering all or a portion of
the Leased Land or the failure of any person named as a Lessor herein to execute
a counterpart hereof, shall not affect the binding force of this Lease as to
those who have executed or shall execute a counterpart hereof.

     IN WITNESS WHEREOF, this Lease and Agreement is executed as of the date
first above written.


/s/ RUTH WALKER COX                       /s/ BETTYE M. SMITH
-----------------------------------       -----------------------------------
RUTH WALKER COX, A Married Woman,         BETTYE M. SMITH, A Widow.


[Notary Seal]

                                       5



CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                                                  Exhibit 10.4.5

         THIS LEASE, made in duplicate this 1st day of August, 1976, by and
between SOUTHERN PACIFIC LAND COMPANY, a California corporation, hereinafter
called "Lessor" and PHILLIPS PETROLEUM COMPANY, a Delaware corporation,
hereinafter called "Lessee".

         W I T N E S S E T H:

         1. Lessor hereby grants, leases and lets, subject to the provisions
hereof, the exclusive right to explore, prospect, drill for, produce, treat,
extract, take, process, remove and utilize all products of geothermal processes,
including, but not limited to, hot brine, hot water, hot rock, and indigenous
steam; steam and other gases; hot water and hot brines resulting from water, gas
or other fluids (whether liquid or gaseous) artificially introduced into
geothermal formations hereinafter referred to as "geothermal energy"; and any
mineral or minerals (exclusive of oil, petroleum and hydrocarbon gas) which are
found in solution or in association with or entrained in such steam, hot water
or hot brines, hereinafter referred to as "substances", and storing, taking,
removing, transporting, and disposing of same, an undivided 50 percent interest
in that certain land situated, lying and being in the County of Churchill, State
of Nevada, hereinafter referred to as "Leased Premises", more particularly
described on Exhibit "A" attached hereto and made a part hereof.

         TOGETHER with the right to inject and reinject geothermal effluents
from operations hereunder in the leased premises and use so much of the leased
premises as may be required by Lessee for the drilling and operation of wells
thereon for the purposes hereof, and to construct and maintain thereon
buildings, structures and equipment, including, but not limited to generation
and transmission of electric power, mineral processing, waste water disposal,
pipe lines, transmission lines, power lines, ponds and roads, in connection with
operations hereunder;



provided however, that Lessee agrees to use for such purpose only so much of the
leased premises as shall be reasonably necessary for Lessee's operations
thereon.

         Subject to easements, leases, licenses and restrictions affecting the
         leased premises. Reserving unto Lessor, its successors and assigns, the
         following:

         (a) The right to construct, maintain and use tracks, roads, trails,
ditches, pipe lines, communication devices, and facilities relating thereto in,
upon, over and across the leased premises, and

         (b) The right to use the leased premises for all other purposes not
inconsistent with or which shall not interfere with the right of the Lessee
hereunder to use the leased premises.

         (c) The exclusive right to all minerals other than those leased
hereunder, including, but not limited to, oil, petroleum, natural hydrocarbon
gas, and other hydrocarbons.

         2. This lease shall be for a primary term of ten years from and after
the date first herein written and for so long thereafter, as there:

         (a) shall be commercial production of said geothermal energy and
substances from the leased premises and/or

         (b) drilling, re-drilling, deepening or remedial operations are being
prosecuted on a continuous basis on the leased premises.

         3. Lessee agrees to pay to Lessor in advance as of the date of this
lease the sum of $*** per acre of the leased premises as rental for the first
year of this lease and to pay to Lessor in advance for the second year of the
lease on or before the 1st day of August 1977, and annually thereafter during
the remaining period this lease is in effect, on or before the same day and
month of each succeeding year, an annual advance minimum royalty at the rate of
$*** per acre for each acre then covered by this lease.

*** Confidential material redacted and filed separately with the Commission.

                                       2


         In the event Lessee uses the surface of a portion or portions of the
leased premises for the construction and operation of facilities for mineral
processing, electric or power generation or waste water disposal, ponds or
plants, exclusive of the portions of the leased premises used for the drilling
and operation of wells and construction and maintenance of pipe lines,
transmission lines, roads and ditches, Lessee agrees to pay to Lessor, in
addition to the above minimum royalty, an annual advance surface rental during
the period of such use equivalent to 9 1/2 % of the current value used in the
assessment by the County in which lands are located as to the portions of the
leased premises so used, which is in effect for each year the use is made.

         4. Lessee shall commence drilling a well for said geothermal energy and
substances on the leased premises within the primary term, and shall continue
the work of drilling said well with due diligence until completion, and
thereafter shall commence and drill such other wells as may be required to
assure Lessee of a supply of said geothermal energy and substances or any of
them in such amounts as its requirements from the leased premises may demand,
provided that the spacing of wells drilled upon the leased premises shall not be
less than the spacing of wells drilled upon adjoining land, and provided further
that this lease shall terminate at the end of the tenth year from the date
hereof as to the acreage hereunder then in excess of the result of multiplying
the number of wells then capable of producing said geothermal energy and
substances in paying quantities times six hundred and forty acres, and that the
locations of the portions of the leased premises which shall remain subject to
this lease shall be selected by Lessee.

         Lessee shall keep each well drilled on the leased premises producing at
the rate deemed by Lessee to be most conducive to efficient operation of the
well and to maximum production of said geothermal energy and substances covered
hereby; provided, however, that if Lessee's well

                                       3


or wells on land adjoining the leased premises are not produced to capacity,
then Lessee may produce from the wells on the leased premises at the same ratio
that the actual production bears to potential production of Lessee's well or
wells being produced on adjoining land.

         In the event Lessee fails to commence drilling a well within the
primary term of this lease or the leased premises or land pooled therewith as
provided herein, this lease shall terminate except as otherwise provided.

         5.  A well shall be deemed completed:

         (a) when formations or mechanical difficulties are encountered which,
in Lessee's judgment, render further drilling of such well unprofitable or
unsuccessful and because of such fact further drilling operations thereon are
discontinued;

         (b) when a well has been drilled to a depth of at least five thousand
feet and the drilling operation is discontinued, or

         (c) Lessee has ceased drilling a well and it is tested and deemed
capable of producing said geothermal energy and substances or any of them in
quantities deemed by Lessee sufficient to warrant the continuance of its
operation.

         6. Lessee agrees to pay to Lessor as royalty:

         (a) *** received by Lessee from the *** at the point of sale.

         (b) on all other leased substances produced therefrom, *** during the
first ten years of the commercial production of said substance and ***
thereafter received by Lessee. ***, for the purpose of this lease, shall be ***

*** Confidential material redacted and filed separately with the Commission.

                                       4


         Lessor shall have the right to receive its royalty in kind.

         7. Lessor does hereby lease to Lessee the exclusive right to use said
leased premises for the slant drilling of wells having their surface locations
upon either the leased premises or adjoining land and having their well bores
passing through the subsurface of the leased premises, for the production of
said geothermal energy and substances, and having their production intervals
beneath land other than the leased premises or land included in any unit created
under provisions of Section 11 hereof, such wells being hereinafter referred to
as "slant wells", together with the exclusive right to drill core holes through
the subsurface of the leased premises to other land to obtain geological
information.

         Unless sooner terminated, either in whole or in part as hereinafter
provided, the primary term of this lease of rights for slant wells shall be
contemporaneous with the primary term of this lease, and for as long thereafter
as said geothermal energy and substances are produced in paying quantities from
land other than the leased premises by slant wells, or Lessee in good faith
conducts slant drilling operations in the leased premises.

         As payment for the slant well rights, hereby leased, Lessee agrees to
pay to Lessor, at the times and in the manner hereinafter provided, an
overriding royalty on the production from each slant well, drilled by Lessee as
follows:

         (a) *** percent of the *** received by Lessee from the ***, at the
point of sale.

         (b) *** percent of the *** received by Lessee on all other leased
substances produced therefrom. ***, for the purpose of this lease, shall be ***.

*** Confidential material redacted and filed separately with the Commission.

                                       5


         The advance minimum royalty paid by Lessee to Lessor, under the
provisions of Section 3 hereof, shall not be credited against any overriding
royalties from production from slant wells drilled under the provisions hereof.

         Lessor agrees to pay a pro rata share, which shall be in the proportion
that its overriding royalty bears to the total production from slant wells
drilled under this section, of the amount of any license, severance, or
production tax levied by any governmental agency on, or measured by, the
substances produced. Lessor agrees to pay the same pro rata share of the mineral
rights taxes upon the land beneath which slant wells have their producing
intervals. Lessee agrees to pay, or cause to be paid, the remainder of any and
all such taxes.

         The obligation of Lessee hereunder with respect to the drilling and
operating of all slant wells, and its right to suspend or delay operations
therein, shall be those provided in such leases in which Lessee has or may
acquire an interest embracing the land beneath which slant wells drilled
hereunder have their producing intervals.

         Lessee shall keep true and correct records of its operations conducted
in, and of the production from, slant wells. Lessee shall, when requested to do
so by Lessor, furnish to Lessor a copy of the drilling log and electric log, and
of the directional survey of the bore of, each slant well drilled by Lessee
hereunder. Lessee shall furnish Lessor, with each overriding royalty payment, a
statement of the production from each slant well showing in detail the
computation of Lessor's overriding royalty. Lessee's records shall be open for
inspection by Lessor at all reasonable times.

         8. Lessee shall have the right to commingle, for the purpose of
utilizing, selling or processing minerals, geothermal energy and substances
produced from the leased land, with geothermal energy and substances produced
from other land and to meter or gauge the

                                       6


production of said geothermal energy and substances from the leased premises,
and to compute and pay royalty to Lessor on the basis of such production as so
determined. Lessee agrees to pay to Lessor on or before the last day of each and
every month the royalties accrued and payable hereunder for the preceding
calendar month, and in making such royalty payments Lessee shall deliver to
Lessor statements setting forth the basis for determination of such royalty. In
the event that the production of said geothermal energy and substances from the
leased premises or from land in the general area of the leased premises should
at any time exceed the demand therefor or the facilities for use thereof, and
Lessee elects to reduce the total volume of said geothermal energy and
substances produced or consumed, then in that event, wells participating on a
commingling basis shall be reduced in a percentage amount equal to the
proportion of the whole in light of good engineering practices.

         In the event all or any part of the leased premises is pooled (as
provided for in Section 11), with other land, then Lessor shall receive as
royalty on production from the pooled acreage only such portion of the royalty
as the amount of Lessor's acreage placed in the unit, bears to the total acreage
so pooled in the unit involved.

         Lessee shall not be required to account to Lessor for, or to pay
royalty on said geothermal energy and substances produced by Lessee on the
leased premises which are not utilized, saved or sold, or on power generated by
Lessee and used by Lessee in Lessee's operations on or with respect to the
leased premises for or in connection with the development, processing and
production of said geothermal energy and substances.

         The annual advance minimum royalty provided in Section 3 payable by
Lessee to Lessor shall be credited against the obligation of Lessee to pay the
royalties which accrue only during the annual period for which paid, but the
annual surface rental provided for in Section 3 shall not

                                       7


be so credited. The surface rental and royalties hereinabove provided for shall
be a lien upon any and all of said geothermal energy and substances removed from
or stored upon the leased premises and upon any improvements or personal
property of Lessee upon the leased premises.

         9. In the event Lessor at the time of making this lease owns a less
interest in the leased premises than one hundred per cent of the rights herein
leased to Lessee, then the rentals and royalties accruing hereunder shall be
paid to Lessor only in the same proportions which Lessor's interest bears to a
one hundred per cent interest in the leased premises. Notwithstanding the
foregoing, should Lessor hereafter acquire any additional right, title or
interest in or to the leased premises, it shall be subject to the provisions
hereof to the same extent as if owned by Lessor at the date hereof, and any
increase in payments of money hereunder necessitated thereby shall commence with
the payment next following receipt by Lessee of satisfactory evidence of
Lessor's acquisition of such additional interest.

         10. In the event Lessee shall, except by Lessor, be lawfully deprived
of possessing, or rights hereunder to, the leased premises, or any portion or
portions thereof, Lessee shall notify Lessor as to the circumstances thereto;
whereupon Lessor may, at Lessor's option, either reinstall Lessee in possession
as to said rights or terminate this lease as to the leased premises, or the
portion or portions thereof, as to which Lessee is so deprived, by notice to
Lessee to that effect and the tender of the sum of One Hundred Dollars, plus the
total amount of any sums other than taxes, theretofore paid by the Lessee
hereunder, for said rights; whereupon no claims for damages whatsoever kind or
character incurred by Lessee by reason of such de-possession shall be chargeable
against Lessor.

         11. Lessee is hereby given the right to combine or pool all or part of
said leased premises with land either adjoining the leased premises or in the
immediate vicinity thereof, so as to create

                                       8


by such combining or pooling one or more operating units of contiguous acreage
for the production of said substances; provided, however, that no such unit
shall substantially exceed 2,560 acres, or the land embraced in four sections of
land according to United States survey and that the designation of such unit
shall be made of the land to be pooled not later than thirty days after the
first well drilled on the unit is placed upon production, and shall define the
area which shall constitute the pool. In the event production of said geothermal
energy and substances is obtained from any land included within any such unit,
whether or not from land covered by this lease, there shall be allocated to the
leased premises included in such unit, for the purpose of royalty determination,
only that proportion of the entire production from such unit that the acres of
the leased premises in such unit bears to the total acres in such unit, and
royalty payable under this lease with respect to leased premises included in
such unit shall be computed only on that portion of such production so allocated
to the leased premises. In the event of the failure of Lessor's or any other
owner's title as to any portion of the land included in such pooled unit, such
portion of such land shall be excluded in allocating production from such pooled
unit; provided, however, Lessee shall not be held to account for any production
allocated to any land excluded from any such pooled unit unless and until Lessee
has actual knowledge of the circumstances requiring such exclusion. For the
purpose of determining drilling obligations in such unit, the entire acreage so
pooled shall be treated as if it were covered by one lease and the drilling of a
well in any part of such unit, whether or not on land covered by this lease,
shall fulfill Lessee's drilling obligations under this lease to the same extent
as if it were drilled on the leased premises and no offset obligations shall
accrue as between the several tracts of land included within any pooled unit. As
to such unit (unless a producing well is located on such pooled unit at the time
the unit is created), Lessee agrees to commence drilling operations within one
year after it is so

                                       9


created, but in any event within the primary term of this lease, and shall be
obligated to drill at least one well for each six hundred and forty acres in the
unit.

         12. Lessee shall have the right to use such water in, on, from or
appurtenant to the leased premises as Lessee may reasonably require in
connection with Lessee's operations hereunder on the leased premises, without
payment therefor to Lessor other than such cost as Lessor may have incurred
therefor; provided that such use by Lessee shall not interfere with Lessor's
requirements with respect to the use thereof on the land subject to this lease
or Lessor's contractual commitments for the use thereof on land other than the
leased premises, and that Lessee shall obtain any necessary governmental
permission therefor and shall comply with applicable statutes, ordinances and
governmental orders and regulations with respect thereto. Applications to
governmental agencies for permission to appropriate water and geothermal energy
within and underlying the leased premises shall be made on behalf of Lessor and
shall be made for beneficial use appurtenant to Lessor's land described in
Section 1 hereof. The permission so granted shall be subject to the leasehold
interest of Lessee and all the terms, covenants and conditions under this lease.

         13. If at any time during the term of this lease, a well is drilled for
said geothermal energy and substances upon land not in the ownership of Lessor,
which is adjacent to the leased premises and within 1,320 feet of the boundary
lines of a unit into which the leased premises or portions thereof may be
pooled, and said well is placed in commercial production for a period of six
months, Lessee shall commence drilling within six months thereafter on the
leased premises and within 1,320 feet from the common boundary line, an offset
well within approximately the same distance from the common boundary line as
said well on adjoining land is located, but in any event either on the leased
premises or on land with which the leased premises may be

                                       10


pooled, and to proceed diligently to drill to completion said offset well to the
zone or horizon from which said well on the adjacent land is producing,
provided, however, that Lessee shall not be required to commence drilling said
offset well if there is already a well being drilled or there is a producing
well on the leased premises or on land with which the leased premises is pooled
within such offset distance of said well on adjoining land.

         14. Lessee may, at Lessee's option, at any time surrender and quitclaim
Lessee's rights under this lease in and to all or any portion of the leased
premises and shall be released thereupon from all obligations thereafter with
respect to the land surrendered and quitclaimed.

         15. Lessee's obligations hereunder, except for payment of taxes,
advance annual minimum royalty and surface rentals under Section 3, and to drill
wells under Section 13, shall be suspended and the primary term of this lease
shall be extended, while Lessee is prevented from complying therewith by
strikes, lockouts, riots, action of the elements, accidents, delays in
transportation, inability to secure labor or materials in the open market, laws,
rules or regulations by any governmental agency, authority or representative
having jurisdiction, inability to secure or absence of a market for commercial
sale of substances developed on or from the leased premises, or other matters or
conditions beyond the reasonable control of Lessee, whether or not similar to
the conditions or matters in this paragraph specifically enumerated.

         16. If at the expiration of the primary term or at any time or times
thereafter while this lease shall remain in force and effect, Lessee has
discovered on the leased premises geothermal energy and substances in quantities
which in Lessee's opinion, may be commercially produced, but said leased
geothermal energy and substances are not being produced, processed or marketed
because of technical or other problems or due to lack of market for such
geothermal energy and substances which is acceptable to Lessee and Lessee is not
then engaged in operations for the

                                       11


purpose of producing, processing or marketing leased geothermal energy and
substances, Lessee may pay as a minimum royalty for the next ensuing twelve
months on or before the expiration date of the primary term hereof or within
ninety days from the suspension of all operations contemplated hereby, the sum
of one dollar per acre for each acre then covered by this lease and if such
payment is made or tendered, it will be considered that the geothermal energy
and substances covered by this lease are being produced from said premises in
paying quantities. In like manner and upon like payments annually this lease may
be extended for additional twelve month periods, provided, however, that this
lease cannot be extended beyond the primary term by reason of the royalty
payments provided in this paragraph for a longer term than five consecutive
years.

         17. Upon the violation by Lessee of any of the terms, covenants or
conditions of this lease, and failure to take steps to remedy the default within
sixty days after receipt of written notice from Lessor to do so, then at the
option of Lessor, this lease shall forthwith cease and terminate, and all rights
of Lessee in and to said leased premises shall be at an end, except that Lessee
shall have the right to retain and hold under this lease any forty acre
subdivision in which a well is producing commercially or is being drilled, and
with respect to which Lessee is not in default. The waiver by Lessor of any
breach of any covenant or condition hereof shall not be a waiver of any other or
subsequent breach hereof, nor of any other covenant or condition hereof.

         18. Upon surrender by Lessee of Lessee's rights hereunder in while or
in part, or upon termination of Lessee's rights hereunder, or any part hereof,
in any manner herein provided, Lessee shall peaceably surrender possession
thereof to Lessor and Lessee shall quitclaim to Lessor all right, title and
interest of Lessee in the leased premises in the condition received.

                                       12


         19. Derricks, buildings, structures, improvements, equipment,
machinery, appliances and personal property placed by Lessee upon the leased
premises shall be and remain the property of Lessee, and Lessee shall have the
obligation, at the option of the Lessor at any time prior to the expiration of
six months after the termination of this lease, to remove the same.

         20. Lessee agrees to keep full records of the operations on, and
production and sales of said geothermal energy and substances from the leased
premises independently of and separate from any other property operated by
Lessee and to notify Lessor promptly of discovery of any of said geothermal
energy and substances on the leased premises, and to furnish to Lessor on or
before the last day of each month a true statement of all production and sales
of said geothermal energy and substances during the preceding month in a form
satisfactory to Lessor. All records of such production and sales shall, at all
reasonable times, be open to the inspection of Lessor's agents and
representatives.

         21. Lessee will keep an accurate log and casing record showing the
progress of drilling, character of formations encountered or drilled through,
and casing in each well in which drilling shall have been done on the leased
premises, and furnish Lessor a copy thereof upon the completion of or the
abandonment of each well, and a true copy of all surface and subsurface surveys
made of each well drilled under this lease. Lessor's duly appointed agents and
representatives shall have access at all reasonable times to all of the wells
and to Lessee's property in and upon said leased premises. Lessor shall make
such observations and measurements at its sole risk and expense and agrees to
indemnify and hold Lessee harmless against all claims and demands of such agents
and representatives arising as a result of such observations and measurements.

                                       13


         Lessee shall carry on Lessee's operations hereunder in a careful and
workmanlike manner, and in accordance with all laws, ordinances and governmental
orders and regulations governing the same.

         22. Lessee agrees to pay before delinquency all taxes and assessments
which have been or shall be lawfully levied and assessed on the mineral rights
covered hereunder in the leased premises, and on the buildings, structures,
equipment and other personal property or improvements placed, maintained or used
by Lessee on the leased premises, and on the geothermal energy and substances
stored thereon and not belonging to Lessor. Lessee may deduct the royalty
proportion of the taxes and assessments on mineral rights covered hereunder in
the leased premises in each fiscal year, paid by Lessee, from the royalties due
and payable to Lessor for production during each successive twelve months'
period subsequent to the day and month in such fiscal year on which the first
installment of such taxes and assessments become delinquent. The above amount of
the taxes and assessments for a particular fiscal year so paid shall be
deductible only from the royalties due and payable during the twelve months'
period which immediately succeeds the date of delinquency of the first
installment in such fiscal year. Lessee agrees to pay to Lessor annually, within
fifteen days after demand, an amount equal to the working interest proportion of
the real property taxes and assessments paid by Southern Pacific Land Company or
Southern Pacific Transportation Company on the land overlying or occupied by the
leased premises (except on buildings, structures and other improvements thereon
not owned, maintained or used by Lessee) each fiscal year of the term of this
lease, prorated from the date of this lease, for the first such year and for
each fiscal year thereafter during the term of this lease. Lessee shall pay any
production or severance tax computed or based upon production of geothermal
energy and substances which may be imposed by the Federal Government, the State

                                       14


of Nevada, or any of its political subdivisions, and Lessor shall reimburse
Lessee for the same proportion of said taxes as Lessor's shares of the taxes on
the mineral rights covered hereunder.

         23. All labor performed and materials furnished for purposes of the
operations of Lessee hereunder shall be at the cost and expense of Lessee and
Lessee shall give reasonable notice to Lessor before commencement of operations
hereunder. Lessor shall not be chargeable with, or liable for, any part thereof,
and Lessee agrees to protect the leased premises against liens of every
character and to indemnify Lessor against liens of every character and to
indemnify Lessor against all liability, cost and expense incurred by Lessor due
to such liens arising from Lessee's operations thereon.

         Lessee further agrees to indemnify Lessor against claims, causes of
action, and liability and for injuries to, or deaths of persons and destruction
or loss of, or damage to property arising out of the operations of Lessee
hereunder.

         24. In the event any buildings or personal property of Lessor shall be
damaged, destroyed or required to be removed because of Lessee's operations on
the leased premises, Lessee shall be liable for payment of the reasonable values
thereof. In the event Lessee shall elect to locate a well site and an access
road thereto on agricultural land of Lessor's at the time under cultivation,
Lessee shall pay to Lessor the fair value of the crop destroyed. Upon the
written request of Lessor, Lessee agrees to lay below plow depth all pipe lines,
except steam-gathering and transmission lines or other hot water lines, which
Lessee constructs through cultivated fields, and to fence all sump holes or
other excavations to safeguard livestock on the land subject to this lease. Upon
completion or abandonment of any well drilled on the leased premises, or upon
the termination of this lease, Lessee shall abandon all wells in accord with
applicable regulations level and fill all sump holes and excavations and shall
remove all debris

                                       15


and shall leave the premises in a clean and sanitary condition. Lessee, in
Lessee's operations, on the leased premises shall at all times have due and
proper regard for the health, welfare and safety of Lessor and of Lessor's
tenants occupying the land subject to this lease. Any wells drilled by Lessee
hereunder shall be drilled in such manner so as not to affect any existing
potable water well or water wells of Lessor on the leased premises. Sufficient
casing shall be set and cemented in such wells drilled by Lessee so as to seal
off and protect known potable waters developed in any such water well or water
wells.

         25. In the event Lessor deems it necessary to file an action to enforce
Lessor's rights hereunder, the prevailing party shall be entitled to recover
reasonable attorney's fees and court costs for the prosecution or defense of the
litigation.

         26. Any notice or statement herein requested or required to be given by
one party to the other shall be in writing. Delivery of such written notice or
statement to Lessor shall be conclusively taken as sufficient if and when
deposited in the United States mail, with the postage thereon fully prepaid,
certified, addressed to Lessor at:

                           Southern Pacific Land Company
                           Southern Pacific Building
                           One Market Plaza - Room 200
                           San Francisco, California 94105

         Payments to Lessor shall be made at the above address. Delivery of such
notice or statement to Lessee shall be conclusively taken as sufficient if and
when deposited in the United States mail, with postage thereon fully prepaid,
certified, addressed to Lessee at:

                           Phillips Petroleum Company
                           Attn:  Manager, Geothermal Operations
                           P.O. Box 752
                           Del Mar, California 92014

         Any party hereto may, by written notice, change their address to any
other location for the above purposes.

                                       16


         27. If Lessee is adjudicated a bankrupt, or shall make an assignment
for the benefit of creditors, or file a voluntary petition under any law having
for its purpose the adjudication of Lessee a bankrupt, or the extension of time
of payment, composition, adjustment, modification, settlement or satisfaction of
the liabilities of Lessee, or a receiver be appointed for the property of Lessee
by reason of the insolvency of Lessee, notwithstanding anything to the contrary
elsewhere in this lease, Lessor shall have the right to terminate this lease and
to take exclusive possession of the leased premises. The acceptance of rent or
other payments for the use of the leased premises shall not constitute a waiver
of Lessor's right to terminate this lease as above set forth.

         28. This instrument is a lease and is not and shall not ever be held or
interpreted to be a mining partnership or partnership of any kind, or in any
sense whatsoever, the intention of the parties hereto being to establish and
create between themselves only the relationship of Lessor and Lessee in
accordance with the provisions hereof.

         29. The rate of $*** per acre in Sections 3 and 16 hereof and the
obligation of Lessee to reimburse Lessor for real property taxes and assessments
equal to Lessee's working interest proportion in Section 22 hereof shall be
subject to pro-ration in the same percentage as the undivided interest of Lessee
specified in Section 1 hereof.

         30. This lease shall not be assigned nor sublet, in whole or in part
without the prior written consent of Lessor, which consent shall not be
unreasonably withheld. Subject to the above, the provisions hereof shall inure
to the benefit of, and be binding upon the successors and assigns of the parties
hereto.

         31. The parties hereto agree to enter into a memorandum form of this
lease for recording purposes which shall incorporate by reference the provisions
hereof.

*** Confidential material redacted and filed separately with the Commission.

                                       17


         32.  Time and specific performance are the essence of this lease.

         IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed as of the day and year first hereinabove written.


                              PHILLIPS PETROLEUM COMPANY, Lessee


                              By        /s/ Indecipherable
                                ------------------------------------------------
                                                              Attorney-in-Fact


                              SOUTHERN PACIFIC LAND COMPANY, Lessor


                              By        /s/ Indecipherable
                                ------------------------------------------------
                                 Assistant General Manager, Natural Resources

                              Attest    /s/ T.F. O'Donnell
                                    --------------------------------------------
                                                          Assistant Secretary



                                       18


                          AMENDMENT TO GEOTHERMAL LEASE
                               DESERT PEAK, NEVADA

         THIS AGREEMENT, made and entered into this 25th day of February 1998,
by and between DAVID P. FRASE, TIMOTHY D. FRASE AND JAMES W. ROBERTS,
hereinafter collectively referred to as "Lessor" or "Frase" and WESTERN STATES
GEOTHERMAL COMPANY, a Delaware corporation, hereinafter referred to as "Lessee"
or "Western".

                              W I T N E S S E T H:

         WHEREAS, Southern Pacific Land Company ("SPL"), predecessor in interest
to Frase, as Lessor, and Phillips Petroleum Company ("Phillips"), predecessor in
interest to Western, as Lessor, entered into two (2) geothermal leases (the
"Leases"), the first lease dated February 14, 1974, a Memorandum of which first
lease was recorded on August 15, 1974, as Document No. 138533, in Book 72, Pages
575, et seq. and the second lease dated August 1, 1976, a Memorandum of which
second lease was recorded on September 27, 1976 as Document No. 148247 in Book
102, Pages 467, et seq., both in the Official Records of the County of
Churchill, State of Nevada, covering and affecting 42,433.44 acres, more or
less, situated in said County and State, whereby SPL leased to Phillips and
Phillips became Lessee of SPL for certain geothermal resources described in the
Leases; and

         WHEREAS, by Assignment dated June 28, 1985 and recorded on December 16,
1985 as Document No. 217089 in the Official Records of the County of Churchill,
State of Nevada, Phillips assigned the Leases to Western, then a wholly owned
subsidiary of Phillips; and

         WHEREAS, by Amendment and Termination agreement dated May 1, 1986, SPL
and Western consolidated the lands leased under the February 14, 1974 lease and
the August 1, 1976 lease under the provisions of the August 1, 1976 lease
(hereinafter referred to as "Said Lease"),



and terminated the February 14, 1974 lease, a copy of which Amendment and
Termination agreement was recorded on April 23, 1987 as document No. 227434 in
the Official Records of the County of Churchill, State of Nevada; and

         WHEREAS, Phillips and Chevron U.S.A. Inc. ("Chevron") entered into an
agreement dated as of February 7, 1986, whereby Phillips agreed to sell to
Chevron, and Chevron agreed to purchase from Phillips, as a single transaction,
all of the stock of Western which would constitute an assignment to Chevron of
all of Phillips' interest in Said Lease and the Desert Peak electrical
generating facility and its associated geothermal steam production wells and
plant. SPL granted its consent to the transfer of the stock of Western, and all
assets of Western, to Chevron on condition that an amendment to the Lease be
entered into to address the payment of royalties in situations not contemplated
by Phillips and SPL when they first entered into the Leases. Said transfer
occurred on or about February 21, 1986; and

         WHEREAS, Southern Pacific Land Company and Western States Geothermal
Company entered into that certain unrecorded Amendment to Geothermal Lease dated
and effective February 21, 1986 amending the method used to calculate, measure
and divide royalties owing under Said Lease, as amended; and

         WHEREAS, Chevron USA Inc ("CUSA") acting through its agent Chevron
Resources Company, a division of Chevron Industries Inc. sold certain assets to
California Energy Company, Inc ("CECI") effective March 28, 1991. CUSA, owner of
all of the common stock of Western States Geothermal Company, sold its entire
interest in the shares of the common stock of Western States Geothermal Company
to CECI. CECI designated its subsidiary CE Geothermal to hold the assets of
Western States Geothermal Company; and



         WHEREAS, it is the desire of the parties hereto that Said Lease, as
heretofore amended, be further amended as hereinafter set forth:

         NOW, THEREFORE, for and in consideration of $12,800 and other good and
valuable consideration accruing unto the parties hereto, the receipt and
sufficiency of all of which are hereby acknowledged, Said Lease is hereby
amended as follows, to wit:

         1. Specifically subject to Section 11 and subject to other Sections of
that certain Geothermal Lease dated August 1, 1976, the first paragraph of
Section 3 is hereby deleted in its entirety and the following paragraph is
hereby substituted therefore:

                           Lessee agrees to pay to Lessor in advance as of the
                           date of this lease the sum of $*** per acre of the
                           leased premises as rental for the first year of this
                           lease and to pay to Lessor in advance for the second
                           year of the lease on or before the first day of
                           August, 1977, and annually thereafter through July
                           31, 1998 the sum of $*** per acre of the leased
                           premises then subject to this lease. Commencing
                           August 1, 1998 and annually throughout the term of
                           this lease, on or before the same day and month of
                           each succeeding year, Lessee agrees pay to Lessor in
                           advance an annual rental payment at the rate of $***
                           per acre for each acre then covered by this lease. It
                           is acknowledged and agreed that the rental provided
                           in this paragraph shall apply only to that portion of
                           the leased premises not then committed to an approved
                           geothermal unit, as provided in said Section 11
                           hereof.

         Lessor hereby agrees that Said Lease, as amended herein, is a valid and
subsisting Geothermal Lease and is in full force and effect.

         Lessor does hereby ratify, affirm and acknowledge that Said Lease, as
amended herein, is and shall remain in full force and effect as to all its
terms, conditions and provisions.

         It is further agreed by and between Lessor and Lessee, that except for
the amendments as hereinabove set forth, Said Lease, as amended, shall in all
other respects remain in full force as originally executed.


*** Confidential material redacted and filed separately with the Commission.



         In the event any inconsistency exists between this Amendment and Said
Lease, the terms of this Amendment shall prevail, and any such inconsistent
terms contained herein shall be construed as superseding and amending the terms
of Said Lease. Except as expressly modified by this Amendment, Said Lease shall
be unchanged and shall remain in full force and effect.

         This Amendment may be executed in any number of counterparts or on
counterpart signature pages, and all such counterparts shall together be deemed
to constitute a single Amendment. The execution of one counterpart by either
Party or any Person comprising such Party shall have the same force and effect
as if such Party or Person had signed all the other counterparts.

         IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first hereinabove written.

                                  LESSOR:

                                  /s/ David P. Frase
                                  ----------------------------------------------
                                  David P. Frase

                                  /s/ Timothy D. Frase
                                  ----------------------------------------------
                                  Timothy D. Frase



                                  ----------------------------------------------
                                  James W. Roberts


                                  LESSEE:

                                  WESTERN STATES GEOTHERMAL COMPANY

                                  By:  /s/ Thomas R. Mason
                                       -----------------------------------------
                                       Thomas R. Mason

                                  Title: President, CalEnergy Operating Company



                                 COUNTERPART "A"



CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                                                  Exhibit 10.4.6

                           GEOTHERMAL RESOURCES LEASE

         THIS LEASE is entered into this 18th day of November, 1983, by and
between s SIERRA PACIFIC POWER COMPANY, a Nevada corporation ("Lessor"), and
GEOTHERMAL DEVELOPMENT ASSOCIATES, a Nevada corporation ("Lessee").

         1. INTEREST GRANTED:

               In consideration of the covenants and agreements contained
herein, Lessor hereby grants and leases to Lessee the exclusive right and
privilege to drill for, extract, produce, remove, utilize, sell, and dispose of
geothermal steam and associated geothermal resources as defined in NRS 322.005,
(hereinafter called "geothermal resources"), in or under that certain parcel of
property located in Washoe County, Nevada, and consisting of approximately
thirty (30) acres, as more particularly described in Exhibit "A," which is
attached hereto and incorporated herein by reference, together with:

               (a) The non-exclusive right to conduct within the leased area
               geological and geophysical exploration;

               (b) The right to construct or erect and to use, operate, and
               maintain within the leased area, together with ingress and egress
               thereupon, all wells, pumps, pipes, pipe lines, buildings,
               plants, sumps, brine pits, reservoirs, tanks, waterworks, pumping
               stations, roads, electric power generating plants, transmission
               lines, industrial facilities, electric telegraph or telephone
               lines, and such other works and structures and to use so much of
               the surface of the land as may be necessary or reasonably
               convenient for the production, utilization, and processing of
               geothermal resources or for the full enjoyment of the rights
               granted by this Lease, subject to applicable laws and
               regulations. Although the use of the leased area for an electric
               generating plant and/or transmission facilities is authorized
               hereunder, the location of such facilities and the terms of
               occupancy therefor shall be set forth in a separate agreement
               between the parties.

               (c) The non-exclusive right to drill potable water wells in
               accordance with Nevada statutory water laws within the leased
               area and to use the water produced therefrom for operation of the
               leased lands, free of costs, provided



               that such drilling and development are conducted in such a way
               that they do not interfere with Lessor's activities on the leased
               land.

               (d) The right, without the payment of royalties hereunder, to
               reinject into the leased lands geothermal resources and
               condensates to the extent that such resources and condensates are
               not utilized, but their reinjection is necessary for operation
               under this Lease in the recovery or processing of geothermal
               resources. If the Lessee, pursuant to a plan approved by the
               Nevada Division of Environmental Protection, disposes of the
               useable brine and waste products into underlying formations, it
               may do so without the payment of royalties.

               All of the activities described above shall be conducted for the
primary purpose of the generation of electrical power through the use of
geothermal resources. Nothing in this Lease shall be construed as prohibiting
the use, for other purposes, of spent geothermal resources produced on the
leased property.

         2. TERM:

               The term of this Lease shall commence upon the date of its
execution and subject to the conditions set forth below shall continue for a
term of twenty (20) years and for so long thereafter as geothermal resources are
produced or utilized in commercial quantities on the leased property, or lands
pooled or unitized therewith.

         3. RENTALS AND ROYALTIES:

               (a) Annual Rental. For each lease year prior to the commencement
               of production of geothermal resources in commercial quantities on
               the leased lands, the Lessee shall pay the Lessor on or before
               the anniversary date of the lease a rental of *** Dollars ($***)
               per acre or a fraction thereof. If no production of electrical
               energy has been achieved on the leased property by the end of the
               third year of the lease term, and the parties have not entered
               into a written agreement to extend the lease term, this Lease
               shall automatically terminate as to both parties.

               (b) After Lessee has commenced the production of electrical
               energy, Lessee may, at its option, suspend or defer such
               production. If Lessee does not then resume production within one
               year, Lessee shall pay rent for the year, in arrears, as
               described in Paragraph 3(a) hereinabove. If production is
               suspended

*** Confidential material redacted and filed separately with the Commission.

                                      -2-


               for more than eighteen (18) months at any one time, this
               agreement shall terminate automatically as to both parties.

               (c) Royalty. On or before the last day of the calendar month
               after the month of commencement of production in commercial
               quantities of geothermal resources and thereafter on a monthly
               basis, the Lessee shall pay to the Lessor:

                    (i) A royalty of ***

                    (ii) A royalty of ***

                    (iii) A royalty of ***, and utilized by Seller for the ***
               The value of said resource shall be considered ***

                    (iv) A royalty of ***. In the event Lessee elects to process
               ***, Lessor's royalty share shall bear its proportionate share of
               such ***. For the purpose of this Lease, the ***

         4. TAXES AND ASSESSMENTS:

               Lessee shall pay all taxes levied against its improvements on the
leased land. Lessor shall pay its royalty share, and Lessee shall pay the
remaining portion of any and all taxes assessed on geothermal resources from the
leased land in the following manner:

               (a) Commencing with the effective date of this Lease and prior to
               the actual production of geothermal resources, Lessor shall pay
               and bear its royalty share,

*** Confidential material redacted and filed separately with the Commission.

                                      -3-


               and Lessee shall pay and bear the remaining portion of any and
               all taxes attributable to an assessment of geothermal resources
               on said leased land.

               (b) After the commencement of production of geothermal resources
               from the leased land, Lessor shall pay its royalty share, and
               Lessee shall pay the remaining portion of any and all taxes
               assessed upon geothermal resources and also of all severance,
               production, license, and other taxes and assessments levied or
               assessed on account of the production of geothermal resources
               from the leased land.

               In the event Lessor's royalty share of such taxes exceeds
one-half of the amount of Lessor's rental shut-in royalty and/or royalty
payments hereunder for the year in which such taxes are payable, Lessee shall
advance such excess on Lessor's behalf and recoup such advance out of one-half
of Lessor's royalty income once commercial production has commenced on the
leased lands. Lessor shall pay before delinquency all other taxes and
assessments on the leased land and improvements. However, Lessee is hereby
authorized to pay any taxes and assessments on behalf of Lessor and may, if it
so desires, deduct the amounts so paid from royalties or monies due Lessor
hereunder.

         5. WELLS:

               (a) Lessee shall not drill or operate water wells or take water
               in such a way as to injure water wells, ponds or reservoirs of
               Lessor or interfere with or restrict the supply of water to
               Lessor or its tenants for domestic, livestock or agricultural
               use. If Lessee elects to permanently abandon any well drilled by
               Lessee or the leased land, Lessor shall have the option of
               requiring in writing that Lessee turn over such well to Lessor,
               and at that time Lessor shall pay Lessee for the salvage value of
               the material and equipment in and on said well. If Lessor so
               elects, Lessee agrees to plug such well at the bottom of the
               surface casing according to the requirements of the State
               Engineer in order to prevent contamination of freshwater bearing
               formations as a result of Lessee's drilling operations.

               (b) Subject to the terms of this Paragraph 5, within six (6)
               months after abandonment of any well, including those
               abandonments resulting from termination of this Lease, Lessee
               shall remove all machinery, material and


                                      -4-


               structures used in connection with said well and not used in its
               other operations, if any, on the leased land, and shall fill in
               and level off all excavations, pits, or other alterations to the
               surface of the leased land caused in connection with said well,
               and, insofar as practical, shall restore the leased land and the
               means of ingress and egress to as good a condition as existed
               when Lessee commenced operations under this Lease, except
               reasonable wear and tear, acts of nature and conditions beyond
               the control of Lessee.

         6. COMINGLING, POOLING AND UNITIZATION:

               (a) Lessee shall have the right to comingle (for purposes of
               storing, transporting, handling, utilizing, selling or
               processing) geothermal resources produced or extracted from the
               leased land and lands pooled, unitized or combined therewith,
               with similar substances produced or extracted from other lands or
               units. In the event of such comingling, Lessee shall meter, gauge
               or measure, according to prevalent industry standards, the
               production from the leased land, or from the unit or units
               including the leased land or other units or lands, as applicable,
               and compute and pay Lessor's royalty attributable to Lessor's
               land on the basis of such production as so determined or
               allocated.

               (b) Lessee may, as a recurring right for drilling, development or
               operating purposes, pool, unitize, or combine all or part of the
               leased land into a unit with any other land or lands (whether
               held by Lessee or others), whether or not adjacent or contiguous,
               which Lessee desires to develop or operate as a unit. Such a unit
               shall be officially created upon Lessee's filing in the official
               records of Washoe County a notice of such unitization, describing
               said unit. Any well (whether or not Lessee's well) commenced,
               drilled, drilling and/or producing or being capable of producing
               in any part of such unit shall for all purposes of this Lease be
               deemed a well commenced, drilled, drilling and/or producing on
               the leased land, and the Lessee shall have the same rights and
               obligations with respect thereto and the drilling and producing
               operations upon the lands from time to time included within any
               such unit as Lessee would have if such lands constituted the
               leased lands; provided, however, that


                                      -5-


               notwithstanding this or any other provision or provisions of this
               Lease to the contrary:

                    (i) Production as to which royalty is payable from any such
               well or wells drilled upon any such unit, whether located on the
               leased land or other lands, shall be allocated to the leased land
               in the proportion that the acreage of the leased land in such
               unit bears to the total acreage of such unit. Such allocated
               portion thereof shall for all purposes be considered as having
               been produced from the leased land, and the royalty payable under
               this Lease with respect to the leased land in such unit shall be
               payable only upon that proportion of production so allocated, and

                    (ii) If taxes of any kind are levied or assessed (other than
               taxes on the surface and on Lessor's improvements), any portion
               of which is chargeable to Lessor under the provisions of this
               Lease, then this share of such taxes to be borne by Lessor shall
               be in proportion to the share of the production from such unit
               allocated to the leased land.

         7. RESERVATIONS TO LESSOR:

               All rights in the leased area not granted to Lessee by this Lease
are hereby reserved to Lessor. Without limiting the generality of the foregoing,
such reserved rights include:

               (a) Disposal - the right to sell or otherwise dispose of the
               surface of the leased lands or any resource in the leased lands
               under existing laws, or laws hereinafter enacted, subject to the
               rights of the Lessee under this Lease.

               (b) Rights of Way - the right to authorize geological and
               geophysical explorations on the leased land which do not
               interfere with or endanger actual operations under this Lease and
               the right to grant such easements or rights of way for joint or
               several use upon, through, or in the leased area for steam lines
               and other public or private purposes which do not interfere with
               or endanger planned or actual operations or facilities
               constructed under this Lease.

               (c) Mineral Rights - the ownership of the right to extract
               minerals, oil, hydrocarbon gas, and helium from the leased lands.

                                      -6-


               (d) Casing - the right to acquire the well and casing at the fair
               market value of the casing where the Lessee finds only potable
               water, and such water is not required in lease operations.

               (e) Measurements - the right to measure geothermal resources and
               to sample any production thereof.

         8. DEFAULT AND TERMINATION:

               Whenever the Lessee fails to comply with any of the terms and
provisions of this Lease, and does not commence to remedy such failure within
ninety (90) days after receipt of written notice from Lessor, the Lessor may (a)
suspend operations until the requested action is taken to correct the
non-compliance, or (b) cancel this Lease by delivering written notice of its
intent to do so to Lessee. Such cancellation shall be effective immediately upon
delivery of said notice. The following property shall be excepted from any Lease
termination hereunder as a result of default: (a) each and any well then capable
of producing in commercial quantities the substances covered by this Lease, and
in respect to which Lessee is not in default; and (b) rights of way and
easements across lands subject to such Lease termination, which rights of way
and easements are necessary for conducting Lessee's operations on or in the
vicinity of the lands retained, including sites for electric generating units.

               Lessee may terminate this Lease at any time upon six (6) months
written notice to Lessor. During the six-month period, Lessee shall remove all
generation equipment and plant, treat all wells in accordance with the
appropriate provisions of Paragraph 5 above, and return the leased land to a
condition as near as possible to its state prior to Lessee's entry thereon.

         9. INDEMNIFICATION:

               The Lessee shall indemnity and hold harmless Lessor, its
officers, agents and employees from any and all claims for liability of any kind
arising from or connected with Lessee's activities and operations under this
Lease. Lessee shall pay to the person beneficially interested in the damaged
object all damages caused by Lessee's operations on the surface of the leased
land, including but not limited to damages to growing crops, pasture and
improvements on the leased land, or to animals or livestock. Lessee agrees to
take reasonable steps to prevent its operations from:

               (a) Causing or contributing to soil erosion, or to the injury to
               soil conserving structures on the leased land;

                                      -7-


               (b) Polluting the waters of reservoirs, springs, streams or water
               wells on the leased land;

               (c) Damaging crops or pasture, consistent with the purposes of
               this Lease; or

               (d) Harming or injuring in any way the animals or livestock owned
               by Lessor or his tenants, or kept or pastured on the leased land,
               including the erection and maintenance of fences, gates and
               cattle guards where necessary for such purposes.

               In no event shall Lessor be indemnified for liability or loss
resulting from its sole negligence.

         10. CONDEMNATION:

               Eminent domain proceedings resulting in the condemnation of a
part of the premises leased herein, but leaving the remaining premises
reasonably useable by Lessee for the purposes of the activities described in
Paragraph 1 above, will not terminate this Lease unless Lessor and Lessee
mutually agree to such termination. The effect of any such partial condemnation
will be to terminate the Lease as to the portion of the premises condemned, and
the Lease of the remainder of the premises shall remain intact. Lessee hereby
assigns and transfers to Lessor any claim it may have to compensation for
damages or award as a result of any condemnation, that does not materially
impair its ability to carry out the activities described in Paragraph 1.

         11. PERMITTING:

               Lessee shall obtain and maintain any and all permits, licenses,
and governmental approvals necessary for the conduct of Lessee's activities on
the leased land. All labor to be performed and material to be furnished in the
operations hereunder shall be at the sole cost and expense of Lessee, and Lessee
shall hold Lessor free and harmless from liability thereunder. Lessee shall keep
the leased premises fully protected against any and all liens of every character
arising from or connected with Lessee's operations hereunder.

         12. ASSIGNMENTS AND SUBLEASES:

               (a) Neither party shall voluntarily assign this Lease without the
               prior written consent of the other party, unless the assignment
               is to a partnership in which one of the parties to this Lease is
               a general partner.

                                      -8-


               (b) In the event that either party to this Lease wishes to assign
               this Lease to a corporation or other entity, which does not fall
               into subsection (a) above, said party shall provide the other
               party with written notice of such intent. Said written notice
               shall describe the financial structure and assets of the
               potential assignee in sufficient detail to permit the noticed
               party to evaluate the effect of the assignment on its interest in
               this Lease and the even-dated Agreement For the Purchase and Sale
               of Electricity executed by the parties hereto. The noticed party
               shall have thirty (30) days from its receipt of the notice to
               consent or refuse to consent to the assignment. Failure to give
               written consent or refusal within said thirty-day period shall be
               deemed consent by the noticed party. In no event shall consent to
               any assignment be unreasonably withheld.

               (c) In the event Lessee is contemplating an assignment such as
               described in subsection (b) above, Lessor shall have a prior
               right to regain Lessee's rights under the Lease, together with
               any and all related improvements, at the price and on the terms
               of the intended assignment. Lessor may exercise this right by
               notifying Lessee of its intent to do so by the end of the
               thirty-day period described in subsection (b) above. Such notice
               shall also be deemed a refusal of consent to the assignment of
               Lessee's rights to a third party.

               Subject to the provisions of this Paragraph, all obligations
hereunder shall be binding upon, and every benefit hereof shall inure to, the
heirs, executors, administrators, successors and assigns of the respective
parties hereto.

         13. NOTICES:

               Lessor may give any notice or deliver any document hereunder to
Lessee by mailing the same by registered mail addressed to Lessee at:

                           Geothermal Development Associates
                           251 Ralston Street
                           Reno, Nevada 89503

or by delivering the same in person to the above-referenced address Lessee.
Lessee may give any notice or deliver any document hereunder to Lessor by
mailing the same by registered mail addressed to Lessor at:

                           Sierra Pacific Power Company
                           Attention: Max Jones

                                      -9-


                           P.O. Box 10100
                           Reno, Nevada 89520

or by delivering the same to Lessor in person. For purposes of this Paragraph,
either party may change its address by written notice to the other. In case of
any notice or document delivered by registered mail, the same shall be deemed
delivered when deposited in any U.S. Post Office, properly addressed as herein
provided, with postage fully prepaid. Lessee may make any payment due Lessor to
Lessor personally or by mail at the address of Lessor given above.

         14. CONDITION:

               The obligations of both parties under this Lease are conditioned
upon the Public Service Commission of Nevada's approval of the pricing
provisions in the parties' even-dated Agreement for the Purchase and Sale of
Electricity as a portion of Lessor's purchased power costs. If such approval is
not received, this Lease shall be considered null and void.

///
///
///
///
///
///
///

               IN WITNESS WHEREOF, the parties hereto have executed this Lease
as of the day and year first above written.

                                             LESSOR:

                                             SIERRA PACIFIC POWER COMPANY



                                             By  /s/ Indecipherable
                                               ---------------------------------
                                             Title:  Sr. Vice President
                                                   -----------------------------


                                             LESSEE:

                                             GEOTHERMAL DEVELOPMENT
                                              ASSOCIATES





                                      -10-


                                             By  /s/ G. Martin Booths
                                               ---------------------------------
                                             Title: President
                                                    ----------------------------





                                      -11-


                               SECOND AMENDMENT TO
                           GEOTHERMAL RESOURCES LEASE

     THIS AGREEMENT is entered into as of the date of its execution by and
between SIERRA PACIFIC POWER COMPANY, A Nevada Corporation ("Lessor") and FAR
WEST HYDROELECTRIC FUND, LTD., a Utah Limited Partnership ("Lessee").

1. RECITALS. This Amendment is based on the following facts:

     a. On November 18, 1983, Lessor and Geothermal Development Associates
     entered into an Agreement for the Purchase and Sale of Electricity ("the
     Original Power Purchase Agreement") and a Geothermal Resources Lease ("the
     Lease") for a geothermal generation project to be located near Steamboat
     Springs, Nevada. The parties amended the Lease on January 7, 1985, and the
     Original Power Purchase Agreement on March 6, 1987. Both the Original Power
     Purchase Agreement, as amended, and the Lease, as amended, are currently in
     effect.

     b. Through a series of assignments, to which Lessor consented, Far West
     Hydroelectric Fund, Ltd. is the current Lessee under the Lease, as well as
     the Seller under the Original Power Purchase Agreement.

     c. Far West Capital, Inc. wishes to construct a geothermal generating
     facility which consists of a 2.0 MW gross (1.8 MW net) expansion at the
     Steamboat Project ("Plant") on the land subject to the Lease, the output of
     which will be sold to Lessor pursuant to a new Long-Term Agreement for the
     Purchase and Sale of Electricity of even date herewith ("the New Power
     Purchase Agreement"). Lessor and Lessee wish to amend the Lease to
     accommodate the Plant on the leased property and delineate a method of
     calculating royalty payments to be made by Lessee on the output of the
     Plant.

     d. Lessee intends to sublease a portion of the leased property to Far West
     Capital, Inc.

In consideration of these facts, the parties agree as follows:

2. AMENDED PROVISION. Section 3(c) (i) of the Lease is hereby amended to read as
follows:

                                       1


     3.(c) ROYALTY - At the end of the Billing Period during which the initial
     production of geothermal resources in commercial quantities from the Plant
     ("the Initial Operation") occurs and at the end of each monthly Billing
     Period thereafter, the Lessee shall pay Lessor royalties calculated as
     follows:

          (i) A royalty of *** percent (***%) on the ***, plant which is the
     subject of the Original Power Purchase Agreement.

          (ii) A royalty, calculated *** from the Plant for the previous Billing
     Period which is the subject of the New Power Purchase Agreement.

          (iii) A royalty of *** percent (***%) on the *** from any other power
     plant built upon or utilizing geothermal resources from the leased lands,
     or land pooled or unitized therewith.

      A "Billing Period" shall mean the time period between established meter
reading dates.

3. STATUS OF AMENDMENT. It is expressly understood and agreed by the parties
hereto that this Amendment is supplemental to the Lease. It is further
understood and agreed that all the terms, conditions and provisions of the
Lease, unless specifically modified herein, are to apply to this Amendment and
are made a part of this Amendment as though they were expressly written,
incorporated and included herein.

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment this
29th day of October 1988.

                                        LESSOR:

                                        SIERRA PACIFIC POWER COMPANY



                                        By  /s/ Gerarld Canning
                                          --------------------------------------

*** Confidential material redacted and filed separately with the Commission.

                                       2



                                        Title: Vice President Electric Resources
                                               ---------------------------------


                                        LESSEE:

                                        FAR WEST HYDROELECTRIC FUND LTD.



                                        By  /s/ Indecipherable
                                          --------------------------------------
                                        Title:  Gen. Partner
                                              ----------------------------------
                                        Date: 10/27/88
                                              ----------------------------------




                                       3


                               THIRD AMENDMENT TO
                           GEOTHERMAL RESOURCES LEASE

THIS THIRD AMENDMENT to Geothermal Resources Lease is entered into as of the
date of its execution, by and between Sierra Pacific Power Company, a Nevada
corporation ("Lessor") and Far West Electric Energy Fund, L.P., a Delaware
limited partnership (formerly Far West Hydroelectric Fund, Ltd. a Utah limited
partnership before its change of name and change of domicile) ("Lessee").

                                    RECITALS.

     a. On November 13, 1983, Lessor and Geothermal Development Associates
entered into an Agreement for the Purchase and Sale of Electricity (the
"Original Power Purchase Agreement"). As the result of a series of assignments
consented to by Lessor, Lessee has become the seller under the Original Power
Purchase Agreement, which Agreement was amended on March 6, 1987.

     b. An unrecorded Geothermal Resources Lease dated November 18, 1983, was
executed by Sierra Pacific Power Company as Lessor, and Geothermal Development
Associates, as Lessee, as disclosed by a Memorandum of Lease by and between
Sierra Pacific Power Company and Geothermal Development Associates dated January
7, 1985, and recorded in Book 2115, page 321, as Document No. 971913 of said
Official Records (the "Lease"). Said Lease was amended by an unrecorded Letter
Amendment by and between Sierra Pacific Power Company and Geothermal Development
Associates dated January 7, 1985, as disclosed by the above Memorandum of Lease
and by an Amended Memorandum of Lease by and between the same parties dated
January 7, 1985, and recorded in Book 2116, page 812, as Document No. 972684 of
said Official Records. Said Lease was assigned by Geothermal Development
Associates to Ormat Systems Inc. by an Assignment of Lease dated September 26,
1985, and recorded in Book 2272, page 643 as Document 1043163 of said Official
Records, further assigned by Ormat Systems Inc. to Bonneville Pacific
Corporation by an Assignment of Lease dated September 26, 1985, and recorded in
Book 2272, page 647 as Document No. 1043164 of said Official Records, further
assigned by Bonneville Pacific Corporation to Far West Capital, Inc. ("FWC") by
an Assignment of Lease dated December 12, 1985, and recorded in Book 2272, page
750 as Document No. 1043167 of said Official Records, and further assigned by
FWC to Far West


                                       1


Hydroelectric Fund, Ltd. by Assignment of lease dated December 12, 1985, and
recorded in Book 2272, page 756, as Document No. 1043168 of said Official
Records, all of said assignments being disclosed by that certain Memorandum of
Lease, Assignments of Lease and Purchase Agreement by and among Geothermal
Development Associates, Ormat Systems Inc., Bonneville Pacific Corporation, FWC,
Far West Hydroelectric Fund, Ltd. and Sierra Pacific Power Company dated
December 31, 1985, and recorded in Book 2317, page 368 as Document 1062824 of
said Official Records. Said Lease was further amended by a Second Amendment to
Geothermal Resources Lease by and between Sierra Pacific Power Company and Far
West Hydroelectric Fund, Ltd. dated October 29, 1988.

     c. Lessee constructed and is operating a five megawatt geothermal power
plant ("Original Power Plant") on the leased property which is delivering power
to the Lessor under the Original Power Purchase Agreement.

     d. Lessor entered into a Long Term Agreement for the Purchase and Sale of
Electricity with FWC (the "1-A Power Purchase Agreement") dated October 29,
1988, and a Special Facilities Agreement ("Special Facilities Agreement") dated
October 29, 1988. The 1-A Power Purchase Agreement, and the Special Facilities
Agreement both relate to the 1.8 MW expansion of the Original Power Plant (the
"1-A Expansion"). The 1-A Expansion is located on the leased property which is
subleased to FWC. FWC has now assigned its rights and interests in the 1-A Power
Purchase Agreement and the Special Facilities Agreement to 1-A Enterprises, a
Nevada General Partnership ("1-A") and Lessor consented to said assignments on
August 18, l989.

     e. Lessee and 1-A have requested and Lessor has agreed that certain
portions of the Lease be modified or clarified.

     NOW THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties agree as follows:

1. Section 3(c) of the Lease is hereby amended to add the following:

     (v) Any such payments made under this section shall be made by Lessee
within thirty (30) days of receipt of an invoice from Lessor requesting said
payment. Should Lessee fail to pay the amount of such invoice, Lessor may offset
future payments to Lessee under the applicable Original Power Purchase Agreement
or the 1-A Power Purchase Agreement by such amount. Such rights shall apply only
to amounts that become due and payable pursuant to this Lease, as amended.


                                       2


2. Section 12 of the Lease is hereby amended to read as follows:

12. ASSIGNMENTS AND SUBLEASES:

     a. Neither party shall voluntarily assign this Lease without the prior
written consent of the other party, unless the assignment is to a partnership in
which one of the parties to this Lease is a general partner.

     b. In the event that either party to this Lease wishes to assign this Lease
to a corporation or other entity, which does not fall into subsection (a) above,
said party shall provide the other party with written notice of such intent.
Such written notice shall describe the financial structure and assets of the
potential assignee in sufficient detail to permit the noticed party to evaluate
the effect of the assignment on its interest in this Lease and the even-dated
Agreement For The Purchase and Sale of Electricity executed by the parties
hereto. The noticed party shall have thirty (30) days from its receipt of the
notice to consent or refuse to consent to the assignment. Failure to give
written consent or refusal within said thirty-day period shall be deemed consent
by the noticed party. In no event shall consent to any assignment be
unreasonably withheld.

     c. In the event Lessee is contemplating an assignment such as described in
subsection (b) above, Lessor shall have a prior right to regain Lessee's rights
under the Lease, together with any and all related improvements, at the price
and on the terms of the intended assignment. Lessor may exercise this right by
notifying Lessee of its intent to do so by the end of the thirty-day period
described in subsection (b) above. Such notice shall also be deemed a refusal of
consent to the assignment of Lessee's rights to a third party. Subject to the
provisions of this paragraph, all obligations under this Lease as amended shall
be binding upon, and every benefit hereof shall inure to, the heirs, executors,
administrators, successors, and assigns of the respective parties thereto.

     d. Subject to subsections (a), (b), and (c) above, which refer to a
complete assignment of interest, from time to time and with prior written notice
to Lessor and without Lessor's consent, Lessee's leasehold estate in the leased
land and Lessee's right, title and interest as tenant in the Lease as amended
may be assigned for security purposes and be encumbered by one or more deeds of
trust, mortgages, security agreements, sale-and-leaseback arrangements,
leveraged leases or other security instruments or devices to secure a debt or
debts or other similar obligation or obligations.




                                       3


     e. From time to time and with the prior written consent of the Lessor, the
Lessee or its Sublessee may enter into Subleases of the leased property. Any
Sublessee may with notice to the Lessor and the Lessee but without their consent
may encumber its subleasehold interest by one or more deeds of trust, mortgages,
security agreements, sale-and-leaseback arrangements, leveraged leases or other
security instruments or devices to secure a debt or debts or other similar
obligation or obligations.

3. Lessor hereby grants to Lessee and its successors, assigns and sublessees the
right to use the easement, 45.0 feet in width described in that certain Basement
Agreement dated October 18, 1971, and recorded November 3, 1971, as Document No.
224422 at Book 589, page 533 in the Official Records of Washoe County, Nevada,
for roadway and electric utility purposes over, upon and across the property
described therein and subject to the terms thereof, which Easement Agreement is
attached hereto as Exhibit C and made a part hereof.

4. It is expressly understood and agreed by the parties hereto that this
Amendment is supplemental to the Lease. It is further understood and agreed that
all of the terms, conditions and provisions of this Lease, as amended, unless
specifically modified herein, are to apply to this Amendment and are made a part
of this Amendment as though they were expressed, incorporated and included
herein.




IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and year first above written.

                                                    LESSOR:
                                                    SIERRA PACIFIC POWER COMPANY

                                                    By /s/ Indecipherable
                                                       ------------------------
                                                    Title: Sr. Vice President
                                                           --------------------

                                                    LESSEE:

                                                    GEOTHERMAL DEVELOPMENT
                                                    ASSOCIATES

                                                    By /s/ Indecipherable
                                                       ------------------------
                                                    Title: President
                                                           --------------------


                                       4



['69 Dec 5 AM 9:01]                                        [Notary Seal]

                                                                 Exhibit 10.4.7

                                 LEASE AGREEMENT

THIS AGREEMENT, made and entered into as of the 1st day of November, 1969, by
and between Chrisman B. Jackson and Sharon Jackson Husband and Wife hereinafter
called "Lessor" (whether one or more) and Standard Oil Company of California, a
corporation, hereinafter called "Lessee,"

                               W I T N E S S E T H

              1. Lessor, for and in consideration of the sum of $10 in hand
paid, and of the royalties herein provided and of the covenants and agreements
hereinafter contained, hereby grants, demises, leases and lets unto Lessee, the
land hereinafter described with the sole and exclusive right to Lessee to drill
for, produce, extract, take and remove therefrom water, brine, steam, steam
power, minerals (other than oil), salts, chemicals, gases (other than gas
associated with oil), and other products produced or extracted by Lessee from
any thereof. Each of the foregoing is hereinafter sometimes termed "a lease
product" and all thereof are sometimes termed "the lease products." For the same
consideration Lessee is hereby granted the right to store, utilize, process,
convert, and otherwise use such lease products upon said land and to sell the
same or any part thereof off said land during the term hereof, with the right of
entry thereon at all times for said purposes, and to construct, use, maintain,
erect, repair and replace thereon, and to remove therefrom all roads, pipelines,
ditches and lanes, telephone and telegraph lines, utility installations, power
lines, poles, tanks, evaporation or settling basins, extraction or processing
plants, machinery, equipment, buildings, electric power plants, and equipment
for generation and transmission of steam power, and electric power, and for the
handling, treatment or storage of lease products, and all structures and
facilities relating thereto, which Lessee may desire to erect, construct or
install in carrying on Lessee's business and operations on or from said land and
other lands in the vicinity on said land; and Lessee shall have the further
right to erect, maintain, operate and remove a plant or plants, structures and
facilities, with all necessary appurtenances for the conversion of steam to
electric power, and for the extraction of lease products from steam, brine or
water produced from said land, and other lands in the vicinity of said land,
including all rights necessary or convenient thereto, together with rights of
way for passage over, upon and across and ingress and egress to and from said
land for any or all of the above mentioned purposes. Lessee shall also have the
right to dispose of waste brine and other waste products in a well or wells
drilled or converted for that purpose on the leased land or on other land in the
vicinity, and the right to inject water, brine, steam and gases in a well or
wells on said land or such other land for the purpose of maintaining or
restoring pressure in the productive zones beneath said land or other land in
the vicinity thereof. The said land included in this lease is situated in the
County of Imperial, State of California, and is described as follows, to wit:


The North half of Tract No. 41 1/2, Township 16 South, Range 14 East, S. B. B. &
M., containing 80 acres of land more or less.

This lease shall cover all the interest in said land now owned or hereafter
acquired by Lessor, even though greater than the undivided interest (if any)
described above. For the purpose of calculating any payments based on acreage,
Lessee, at Lessee's option, may act as if said land and its constituent parcels
contain the acreage above stated, whether they actually contain more or less.

              2. Subject to the other provisions contained, this lease shall
remain in force for a period of ten (10) years from the date hereof, called the
"primary term," and thereafter so long as lease products, or any one or more of
them, is produced from, or Lessee is engaged in drilling, extraction, processing
or reworking operations on said land hereunder or on land pooled or unitized
with said land, as provided in Section 19 hereof, (said land, together with such
pooled or unitized land, being hereinafter sometimes called "the unit area").

              3. Lessee shall pay to Lessor, on or before the last day of each
calendar month, the royalties accrued and payable for the preceding calendar
month, and in making such payments Lessee shall furnish to Lessor statements
setting forth the basis for computation of such royalty.

As royalty and rental, Lessee shall pay to Lessor 10% of the value at the well
of all lease products produced, saved and sold. As used herein, the term "value
at the well" shall mean the actual price received by Lessee for the sale of
lease products at the well. If such products are not sold by Lessee at the well
but are sold at a plant or plants on or in the vicinity of said land, then the
value at the well shall be determined by deducting from the actual price
received by Lessee for the sale of such lease products all costs and expenses
incurred by Lessee in transporting, manufacturing, processing and otherwise
handling such lease products prior to the actual sale thereof. If lease products
are not sold by Lessee at the well or at such a plant but are otherwise used by
Lessee in its chemical operations or disposed of for value, then the value of
such lease products at the well shall be determined by deducting from the price
thereof at the nearest point where the same or similar products are sold in
substantial quantities, the cost of transporting, manufacturing, processing and
otherwise handling such lease products prior to sale thereof. Lessee shall
meter, gauge or otherwise determine the volume and quality of all, lease
products commingled and such metering or gauging shall furnish the basis for
computing Lessor's royalties hereunder. Lessee may use, free of royalty, steam,
steam power, electric power, and water developed from said land by Lessee, for
all operations hereunder, and Lessee shall not be required to account to Lessor
for, or pay royalty on any lease product or products reasonably lost or consumed
in operations hereunder.

                                       2


              4. Lessee agrees to commence drilling, extraction or processing
operations on said land or on the unit area within the period of ten (10) years
from the date hereof and to prosecute such operations with reasonable diligence
until lease products or any thereof shall have been found, extracted and
processed in quantities deemed paying quantities by Lessee, or until further
operations would, in the judgment of Lessee, be unprofitable or impracticable,
or Lessee may at any time within said primary term terminate this lease and
surrender said land; provided that, commencing with the 1st day of November,
1970, if Lessee has not theretofore commenced any such operations on said land
or on the unit area or terminated this lease, Lessee shall pay or tender to
Lessor annually, in advance, as rental, the sum of Forty and No/100 -------
Dollars ($40.00) (each of such annual periods being hereinafter referred to as
rental period") until operations are commenced on said land or lands which have
been pooled or unitized therewith, pursuant to paragraph 19 hereof, or this
lease terminated as herein provided; it being understood that in the event of
the surrender or termination of this lease as to any portion or portions of the
land covered thereby, said rental shall be reduced proportionately as provided
in paragraph 16 hereof. The consideration expressed in paragraph 1 hereof covers
all rental to the date last above mentioned. If Lessee shall elect not to
commence operations on said land or on the unit area during the primary term, as
above provided, this lease shall terminate.

              It is expressly understood and agreed by the parties hereto:

                a. That if within 10 years from the date hereof Lessee has not
         completed one or more wells or a processing plant on the unit area or
         on said land, capable of producing or processing lease products or any
         thereof in quantities and quality deemed paying quantities by Lessee,
         then Lessor may, at his option, terminate this lease; and

                b. That if within 15 years from the date hereof Lessee has not
         made or arranged for a sale or sales of lease products or any thereof,
         produced from or allocated to said land, then Lessor may, at his
         option, terminate this lease.

              5. If at any time or times after the primary term or within three
(3) months before expiration of the primary term, all operations and all
production hereunder on said land or on the unit area shall cease for any cause
other than those for which specific provision is made herein, this lease shall
not terminate if Lessee shall commence or resume drilling, processing,
extraction or reworking operations or production within three (3) months after
such cessation.

              6. Lessee shall be obligated to produce only such quantity or
quantities of lease products as it may be able to market at the well or wells,
plant or plants. It is recognized that the market demand for lease products may
vary from time to time and during such periods as there is no market at the
wells or plant for any lease product or


                                       3


products, Lessee's obligation to produce, process and extract such lease product
or products shall be suspended.

Subject to the foregoing and except as herein otherwise provided, it is agreed
that the Lessee shall drill such well and operate each completed well with
reasonable diligence and in accordance with good operating practice so long as
such wells shall produce lease products in paying quantities while this lease is
in force as to the portion of said land on which such tell or wells are
situated; but in conformity with any reasonable conservation program affecting
the drilling of wells or the production of lease products from said land, which
the Lessee may either voluntarily or by order of any authorized governmental
agency adopt, subscribe to or be subject to.

              7. The possession by Lessee of said land shall be sole and
exclusive excepting only that lessor reserves the right to occupy and use or to
lease the surface of said land for agricultural, horticultural or other surface
uses, except those granted to Lessee hereunder, which uses shall be carried on
by Lessor subject to, and with no interference with, the rights or operations of
Lessee hereunder. No well shall be drilled closer than 100 feet to any residence
or barn now on said land without written consent of Lessor. Lessee shall pay for
damages caused by Lessee's operations to houses, barns, growing crops, fences
and irrigation systems. Lessee shall have the right to drill such wells on said
land as Lessee say deem desirable for the purposes hereof and Lessee shall
utilize or use only so much of said land as is necessary or reasonably
convenient for Lessee's operations hereunder and shall interfere as little as
reasonably necessary with the use and occupancy of said land by Lessor. No
default of Lessee hereunder with respect to any well, or portion of this lease,
shall impair Lessee's rights with respect to any other well or portion of this
lease.

              8. The rights of Lessor and Lessee hereunder may be assigned in
whole or in part. No present or future division of Lessor's ownership as to
different portions or parcels of said land shall operate to enlarge the
obligations or diminish the rights of Lessee, and Lessee's operations may be
conducted without regard to any such division. If all or any part of this lease
is assigned, no leasehold owner shall be liable for any act or omission of any
other leasehold owner, and failure by one to pay rental shall not affect the
rights of others -- rental being apportionable in proportion to acreage.

              9. The obligations of Lessee hereunder shall be suspended (but
without impairment of Lessor's rights under (a) and (b) of paragraph 4 hereof)
while Lessee is prevented or hindered from complying therewith in part or in
whole, by strikes, lockouts, labor disturbances, acts of God, unavoidable
accidents, laws, rules, regulations or orders of any Federal, state, municipal
or other governmental agency, acts of war or conditions arising out of or
attributable to war, shortage of necessary material, equipment or labor, or
restrictions in, or limitations upon the use thereof, inability to secure or
absence of a

                                       4


market for the sale of lease products which can be produced or recovered in
commercial quantities from said land, delays in transportation, and also matters
beyond the control of Lessee, whether similar to the matters herein specifically
enumerated or not. This lease shall remain in full force and effect during any
suspension of Lessee's obligations under any provision of this paragraph, and
for a reasonable time thereafter, provided that after the removal of the cause
or causes preventing or hindering the performance of such obligation, Lessee,
subject to the other provisions of this Lease, diligently commences or resumes
the performance of such obligation. Notwithstanding anything to the contrary
herein provided, if any of Lessee's obligations hereunder conflict with or
violate the provisions of any reasonable conservation program or plan of orderly
development, whether now or hereafter adopted, to which Lessee may voluntarily
subscribe, or of any conservation program or plan which is now or may hereafter
be prescribed by any order of any governmental agency, Lessee shall not be
obligated, to perform such obligation.

              10. If Lessee shall fail to pay any installment of royalty or
rental when due and if such default shall continue for a period of 15 days after
receipt by Lessee of written notice thereof from Lessor to Lessee, then at the
option of Lessor, this lease shall terminate as to the portion or portions
thereof as to which Lessee is in default; provided, however, that if there be a
bona fide dispute as to the amount due and all undisputed amounts are paid, said
15-day period shall be extended until 5 days after such dispute is settled by
final court decree, arbitration or agreement.

If lessee shall be in default in the performance of any obligations under this
Lease, other than the payment of rentals or royalties, and if, for a period of
90 days after written notice is given to Lessee by Lessor of such default,
Lessee shall fail to commence and thereafter diligently and in good faith
prosecute action to remedy such default, Lessor may terminate this Lease.

              11. Lessee shall pay all taxes that may be levied against the
improvements, plant, machinery and personal property owned by Lessee and located
upon any part of said land.

              12. Lessee shall also pay Lessee's share of any and all taxes
assessed during the term of this lease upon any products of Lessee's operations
hereunder, together with Lessee's share of all severance, production and license
taxes or other taxes or assessments levied or assessed on account of the
production of lease products or any thereof on or from said land, or on or from
such portion of said land as Lessee may be holding under this lease on the date
of such tax lien.

              13. Lessor agrees to pay Lessor's share of any and all taxes
assessed upon any products of Lessee's operations hereunder, together with
Lessor's share of all severance, production and license taxes or other taxes or
assessments levied or assessed

                                       5


on account of the production of lease products from said land, and to pay all
other taxes assessed against said land, whether the same are assessed to Lessor
or Lessee or otherwise, and Lessee is hereby authorized to pay all such taxes
and assessments on behalf of Lessor and to deduct the amount so paid from any
royalties or moneys due Lessor hereunder. "Lessee's share" and "Lessor's share",
as used above refers to Lessee's and Lessor's respective proportionate parts of
the gross proceeds from the sale of any and all lease products produced, saved
and sold from said land by Lessee or allocated to said land under the terms of
any unit or pooling plan during the preceding calendar year.

              14. All royalties, rentals and other payments payable in money
hereunder shall be paid to Lessor by Lessee mailing or delivering a check
therefore to Lessor at 1075 So. 19th St. El. Centro, California, or Lessee may,
at its option, pay any or all royalties, rentals and other payments payable in
money hereunder by mailing or delivering a check therefor to
______________________________________________________________________, at
____________________________________________________________________,
______________________________________________________________________, its
successors and assigns, herein designated by Lessor as depositary, hereby
granting to said depositary full power and authority on behalf of Lessor and on
behalf of the heirs, executors, administrators, successors and assigns of
Lessor, and each of them, to collect and receipt for all sums of money due and
payable from Lessee to Lessor hereunder, and to settle all accounts end
accounting of rentals, royalties and other payments payable in money hereunder.
No change in the ownership of the land or minerals covered by this lease and no
assignment of rentals or royalties shall be binding upon Lessee or the
depositary until both Lessee and the depositary have been furnished with written
evidence thereof satisfactory to them. Said depositary above named shall
continue to act as such until the owners and holders of at least two-thirds of
Lessor's estate hereunder shall in writing designate a different depositary and
notify Lessee in writing at P.O. Box 3495 San Francisco, California 94120 of the
name and address of such new depositary. The payment of any and all rentals,
royalties and other payments hereunder by Lessee to the depositary designated
herein or to any other depositary hereafter designated by Lessor, as aforesaid,
shall be a full acquittance and discharge of Lessee of and from any and all
liability to Lessor, and to the heirs, executors, administrators, successors and
assigns of Lessor, and each of them, for any part of such rentals, royalties or
other payments, and Lessee will not be responsible at any time for the
disposition or disbursement by any such depositary of all or any part of any
moneys received by it hereunder.

              15. It is agreed that if Lessor owns a less interest in the sole
and exclusive rights herein granted Lessee, than the entire and undivided fee
simple estate therein, then any royalties, rentals and other payments herein
provided for shall be paid Lessor only in the proportion which Lessor's interest
bears to the whole and undivided fee. In the event

                                       6


Lessee's estate hereunder shall fail, for a cause other than Lessee's default
hereunder, in regard to any portion of said land or any interest therein, such
failure shall not affect or invalidate Lessee's estate hereunder. In regard to
the remaining portions of said lands or the remaining interests therein and this
lease shall nevertheless continue in full force and effect with respect to said
remaining portions of said land or remaining interests therein, and Lessee shall
not be accountable to Lessor for any payment theretofore made with respect to
said portion of said land or such interest in regard to which Lessee's estate
hereunder has failed. If and whenever it shall be necessary so to do in order to
protect Lessee's interest under this lease, Lessee may at its option pay and
discharge at any time any mortgage or other lien now or hereafter attaching to
said land or any part thereof and in such event Lessee shall be subrogated to
all of the rights of the owner or holder of such mortgage or other lien and
Lessee may in addition thereto, at its option, apply to the discharge of any
such mortgage or other lien, or to the reimbursement to Lessee for any amount so
paid by it, any rentals, royalties or other sums accruing or payable hereunder,
to the owner of the lands to which such mortgage or other lien attaches.

              16. Lessee may at any time or times surrender this lease as to all
or any portion of said land and be relieved of all obligations thereafter
accruing as to the acreage surrendered, and thereafter the rental shall be
reduced in the same proportion that the acreage covered hereby is reduced. In
the event this lease shall be surrendered under the provisions of this
paragraph, or assigned as hereinabove provided as to any portion or portions of
said land, Lessee shall have such rights of way or easements hereunder, over,
upon and across the land as to which this lease is so surrendered or assigned as
shall be necessary or convenient for Lessee's operations on the land retained by
it and other lands in the vicinity thereof. Upon any surrender or assignment of
this lease as to all or any portion of said land, Lessee shall be relieved of
all further obligations hereunder with respect to the lands so surrendered or
assigned. Any such surrender shall become effective upon delivery to Lessor, or
to the depositary bank herein designated, or the deposit in the United States
mail, postage prepaid, of a duly executed duplicate of an instrument of
surrender properly addressed to Lessor or to such depositary bank. Within a
reasonable time thereafter, Lessee shall record the original of such instrument
of surrender.

              17. Lessee shall have the right at any time and from time to time
during the continuance hereof and within a reasonable time after the surrender
or any termination of this lease, to remove from said land all equipment,
machinery, installations, and any other property or improvements belonging to or
furnished by Lessee or Lessee's permitees.

              18. All labor to be performed and material to be furnished in the
operations of Lessee hereunder shall be at the cost and expense of Lessee, and
Lessor shall not be chargeable with nor liable for any part thereof. Lessee
shall protect said land from liens arising from Lessee's operations thereon.

                                       7


              19.(a) Lessee is given the sole right and option by written
declaration of pooling at any time or from time to time, within twenty (20)
years from the date hereof, to combine, pool or unitize in whole or in part as
to any stratum or strata all or any part of said lands with other lands not
subject to this lease so as to create one or more reasonably compact operating
units for any operating or producing purpose. Such written declaration of
pooling shall describe the pooled lands and shall become effective when recorded
in the Office of the County Recorder in the county where the land is situated.
Lessee shall give written notice of such pooling to those Lessors whose lands
are so pooled. Lessors agree that with respect to all lease products obtained
from any lands included within any such operating unit, whether or not from
lands covered by this lease, there shall be allocated to and deemed to have been
produced from the lands covered by this lease and included in such operating
unit, only that proportion of the entire production from such operating unit
that the amount of acreage within the lands herein leased and included in such
operating unit bears to the total acreage of all of the land in such operating
unit, and royalty payable under this lease with respect to leased land included
in such operating unit shall be computed only on that portion of such production
so allocated to such leased lands. The entire acreage so pooled or unitized
shall be treated as if it were covered by one lease and the drilling of a well
or performance of any other obligations in any part of such operating unit,
whether or not on land subject to this lease, shall fulfill Lessee's drilling
and other obligations under this lease to the same extent as if such well were
drilled and other obligations performed on land subject to this lease. No offset
obligation shall accrue under this lease as a result of any well drilled within
any such operating unit. Lessee may, at its sole option, at any time when there
is no production in such operating unit of lease products in quantities deemed
paying by Lessee terminate such operating unit by a written declaration thereof,
in the same manner in which it was created.

              (b) Lessee is hereby granted the right at any time or times within
the period hereinafter provided to unitize this lease and the lands covered
hereby, in whole or in part or as to any stratum or strata, with other lands and
leases and to increase or decrease the size of any such unit. Any change in the
amount of Lessor's royalties resulting from unitization of this lease or from
any increase or decrease in the size of any such unit shall not be retroactive.
In the event of any such unitization, this lease, unless sooner terminated by
Lessee, shall continue in effect for so long as any of the lands hereby leased
remain subject to such unit. The drilling and producing operations conducted on
any of the unitized lands shall constitute full compliance with the drilling and
producing obligations of Lessee hereunder and Lessor shall be entitled to the
royalties in this lease provided, on the fractional part only, if any, of the
unit production allocated to this lease in accordance with the provisions of
said unit. The method of allocation of production from lands subject to said
unit shall be set forth therein and may be based upon the surface acreage or the
estimated volumetric content of recoverable lease products, or any


                                       8


weighing of either or both thereof, of lands within such unit or within the
estimated productive limits of such unit, or such allocation may be made upon
any other basis approved by State or Federal authorities having jurisdiction
thereof. The provisions of this paragraph authorizing the establishment and
enlargement or contraction of such unit and change of the ratio of participation
thereunder shall not extend beyond the period of twenty (20) years from the date
of this lease; provided, however, that if such unit is established before the
expiration of said twenty-year period, such unit may continue in effect beyond
said twenty-year period. Any such unit may be established, enlarged, or
diminished, and, in the absence of production therefrom, may be dissolved by
Lessee's filing for record an instrument so declaring. A copy of such instrument
shall be delivered to Lessor or to the depositary.

              20. Whenever used herein, the expression "drilling operations"
shall mean, for all purposes hereof, any work or actual operations undertaken or
commenced for the purpose of drilling of a well, including without limiting the
generality hereof, the preparation of the ground therefor, the building of roads
and other facilities therefor, the construction of a derrick and other necessary
structures for the drilling of a well followed by the actual operation of
drilling in the ground. Any such work or operations preliminary to the drilling
in the ground may be undertaken in any order Lessee shall see fit. All such work
and operations shall be prosecuted with reasonable diligence.

              21. This agreement may be executed in any number of counterparts
with the same force and effect as if all parties signed the same document.

              22. This lease shall be binding upon all who execute it, whether
or not they are named in the granting clause hereof and whether or not all
parties named in the granting clause execute this lease. All the provisions of
this lease shall inure to the benefit of and be binding upon the heirs,
executors, administrators, successors and assigns of Lessor and Lessee.

              IN WITNESS WHEREOF, the parties hereto have executed this
agreement.

STANDARD OIL COMPANY OF AMERICA

By: /s/ Indecipherable                    /s/ Chrisman B. Jackson
   ---------------------------         ----------------------------------
           Contract Agent              Chrisman B. Jackson

By: /s/ Indecipherable                    /s/ Sharon Jackson
   ---------------------------         ----------------------------------
          Assistant Secretary          Sharon Jackson, Husband and Wife



___________________________            __________________________________
           LESSEE                               LESSOR


                                       9




STATE OF CALIFORNIA        )
                           ):  ss.

COUNTY OF LOS ANGELES       )



State of California                )
                                    ):  ss.
City and County of San Francisco    )

              On November 25, 1969, before me, Edmond Lee Kelly, a Notary Public
in and for said City and County and State, residing therein, duly commissioned
and sworn, personally appeared A.T. SMITH and E.A. HANSEN known to me to be
CONTRACT AGENT and ASSISTANT SECRETARY, respectively, of STANDARD OIL COMPANY OF
CALIFORNIA the Corporation described in and that executed the within instrument,
and also known to me to be the persons who executed it on behalf of the said
Corporation therein named, and they acknowledged to me that such Corporation
executed the same.

              IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
Official Seal, at my office in the City and County and State aforesaid the day
and year in this certificate above written.

                                   /s/ Indecipherable                18
                                   ----------------------------------
                                   Notary Public in and for said City and
                                   County of San Francisco, State of California


                                       10


                          AMENDMENT OF LEASE AGREEMENT

              THIS AGREEMENT, made this 1st day of April, 1976, by and between
CHRISMAN B. JACKSON and MARY ANGELA, his wife, hereinafter called "Lessor", and
STANDARD OIL COMPANY OF CALIFORNIA, a corporation, hereafter called "Lessee";

                              W I T N E S S E T H:

              THAT, WHEREAS, by that certain Lease Agreement dated November 1,
1969 and recorded in the Office of the County Recorder of Imperial County,
California, in Book 1286 at Page 643, et. seq. of Official Records, Lessors did
grant, let and lease unto Lessee for the purposes therein described certain
lands situate in said County and State, particularly described in such lease;
such lease being hereinafter referred to as "said lease"; and

              WHEREAS, Lessor and Lessee have agreed to amend said lease as
hereinafter set forth:

              NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00)
and other valuable consideration, receipt of which is hereby acknowledged,
Lessor and Lessee agree as follows:

              1. The following paragraph is hereby added to said lease, as
amended, insofar as it covers said land:

       "23. Lessee agrees that when it physically occupies and uses the surface
       of said land, it shall pay Lessor rental in the amount of Two Hundred and
       No/100 Dollars ($200.00) per acre per year for so much of Lessor's
       surface acreage actually occupied and used. Such rental shall be payable
       annually in advance so long as said use continues. Said rental shall be
       comparable with rentals in general paid for other lands in the area for
       agricultural purposes and may be increased in the future to conform to
       any general increase in rentals for agricultural purposes."

              2. Lessor hereby ratifies said lease, as amended, and acknowledges
full performance by Lessee of all of its obligations thereunder to the date
hereof and, as herein amended, said lease shall remain in full force and effect
and, to implement this amendment, Lessor does hereby lease, let and demise unto
Lessee said lands pursuant to the terms of said lease, as amended.


              3. The provisions of this agreement shall be binding upon and
shall inure to the benefit of the respective heirs, executors, administrators,
successors and assigns of the parties hereto.

              4. Lessor hereby acknowledges receipt of rental in full for
surface use by Lessee referred to in Paragraph 1 hereof for the period June 30,
1974 to June 30, 1976.





                          AMENDMENT OF LEASE AGREEMENT

              THIS AGREEMENT, made this 1st day of October, 1979, between the
party or parties whoe names are subscribed hereto under the designation of
"Lessor", hereinafter called "Lessor" (whether one or more), and CHEVRON U.S.A.
INC. successor in interest to STANDARD OIL COMPANY OF CALIFORNIA, a corporation,
hereinafter called "Lessee",

                              W I T N E S S E T H:

              THAT, REFERENCE IS HEREBY HAD to certain Lease Agreement dated
November 1, 1969 (such lease being of record in the Office of the County
Recorder of Imperial County, California, in Book 1286, at Page 643, et seq., of
Official Records), whereby CHRISMAN B. AND SHARON JACKSON did grant, let and
lease unto Lessee for the purposes therein described certain lands situate in
said County and State particularly described in such lease, such lease being
hereinafter referred to as "said lease";

              AND, WHEREAS, by amendment of Lease Agreement dated April 1, 1976,
a short form of which was recorded in Book 1387, Page 1064 Official Records
Imperial County, California said Lease Agreement was amended;

              AND, WHEREAS, by Grant Deed dated December 14, 1977, and recorded
in Book 1410, Page 216 Official Records Imperial County, California, Lessor
became the owner and holder of Lessor's interest under said Lease Agreement as
amended;

              AND, WHEREAS, by amendment of lease agreement dated October 23,
1978, a short form of which was recorded in B-1430, P-1585, et seq. of official
records of Imperial County, California, said lease was amended;

              AND, WHEREAS, Lessor and Lessee have agreed to further amend said
lease in the particulars hereinafter set forth:

              NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00)
and other valuable consideration paid to Lessor by Lessee, receipt of which is
hereby acknowledged, Lessor and Lessee agree as follows:

              1. Effective with the rental period that begins in 1979, that part
of the first sentence of Section 4 of said lease which now reads as follows:

              "...., the sum of Six Hundred & No/l00 DOLLARS ($600.00) ...."

              shall be and hereby is amended to read as follows:


              "...., the sum of One Thousand & No/100 DOLLARS ($1,000.00)...."

              2. To implement the foregoing, Lessor does hereby grant, demise,
lease and let unto Lessee all those certain lands particularly described in said
lease for the term and purposes and subject to all of the other provisions of
said lease as hereby amended. Lessor agrees that said lease as hereby amended is
in good standing and in full force and effect. Lessor acknowledges receipt of
rental in full under said lease to November 1, 1980.

              3. This agreement shall bind and inure to the benefit of the
respective heirs, executors, administrators, successors, and assigns of the
parties hereto.



                          AMENDMENT OF LEASE AGREEMENT

              THIS AGREEMENT, made this 23rd day of October, 1978 between the
party or parties whose names are subscribed hereto under the designation of
"Lessor", hereinafter called "Lessor" (whether one or more), and CHEVRON U.S.A.
INC. successor in interest to STANDARD OIL COMPANY OF CALIFORNIA, a corporation,
hereinafter called "Lessee",

                              W I T N E S S E T H:

              THAT, REFERENCE IS HEREBY HAD to that certain Lease Agreement
dated November 1, 1969 (such lease being of record in the Office of the County
Recorder of Imperial County, California, in Book 1236 at Page 643, et seq., of
Official Records), whereby CHRISMAN B. and Sharon Jackson did grant, let and
lease unto Lessee for the purposes therein described certain lands situate in
said County and State particularly described in such lease, such lease; being
hereinafter referred to as "said lease";

              AND, WHEREAS, by amendment of Lease Agreement a short form of
which was recorded in Book 1387, Page 1064 Official Records Imperial County,
California said Lease Agreement was amended;

              AND, WHEREAS, by Grant Deed dated December 14, 1977 and recorded
in Book 1410, Page 216 Official Records Imperial County, California, Lessor
became the owner and holder of Lessor's interest under said Lease Agreement as
amended;

              AND, WHEREAS, Lessor and Lessee have agreed to further amend said
lease in the particulars hereinafter set forth:

              NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00)
and other valuable consideration paid to Lessor by Lessee, receipt of which is
hereby acknowledged, Lessor and Lessee agree as follows:

              1.     That part of the first sentence of Section 2 of said lease
which now reads as follows:

              "...., this lease shall remain in force for a period of ten (10)
years from the date hereof, called the 'primary term',...."

              shall be and hereby is amended to read as follows:

              "...., this lease shall remain in force for a period of fifteen
(15) years from the date hereof, called the 'primary term',...."


              2.     That part of the first sentence of Section 4 of said lease
which now reads as follows:

              "4. Lessee agrees to commence drilling, extraction or processing
operations on said land or on the unit area within the period of ten (10) years
from the date hereof...."

              shall be and hereby is amended to read as follows:

              "4. Lessee agrees to commence drilling, extraction or processing
operations on said land or on the unit area within the period of fifteen (15)
years from the date hereof...."

              3. Effective with the rental period that begins in 1979, that part
of the first sentence of Section 4 of said lease which now reads as follows:

              "...., the sum of Forty and NO/100 DOLLARS ($40.00)...."

              shall be and hereby is amended to read as follows:

              "...., the sum of Six Hundred and NO/100 DOLLARS ($600.00)...."

              4.     That part of Section 4a. of said lease which now reads as
     follows:

              "a.      That if within 10 years...."

              shall be and hereby is amended to read as follows:

              "a. That if within 15 years...."

              5.     That part of Section 4b. of said lease which now reads as
     follows:

              "b. That if within 15 years...."

              shall be and hereby is amended to read as follows:

              "b. That if within 20 years...."

              6. To implement the foregoing, Lessor does hereby grant, demise,
lease and let unto Lessee all those certain lands particularly described in said
lease for the term and purposes and subject to all of the other provisions of
said lease as hereby amended. Lessor agrees that said lease as hereby amended is
in good standing and in full force and


effect. Lessor acknowledges receipt of rental in full under said lease to
November 1, 1980.

              7. This agreement shall bind and inure to the benefit of the
respective heirs, executors, administrators, successors, and assigns of the
parties hereto.

              IN WITNESS WHEREOF, this agreement has been executed as of the day
and year first herein written.

LESSEE                                            LESSOR

CHEVRON U.S.A. INC.                               CHRISMAN B. JACKSON



By  /s/ Indecipherable                            By   /s/ Chrisman B. Jackson
   ------------------------                          -------------------------
   Its Attorney-in-Fact





STATE OF CALIFORNIA)
COUNTY OF IMPERIAL)

On October 23, 1978 before me, the undersigned, a Notary Public in and for said
State, personally appeared Chrisman B. Jackson, known to me to be the person
whose name is subscribed to the within instrument and acknowledged that he
executed the same.

WITNESS my hand and official seal.

     /s/ Pauline C. Montgomery
------------------------------        [Official seal of Pauline C. Montgomery]



   Pauline C. Montgomery



                                                                 Exhibit 10.4.8


                          L E A S E  A G R E E M E N T

              THIS AGREEMENT, made and entered into as of the 22nd day of
SEPTEMBER, 1976, by and between THE UNDERSIGNED
_____________________________________________________________
_____________________________________________________________ hereinafter called
"Lessor" (whether one or more) and STANDARD OIL COMPANY OF CALIFORNIA,
hereinafter called "Lessee,"

                               W I T N E S S E T H

              1. Lessor, for and in consideration of the sum of $10 in hand
paid, and of the royalties herein provided and of the covenants and agreements
hereinafter contained, hereby grants, demises, leases and lets unto Lessee, the
land hereinafter described with the sole and exclusive right to Lessee to drill
for, produce, extract, take and remove therefrom water, brine, steam, steam
power, minerals (other than oil), salts, chemicals, gases (other than gas
associated with oil), and other products produced or extracted by Lessee from
any thereof. Each of the foregoing is hereinafter sometimes termed "a lease
product" and all thereof are sometimes termed "the lease products". For the same
consideration Lessee is hereby granted the right to store, utilize, process,
convert, and otherwise use such lease products upon said land and to sell the
same or any part thereof off said land during the tern hereof, with the right of
entry thereon at all times for said purposes, and to construct, use, maintain,
erect, repair and replace thereon, and to remove therefrom all roads, pipelines,
ditches and lanes, telephone and telegraph lines, utility installations, power
lines, poles, tanks, evaporation or settling basins, extraction or processing
plants, machinery, equipment, buildings, electric power plants, and equipment
for generation and transmission of steam power, and electric power, and for the
handling, treatment or storage of lease products, and all structures and
facilities relating thereto, which Lessee may desire to erect, construct or
install in carrying on Lessee's business and operations on or from said land and
other lands in the vicinity of said land; and Lessee shall have the further
right to erect, maintain, operate and remove a plant or plants, structures and
facilities, with all necessary appurtenances for the conversion of steam to
electric power, and for the extraction of lease products from steam, brine or
water produced from said land, and other lands in the vicinity of said land,
including all rights necessary or convenient thereto, together with rights of
way for passage over, upon and across and ingress and egress to and from said
land for any or all of the above mentioned purposes. Lessee shall also have the
right to dispose of waste brine and other waste products in a well or wells
drilled or converted for that purpose on the leased land or on other land in the
vicinity, and the right to inject water, brine, steam and gases in a well or
wells on said land or such other land for the purpose of maintaining or
restoring pressure in the productive zones beneath said land or other land in
the vicinity thereof.




The said land included in this lease is situated in the County of IMPERIAL,
State of CALIFORNIA and is described as follows, to wit:

ALL THAT PORTION OF THE EAST HALF OF TRACT 45, TOWNSHIP 16 SOUTH, RANGE 14 EAST,
S.B.M., IN THE COUNTY OF IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO THE
OFFICIAL PLAT OF RE-SURVEY APPROVED FEBRUARY 6, 1909, AND FILED IN THE DISTRICT
LAND OFFICE, LYING EAST OF THE EAST LINE OF THE RIGHT OF WAY OF THE SOUTHERN
PACIFIC RAILROAD COMPANY, EXCEPTING THEREFROM THE EAST 30 FEET AS CONVEYED TO
THE COUNTY OF IMPERIAL BY DEED RECORDED IN BOOK 470, PAGE 507 OF OFFICIAL
RECORDS.

              containing 28.00 --------

              This lease shall cover all the interest in said land now owned or
hereafter acquired by Lessor, even though greater than the undivided interest
(if any) described above. For the purpose of calculating any payments based on
acreage, Lessee, at Lessee's Option, may act as if said land and its constituent
parcels contain the acreage above stated, whether they actually contain more or
less.

              2. Subject to the other provisions herein contained, this lease
shall remain in force for a period of ten (10) years from the date hereof,
called the "primary term," and thereafter so long as lease products, or any one
or more of them, is produced from, or Lessee is engaged in drilling, extraction,
processing or reworking operations on said land hereunder or on land pooled or
unitized with said land, as provided in Section 19 hereof, (said land, together
with such pooled or unitized land, being hereinafter sometimes called "the unit
area").

              3. Lessee shall pay to Lessor, on or before the last day of each
calendar month, the royalties accrued and payable for the preceding calendar
month, and in making such payments Lessee shall furnish to Lessor statements
setting forth the basis for computation of such royalty.

              As royalty and rental, Lessee shall pay to Lessor 10% of the value
at the well of all lease products produced, saved and sold. As used herein, the
term "value at the well" shall mean the actual price received by Lessee for the
sale of lease products at the well. If such products are not sold by Lessee at
the well but are sold at a plant or plants on or in the vicinity of said land,
then the value at the well shall be determined by deducting from the actual
price received by Lessee for the sale of such lease products all costs and
expenses incurred by Lessee in transporting, manufacturing, processing and
otherwise handling such lease products prior to the actual sale thereof. If
lease products are not sold by Lessee at the well or at such a plant but are
otherwise used by Lessee in


                                       2




its chemical operations or disposed of for value, then the value of such lease
products at the well shall be determined by deducting from the price thereof at
the nearest point where the same or similar products are sold in substantial
quantities, the cost of transporting, manufacturing, processing and otherwise
handling such lease products prior to sale thereof. Lessee shall meter, gauge or
otherwise determine the volume and quality of all lease products commingled and
such metering or gauging shall furnish the basis for computing Lessor's
royalties hereunder. Lessee may use, free of royalty, steam, steam power,
electric power, and water developed from said land by Lessee, for all operations
hereunder, and Lessee shall not be required to account to Lessor for, or pay
royalty on any lease product or products reasonably lost or consumed in
operations hereunder.

              4. Lessee agrees to commence drilling, extraction or processing
operations on said land or on the unit area within the period of twenty (20)
years from the date hereof and to prosecute such operations with reasonable
diligence until lease products or any thereof shall have been found, extracted
and processed in quantities deemed paying quantities by Lessee, or until further
operations would, in the judgment of Lessee, be unprofitable or impracticable,
or Lessee may at any time within said primary term terminate this lease and
surrender said land, provided that, commencing with the 22ND day of SEPTEMBER ,
l977, if Lessee has not theretofore commenced any such operations on said land
or on the unit area or terminated this lease, Lessee shall pay or tender to
Lessor annually, in advance, as rental, the sum of FIVE HUNDRED SIXTY AND
NO/100THS ------------DOLLARS ($ 560 00) (each of such annual periods being
hereinafter referred to as "rental period") until operations are commenced on
said land or lands which have been pooled or unitized therewith, pursuant to
paragraph 19 hereof, or this lease terminated as herein provided; it being
understood that in the event of the surrender or termination of this lease as to
any portion or portions of the land covered thereby, said rental shall be
reduced proportionately as provided in paragraph 16 hereof. The consideration
expressed in paragraph 1 hereof covers all rental to the date last above
mentioned. If Lessee shall elect not to commence operations on said land or on
the unit area

              It is expressly understood and agreed by the parties hereto:

              a. That it within 10 years from the date hereof Lessee has not
       completed one or more wells or a processing plant on the unit area or on
       said land, capable of producing or processing lease products or any
       thereof in quantities and quality deemed paying quantities by Lessee,
       then Lessor may, at his option, terminate this lease; and

              b. That if within 15 years from the date hereof Lessee has not
       made or arranged for a sale or sales of lease products or any thereof,
       produced from or allocated to said land, then Lessor may, at his option,
       terminate this lease

                                       3


              5. If at any time or times after the primary term or within three
(3) months before expiration of the primary term, all operations and all
production hereunder on said land or on the unit area shall cease for any cause
other than those for which specific provision is made herein, this lease shall
not terminate if Lessee shall commence or resume drilling, processing,
extraction or reworking operations or production within three (3) months after
such cessation.

              6. Lessee shall be obligated to produce only such quantity or
quantities of lease products as it may be able to market at the well or wells,
plant or plants. It is recognized that the market demand for lease products may
vary from time to time and during such periods as there is no market at the
wells or plant for any lease product or products, Lessee's obligation to
produce, process and extract such lease product or products shall be suspended.

              Subject to the foregoing and except as herein otherwise provided,
it is agreed that the Lessor shall drill such wells and operate each completed
well with reasonable diligence and in accordance with good operating practice so
long as such wells shall produce lease products in paying quantities while this
lease is in force as to the portion of said land on which such well or wells are
situated; but in conformity with any reasonable conservation program affecting
the drilling of wells or the production of lease products from said land, which
the Lessee may either voluntarily or by order of any authorized governmental
agency adopt, subscribe to or be subject to.

              7. The possession by Lessee of said land shall be sole and
exclusive excepting only that Lessor reserves the right to occupy and use or to
lease the surface of said land for agricultural, horticultural or other surface
uses, except those granted to Lessee hereunder, which uses shall be carried on
by Lessor subject to, and with no interference with, the rights or operations of
Lessee hereunder. No well shall be drilled closer than 100 feet to any residence
or barn now on said land without written consent of Lessor. Lessee shall pay for
damages caused by Lessee's operations to houses, barns, growing crops, fences
and irrigation systems. Lessee shall have the right to drill such wells on said
land as Lessee may deem desirable for the purposes hereof and Lessee shall
utilize or use only so much of said land as is necessary or reasonably
convenient for Lessee's operations hereunder and shall interfere as little as
reasonably necessary with the use and occupancy of said land by Lessor. No
default of Lessee hereunder with respect to any well, or portion of this lease,
shall impair Lessee's rights with respect to any other well or portion of this
lease.

              8. The rights of Lessor and Lessee hereunder may be assigned in
whole or in part. No present or future division of Lessor's ownership as to
different portions or parcels of said land shall operate to enlarge the
obligations or diminish the rights of Lessee, and Lessee's operations may be
conducted without regard to any such division.

                                       4


If all or any part of this lease is assigned, no leasehold owner shall be liable
for any act or omission or any other leasehold owner, and failure by one to pay
rental shall not affect the rights of others--rental being apportionable in
proportion to acreage.

              9. The obligations of Lessee hereunder shall, be suspended (but
without impairment of Lessor's rights under (a) and (b) of paragraph 4 hereof)
while Lessee is prevented or hindered from complying therewith in part or in
whole, by strikes, lockouts, labor disturbances, acts of God, unavoidable
accidents, laws, rules, regulations or orders of any Federal, state, municipal
or other governmental agency, acts of war or conditions arising out of or
attributable to war, shortage of necessary material, equipment or labor, or
restrictions in, or limitations upon the use thereof, inability to secure or
absence of a market for the sale of lease products which can be produced or
recovered in commercial quantities from said land, delays in transportation, and
also matters beyond the control of Lessee, whether similar to the matters herein
specifically enumerated or not. This lease shall remain in full force and effect
during any suspension of Lessee's obligations under any provisions of this
paragraph, and for a reasonable time thereafter, provided that after the removal
of the cause or causes preventing or hindering the performance of such
obligation, Lessee, subject to the other provisions of this Lease, diligently
commences or resumes the performance of such obligation. Notwithstanding
anything to the contrary herein provided, if any of Lessee's obligations
hereunder conflict with or violate the provisions of any reasonable conservation
program or plan of orderly development, whether now or hereafter adopted, to
which Lessee may voluntarily subscribe, or of any conservation program or plan
which is now or may hereafter be prescribed by any order of any governmental
agency, Lessee shall not be obligated to perform such obligation.

              10. If Lessee shall fail to pay any installment of royalty or
rental when due and it such default shall continue for a period of 15 days after
receipt by Lessee of written notice thereof from Lessor to Lessee, then at the
option of Lessor, this lease shall terminate as to the portion or portions
thereof as to which Lessee is in default; provided, however, that if there be a
bona fide dispute as to the amount due and all undisputed amounts are paid, said
15-day period shall be extended until 5 days after such dispute is settled by
final court decree, arbitration or agreement.

              If Lessee shall be in default in the performance of any
obligations under this Lease, other than the payment of rentals or royalties,
and if, for a period of 90 days after written notice is given to Lessee by
Lessor of such default, Lessee shall fail to commence and thereafter diligently
and in good faith prosecute action to remedy such default, Lessor may terminate
this Lease.

              11. Lessee shall pay all taxes that may be levied against the
improvements, plant, machinery and personal property owned by Lessee and located
upon any part of said land.

                                       5


              12. Lessee shall also pay Lessee's share of any and all taxes
assessed during the term of this lease upon any products of Lessee's operations
hereunder, together with Lessee's share of all severance, production and license
taxes or other taxes or assessments levied or assessed on account of the
production of lease products or any thereof on or from said land, or on or from
such portion of said land as Lessee may be holding under this lease on the date
of such tax lien.

              13. Lessor agrees to pay Lessor's share of any and all taxes
assessed upon any products of Lessee's operations hereunder, together with
Lessor's share of all severance, production and license taxes or other taxes or
assessments levied or assessed on account of the production of lease products
from said land, and to pay all other taxes assessed against said land, whether
the same are assessed to Lessor or Lessee or otherwise, and Lessee is hereby
authorized to pay all such taxes and assessments on behalf of Lessor and to
deduct the amount so paid from any royalties or moneys due Lessor hereunder.
"Lessee's share" and "Lessor's share", as used above refers to Lessee's and
Lessor's respective proportionate parts of the gross proceeds from the sale of
any and all lease products produced, saved and sold from said land by Lessee or
allocated to said land under the terms of any unit or pooling plan during the
preceding calendar year.

              14. All royalties, rentals and other payments payable in money
hereunder shall be paid to Lessor by Lessee mailing or delivering a check
therefor to Lessor at P.O. Box "6" Heber, CA 92249 or Lessee may, its option,
pay any or all royalties, rentals and other payments payable in money hereunder
by mailing or delivering a check therefor to _____________________________ at
________________________ its successors and assigns, herein designated by Lessor
as depositary, hereby granting to said depositary full power and authority in
behalf of Lessor and on behalf of the heirs, executors, administrators,
successors and assigns of Lessor, and each of them, to collect and receipt for
all sums of money due and payable from Lessee to Lessor hereunder, and to settle
all accounts and accounting of rentals, royalties and other payments payable in
money hereunder. No change in the ownership of the land or minerals covered by
this lease and no assignment of rentals or royalties shall be binding upon
Lessee or the depositary until both Lessee and the depositary have been
furnished with written evidence thereof satisfactory to them. Said depositary
above named shall continue to act as such until the owners and holders of at
least two-thirds of Lessor's estate hereunder shall in writing designate a
different depositary and notify Lessee in writing at P.O. Box 3495 San
Francisco, CA 94119, of the name and address of such new depositary. The payment
of any and all rentals, royalties and other payments hereunder by Lessee to the
depositary designated herein or to any other depository hereafter designated by
Lessor, as aforesaid, shall be a full acquittance and discharge of Lessee of and
from any and all, liability to Lessor, and to the heirs, executors,
administrators, successors and assigns of Lessor, and each of them, for any part
of such rentals, royalties or other payments, and Lessee will not be responsible
at any time for the disposition or

                                       6



disbursement by any such depositary of all or any part of any moneys received by
it hereunder.

              15. It is agreed that if Lessor owns a less interest in the sole
and exclusive rights herein granted Lessee, than the entire and undivided fee
simple estate therein, then any royalties, rentals and other payments herein
provided for shall be paid Lessor only in the proportion which Lessor's interest
bears to the whole, and undivided fee. In the event Lessee's estate hereunder
shall fail, for a cause other than Lessee's default hereunder, in regard to any
portion of said land or any interest therein, such failure shall not affect or
invalidate Lessee's estate hereunder in regard to the remaining portions of said
lands or the remaining interests therein and this lease shall nevertheless
continue in full force and effect with respect to said remaining portions of
said land or remaining interests therein, and Lessee shall not be accountable to
Lessor for any payment theretofore made with respect to said portion of said
land or such interest in regard to which Lessee's estate hereunder has failed.
If whenever it shall be necessary so to do in order to protect Lessee's interest
under this lease, Lessee may at its option pay and discharge at any time any
mortgage or other lien now or hereafter attaching to said land or any part
thereof and in such event Lessee shall be subrogated to all of the rights of the
owner or holder of such mortgage or other lien and Lessee may in addition
thereto, at its option, apply to the discharge of any such mortgage or other
lien, or to the reimbursement to Lessee for any amount so paid by it, any
rentals, royalties or other sums accruing or payable hereunder, to the owner of
the lands to which such mortgage or other lien attaches.

              16. Lessee may at any time or times surrender this lease as to all
or any portion of said land and be relieved of all obligations thereafter
accruing as to the acreage surrendered, and thereafter the rental shall be
reduced in the same proportion that the acreage covered hereby is reduced. In
the event this lease shall be surrendered under the provisions of this
paragraph, or assigned as hereinabove provided as to any portion or portions of
said land, Lessee shall have such rights of way or easements hereunder, over,
upon and across the land as to which this lease is so surrendered or assigned as
shall be necessary or convenient for Lessee's operations on the land retained by
it and other lands in the vicinity thereof. Upon any surrender or assignment of
this lease as to all or any portion of said land, Lessee shall be received of
all further obligations hereunder with respect to the lands so surrendered or
assigned. Any such surrender shall become effective upon delivery to Lessor, or
to the depositary bank herein designated, or the deposit in the United States
mail, postage prepaid, of a duly executed duplicate of an instrument of
surrender properly addressed to Lessor or to such depositary bank. Within a
reasonable time thereafter, Lessee shall record the original of such instrument
of surrender.

              17. Lessee shall have the right at any time and from time to time
during the continuance hereof and within a reasonable time after the surrender
or any termination of

                                       7


this lease, to remove from said land all equipment, machinery, installations,
and any other property or improvements belonging to or furnished by Lessee or
Lessee's permitees.

              18. All labor to be performed and material to be furnished in the
operations of Lessee hereunder shall be at the cost and expense of Lessee, and
Lessor shall not be chargeable with nor liable for any part thereof. Lessee
shall protect said land from liens arising from Lessee's operations thereon.

              19.(a) Lessee is given the sole right and option by written
declaration of pooling at any tine or from time to time, within twenty (20)
years from the date hereof, to combine, pool or unitize in whole or in part as
to any stratum or strata all or any part of said lands with other lands not
subject to this lease so as to create one or more reasonably compact operating
units for any operating or producing purpose. Such written declaration of
pooling shall describe the pooled lands and shall become effective when recorded
in the Office of the County Recorder in the county where the land is situated.
Lessee shall give written notice of such pooling to those Lessors whose lands
are so pooled. Lessors agree that with respect to all lease products obtained
from any lands included within any such operating unit, whether or not from
lands covered by this lease, there shall be allocated to and deemed to have been
produced from the lands covered by this lease and included in such operating
unit, only that proportion of the entire production from such operating unit
that the amount of acreage within the lands herein leased and included in such
operating unit bears to the total acreage of all of the land in such operating
unit, and royalty payable under this lease with respect to leased land included
in such operating unit shall be computed only on that portion of such production
so allocated to such leased lands. The entire acreage so pooled or unitized
shall be treated as if it were covered by one lease and the drilling of a well
or performance of any other obligations in any part of such operating unit,
whether or not on land subject to this lease, shall, fulfill Lessee's drilling
and other obligations under this lease to the same extent as if such well were
drilled and other obligations performed on land subject to this lease. No offset
obligation shall accrue under this lease as a result of any well drilled within
any such operating unit. Lessee may, at its sole option, at any time when there
is no production in such operating unit of lease products in quantities deemed
paying by Lessee terminate such operating unit by a written declaration thereof,
in the same manner in which it was created.

              (b) Lessee is hereby granted the right at any time or times within
the period hereinafter provided to unitize this lease and the lands covered
hereby, in whole or in part or as to any stratum or strata, with other lands and
leases and to increase or decrease the size of any such unit. Any change in the
amount of Lessor's royalties resulting from unitization of this lease or from
any increase or decrease in the size of any such unit shall not be retroactive.
In the event of any such unitization, this lease, unless sooner terminated by
Lessee, shall continue in effect for so long as any of the lands hereby


                                       8


leased remain subject to such unit. The drilling and producing operations
conducted on any of the unitized lands shall constitute full compliance with the
drilling and producing obligations of Lessee hereunder and Lessor shall be
entitled to the royalties in this lease provided, on the fractional part only,
if any, of the unit production allocated to this lease in accordance with the
provisions of said unit. The method of allocation of production from lands
subject to said unit shall be set forth therein and may be based upon the
surface acreage or the estimated volumetric content of recoverable lease
products, or any weighing of either or both thereof, of lands within such unit
or within the estimated productive limits of such unit, or such allocation may
be made upon any other basis approved by State or Federal authorities having
jurisdiction there thereof. The provisions of this paragraph authorizing the
establishment and enlargement or contraction of such unit and change of the
ratio of participation thereunder shall not extend beyond the period of twenty
(20) years from the date of this lease; provided, however, that if such unit is
established before the expiration of said twenty-year period, such unit may
continue in effect beyond said twenty-year period. Any such unit may be
established, enlarged, or diminished, and, in the absence of production
therefrom, may be dissolved by lessee's filing for record an instrument so
declaring. A copy of such instrument shall be delivered to Lessor or to the
depositary.

              20. Whenever used herein, the expression "drilling operations"
shall mean, for all purposes hereof, any work or actual operations undertaken or
commenced for the purposes of drilling of a well, including without limiting the
generality hereof, the preparation of the ground therefor, the building of roads
and other facilities therefor, the construction of a derrick and other necessary
structures for the drilling of a well followed by the actual operation of
drilling in the ground. Any such work or operations preliminary to the drilling
in the ground may be undertaken in any order Lessee shall see fit. All such work
and operations shall be prosecuted with reasonable diligence.

              21. This agreement may be executed in any number of counterparts
with the same force and effect as if all parties signed the same document.

              22. This lease shall be binding upon all who execute it, whether
or not they are named in the granting clause hereof and whether or not all
parties named in the granting clause execute this lease. All the provisions of
this lease shall inure to the benefit of and be binding upon the heirs,
executors, administrators, successors and assigns of Lessor and Lessee.

              23. Subject to Lessee's right to surrender this lease as provided
in Paragraph 16 hereof and notwithstanding anything else to the contrary
contained herein, Lessee agrees to pay Lessor the annual rental as provided in
Paragraph 6 hereof until such time as royalty producing production occurs on
said land or land pooled or unitized with said land or this lease terminates.

                                       9


              IN WITNESS WHEREOF, the parties hereto have executed this
agreement.

STANDARD OIL COMPANY                      EL TORO LAND & CATTLE Co.,
--------------------                      --------------------------
OF CALIFORNIA                             A CORPORATION

By /s/ Indecipherable
  ------------------------                -------------------------------
Its Attorney in Fact

__________________________                By: /s/ M.J. LaBrucherie
LESSEE                                       ----------------------------
                                             M.J. LaBrucherie, Secy-Treas.

                                          By: /s/ Edward Johnson
                                             ----------------------------
                                             Edward Johnson, Vice-Pres.






[Notary Seal]



                                                                 Exhibit 10.4.9

                                 LEASE AGREEMENT

     THIS AGREEMENT, made and entered into as of the 17th day of February, 1977,
by and between the undersigned hereinafter called "Lessor" (whether one or more)
and CHEVRON U.S.A. INC., a corporation, hereinafter called "Lessee."

                              W I T N E S S E T H

     1. Lessor, for and in consideration of the sum of $10 in hand paid, and of
the royalties herein provided and of the covenants and agreements hereinafter
contained, hereby grants, demises, leases and lets unto Lessee, the land
hereinafter described with the sole and exclusive right to Lessee to drill for,
produce, extract, take and remove therefrom water, brine, steam, steam power,
minerals (other than oil), salts, chemicals, gases (other than gas associated
with oil), and other products produced or extracted by Lessee from any thereof.
Each of the foregoing is hereinafter sometimes termed "a lease product" and all
thereof are sometimes termed "the lease products." For the same consideration
Lessee is hereby granted the right to store, utilize, process, convert, and
otherwise use such lease products upon said land and to sell the same or any
part thereof off said land during the term hereof, with the right of entry
thereon at all times for said purposes, and to construct, use, maintain, erect,
repair and replace thereon, and to remove therefrom all roads, pipelines,
ditches and lanes, telephone and telegraph lines, utility installations, power
lines, poles, tanks, evaporation or settling basins, extraction or processing
plants, machinery, equipment, buildings, electric power plants, and equipment
for generation and transmission of steam power, and electric power, and for the
handling, treatment or storage of lease products, and all structures and
facilities relating thereto, which Lessee way desire to erect, construct or
install in carrying on Lessee's business and operations on or from said land and
other lands in the vicinity of said land; and Lessee shall have the further
right to erect, maintain, operate and remove a plant or plants, structures and
facilities, with all necessary appurtenances for the conversion of steam to
electric power, and for the extraction of lease products from steam, brine or
water produced from said land, and other lands in the vicinity of said land,
including all rights necessary or convenient thereto, together with rights of
way for passage over, upon and across and ingress and egress to and from said
land for any or all of the above mentioned purposes. Lessee shall also have the
right to dispose of waste brine and other waste products in a well or wells
drilled or converted for that purpose on the leased land or on other land in the
vicinity, and the right to insect water, brine, steam and gases in a well or
wells on said land or such other land for the purpose of maintaining or
restoring pressure in the productive zones beneath said land or other land in
the vicinity thereof. The said land included in this lease is situated in the
County of Imperial, State of California, and is described as follows, to wit:



     The NW-1/4 of the E-1/2 of Tract No. 45, Township 16 South, Range 14 East,
     S.B.M.

     That portion of the E-1/2 of the E-1/2 West of the Railroad, Tract No. 45,
     Township 16 South, Range 14 East, S.B.M.

     The SW-1/4 of the E-1/2 of Tract No. 45, Township 16 South, Range 14 East,
     S.B.M.

containing 122 acres of land more or less.

This lease shall cover all the interest in said land now owned or hereafter
acquired by Lessor, even though greater than the undivided interest (if any)
described above. For the purpose of calculating any payments based on acreage,
Lessee, at Lessee's option, may act as if said land and its constituent parcels
contain the acreage above stated, whether they actually contain more or less.

     2. Subject to the other provisions herein contained, this lease shall
remain in force for a period of five (5) years from the date hereof, called the
"primary term," and thereafter so long as lease products, or any one or more of
them, is produced from, or Lessee is engaged in drilling, extraction, processing
or reworking operations on said land hereunder or on land pooled or unitized
with said land, as provided in Section 19 hereof, (said land, together with such
pooled or unitized land, being hereinafter sometimes called "the unit area").

     3. Lessee shall pay to Lessor, on or before the last day of each calendar
month, the royalties accrued and payable for the preceding calendar month, and
in making such payments Lessee shall furnish to Lessor statements setting forth
the basis for computation of such royalty.

As royalty and rental, Lessee shall pay to Lessor 10% of the value at the well
of all lease products produced, saved and sold. As used herein, the term "value
at the well" shall mean the actual price received by Lessee for the sale of
lease products at the well. If such products are not sold by Lessee at the well
but are sold at a plant or plants on or in the vicinity of said land, then the
value at the well shall be determined by deducting from the actual price
received by Lessee for the sale of such lease products all costs and expenses
incurred by Lessee in transporting, manufacturing, processing and otherwise
handling such lease products prior to the actual sale thereof. If lease products
are not sold by Lessee at the well or at such a plant but are otherwise used by
Lessee in its chemical operations or disposed of for value, then the value of
such lease products at the well shall be determined by deducting from the price
thereof at the nearest point where the same or similar products are sold in
substantial quantities, the cost of transporting,


                                       2


manufacturing, processing and otherwise handling such lease products prior to
sale thereof. Lessee shall meter, gauge or otherwise determine the volume and
quality of all lease products commingled and such metering or gauging shall
furnish the basis for computing Lessor's royalties hereunder. Lessee may use,
free of royalty, steam, steam power, electric power, and water developed from
said land by Lessee, for all operations hereunder, and Lessee shall not be
required to account to Lessor for, or pay royalty on any lease product or
products reasonably lost or consumed in operations hereunder.

     4. Lessee agrees to commence drilling, extraction or processing operations
on said land or on the unit area within the period of five (5) years from the
date hereof and to prosecute such operations with reasonable diligence until
lease products or any thereof shall have been found, extracted and processed in
quantities deemed paying quantities by Lessee, or until further operations
would, in the judgment of Lessee, be unprofitable or impracticable, or Lessee
may at any time within said primary term terminate this lease and surrender said
land; provided that, commencing with the 17th day of February __, 1978, if
Lessee has not theretofore commenced any such operations on said land or on the
unit area or terminated this lease, Lessee shall pay or tender to Lessor
annually, in advance, as rental, the sum of THREE THOUSAND AND FIFTY DOLLARS
($3,050.00) (each of such annual periods being hereinafter referred to as
"rental period") until operations are commenced on said land or lands which have
been pooled or unitized therewith, pursuant to paragraph 19 hereof, or this
lease terminated as herein provided; it being understood that in the event of
the surrender or termination of this lease as to any portion or portions of the
land covered thereby, said rental shall be reduced proportionately as provided
in paragraph 16 hereof. The consideration expressed in paragraph 1 hereof covers
all rental to the date last above mentioned. If Lessee shall elect not to
commence operations on said land or on the unit area during the primary term, as
above provided, this lease shall terminate.

     It is expressly understood and agreed by the parties hereto:

     a.   That if within 10 years from the date hereof Lessee has not completed
          one or more wells or a processing plant on the unit area or on said
          land, capable of producing or processing lease products or any thereof
          in quantities and quality deemed paying quantities by Lessee, then
          Lessor may, at his option, terminate this lease; and

     b.   That if within 15 years from the date hereof Lessee has not made or
          arranged for a sale or sales of lease products or any thereof,
          produced from or allocated to said land, then Lessor may, at has
          option, terminate this lease.


                                       3


     5. If at any time or times after the primary term or within three (3)
months before expiration of the primary term, all operations and all production
hereunder on said land or on the unit area shall cease for any cause other than
those for which specific provision is made herein, this lease shall not
terminate if Lessee shall commence or resume drilling, processing, extraction or
reworking operations or production within three (3) months after such cessation.

     6. Lessee shall be obligated to produce only such quantity or quantities of
lease products as it may be able to market at the well or wells, plant or
plants. It is recognized that the market demand for lease products may vary from
time-to-time and during such periods as there as no market at the wells or plant
for any lease product or products, Lessee's obligation to produce, process and
extract such lease product or products shall be suspended.

     Subject to the foregoing and except as herein otherwise provided, it is
agreed that the Lessee shall drill such wells and operate each completed well
with reasonable diligence and in accordance with good operating practice so long
as such wells shall produce lease products in paying quantities while this lease
is in force as to the portion of said land on which such well, or wells are
situated, but in conformity with any reasonable conservation program affecting
the drilling of walls or the production of lease products from said land, which
the Lessee may either voluntarily or by order of any authorized governmental
agency adopt, subscribe to or be subject to.

     7. The possession by Lessee of said land shall be sole and exclusive
excepting only that Lessor reserves the right to occupy and use or to lease the
surface of said land for agricultural, horticultural or other surface uses,
except those granted to Lessee hereunder, which uses shall be carried on by
Lessor subject to, and with no interference with, the rights or operations of
Lessee hereunder. No well shall be drilled closer than 100 feet to any residence
or barn now on said land without written consent of Lessor. Lessee shall pay for
damages caused by Lessee's operations to houses, barns, growing crops, fences
and irrigation systems. Lessee shall have the right to drill such wells on said
land as Lessee may deem desirable toy the purposes hereof and Lessee shall
utilize or use only so much of said land as is necessary or reasonably
convenient for Lessee's operations hereunder and shall interfere as little as
reasonably necessary with the use and occupancy of said land by Lessor. No
default of Lessee hereunder with respect to any well, or portion of this lease,
shall impair Lessee's rights with respect to any other well or portion of this
lease.

     8. The rights of Lessor and Lessee hereunder may be assigned in whole or in
part. No present or future division of Lessor's ownership as to different
portions or parcels of said land shall operate to enlarge the obligations or
diminish the rights of Lessee, and Lessee's operations may be conducted without
regard to any such division. If all or any


                                       4


part of this lease is assigned, no leasehold owner shall be liable for any act
or omission of any other leasehold owner, and failure by one to pay rental shall
not affect the rights of others--rental being apportionable in proportion to
acreage.

     9. The obligations of Lessee hereunder shall be suspended (but without
impairment of Lessor's rights under (a) and (b) of paragraph 4 hereof) while
Lessee is prevented or hindered from complying therewith in part or in whole, by
strikes, lockouts, labor disturbances, acts of God, unavoidable accidents, laws,
rules, regulations or orders of any Federal, state, municipal or other
governmental agency, acts of war or conditions arising out of or attributable to
war, shortage of necessary material, equipment or labor, or restrictions in, or
limitations upon the use thereof, inability to secure or absence of a market for
the sale of lease products which can be produced or recovered in commercial
quantities from said land, delays on transportation, and also matters beyond the
control of Lessee, whether similar to the matters herein specifically enumerated
or not. This lease shall remain in full force and effect during any suspension
of Lessee's obligations under any provisions of this paragraph, and for a
reasonable time thereafter, provided that after the removal of the cause or
causes preventing or hindering the performance of such obligation, Lessee,
subject to the other provisions of this Lease, diligently commences or resumes
the performance of such obligation. Notwithstanding anything to the contrary
herein provided, if any of Lessee's obligations hereunder conflict with or
violate the provisions of any reasonable conservation program or plan of orderly
development, whether now or hereafter adopted, to which Lessee may voluntarily
subscribe, or of any conservation program or plan which is now or may hereafter
be prescribed by any order of any governmental, agency, Lessee shall not be
obligated to perform such obligation.

     10. If Lessee shall fail to pay any installment of royalty or rental when
due and if such default shall continue for a period of 15 days after receipt by
Lessee of written notice thereof from Lessor to Lessee, then at the option of
Lessor, this lease shall terminate as to the portion or portions thereof as to
which Lessee is in default; provided, however, that if there be a bona fide
dispute as to the amount due and all undisputed amounts are paid, said 15-day
period shall be extended until 5 days after such dispute is settled by final
court decree, arbitration or agreement.

If lessee shall be in default in the performance of any obligations under this
Lease, other than the payment of rentals or royalties, and if, for a period of
90 days after written notice is given to Lessee by Lessor of such default,
Lessee shall fail to commence and thereafter diligently and in good faith
prosecute action to remedy such default, Lessor may terminate this Lease.

     11. Lessee shall pay all taxes that may be levied against the improvements,
plant, machinery and personal property owned by Lessee and located upon any part
of said land.

                                       5


     12. Lessee shall also pay Lessee's share of any and all taxes assessed
during the term of this lease upon any products of Lessee's operations
hereunder, together with Lessee's share of all severance, production and license
taxes or other taxes or assessments levied or assessed on account of the
production of lease products or any thereof on or from said land, or on or from
such portion of said land as Lessee may be holding under this lease on the date
of such tax lien.

     13. Lessor agrees to pay Lessor's share of any and all taxes assessed upon
any products of Lessee's operations hereunder, together with Lessor's share of
all severance, production and license taxes or other taxes or assessments levied
or assessed on account of the production of lease products from said land, and
to pay all other taxes assessed against said land, whether time same are
assessed to Lessor or Lessee or otherwise, and Lessee is hereby authorized to
pay all such taxes and assessments on behalf of Lessor and to deduct the amount
so paid from any royalties or moneys due Lessor hereunder. "Lessee's share" and
"Lessor's share," as used above refers to Lessee's and Lessor's respective
proportionate parts of the gross proceeds from the sale of any and all lease
products produced, saved and sold from said land by Lessee or allocated to said
land under the terms of any unit or pooling plan during the preceding calendar
year.

     14. All royalties, rentals and other payments payable in money hereunder
shall be paid to Lessor by Lessee mailing or delivering a check therefor to
Lessor at 911 Lacy Street, Santa Ana, California 92701, or Lessee may, at its
option, pay any or all royalties, rentals and other payments payable in money
hereunder by mailing or delivering a check therefor to _______________________
___________________________ at __________________________________________ its
successors and assigns, herein designated by Lessor as depositary, hereby
granting to said depositary full power and authority on behalf of Lessor and on
behalf of the heirs, executors, administrators, successors and assigns of
Lessor, and each of them, to collect and receipt for all sums of money due and
payable from Lessee to Lessor hereunder, and to settle all accounts and
accounting of rentals, royalties and other payments payable in money hereunder.
No change in the ownership of the land or minerals covered by this lease and no
assignment of rentals or royalties shall be binding upon Lessee or the
depositary until both Lessee and the depositary have been furnished with written
evidence thereof satisfactory to them. Said depositary above named shall
continue to act as such until the owners and holders of at least two-thirds of
Lessor's estate hereunder shall in writing designate a different depositary and
notify Lessee in writing at Land Dept., P.O. Box 7643, San Francisco, CA 94120,
of the name and address of such new depositary. The payment of any and all
rentals, royalties and other payments hereunder by Lessee to the depositary
designated herein or to any other depositary hereafter designated by Lessor, as
aforesaid, shall be a full acquitance and discharge of Lessee of and from any
and all liability to Lessor, and to the heirs, executors, administrators,
successors and assigns of Lessor, and each of them, for any part of such
rentals, royalties


                                       6


or other payments, and Lessee will not be responsible at any time for the
disposition or disbursement by any such depositary of all or any part of any
moneys received by it hereunder.

     15. It is agreed that if Lessor owns a less interest in the sole and
exclusive rights herein granted Lessee than the entire and undivided fee simple
estate therein, then any royalties, rentals and other payments herein provided
for shall be paid Lessor only in the proportion which Lessor's interest bears to
the whole and undivided fee. In the event Lessee's estate hereunder shall fail,
for a cause other than Lessee's default hereunder, in regard to any portion of
said land or any interest therein, such failure shall not affect or invalidate
Lessee's estate hereunder in regard to the remaining portions of said lands or
the remaining interests therein and this lease shall nevertheless continue in
full force and effect with respect to said remaining portions of said land or
remaining interests therein, and Lessee shall not be accountable to Lessor for
any payment theretofore made with respect to said portion of said land or such
interest in regard to which Lessee's estate hereunder has failed. If and
whenever it shall be necessary so to do in order to protect Lessee's interest
under this lease, Lessee may at its option pay and discharge at any time any
mortgage or other lieu now or hereafter attaching to said land or any part
thereof and in such event Lessee shall be subrogated to all of the rights of the
owner or holder of such mortgage or other lien and Lessee may in addition
thereto, at its option, apply to the discharge of any such mortgage or other
lien, or to the reimbursement to Lessee for any amount so paid by it, any
rentals, royalties or other sums accruing or payable hereunder, to the owner of
the lands to which such mortgage or other lien attaches.

     16. Lessee may at any time or times surrender this lease as to all or any
portion of said land and be relieved of all obligations thereafter accruing as
to the acreage surrendered, and thereafter the rental shall be reduced in the
same proportion that the acreage covered hereby is reduced. In the event this
lease shall be surrendered under the provisions of this paragraph, or assigned
as hereinabove provided as to any portion or portions of said land, Lessee shall
have such rights of way or easements hereunder, over, upon and across the land
as to which this lease is so surrendered or assigned as shall be necessary or
convenient for Lessee's operations on the land retained by it and other lands in
the vicinity thereof. Upon any surrender or assignment of this lease as to all
or any portion of said land, Lessee shall be relieved of all further obligations
hereunder with respect to the lands so surrendered or assigned. Any such
surrender shall become effective upon delivery to Lessor, or to the depositary
bank herein designated, or the deposit in the United States mail, postage
prepaid, of a duly executed duplicate of an instrument of surrender properly
addressed to Lessor or to such depositary bank. Within a reasonable time
thereafter, Lessee shall record the original of such instrument of surrender.


                                       7


     17. Lessee shall have the right at any time and from time-to-time during
the continuance hereof and within a reasonable time after the surrender or any
termination of this lease, to remove from said land all equipment, machinery,
installations, and any other property or improvements belonging to or furnished
by Lessee or Lessee's permitees.

     18. All labor to be performed and material to be furnished in the
operations of Lessee hereunder shall be at the cost and expense of Lessee, and
Lessor shall not be chargeable with nor liable for any part thereof. Lessee
shall protect said land from liens arising from Lessee's operations thereon.

     19.(a) Lessee is given the sole right and option by written declaration of
pooling at any time or from time-to-time, within twenty (20) years from the date
hereof, to combine, pool or unitize in whole or in part as to any stratum or
strata all or any part of said lands with other lands not subject to this lease
so as to create one or more reasonably compact operating units for any operating
or producing purpose. Such written declaration of pooling shall describe the
pooled lands and shall become effective when recorded in the Office of the
County Recorder in the county where the land is situated. Lessee shall give
written notice of such pooling to those Lessors whose lands are so pooled.
Lessors agree that with respect to all lease products obtained from any lands
included within any such operating unit, whether or not from lands covered by
this lease, there shall be allocated to and deemed to have been produced from
the lands covered by this lease and included in such operating unit, only that
proportion of the entire production from such operating unit that the amount of
acreage within the lands herein leased and included in such operating unit bears
to the total acreage of all of the land in such operating unit, and royalty
payable under this lease with respect to leased land included in such operating
unit shall be computed only on that portion of such production so allocated to
such leased lands. The entire acreage so pooled or unitized shall be treated as
if it were covered by one lease and the drilling of a well or performance of any
other obligations in any part of such operating unit, whether or not on land
subject to this lease, shall fulfill Lessee's drilling and other obligations
under this lease to the same extent as if such well were drilled and other
obligations performed on land subject to this lease. No offset obligation shall
accrue under this lease as a result of any well drilled within any such
operating unit. Lessee may, at its sole option, at any time when there is no
production in such operating unit of lease products in quantities deemed paying
by Lessee terminate such operating unit by a written declaration thereof, in the
same manner in which it was created.

     (b) Lessee is hereby granted the right at any time or times within the
period hereinafter provided to unitize this lease and the lands covered hereby,
in whole or in part or as to any stratum or strata, with other lands and leases
and to increase or decrease the size of any such unit. Any change in the amount
of Lessor's royalties resulting from unitization of this lease or from any
increase or decrease in the size of any such unit shall not be retroactive. In
the event of any such unitization, this lease, unless sooner


                                       8


terminated by Lessee, shall continue in effect for so long as any of the lands
hereby leased remain subject to such unit. The drilling and producing operations
conducted on any of the unitized lands shall constitute full compliance with the
drilling and producing obligations of Lessee hereunder and Lessor shall be
entitled to the royalties in this lease provided, on the fractional part only,
if any, of the unit production allocated to this lease in accordance with the
provisions of said unit. The method of allocation of production from lands
subject to said unit shall be set forth therein and may be based upon the
surface acreage or the estimated volumetric content of recoverable lease
products, or any weighing of either or both thereof, of lands within such unit
or within the estimated productive limits of such unit, or such allocation may
be made upon any other basis approved by State or Federal authorities having
jurisdiction thereof. The provisions of this paragraph authorizing the
establishment and enlargement or contraction of such unit and change of the
ratio of participation thereunder shall not extend beyond the period of twenty
(20) years from the date of this lease; provided, however, that if such unit is
established before the expiration of said twenty-year period, such unit may
continue in effect beyond said twenty-year period. Any such unit may be
established, enlarged, or diminished, and, in the absence of production
therefrom, may be dissolved by Lessee's filing for record an instrument so
declaring. A copy of such instrument shall be delivered to Lessor or to the
depositary.

     20. Whenever used herein, the expression "drilling operations" shall mean,
for all purposes hereof, any work or actual operations undertaken or commenced
for the purpose of drilling of a well, including without limiting the generality
hereof, the preparation of the ground therefor, the building of roads and other
facilities therefor, the construction of a derrick and other necessary
structures for the drilling of a well followed by the actual operation of
drilling in the ground. Any such work or operations preliminary to the drilling
in the ground may be undertaken in any order Lessee shall see fit. All such work
and operations shall be prosecuted with reasonable diligence.

     21. It is understood and agreed by and between the parties hereto that at
any time during the primary term of this agreement if Lessee shall acquire by
the lease purchase, or assignment an interest in any lease executed after the
date of this agreement and covering private lands located within five (5) miles
of the land covered hereby, which lease shall contain a greater Lessor's royalty
or a greater annual per acre rental than is provided by this agreement, the
Lessee shall immediately increase the corresponding terms of this agreement so
as to afford the Lessor herein equal terms. In the event of such increase, the
Lessee shall promptly tender to Lessor for his execution an instrument in
writing which shall contain such increased terms.

     22. Notwithstanding anything to the contrary contained herein, the
possession by Lessee of said land shall be sole and exclusive; provided,
however, except for the surface use hereinafter specifically provided for,
Lessee shall have no right to use the


                                       9


surface of any of said land. Lessee, after prior consultation and approval of
Lessor (which approval shall not be unreasonably withheld), shall have the right
to conduct geological and geophysical operations on said land. Additionally,
Lessor shall make available to Lessee on the surface of said land three (3)
drill sites, each to be limited to a maximum of two (2) acres in size. Lessor
shall also make available to Lessee one (1) site for the construction of a plant
for the conversion of geothermal resources into commercial products, such site
to be limited to a maximum of five (5) acres. Lessor shall also make available
to Lessee ingress and egress rights to all such sites together with rights of
way for pipelines, power lines, and telephone lines. All such sites, ingress and
egress rights, and rights of way shall be selected by Lessee subject to approval
thereof by Lessor in writing. Lessor agrees not to unreasonably withhold
approval of any such selections made by Lessee. Lessee shall pay for damages
caused by Lessee's operations to houses, barns, growing crops and irrigation and
drainage systems. In addition, Lessee shall pay to Lessor the sum of TWO HUNDRED
FIFTY DOLLARS ($250.00) per acre per year for each acre occupied by Lessee with
respect to the aforementioned drill sites set aside for drilling purposes;
provided, however, that at the end of each two-year period of such occupancy of
such sites, the site rental payable hereunder shall be increased to be
comparable to rental paid for agricultural purposes on like lands in the same
vicinity if such rental is found to be in excess of the site rental then being
paid hereunder.

     With respect to the aforementioned site set aside for plant use, if such
site is selected by Lessee and approved by Lessor, Lessee shall purchase said
site, paying to the Lessor the fair market value thereof. Said fair market value
shall be based upon the highest and best use of said site, notwithstanding the
fact that the same may then be devoted to agricultural purposes. If the parties
cannot agree upon the fair market value of such land within thirty (30) days
after Lessee's receipt of written approval from Lessor, such value shall be
determined by three qualified appraisers, one to be selected by each of the
parties and the third by any judge of the Imperial County Superior Court. The
rules of the American Arbitration Association shall apply and be binding upon
the parties as to any such valuation. In the event of such sale, Lessor shall
retain all geothermal and mineral rights under said site.

     23. Notwithstanding anything to the contrary contained herein, in the event
any or all of the lands covered by this Lease are included in a unit as provided
for in Paragraph 19(b) hereof, such unit shall not exceed 5120 acres in areal
extent, plus or minus 10%.

     24. Should the Lessor cause any of said land to be used for other than
agricultural purposes, Lessor shall have the right, at its own risk and expense,
to cause any existing easements and rights of way referred to in Paragraph 22
hereof to be relocated in a manner that will not unreasonably interfere with
Lessee's operations hereunder.


                                       10


     25. This agreement may be executed in any number of counterparts with the
same force and effect as if all parties signed the same document.

     26. This lease shall be binding upon all who execute it, whether or not
they are named in the granting clause hereof and whether or not all parties
named in the granting clause execute this lease. All the provisions of this
lease shall inure to the benefit of and be binding upon the heirs, executors,
administrators, successors and assigns of Lessor and Lessee.

     IN WITNESS WHEREOF, the parties hereto have executed this agreement.

LESSEE:                                LESSOR

CHEVRON U.S.A. INC.


By /s/ Indecipherable                  /s/ Joseph L. Holtz
   ---------------------------------   -----------------------------------------
     Its Attorney in Fact              JOSEPH L. HOLTZ,
                                       a single man

STATE OF CALIFORNIA
COUNTY OF ORANGE

     On this 13th day of March, A.D. 1977, personally appeared before me, a
Notary Public, in and for said County, Joseph L. Holtz, known to me to be the
person described in and who executed the foregoing instrument, who acknowledged
to me that he executed the foregoing instrument, who acknowledged to me that he
executed the same freely and voluntarily and for the uses and purposes therein
mentioned.

/s/ Janet Stroud
------------------------------------   -----------------------------------------
           (Signature)                                 (Title)


STATE OF CALIFORNIA
CITY AND COUNTY OF SAN FRANCISCO

     On April 25, 1977, before me, the undersigned, a Notary Public, in and for
said City and County and State, residing therein, duly commissioned and sworn,
personally appeared Clair Ghylin known to me to be an Attorney in Fact of
CHEVRON U.S.A. INC. the Corporation described in and that executed the within
instrument, and also known to me to be the person who executed it on behalf of
the said Corporation therein named, and he acknowledged to me that such
Corporation executed the same.


                                       11


     IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
Seal, the day and year in this certificate above written.



                                    /s/ Edna M. Chang-Lo
                                    --------------------------------------------
                                    Notary Public in and for said City and
                                    County of San Francisco, State of California



                                       12


                          AMENDMENT OF LEASE AGREEMENT

     THIS AGREEMENT, made this 21 day of May, 1973, between the party or parties
whose names are subscribed hereto under the designation of "Lessor", hereinafter
called "Lessor" (whether one or more), and STANDARD OIL COMPANY OF CALIFORNIA, a
corporation, hereinafter called "Lessee",

                              W I T N E S S E T H:

     THAT, REFERENCE IS HEREBY HAD to that certain Lease Agreement dated
March 28, 1964 (such lease being of record in the Office of the County Recorder
of Imperial County, California, in Book ____, at Page ____, et seq., of Official
Records), whereby Lessor did grant, let and lease unto Lessee for the purposes
therein described certain lands situate in said County and State particularly
described in such lease; such lease being hereinafter referred to as "said
lease";

     AND, WHEREAS, Lessor and Lessee have agreed to amend said lease in the
particulars hereinafter set forth:

     NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00) and other


valuable consideration paid to Lessor by Lessee, receipt of which is hereby
acknowledged, Lessor and Lessee agree as follows:

     1. That part of the first sentence of Section 2 of said lease which now
reads as follows:

          ".... this lease shall remain in force for a period of twenty (20)
     years from the date hereof, called the 'primary term' ...."


shall be and hereby is amended to read as follows:

          "...., this lease shall remain in force for a period of thirty (30)
     years from the date hereof, called the 'primary term',..."

     2. That part of the first sentence of Section 4 of said lease which now
reads as follows:

          "4. Lessee agrees to commence drilling, extraction or processing
     operations on said land or on the unit area within the period of twenty
     (20) years from the date hereof...."

shall be and hereby is amended to read as follows:


                                       13


          "4. Lessee agrees to commence drilling, extraction or processing
     operations on said land or on the unit area within the period of thirty
     (30) years from the date hereof...."

     3. Effective with the rental period that begins in 1974, that part of the
first sentence of Section 4 of said lease which now reads as follows:

          "..., the sum of Forty and. No/100 DOLLARS ($40.00)...."

shall be and hereby is amended to read as follows:

          "...., the sum of Four Hundred and No/100 DOLLARS ($400.00)...."

     4. That part of Section 4a. of said lease which now reads as follows:

          "a. That if within 10 years...."

shall be and hereby is amended to read as follows:

          "a. That if within 20 years...."

     5. That part of Section 4b. of said lease which now reads as follows:

          "b. That if within 15 years...."

shall be and hereby is amended to read as follows:

          "b. That if within 25 years...."

     6. To implement the foregoing, Lessor does hereby grant, demise, lease and
let unto Lessee all those certain lands particularly described in said lease for
the term and purposes and subject to all of the other provisions of said lease
as hereby amended. Lessor agrees that said lease as hereby amended is in good
standing and in full force and effect. Lessor acknowledges receipt of rental in
full under said lease to March 28, 1975.

     7. This agreement shall bind and inure to the benefit of the respective
heirs, executors, administrators, successors, and assigns of the parties hereto.


                                       14


     IN WITNESS WHEREOF, this agreement has been executed as of the day and year
first herein written.

LESSEE                                 LESSOR

STANDARD OIL COMPANY                   [/s/ Birdie R. Williamson]
OF CALIFORNIA


By /s/ Indecipherable                  /s/ Lloyd K. Williamson
   ----------------------------------  -----------------------------------------
   Contract Agent                      LLOYD K. WILLIAMSON

By /s/ Barbara F. Perez                /s/ Robert C. Williamson
   ----------------------------------  -----------------------------------------
   Assistant Secretary                 ROBERT C. WILLIAMSON

May 21, 1973                           /s/ Neva A. Smith
/s/                                    -----------------------------------------
                                       NEVA A. SMITH,
                                       a/k/a Neva Williamson Smith
                                       [/s/ Ralph L. Smith]
STATE OF CALIFORNIA

COUNTY OF LOS ANGELES

     On May 29, 1973, before me, the undersigned, a Notary Public in and for
said State, personally appeared Birdie R. Williamson, Lloyd K. Williamson, Neva
M. Smith & Ralph L. Smith known to me to be the persons whose names are
subscribed to the within Instrument, and acknowledged to me that they executed
the same.

     WITNESS my hand and official seal.


                                       /s/ Henry A. Rohlfling
                                       -----------------------------------------
                                       Notary Public in and for said State


                                       15


[County Recorder  /s/]

                    AMENDMENT OF LEASE AGREEMENT (SHORT FORM)

     THIS AGREEMENT, made this 21 day of May, 1973, between the party or
parties whose names are subscribed hereto under the designation of "Lessor",
hereinafter called "Lessor" (whether one or more), and STANDARD OIL COMPANY OF
CALIFORNIA, a corporation, hereinafter called "Lessee",

                              W I T N E S S E T H:

     THAT, REFERENCE IS HEREBY HAD to that certain Lease Agreement dated
March 28, 1964 (such lease being of record in the Office of the County Recorder
of Imperial County, California, in Book 1193, at Page 203 et seq. of Official
Records), whereby Lessor did grant, let and lease unto Lessee for the purposes
therein described certain lands situate in said County said State particularly
described in such lease; such lease being hereinafter referred to as "said
lease";

     AND, WHEREAS, Lessor and Lessee have agreed to amend said lease in the
particulars hereinafter set forth:

     NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00) and other


valuable consideration paid to Lessor by Lessee, receipt of which is hereby
acknowledged, Lessor and Lessee agree as follows:

     1. That part of the first sentence of Section 2 of said lease which now
reads as follows:

          ".... this lease shall remain in force for a period of twenty (20)
     years from the date hereof, called the 'primary term', ...."


shall be and hereby is amended to read as follows;

          ".... this lease shall remain in force for a period of thirty (30)
     years from the date hereof, called the 'primary term' ...."

     2. That part of the first sentence of Section 4 of said lease which now
reads as follows:

          "4. Lessee agrees to commence drilling, extraction or processing
     operations on said land or on the unit area within the period of twenty
     (20) years from the date hereof...."

shall be and hereby is amended to read as follows:


                                       16


          "4. Lessee agrees to commence drilling, extraction or processing
     operations on said land or on the unit area within the period of thirty
     (30) years from the date hereof...."

     3. That part of Section 4a. of said lease which now reads as fol1ows:

          "a. That if within 10 years...."

     4. That part of Section 4b. of said lease which now reads as follows:

          "b. That if within 15 years...."

shall be and hereby is amended to read as follows:

          "b. That if within 25 years...."

     5. Said lease is further amended as set forth in that certain Amendment of
Lease Agreement bearing even date herewith by and between the parties hereto and
covering the lands described in Section 1 of said lease, and by this reference
incorporated into this Amendment of Lease Agreement.

     6. To implement the foregoing, Lessor does hereby grant, demise, lease and
let unto Lessee all those certain lands particularly described in said lease for
the term and purposes and subject to all of the other provisions of said lease
as hereby amended. Lessor agrees that said lease as hereby amended is in good
standing and in full force and effect. Lessor acknowledges receipt of rental in
full under said lease to March 28, 1975.

     7. This agreement shall bind and inure to the benefit of the respective
heirs, executers, administrators, successors, and assigns of the parties hereto.

     IN WITNESS WHEREOF, this agreement has been executed as of the day and year
first herein written.

LESSEE                                               LESSOR

STANDARD OIL COMPANY                   /s/ Birdie R. Williamson
OF CALIFORNIA


By /s/ Indecipherable                  /s/ Lloyd K. Williamson
   ----------------------------------  -----------------------------------------
   Contract Agent                      LLOYD K. WILLIAMSON

By /s/ Barbara F. Perez                /s/ Robert C. Williamson
   ----------------------------------  -----------------------------------------
   Assistant Secretary                 ROBERT C. WILLIAMSON


                                       17

                                       /s/ Neva M. Smith
                                       -----------------------------------------
                                       NEVA M. SMITH,
                                       aka Neva Williamson Smith
                                       [/s/ Ralph L. Smith]
STATE OF CALIFORNIA,   )
                       )  ss.
COUNTY OF LOS ANGELES  )

     On May 29, 1973, before me, the undersigned, a Notary Public in and for
said State, personally appeared Birdie R. Williamson, Lloyd K. Williamson, Neva
M. Smith and Ralph L. Smith, known to me to be the persons whose names are
subscribed to the within instrument, and acknowledged to me that they executed
the same.

     WITNESS my hand and official seal.

                                       /s/ Henry A. Rohlfing
                                       -----------------------------------------
                                       Notary Public in and for said State.


                                       18


[County Recorder]

                    AMENDMENT OF LEASE AGREEMENT (SHORT FORM)

     THIS AGREEMENT, made this 16th day of February, 1982, between the party
whose name is subscribed hereto under the designation of "Lessor", hereinafter
called "Lessor", and CHEVRON GEOTHERMAL COMPANY OF CALIFORNIA, a corporation,
hereinafter called "Lessee,"

                              W I T N E S S E T H:

     THAT REFERENCE IS HEREBY HAD to that certain Lease Agreement, dated
February 17, 1977 (the short form of which is on record in the Office of the
County Recorder of Imperial County, California, in Book 1401, Page 923, et seq.,
of Official Records), whereby Lessor did grant, let and lease unto Lessee's
predecessor in interest for the purposes therein described in such lease; such
lease being hereinafter referred to as "said lease;"

     NOW THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00) and other


valuable consideration paid to Lessor by Lessee, receipt of which is hereby
acknowledged, Lessor and Lessee agree as follows:

     1. That part of the first sentence of Section 2 of said lease which now
reads as follows:

          "...., this lease shall remain in force for a period of five (5) years
     from the date hereof, called the 'primary term'...."


shall be and hereby is amended to read as follows:

          "...., this lease shall remain in force for a period of six (6) years
     from the date hereof, called the 'primary term'...."

     2. This Amendment of Lease agreement (Short Form) is made upon the terms,
covenants and conditions set forth in that certain Amendment of Lease Agreement
bearing even date herewith by and between the said parties hereto which
Amendment of Lease Agreement is by this reference incorporated herein and made a
part hereof in all respects as though the same were fully set forth herein.

     3. To implement the foregoing, Lessor does hereby grant, demise, lease and
let unto Lessee all those certain lands particularly described in said lease for
the term and purposes and subject to all of the other provisions of said lease
as hereby amended. Lessor agrees that said lease as hereby amended is in good
standing and in full force and effect. Lessor acknowledges receipt of rental in
full under said lease to February 16, 1983.


                                       19


     4. This agreement shall bind and inure to the benefit of the respective
heirs, executors, administrators, successors, and assigns of the parties hereto.

     IN WITNESS WHEREOF, this agreement has been executed as of the day and year
first herein written.

CHEVRON GEOTHERMAL COMPANY             LESSOR
    OF CALIFORNIA


By: /s/ J. Turner                       By: /s/ Joseph L. Holtz
   ---------------------------------       ------------------------------------
   SECRETARY                               JOSEPH L. HOLTZ,
                                           a single man


                                       20


                          AMENDMENT OF LEASE AGREEMENT

     THIS AGREEMENT, made this 16th day of February, 1982, between the party
whose name is subscribed hereto under the designation of "Lessor", hereinafter
called "Lessor" and CHEVRON GEOTHERMAL COMPANY OF CALIFORNIA, a corporation,
hereinafter called "Lessee,"

                                   WITNESSETH:

     THAT REFERENCE IS HEREBY HAD to that certain Lease Agreement, dated
February 17, 1977 (the short form of which is on record in the Office of the
County Recorder of Imperial County, California, in Book 1401, Page 923, et seq.,
of Official Records), whereby Lessor did grant, let and lease unto Lessee's
predecessor in interest for the purposes therein described in such lease; such
lease being hereinafter referred to as "said lease;"

     NOW THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00) and other


valuable consideration paid to Lessor by Lessee, receipt of which is hereby
acknowledged, Lessor and Lessee agree as follows:

     1. That part of the first sentence of Section 2 of said lease which now
reads as follows:

          "...., this lease shall remain in force for a period of five (5) years
     from the date hereof, called the 'primary term'...."


shall be and hereby is amended to read as follows:

          "...., this lease shall remain in force for a period of six (6) years
     from the date hereof, called the 'primary term'...."

     2. That part of the first sentence of Section 4 of said lease which now
reads as follows:

          "4. Lessee agrees to commence drilling, extraction or processing
     operations on said land or on the unit area within the period of five (5)
     years from the date hereof...."

shall be hereby amended to read as follows:

          "4. Lessee agrees to commence drilling, extraction or processing
     operations on said land or on the unit area within the period of six (6)
     years from the date hereof...."


                                       21


     3. There is added to said lease the following Section 27:

     "27. Subject to Lessor's rights under Section 4b. hereof and
notwithstanding anything else to the contrary contained herein, if lessee
completes a well or wells or a processing plant on said land or on the unit area
capable of producing or processing lease products in quantities and quality
deemed paying quantities by Lessee, Lessee may continue to pay or tender to
Lessor, annually in advance of each lease anniversary date, rental until Lessee
has made a sale of lease products produced from or allocated to said land. So
long as such annual rental payments are paid or tendered, this lease shall
remain in force and effect even though extended thereby beyond the primary term,
and all payments so paid or tendered after the expiration of said primary term
shall be deemed advance royalties, and so long as same are paid, each well or
wells shall be deemed to be actually producing lease products in paying
quantities under the terms hereof." The above mentioned advance royalties shall
not be recoverable by lessee out of any future production of said lease
products.

     Lessee agrees to exercise due diligence in the drilling and development of
wells and the production of lease products in paying quantities, provided
however that unit operations conducted under the terms of the Heber Geothermal
Unit Agreement (recorded an Book 1437, page 1262 et seq. Official Records of
Imperial County, California) without cessation of 180 consecutive days for
reasons other than those stated in Article XIV therein shall be considered as
due diligence under this Section 27.

     4. Lessee confirms that Section 21 of said lease shall remain in full force
and effect throughout the primary term as extended hereby.

     5. To implement the foregoing, Lessor does hereby grant, demise, lease and
let unto Lessee all those certain lands particularly described in said lease for
the term and purposes and subject to all of the other provisions of said lease
as hereby amended. Lessor agrees that said lease as hereby amended is in good
standing and in full force and effect. Lessor acknowledges receipt of rental in
full under said lease to February 16, 1983.

     6. This agreement shall bind and inure to the benefit of the respective
heirs, executors, administrators, successors, and assigns of the parties hereto.


                                       22


     IN WITNESS WHEREOF, this agreement has been executed as of the day and year
first herein written.

CHEVRON GEOTHERMAL COMPANY             LESSOR
     OF CALIFORNIA


By: /s/ J. Turner                       By: /s/ Joseph L. Holtz
   ---------------------------------       -------------------------------------
                                           JOSEPH L. HOLTZ,
                                           a single man

STATE OF CALIFORNIA    )
                       )  ss.
COUNTY OF ORANGE       )

     On May 10, 1982, before me, the undersigned, a Notary Public in and for
said State, personally appeared Joseph L. Holtz, _____________________,
_____________________, known to me to be the person_ whose name_ is subscribed
to the within instrument and acknowledged that he executed the same.

     WITNESS my hand and official seal.


/s/ Janet Stroud
-------------------------------------
(Signature)





                                       23



                                                                 EXHIBIT 10.4.10

                                 LEASE AGREEMENT

     THIS AGREEMENT, made and entered into as of the 11th day of March, 1964, by
and between JOHN D. JACKSON and FRANCES JONES JACKSON, also known as FRANCES J.
JACKSON, husband and wife hereinafter called "Lessor" (whether one or more) and
STANDARD OIL COMPANY OF CALIFORNIA, a corporation, hereinafter called "Lessee,"

                               W I T N E S S E T H

1. Lessor, for and in consideration of the sum of $10 in hand paid, and of the
royalties herein provided and of the covenants and agreements hereinafter
contained, hereby grants, demises, leases and lets unto Lessee, the land
hereinafter described with the sole and exclusive right to Lessee to drill for,
produce, extract, take and remove therefrom water, brine, steam, steam power,
minerals (other than oil), salts, chemica1, gases (other than gas associated
with oil), and other products produced or extracted by Lessee from any thereof.
Each of the foregoing is hereinafter sometimes termed "a lease product" and all
thereof are sometimes termed "the lease products." For the same consideration
Lessee is hereby granted the right to store, utilize, process, convert, and
otherwise use such lease products upon said land and to sell the same or any
part thereof off said land during the term hereof, with the right of entry
thereon at all times for said purposes, and to construct, use, maintain, erect,
repair and replace thereon, and to remove therefrom all roads, pipelines,
ditches and lanes, telephone and telegraph lines, utility installations, power
lines, poles, tanks, evaporation or settling basins, extraction or processing
plants, machinery, equipment, buildings, electric power plants, and equipment
for generation and transmission of steam power, and electric power, and for the
handling, treatment or storage of lease products, and all structures and
facilities relating thereto, which Lessee may desire to erect, construct or
install in carrying on Lessee's business and operations on or from said land and
other lands in the vicinity of said land; and Lessee shall have the further
right to erect, maintain, operate and remove a plant or plants, structures and
facilities, with all necessary appurtenances for the conversion of steam to
electric power, and for the extraction of lease products from steam, brine or
water produced from said land, and other lands in the vicinity of said, land,
including all rights necessary or convenient thereto, together with rights of
way for passage over, upon and across and ingress and egress to and from said
land for any and all of the above mentioned purposes. Lessee shall, also have
the right to dispose of waste brine and other waste products in a well or wells
drilled or converted for that purpose on the leased, land or on other land in
the vicinity, and the right to inject water, brine, steam and gases in a well or
wells on said land or such other land for the purpose or maintaining or
restoring pressure in the productive zones beneath said land or other land in
the vicinity thereof. The said land included in this lease is situated in the
County of Imperial, State of California, and is described as follows, to wit:




Parcel 1:

The South Half of Tract 52, Township 16 South, Range 14 East, S.B.M.,

Parcel 2:

The West 40 acres of the North Half of Tract 52, Township 16 South, Rang 14
East, S.B.M.,

Parcel 3:

The West Half of the South Half of Tract 51, Township 16 South, Range 14 East,
S.B.M.,

Parcel 4:

The East Half of the North Half of Tract 52, Township 16 South, Range 14 East,
S.B.M.,

Parcel 5:

Tract 48 1/2, Township 16 South, Range 13 and 14 East, S.B.M.,

Parcel 6:

The West 22 acres of Tract 47, Township 16 South, Ranges 13 and 14 East, S.B.M.

containing 240.00 acres of land more or less.

This lease shall cover all the interest in said land now owned or hereafter
acquired by Lessor, even though greater than the undivided interest (if any)
described above. For the purposes of calculating any payments based on acreage,
Lessee, at Lessee's option, may act as if said land and its constituent parcels
contain the acreage above stated, whether they actually contain more or less.

2. Subject to the other provisions herein contained, this lease shall remain in
force for a period of ten (10) years from the date hereof, called the "primary
term," and thereafter so long as lease products, or any one or more of them, is
produced from, or Lessee is engaged in drilling, extraction, processing or
reworking operations on said land hereunder or on land pooled or unitized with
said land, as provided in Section 19 hereof, (said land, together with such
pooled or unitized land, being hereinafter sometimes called "the unit area").

3. Lessee shall pay to Lessor, on or before the last day of each calendar month,
the royalties accrued and payable for the preceding calendar month, and in
making such

                                       2


payments Lessee shall furnish to Lessor statements setting forth the basis for
computation of such royalty.

As royalty and rental, Lessee shall pay to Lessor 10% of the value at the well
of all lease products produced, saved and sold. As used herein, the term "value
at the well" shall mean the actual price received by Lessee for the sale of
lease products at the well. If such products are not sold by Lessee at the well
but are sold at a plant or plants on or in the vicinity of said land, then the
value at the well shall be determined by deducting from the actual price
received by Lessee for the sale of such lease products all costs and expenses
incurred by Lessee in transporting, manufacturing, processing and otherwise
handling such lease products prior to the actual sale thereof. If lease products
are not sold by Lessee at the well or at such a plant but are otherwise used by
Lessee in its chemical operations or disposed of for value, then the value of
such lease products at the well shall be determined by deducting from the price
thereof at the nearest point where the same or similar products are sold in
substantial quantities, the cost of transporting, manufacturing, processing and
otherwise handling such lease products prior to sale thereof. Lessee shall
meter, gauge or otherwise determine the volume and quality of all lease products
commingled and such metering or gauging shall furnish the basis for computing
Lessor's royalties hereunder. Lessee may use, free of royalty, steam, steam
power, electric power, and water developed from said land by Lessee, for all
operations hereunder, and Lessee shall not be required to account to Lessor for,
or pay royalty on any lease product or products reasonably lost or consumed in
operations hereunder.

4. Lessee agrees to commence drilling, extraction or processing operations on
said land or on the unit area within the period of ten (10) years from the
date hereof and to prosecute such operations with reasonable diligence until
lease products or any thereof shall have been found, extracted and processed in
quantities deemed paying quantities by Lessee, or until further operations
would, in the judgment of Lessee, be unprofitable or impracticable, or Lessee
may at any time within said primary term terminate this lease and surrender said
land; provided that, commencing with the 11th day of March, 1965, if Lessee has
not theretofore commenced any such operations on said land or on the unit area
or terminated this lease, Lessee shall pay or tender to Lessor annually, in
advance, as rental, the sum of Three Thousand Six Hundred Thirty and No/100
Dollars ($3,630.00) (each of such annual periods being hereinafter referred to
as "rental period") until operations are commenced on said land or lands which
have been pooled or unitized therewith, pursuant to paragraph 19 hereof, or this
lease terminated as herein provided; it being understood that in the event of
the surrender or termination of this lease as to any portion or portions of the
land covered thereby, said rental shall be reduced proportionately as provided
in paragraph 16 hereof. The consideration expressed in paragraph 1 hereof covers
all rental to the date last above mentioned. If Lessee shall elect not to
commence operations on said land or on the unit area during the primary term, as
above provided, this lease shall terminate.


                                       3


It is expressly understood and agreed by the parties hereto:

     a.   That if within 20 years from the date hereof Lessee has not completed
          one or more wells or a processing plant on the unit area or on said
          land, capable of producing or processing lease products or any thereof
          in quantities and quality deemed paying quantities by Lessee, then
          Lessor may, at his option, terminate this lease; and

     b.   That if within 25 years from the date hereof Lessee has not made or
          arranged for a sale or sales of lease products or any thereof,
          produced from or allocated to said land, then Lessor may, at his
          option, terminate this lease.

5. If at any time or times after the primary term or within three (3) months
before expiration of the primary term, all operations and all production
hereunder on said land or on the unit area shall cease for any cause other then
those for which specific provision is made herein, this lease shall not
terminate if Lessee shall commence or resume drilling, processing, extraction or
reworking operations or production within three (3) mouths after such cessation.

6. Lessee shall be obligated to produce only such quantity or quantities of
lease products as it may be able to market at the well or wells, plant or
plants. It is recognized that the market demand for lease products may vary from
time to time and during such periods as there is no market at the wells or plant
for any lease product or products, Lessee's obligation to produce, process and
extract such lease product or products shall be suspended.

Subject to the foregoing and except as herein otherwise provided, it is agreed
that the Lessee shall drill such wells and operate each completed well with
reasonable diligence and in accordance with good operating practice so long as
such wells shall produce lease products in paying quantities while this lease is
in force as to the portion of said land on which such well or wells are
situated; but in conformity with any reasonable conservation program affecting
the drilling of wells or the production of lease products from said land, which
the Lessee may either voluntarily or by order of any authorized governmental
agency adopt, subscribe to or be subject to.

7. The possession by Lessee of said land shall be sole and exclusive excepting
only that Lessor reserves the right to occupy and use or to lease the surface of
said land for agricultural, horticultural or other surface uses, except those
granted to Lessee hereunder, which uses shall be carried on by Lessor subject
to, and with no interference with, the rights or operations of Lessee hereunder.
No well shall be drilled closer than 100 feet to any residence or barn now on
said land without written consent of Lessor. Lessee shall


                                       4


pay all damages caused by Lessee's operations to houses, barns, growing crops,
fences and irrigation systems. Lessee shall have the right to drill such wells
on said land as Lessee may deem desirable for the purposes hereof and Lessee
shall utilize or use only so much of said land, as is necessary or reasonably
convenient for Lessee's operations hereunder and shall interfere a little as
reasonably necessary with the use and occupancy of said land, by Lessor. No
default of Lessee hereunder with respect to any well, or portion of this lease,
shall impair Lessee's rights with respect to any other well or portion of this
lease.

7A. Notwithstanding anything to the contrary contained herein, Lessee agrees not
to use the surface of the lands as described in Parcels One, Two and Four (1-2 &
4), that lay within a distance of 750 feet from the main residence of the
Lessor.

8. The rights of Lessor and Lessee hereunder may be assigned in whole or in
part. No present or future division of Lessor's ownership as to different
portions or parcels of said land shall operate to enlarge the obligations or
diminish the rights of Lessee, and Lessee's operations may be conducted without
regard to any such division. If all or any part of this lease is assigned., no
leasehold owner shall be liable for any act or omission of any other leasehold
owner, and failure by one to pay rental shall not affect the rights of
others--rental being apportionable in proportion to acreage.

9. The obligations of Lessee hereunder shall be suspended (but without
impairment of Lessor's rights under (a) and (b) of paragraph 4 hereof) while
Lessee is prevented or hindered from complying therewith in part or in whole, by
strikes, lockouts, labor disturbances, acts of God, unavoidable accidents, laws,
rules, regulations or orders of any Federal, state, municipal or other
governmental, agency, acts of war or conditions arising out of or attributable
to war, shortage of necessary material, equipment or labor, or restrictions in,
or limitations upon the use thereof, inability to secure or absence of a market
for the sale of lease products which can be produced or recovered in commercial
quantities from said land, delays in transportation, and also matters beyond the
control of Lessee, whether similar to the matters herein specifically enumerated
or not. This lease shall remain in full force and effect during any suspension
of Lessee's obligations under any provisions of this paragraph, and for a
reasonable time thereafter, provided that after the removal of the cause or
causes preventing or hindering the performance of such obligation, Lessee,
subject to the other provisions of this Lease, diligently commences or resumes
the performance of such obligation. Notwithstanding anything to the contrary
herein provided, if any of Lessee's obligations hereunder conflict with or
violate the provisions of any reasonable conservation program or plan of orderly
development, whether now or hereafter adopted, to which Lessee may voluntarily
subscribe, or of any conservation program or plan which is now or may hereafter
be prescribed by any order of any governmental agency, Lessee shall not be
obligated to perform such obligation.



                                       5


10. If Lessee shall fail to pay any installment of royalty or rental when due
and if such default shall continue for a period of 15 days after receipt by
Lessee of written notice thereof from Lessor to Lessee, then at the option of
Lessor, this lease shall terminate as to the portion or portions thereof as to
which Lessee is in default; provided, however, that if there be a bona fide
dispute as to the amount due and all undisputed amounts are paid, said l5-day
period shall be extended, until 5 days after such dispute is settled by final
court decree, arbitration or agreement.

If lessee shall be in default in the performance of any obligations under this
Lease, other than the payment of rentals or royalties, and if, for a period of
90 days after written notice is given to Lessee by Lessor of such default,
Lessee shall fail to commence and thereafter diligently and in good faith
prosecute action to remedy such default, Lessor may terminate this Lease.

11. Lessee shall pay all taxes that may be levied against the improvements,
plant, machinery and personal property owned by Lessee and located upon any part
of said land.

12. Lessee shall also pay Lessee's share of any and all taxes assessed during
the term of this lease upon any products of Lessee's operations hereunder,
together with Lessor's share of all severance, production and license taxes or
other taxes or assessments levied or assessed on account of the production of
lease products or any thereof on or from said land, or on or from such portion
of said land as Lessee may be holding under this lease on the date of such tax
lien.

13. Lessor agrees to pay Lessor's share of any and all taxes assessed upon any
products of Lessee's operations hereunder, together with Lessor's share of all
severance, production and license taxes or other taxes or assessments levied or
assessed on account of the production of lease products from said land, and to
pay all other taxes assessed against said land, whether the same are assessed to
Lessor or Lessee or otherwise, and Lessee is hereby authorized to pay all such
taxes and assessments on behalf of Lessor and to deduct the amount so paid from
any royalties or moneys due Lessor hereunder. "Lessee' s share" and "Lessor's
share", as used above refers to Lessee's and Lessor's respective proportionate
parts of the gross proceeds from the sale of any and all lease products
produced, saved and sold from said land by Lessee or allocated to said land
under the terms of any unit or pooling plan during the preceding calendar year.

14. All royalties, rentals and other payments payable in money hereunder shall
be paid to Lessor by Lessee mailing or delivering a check therefor to Lessor at
P.O. Box 78 El Centro, California, or Lessee may, at its option, pay any or all
royalties, rentals and other payments payable in money hereunder by mailing or
delivering a Check therefor to BANK OF AMERICA, N. T. & S. A., El Centro Branch
at EL CENTRO, California its


                                       6


successors and assigns, herein designated by Lessor as depositary, hereby
granting to said depositary full power and authority on behalf of Lessor and on
behalf of the heirs, executors, administrators, successors and assigns of
Lessor, and each of them, to collect and receipt for all sums of money due and
payable from Lessee to Lessor hereunder, and to settle all accounts and
accounting of rentals, royalties and other payments payable in money hereunder.
No change in the ownership of the land or minerals covered by this lease and no
assignment of rental or royalties shall be binding upon Lessee or the depositary
until both Lessee and the depositary have been furnished with written evidence
thereof satisfactory to them. Said depositary above named shall continue to act
as such until the owners and holders of at least two-thirds of Lessor's estate
hereunder shall in writing designate a different depositary and notify Lessee in
writing at P.O. Box 3495, San Francisco, California, 94120, of the name and
address of such new depositary. The payment of any and all rentals, royalties
and other payments hereunder by Lessee to the depositary designated herein or to
any other depositary hereafter designated by Lessor, as aforesaid, shall be a
full acquittance and discharge of Lessee of and from any and all liability to
Lessor, and to the heirs, executors, administrators, successors and assigns of
Lessor, and each of them, for any part of such rentals, royalties or other
payments, and Lessee will not be responsible at any time for the disposition or
disbursement by any such depositary of all or any part of any moneys received by
it hereunder.

15. It is agreed that if Lessor owns a less interest in the sole and exclusive
rights herein granted Lessee, than the entire and undivided fee simple estate
therein, then any royalties, rentals and other payments herein provided for
shall be paid Lessor only in the proportion which Lessor's interest bears to the
whole and undivided fee. In the event Lessee' estate hereunder shall fail, for a
cause other then Lessee's default hereunder, in regard to any portion of said
land or any interest therein, such failure shall not affect or invalidate
Lessee's estate hereunder in regard to the remaining portions of said lands or
the remaining interests therein and this lease shall nevertheless continue in
full force and effect with respect to said remaining portions of said land or
remaining interests therein, and Lessee shall not be accountable to Lessor for
any payment theretofore made with respect to said portion of said land or such
interest in regard to which Lessee's estate hereunder has failed. If and
whenever it shal1 be necessary so to do in order to protect Lessee's interest
under this lease, Lessee may at its option pay and discharge at any time any
mortgage or other lien now or hereafter attaching to said land or any part
thereof and in such event lessee shall be subrogated to all of the rights of the
owner or holder of such mortgage or other lien and Lessee may in addition
thereto, at its option, apply to the discharge of any such mortgage or other
lien, or to the reimbursement to Lessee for any amount so paid by it, any
rentals, royalties or other sums accruing or payable hereunder, to the owner of
the lands to which such mortgage or other lien attaches.



                                       7


16. Lessee may at any time or times surrender this lease as to all or any
portion of said land and be relieved of all obligations thereafter accruing as
to the acreage surrendered, and thereafter the rental shall be reduced in the
same proportion that the acreage covered hereby is reduced. In the event this
lease shall be surrendered under the provisions of this paragraph, or assigned
as hereinabove provided as to any portion or portions of said land, Lessee shall
have such rights of way or easements hereunder, over, upon and across the land
as to which this lease is so surrendered or assigned as shall be necessary or
convenient for Lessee's operations on the land retained by it and other lands in
the vicinity thereof. Upon any surrender or assignment of this lease as to all
or any portion of said land, Lessee shall be relieved of all further obligations
hereunder with respect to the lands so surrendered or assigned. Any such
surrender shall become effective upon delivery to Lessor, or to the depositary
bank herein designated, or the deposit in the United States mail, postage
prepaid, of a daily executed duplicate of an instrument of surrender properly
addressed to Lessor or to such depositary bank. Within a reasonable time
thereafter, Lessee shall record the original of such instrument of surrender.

17. Lessee shall have the right at any time and from time to time during the
continuance hereof and within a reasonable time after the surrender or any
termination of this lease, to remove from said land all equipment, machinery,
installations, and any other property or improvements belonging to or furnished
by Lessee or Lessee's permitees.

18. All labor to be performed and material to be furnished in the operations of
Lessee hereunder shall be at the cost and expense of Lessee, and Lessor shall
not be chargeable with nor liable for any part thereof. Lessee shall protect
said land from liens arising from Lessee's operations thereon.

19. (a) Lessee is given the sole right and option by written declaration of
pooling at any time or from time to time, within twenty (20) years from the date
hereof, to combine, pool or unitize in whole or in part as to any stratum or
strata all or any part of said lands with other lands not subject to this lease
so as to create one or more reasonably compact operating units for any operating
or producing purpose. Such written declaration of pooling shall describe the
pooled lands and shall become effective when recorded in the Office of the
County Recorder in the county where land is situated. Lessee shall give written
notice of such pooling to those Lessors whose lands are so pooled. Lessors agree
that with respect to all lease products obtained from any lands included within
any such operating unit, whether or not from lands covered by this lease, there
shall be allocated to and deemed to have been produced from the lands covered by
this lease and included in such operating unit, only that proportion of the
entire production from such operating unit that the amount of acreage within the
lands herein leased and included in such operating unit bears to the total
acreage of all of the land in such operating unit, and royalty payable under
this lease with respect to leased land included in such operating unit shall be
computed only on that portion of such production so allocated to such leased
lands. The


                                       8


entire acreage so pooled or unitized shall be treated as if it were covered by
one lease and the drilling of a well or performance of any other obligations in
any part of such operating unit, whether or not on land subject to this lease,
shall fulfill Lessee's drilling and other obligations under this lease to the
same extent as if such well were drilled and other obligations performed on land
subject to this lease. No offset obligation shall accrue under this lease as a
result of any well drilled within any such operating unit. Lessee may, at its
sole option, at any time when there is no production in such operating unit of
lease products in quantities deemed paying by Lessee terminate such operating
unit by a written declaration thereof, in the same manner in which it was
created.

(b) Lessee is hereby granted the right at any time or times within the period
hereinafter provided to unitize this lease and the lands covered hereby, in
whole or in part as to any stratum or strata, with other lands and leases and to
increase or decrease the size of any such unit. Any change in the amount of
Lessor's royalties resulting from unitization of this lease or from any increase
or decrease in the size of any such unit shall not be retroactive. In the event
of any such unitization, this lease, unless sooner terminated by Lessee, shall
continue in effect for so long as any of the lands hereby leased remain subject
to such unit. The drilling and producing operations conducted on any of the
unitized lands shall constitute full compliance with the drilling and producing
obligations of Lessee hereunder and Lessor shall be entitled to the royalties in
this lease provided, on the fractional part only, if any, of the unit production
allocated to this lease in accordance with the provisions of said unit. The
method of allocation of production from lands subject to said unit shall be set
forth therein and may be based upon the surface acreage or the estimated
volumetric content of recoverable lease products, or any weighing of either or
both thereof, of lands within such unit or within the estimated productive
limits of such unit, or such allocation may be made upon any other basis
approved by State or Federal having jurisdiction thereof. The provisions of this
paragraph authorizing the establishment and enlargement or contraction of such
unit and change of the ratio of participation thereunder shall not extend beyond
the period of twenty (20) years from the date of this lease; provided, however,
that if such unit is established before the expiration of said twenty-year
period, such unit may continue in effect beyond said twenty-year period. Any
such unit may be established, enlarged, or diminished, and, in the absence of
production therefrom, may be dissolved by Lessee's filing for record an
instrument so declaring. A copy of such instrument shall be delivered to Lessor
or to the depositary.

20. Whenever used herein, the expression "drilling operations" shall mean, for
all purposes hereof, any work or actual operations undertaken or commenced for
the purpose of drilling a well, including without limiting the generality
hereof, the preparation of the ground therefor, the building of roads and other
facilities therefor, the construction of a derrick and other necessary
structures for the drilling of a well followed by the actual operation of
drilling in the ground. Any such work or operations preliminary to the


                                       9


drilling in the ground may be undertaken in any order Lessee shall see fit. All
such work and operations shall be prosecuted with reasonable diligence.

21. This agreement may be executed in any number of counterparts with the same
force and effect as if all parties signed the same document.

22. This lease shall be binding upon all who execute it, whether or not they are
named in the granting clause hereof and whether or not all parties named in the
granting clause execute this lease. All the provisions of this lease shall inure
to the benefit of and be binding upon the heirs, executors, administrators,
successors and assigns of Lessor and Lessee.

IN WITNESS WHEREOF, the parties hereto have executed this agreement.

STANDARD OIL COMPANY OF CALIFORNIA

By: /s/ Indecipherable                            /s/ John D. Jackson
   ----------------------------                   --------------------------
    Contract Agent                                    JOHN D. JACKSON

By: /s/ Indecipherable                            /s/ Frances Jones Jackson
   ----------------------------                   --------------------------
    Assistant Secretary                              FRANCES J. JACKSON

   ----------------------------                   --------------------------
   Lessee                                         Lessor

Witness to the above signature(s)/s/ Indecipherable
                                 ----------------------

[two stamps]



                                       10



                          AMENDMENT OF LEASE AGREEMENT

THIS AGREEMENT, made this 9th day of July, 1973, between the party or parties
whose names are subscribed hereto under the designation of "Lessor", hereinafter
called "Lessor" (whether one or more), and STANDARD OIL COMPANY OF CALIFORNIA, a
corporation, hereinafter called "Lessee";

                               W I T N E S S E T H

THAT, REFERENCE IS HEREBY HAD to that certain Lease Agreement dated March 11,
1964 (such lease being of record in the Office of the County Recorder of
Imperial County, California, in Book 1193., at Page 33, et seq., of Official
Records), whereby Lessor and Jackson Feed Mill, Inc. did grant, let and lease
unto Lessee for the purposes therein described certain lands situate in said
County and State particularly described in such lease; such lease being
hereinafter referred to as "said lease";

AND, WHEREAS, Lessor and Lessee have agreed to amend said lease in the
particulars hereinafter set forth:

NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00) and other
valuable consideration paid to Lessor by Lessee, receipt of which is hereby
acknowledged, Lessor and Lessee agree as follows:

1. That part of the first sentence of Section 2 of said lease which now reads as
follows:

"...., this lease shall remain in force for a period of ten (10) years from the
date hereof, called the 'primary term',...."

shall be and hereby is amended to read as follows:

"...., this lease shall remain in force for a period of twenty (20) years from
the date hereof, called the 'primary term',...."

2. That part of the first sentence of Section 4 of said lease which now reads as
follows:

"4. Lessee agrees to commence drilling, extraction or processing operations on
said land or on the unit area within the period of ten (10) years from the date
hereof...."

shall be and hereby is amended to read as follows:

"4. Lessee agrees to commence drilling, extraction or processing operations on
said land or on the unit area within the period of twenty (20) years from the
date hereof...."


                                       11



3. Effective with the rental period that begins in 1974, that part of the first
sentence of Section 4 of said lease which now reads as follows:

"...., the sum of One Hundred Seventy-Two and No/100------------DOLLARS
($172.00)...."

shall be and hereby is amended to read as follows:

"...., the sum of Thirty-Six Hundred/Thirty and No/100 Dollars ($3,630.00)...."

4. That part of Section 4a, of said lease which now reads as follows:

"a.  That if within 10 years...."

shall be and hereby is amended to read as follows:

     "a.  That if within 20 years...."

5. That part of Section 4b. of said lease which now reads as follows:

     "b.  That if within 15 years...."

shall be and hereby is amended to read as follows:

     b.  That if within 25 years...."

6. Lessor does hereby grant, demise, lease and let unto Lessee only those
certain lands included in said lease, situated in the County of Imperial, State
of California, that are particularly described as follows:

Parcel 1: The South 1/2 of Tract 52, Township 16 South, Range 14 East, S.B.M.

Parcel 2: The West 40 acres of the North 1/2 of Tract 52, Township 16 South,
Range 14 East, S.B.M.

Parcel 3: The West 1/2 of the South 1/2 of Tract 51, Township 16 South, Range 14
East, S.B.M.

Parcel 4: The East 1/2 of the North 1/2 of Tract 52, Township 16 South, Range 14
East, S.B.M.

containing 240 acres of land more or less, for the term and purposes and subject
to all of the other provisions of said lease as hereby amended, and Lessor and
Lessee further agree


                                       12


that all provisions of that certain lease agreement above referred to shall
apply separated and distinctly to the above-described lands and this amendment
shall constitute and create a separate and distinct holding under that certain
lease agreement above referred to. Lessor further agrees that said lease as
hereby amended is in good standing and in full force and effect. Lessor
acknowledge receipt of rental in full under said lease to March 11, 1975.

7. This agreement shall bind and inure to the benefit of the respective heirs,
executors, administrators, successors, and assigns of the parties hereto.

IN WITNESS WHEREOF, this agreement has been executed as of the day and year
first herein written.

LESSEE                                              LESSOR

CHEVRON U.S.A. INC.

By /s/ H. R. Hargrave                              /s/ John D. Jackson
  ----------------------------                     -----------------------
         Contract Agent                                JOHN D. JACKSON

By /s/ Indecipherable                              /s/ Frances J. Jackson
  ----------------------------                     -----------------------
      Assistant Secretary                             FRANCES J. JACKSON


                                                          PO Box 78
                                                          El Centro, CA








                                       13


                          AMENDMENT OF LEASE AGREEMENT

THIS AGREEMENT, made this 1st day of October, 1979, between the party or parties
whose names are subscribed hereto under the designation of "Lessor", hereinafter
called "Lessor" (whether one or more), and Chevron U.S.A. INC. successor in
interest to STANDARD OIL COMPANY OF CALIFORNIA, a corporation, hereinafter
called "Lessee",

                               W I T N E S S E T H

THAT, REFERENCE IS HEREBY HAD to certain Lease Agreement dated March 11, 1964
(such lease being of record in the Office of the County Recorder of Imperial
County, California, in Book 1193, at Page 33 et seq., of Official Records),
whereby Lessor and Jackson Feed Mill, Inc. did grant, let and lease unto Lessee
for the purposes therein described certain lands situate in said County and
State particularly described in such lease; such lease being hereinafter
referred to as "said lease";

AND, WHEREAS, by amendment of lease agreement dated July 9, 1973, a short form
of which was recorded in B-1353, P-34, et seq. of official records of Imperial
County, California, said lease was amended;

AND, WHEREAS, Lessor and Lessee have agreed to further amend said lease in the
particulars hereinafter set forth:

NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00) and other
valuable consideration paid to Lessor by Lessee, receipt of which is hereby
acknowledged, Lessor and Lessee agree as follows:

1. Effective with the rental period that begins in 1980, that part of the first
sentence of Section 4 of said lease which now reads as follows:

"...., the sum of Thirty Six Hundred Thirty & No/100 DOLLARS ($3,630.00)...."

shall be and hereby is amended to read as follows:

"...., the sum of Six Thousand Fifty & No/100 DOLLARS ($6,050.00)...."

2. Lessor does hereby grant, demise, lease and let unto Lessee only those
certain lands included in said lease, situated in the County of Imperial, State
of California, that are particularly described as follows:

Parcel 1: The South 1/2 of Tract 52, Township 16 South, Range 14 East, S.B.M.

                                       14


Parcel 2: The West 40 acres of the North 1/2 of Tract 52, Township 16 South,
Range 14 East, S.B.M.

Parcel 3: The West 1/2 of the South 1/2 of Tract 51, Township 16 South, Range 14
East, S.B.M.

Parcel 4: The East 1/2 of the North 1/2 of Tract 52, Township 16 South, Range 14
East, S.B.M.

containing 240 acres of land more or less, for the term and purposes and subject
to all of the of the provisions of said lease as hereby amended, and Lessor and
Lessee further agree that all provisions of that certain lease agreement above
referred to shall apply separately and distinctly to the above-described lands
and this amendment shall constitute and create a separate and distinct holding
under that certain lease agreement above referred to.

Lessor further agrees that said lease as hereby amended is in good standing and
in full force and effect. Lessor acknowledges receipt of rental in full under
said least to March 11, 1980.

3. This agreement shall bind and inure to the benefit of the respective heirs,
executors, administrators, successors, and assigns of the parties hereto.

IN WITNESS WHEREOF, this agreement has been executed as of the day and year
first herein written.

          LESSEE                                         LESSOR

CHEVRON U.S.A. INC.

By /s/ J. H. Turner                                 /s/ John D. Jackson
  ----------------------------                      -----------------------
     Its Attorney-in-Fact                               JOHN D. JACKSON

                                                    /s/ Frances J. Jackson
                                                    -----------------------
                                                      FRANCES J. JACKSON










                                       15



STATE OF CALIFORNIA )
                    )
COUNTY OF IMPERIAL  )

On October 1, 1979 before me, the undersigned, a Notary Public in and for said
State, personally appeared John D. Jackson and Frances J. Jackson, known to me
to be the persons whose name are subscribed to the within instrument and
acknowledged that they executed the same.

WITNESS my hand and official seal

Signature /s/ Pauline C. Montgomery
          -------------------------

[Notary Seal]
















                                       16




                                                                 Exhibit 10.4.11

                                 LEASE AGREEMENT

                  THIS AGREEMENT, made and entered into as of the 16th day of
February, 1964, by and between JOHN D. JACKSON, Conservator for the Estate of
APHIA JACKSON WALLAN hereinafter called "Lessor" (whether one or more) and
STANDARD OIL COMPANY OF CALIFORNIA, a corporation, hereinafter called "Lessee,"

                              W I T N E S S E T H :

1. Lessor, for and in consideration of the sum of $10 in hand paid, and of the
royalties herein provided and of the covenants and agreements hereinafter
contained, hereby grants, demises, leases and lets unto Lessee, the land
hereinafter described with the sole and exclusive right to Lessee to drill for,
produce, extract, take and remove therefrom water, brine, steam, steam power,
minerals (other than oil), salts, chemicals, gases (other than gas associated
with oil), and other products produced or extracted by Lessee from any thereof.
Each of the foregoing is hereinafter sometimes termed "a lease product" and all
thereof are sometimes termed "the lease products." For the same consideration
Lessee is hereby granted the right to store, utilize, process, convert, and
otherwise use such lease products upon said land and to sell the same or any
part thereof off said land during the term hereof, with the right of entry
thereon at all times for said purposes, and to construct, use, maintain, erect,
repair and replace thereon, and to remove therefrom all roads, pipelines,
ditches and lanes, telephone and telegraph lines, utility installations, power
lines, poles, tanks, evaporation or settling basins, extraction or processing
plants, machinery, equipment, buildings, electric power plants, and equipment
for generation and transmission of steam power, and electric power, and for the
handling, treatment or storage of lease products, and all structures and
facilities relating thereto, which Lessee may desire to erect, construct or
install in carrying on Lessee's business and operations on or from said land and
other lands in the vicinity of said land; and Lessee shall have the further
right to erect, maintain, operate and remove a plant or plants, structures and
facilities, with all necessary appurtenances for the conversion of steam to
electric power, and for the extraction of lease products from steam, brine or
water produced from said land, and other lands in the vicinity of said land,
including all rights necessary or convenient thereto, together with rights of
way for passage over, upon and across and ingress and egress to and from said
land for any or all of the above mentioned purposes. Lessee shall also have the
right to dispose of waste brine and other waste products in a well or wells
drilled or converted for that purpose on the leased land or on other land in the
vicinity, and the right to inject water, brine, steam and gases in a well or
wells on said land or such other land for the purpose of maintaining or
restoring pressure in the productive zones beneath said land or other land in
the vicinity thereof. The said land included in this lease is situated in the
County of Imperial, State of California, and is described as follows, to wit:

                The E 1/2 of the S 1/2 of Tract No. 51, Township 16 South,
                Range 14 East, S.B.M. containing 80 acres of land more or less.

This lease shall cover all the interest in said lend now owned or hereafter
acquired by Lessor, even though greater than the undivided interest (if any)
described above. For the purpose of calculating any payments based on acreage,
Lessee, at Lessee's option, may act as if said land and its constituent parcels
contain the acreage above stated, whether they actually contain more or less.


2. Subject to the other provisions herein contained, this lease shall remain in
force for a period of ten (10) years from the date hereof, called the "primary
term," and thereafter so long as lease products, or any one or more of them, is
produced from, or Lessee is engaged in drilling, extraction, processing or
reworking operations on said land hereunder or on land pooled or unitized with
said land, as provided in Section 19 hereof, (said land, together with such
pooled or unitized land, being hereinafter sometimes called "the unit area").

3. Lessee shall pay to Lessor, on or before the last day of each calendar month,
the royalties accrued and payable for the preceding calendar month, and in
making such payments Lessee shall furnish to Lessor statements setting forth the
basis for computation of such royalty.

As royalty and rental, Lessee shall pay to Lessor 10% of the value at the well
of all lease products produced, saved and sold. As used herein, the term "value
at the well" shall mean the actual price received by Lessee for the sale of
lease products at the well. If such products are not sold by Lessee at the well
but are sold at a plant or plants on or in the vicinity of said land, then the
value at the well shall be determined by deducting from the actual price
received by Lessee for the sale of such lease products all costs and expenses
incurred by Lessee in transporting, manufacturing, processing and otherwise
handling such lease products prior to the actual sale thereof. If lease products
are not sold by Lessee at the well or at such a plant but are otherwise used by
Lessee in its chemical operations or disposed of for value, then the value of
such lease products at the well shall be determined by deducting from the price
thereof at the nearest point where the same or similar products are sold in
substantial quantities, the cost of transporting, manufacturing, processing and
otherwise handling such lease products prior to sale thereof. Lessee shall
meter, gauge or otherwise determine the volume and quality of all lease products
commingled and such metering or gauging shall furnish the basis for computing
Lessor's royalties hereunder. Lessee may use, free of royalty, steam, steam
power, electric power, and water developed from said land by Lessee, for all
operations hereunder, and Lessee shall not be required to account to Lessor for,
or pay royalty on any lease product or products reasonably lost or consumed in
operations hereunder.


4. Lessee agrees to commence drilling, extraction or processing operations on
said land or on the unit area within the period of ten (10) years from the date
hereof and to prosecute such operations with reasonable diligence until lease
products or any thereof shall have been found, extracted and processed in
quantities deemed paying quantities by Lessee, or until further operations
would, in the judgment of Lessee, be unprofitable or impracticable, or Lessee
may at any time within said primary term terminate this lease and surrender said
land; provided that, commencing with the 16th day of February, 1965, if Lessee
has not theretofore commenced any such operations on said land or on the unit
area or terminated this lease, Lessee shall pay or tender to Lessor annually, in
advance, as rental, the sum of Forty and 00/100 DOLLARS ($40.00) (each of such
annual periods being hereinafter referred to as "rental period") until
operations are commenced on said land or lands which have been pooled or
unitized therewith, pursuant to paragraph 19 hereof, or this lease terminated as
herein provided; it being understood that in the event of the surrender or
termination of this lease as to any portion or portions of the land covered
thereby, said rental shall be reduced proportionately as provided in paragraph
16 hereof. The consideration expressed in paragraph 1 hereof covers all rental
to the date last above mentioned. If Lessee shall elect not to commence
operations on said land or on the unit area during the primary term, as above
provided, this lease shall terminate.



                                       2


It is expressly understood and agreed by the parties hereto:

         a.    That if within 10 years from the date hereof Lessee has not
               completed one or more wells or a processing plant on the unit
               area or on said land, capable of producing or processing lease
               products or any thereof in quantities and quality deemed paying
               quantities by Lessee, then Lessor may, at his option, terminate
               this lease; and

         b.    That if within 15 years from the date hereof Lessee has not made
               or arranged for a sale or sales of lease products or any thereof,
               produced from or allocated to said land, then Lessor may, at his
               option, terminate this lease.

5. If at any time or times after the primary term or within three (3) months
before expiration of the primary term, all operations and all production
hereunder on said land or on the unit area shall cease for any cause other than
those for which specific provision is made herein, this lease shall not
terminate if Lessee shall commence or resume drilling, processing, extraction or
reworking operations or production within three (3) months after such cessation.

6. Lessee shall be obligated to produce only such quantity or quantities of
lease products as it may be able to market at the well or wells, plant or
plants. It is recognized that the market demand for lease products may vary from
time to time and during such periods as there is no market at the wells or plant
for any lease product or products, Lessee's obligation to produce, process and
extract such lease product or products shall be suspended.

Subject to the foregoing and except as herein otherwise provided, it is agreed
that the Lessee shall drill such wells and operate each completed well, with
reasonable diligence and in accordance with good operating practice so long as
such wells shall produce lease products in paying quantities while this lease is
in force as to the portion of said land on which such well, or wells are
situated; but in conformity with any reasonable conservation program affecting
the drilling of wells or the production of lease products from said land, which
the Lessee may either voluntarily or by order of any authorized governmental
agency adopt, subscribe to or be subject to.

7. The possession by Lessee of said land shall, be sole and exclusive excepting
only that Lessor reserves the right to occupy and use or to lease the surface of
said land for agricultural, horticultural or other surface uses, except those
granted to Lessee hereunder, which uses shall be carried on by Lessor subject
to, and with no interference with, the rights or operations of Lessee hereunder.
No well shall be drilled closer than 100 feet to any residence or barn now on
said land without written consent of Lessor. Lessee shall pay for damages caused
by Lessee's operations to houses, barns, growing crops, fences and irrigation
systems. Lessee shall have the right to drill such wells on said land as Lessee
may deem desirable for the purposes hereof and Lessee shall utilize or use only
so much of said land as is necessary or reasonably convenient for Lessee's
operations hereunder and shall interfere as little as reasonably necessary with
the use and occupancy of said land by Lessor. No default of Lessee hereunder
with respect to any well, or portion of this lease, shall impair Lessee's rights
with respect to any other well or portion of this lease.

                                       3


8. The rights of Lessor and Lessee hereunder may be assigned in whole or in
part. No present or future division of Lessor's ownership as to different
portions or parcels of said land shall operate to enlarge the obligations or
diminish the rights of Lessee, and Lessee's operations may be conducted without
regard to any such division. If all or any part of this lease is assigned, no
leasehold owner shall be liable for any act or omission of' any other leasehold
owner, and failure by one to pay rental shall not affect the rights of
others--rental being apportionable in proportion to acreage.

9. The obligations of Lessee hereunder shall be suspended (but without
impairment of Lessor's rights under (a) and (b) of paragraph 4 hereof) while
Lessee is prevented or hindered from complying therewith in part or in whole, by
strikes, lockouts, labor distrubances, acts of God, unavoidable accidents, laws,
rules, regulations or orders of any Federal, state, municipal or other
governmental agency, acts of war or conditions arising out of or attributable to
war, shortage of necessary material, equipment or labor, or restrictions in, or
limitations upon the use thereof, inability to secure or absence of a market for
the sale of lease products which can be produced or recovered in commercial
quantities from said land, delays in transportation, and also matters beyond the
control of Lessee, whether similar to the matters herein specifically enumerated
or not. This lease shall remain in full force and effect during any suspension
of Lessee's obligations under any provisions of this paragraph, and for a
reasonable time thereafter, provided that after the removal of the cause or
causes preventing or hindering the performance of such obligation, Lessee,
subject to the other provisions of this Lease, diligently commences or resumes
the performance of such obligation. Notwithstanding anything to the contrary
herein provided, if any of Lessee's obligations hereunder conflict with or
violate the provisions of any reasonable conservation program or plan of orderly
development, whether now or hereafter adopted, to which Lessee may voluntarily
subscribe, or of any conservation program or plan which is now or may hereafter
be prescribed by any order of any governmental agency, Lessee shall not be
obligated to perform such obligation.

10. If Lessee shall fail to pay any installment of royalty or rental when due
and if such default shall continue for a period of 15 days after receipt by
Lessee of written notice thereof from Lessor to Lessee, then at the option of
Lessor, this lease shall terminate as to the portion or portions thereof as to
which Lessee is in default; provided, however, that if there be a bona fide
dispute as to the amount due and all undisputed amounts are paid, said 15-day
period shall be extended until 5 days after such dispute is settled by final
court decree, arbitration or agreement.

If lessee shall be in default in the performance of any obligations under this
Lease, other than the payment of rentals or royalties, and if, for a period of
90 days after written notice is given to Lessee by Lessor of such default,
Lessee shall fail, to commence and thereafter diligently and in good faith
prosecute action to remedy such default, Lessor may terminate this Lease.

11. Lessee shall pay all taxes that may be levied against the improvements,
plant, machinery and personal property owned by Lessee and located upon any part
of said land.

12. Lessee shall also pay Lessee's share of any and all taxes assessed during
the term of this lease upon any products of Lessee's operations hereunder,
together with Lessee a share of all severance, production and license taxes or
other taxes or assessments levied or assessed on

                                       4


account of the production of lease products or any thereof on or from said land,
or on or from such portion of said land as Lessee may be holding under this
lease on the date of such tax lien.

13. Lessor agrees to pay Lessor's share of any and all taxes assessed upon any
products of Lessee's operations hereunder, together with Lessor's share of all
severance, production and license taxes or other taxes or assessments levied or
assessed on account of the production of lease products from said land, and to
pay all other taxes assessed against said land, whether the same are assessed to
Lessor or Lessee or otherwise, and Lessee is hereby authorized to pay all such
taxes and assessments on behalf of Lessor and to deduct the amount so paid from
any royalties or moneys due Lessor hereunder. "Lessee's share" and "Lessor's
share," as used above refers to Lessee's and Lessor's respective proportionate
parts of the gross proceeds from the sale of any and all lease products
produced, saved and sold from said land by Lessee or allocated to said land
under the terms of any unit or pooling plan during the preceding calendar year.

14. All royalties, rentals and other payments payable in money hereunder shall
be paid to Lessor by Lessee mailing or delivering a check therefor to Lessor at
P.O. Box 78, EL CENTRO, California or lessee may, at its option, pay any or all
royalties, rentals and other payments payable in money hereunder by mailing or
delivering a check therefor to BANK of AMERICA, N.T.& S.A., El Centro Branch at
EL CENTRO, California its successors and assigns, herein designated by lessor as
depositary, hereby granting to said depositary full power and authority on
behalf of Lessor and on behalf of the heirs, executors, administrators,
successors and assigns of Lessor, and each of them, to collect and receipt for
all sums of money due and payable from Lessee to Lessor hereunder, and to settle
all accounts and accounting of rentals, royalties and other payments payable in
money hereunder. No change in the ownership of the land or minerals covered by
this lease and no assignment of rentals or royalties shall be binding upon
Lessee or the depositary until both Lessee and the depositary have been
furnished with written evidence thereof satisfactory to them. Said depositary
above named shall continue to act as such until the owners and holders of at
least two-thirds of Lessor's estate hereunder shall in writing designate a
different depositary and notify Lessee in writing at P.O. Box 3495, San
Francisco, California 94120, of the name and address of such new depositary. The
payment of any and all rentals, royalties and other payments hereunder by Lessee
to the depositary designated herein or to any other depositary hereafter
designated by Lessor, as aforesaid, shall be a full acquittance and discharge of
Lessee of and from any and all liability to Lessor, and to the heirs, executors,
administrators, successors and assigns of Lessor, and each of them, for any part
of such rentals, royalties or other payments, and Lessee will not be responsible
at any time for the disposition or disbursement by any such depositary of all or
any part of any moneys received by it hereunder.

15. It is agreed that if Lessor owns a less interest in the sole and exclusive
rights herein granted Lessee, than the entire end undivided fee simple estate
therein, then any royalties, rentals and other payments herein provided for
shall be paid Lessor only in the proportion which Lessor's interest bears to the
whole and undivided fee. In the event Lessee's estate hereunder shall fail, for
a cause other than Lessee's default hereunder, in regard to any portion of said
land or any interest therein, such failure shall not affect or invalidate
Lessee's estate hereunder in regard to the remaining portions of said lands or
the remaining interests therein and this lease shall nevertheless continue in
full force and effect with respect to said remaining portions of said land or
remaining interests therein, and Lessee shall not be accountable to Lessor for
any payment theretofore made with respect to said portion of said land or such
interest in regard to which

                                       5


Lessee's estate hereunder has failed. If and whenever it shall be necessary so
to do in order to protect Lessee's interest under this lease, Lessee may at its
option pay and discharge at any time any mortgage or other lien now or hereafter
attaching to said land or any part thereof and in such event Lessee shall be
subrogated to all of the rights of the owner or holder of such mortgage or other
lien and Lessee may in addition thereto, at its option, apply to the discharge
of any such mortgage or other lien, or to the reimbursement to Lessee for any
amount so paid by it, any rentals, royalties or other sums accruing or payable
hereunder, to the owner of the lands to which such mortgage or other lien
attaches.

16. Lessee may at any time or times surrender this lease as to all or any
portion of said land and be relieved of all obligations thereafter accruing as
to the acreage surrendered, and thereafter the rental shall be reduced in the
same proportion that the acreage covered hereby is reduced. In the event this
lease shall be surrendered under the provisions of this paragraph, or assigned
as hereinabove provided as to any portion or portions of said land, Lessee shall
have such rights of way or easements hereunder, over, upon and across the land
as to which this lease is so surrendered or assigned as shall be necessary or
convenient for Lessee' s operations on the land retained by it and other lands
in the vicinity thereof. Upon any surrender or assignment of this lease as to
all or any portion of said land, Lessee shall be relieved of all further
obligations hereunder with respect to the lands so surrendered or assigned. Any
such surrender shall become effective upon delivery to Lessor, or to the
depositary bank herein designated, or the deposit in the United States mail,
postage prepaid, of a duly executed duplicate of an instrument of surrender
properly addressed to Lessor or to such depositary bank. Within a reasonable
time thereafter, Lessee shall record the original of such instrument of
surrender.

17. Lessee shall have the right at any time and from time to time during the
continuance hereof and within a reasonable time after the surrender or any
termination of this lease, to remove from said land all equipment, machinery,
installations, and any other property or improvements belonging to or furnished
by Lessee or Lessee's permittees.

18. All labor to be performed and material to be furnished in the operations of
Lessee hereunder shall be at the cost and expense of Lessee, and Lessor shall
not be chargeable with nor liable for any part thereof. Lessee shall protect
said land from liens arising from Lessee's operations thereon.

19. (a) Lessee is given the sole right and option by written declaration of
pooling at any time or from time to time, within twenty (20) years from the date
hereof, to combine, pool or unitize in whole or in part as to any stratum or
strata all or any part of said lands with other lands not subject to this lease
so as to create one or more reasonably compact operating units for any operating
or producing purpose. Such written declaration of pooling shall describe the
pooled lands and shall become effective when recorded in the Office of the
County Recorder in the county where the land is situated. Lessee shall give
written notice of such pooling to those Lessors whose lands are so pooled.
Lessors agree that with respect to all lease products obtained from any lands
included within any such operating unit, whether or not from lands covered by
this lease, there shall be allocated to and deemed to have been produced from
the lands covered by this lease and included in such operating unit, only that
proportion of the entire production from such operating unit that the amount of
acreage within the lands herein leased and included in such operating unit bears
to the total acreage of all of the land in such operating unit, and

                                       6


royalty payable under this lease with respect to leased land included in such
operating unit shall be computed only on that portion of such production so
allocated to such leased lands. The entire acreage so pooled or unitized shall
be treated as if it were covered by one lease and the drilling of a well or
performance of any other obligations in any part of such operating unit, whether
or not on land subject to this lease, shall fulfill Lessee's drilling and other
obligations under this lease to the same extent as if such well were drilled and
other obligations performed on land subject to this lease. No offset obligation
shall accrue under this lease as a result of any well drilled within any such
operating unit. Lessee may, at its sole option, at any time when there is no
production in such operating unit of lease products in quantities deemed paying
by Lessee terminate such operating unit by a written declaration thereof, in the
same manner in which it was created.

(b) Lessee is hereby granted the right at any time or times within the period
hereinafter provided to unitize this lease and the lands covered hereby, in
whole or in part or as to any stratum or strata, with other lands and leases and
to increase or decrease the size of any such unit. Any change in the amount of
Lessor's royalties resulting from unitization of this lease or from any increase
or decrease in the size of any such unit shall not be retroactive. In the event
of any such unitization, this lease, unless sooner terminated by Lessee, shall
continue in effect for so long as any of the lands hereby leased remain subject
to such unit. The drilling end producing operations conducted on any of the
unitized lands shall constitute full compliance with the drilling and producing
obligations of Lessee hereunder and Lessor shall be entitled to the royalties in
this lease provided, on the fractional part only, if any, of the unit production
allocated to this lease in accordance with the provisions of said unit. The
method of allocation of production from lands subject to said unit shall be set
forth therein and may be based upon the surface acreage or the estimated
volumetric content of recoverable lease products, or any weighing of either or
both thereof, of lands within such unit or within the estimated productive
limits of such unit, or such allocation may be made upon any other basis
approved by State or Federal authorities having jurisdiction thereof. The
provisions of this paragraph authorizing the establishment and enlargement or
contraction of such unit and change of the ratio of participation thereunder
shall not extend beyond the period of twenty (20) years from the date of this
lease; provided, however, that if such unit is established before the expiration
of said twenty-year period, such unit may continue in effect beyond said
twenty-year period. Any such unit may be established, enlarged, or diminished,
and, in the absence of production therefrom, may be dissolved by Lessee's filing
for record an instrument so declaring. A copy of such instrument shall be
delivered to Lessor or to the depositary.

20. Whenever used herein, the expression "drilling operations" shall, mean, for
all purposes hereof, any work or actual operations undertaken or commenced for
the purpose of drilling of a well, including without limiting the generality
hereof, the preparation of the ground therefor, the building of roads and other
facilities therefor, the construction of a derrick and other necessary
structures for the drilling of a well followed by the actual operation of
drilling in the ground. Any such work or operations preliminary to the drilling
in the ground may be undertaken in any order Lessee shall see fit. All such work
and operations shall be prosecuted with reasonable diligence.

21. This agreement may be executed in any number of counterparts with the same
force and effect as if all parties signed the same document.

                                       7


22. This lease shall be binding upon all who execute it, whether or not they are
named in the granting clause hereof and whether or not all parties named in the
granting clause execute this lease. All the provisions of this lease shall inure
to the benefit of and be binding upon the heirs, executors, administrators,
successors and assigns of Lessor and Lessee.

IN WITNESS WHEREOF, the parties hereto have executed this agreement.

STANDARD OIL COMPANY OF CALIFORNIA

By: /s/ Indecipherable                      /s/ John D. Jackson
    ------------------------------          ---------------------------------
           Contract Agent                   JOHN D. JACKSON, Conservator for the
By: /s/ Indecipherable                      Estate of APHIA JACKSON WALLAN
    ------------------------------          --------------------------------
           Assistant Secretary

__________________________________          _________________________________
             LESSEE                                  LESSOR



                                            WITNESS TO THE ABOVE SIGNATURE(S)

                                            /s/ Indecipherable
                                            --------------------------------


                                       8



                          AMENDMENT OF LEASE AGREEMENT

                  THIS AGREEMENT, made this 9th of July, 1973, between the party
or parties whose names are subscribed hereto under the designation of "Lessor",
hereinafter called "Lessor" (whether one or more), and STANDARD OIL COMPANY OF
CALIFORNIA, a corporation, hereinafter called "Lessee",

                              W I T N E S S E T H :

                  THAT, REFERENCE IS HEREBY HAD to that certain Lease Agreement
dated February 16, 1964 (such lease being of record in the Office of the County
Recorder of Imperial County, California, in Book 1193, at Page 106 et seq., of
Official Records), whereby Lessor did grant, let and lease unto Lessee for the
purposes therein described certain lands situate in said County and State
particularly described in such lease, such lease being hereinafter referred to
as "said lease";

                  AND, WHEREAS, Lessor and Lessee have agreed to amend said
lease in the particulars hereinafter set forth:

                  NOW, THEREFORE, in consideration of the sum of ONE DOLLAR
($1.00) and other valuable consideration paid to Lessor by Lessee, receipt of
which is hereby acknowledged, Lessor and Lessee agree as follows:

                  1.     That part of the first sentence of Section 2 of said
lease which now reads as follows:

                          ".... this lease shall remain in force for a period of
                  ten (10) years from the date hereof, called the 'primary term'
                  , ...."

shall be and hereby is amended to read as follows:

                          ".... this lease shall remain in force for a period of
                  twenty (20) years from the date hereof, called the 'primary
                  term' , ...."

                  2.     That part of the first sentence of Section 4 of said
lease which now reads as follows:

                          "4. Lessee agrees to commence drilling, extraction or
                  processing operations on said land or on the unit area within
                  the period of ten (10) years from the date hereof...."

shall be and hereby is amended to read as follows:

                          "4. Lessee agrees to commence drilling, extraction or
                  processing operations on said land or on the unit area within
                  the period of twenty (20) years from the date hereof...."



                  3. Effective with the rental period that begins in 1974, that
part of the first sentence of Section 4 of said lease which now reads as
follows:

                          "...., the sum of Forty and 00/100 DOLLARS ($40.00).."

shall be and hereby is amended to read as follows:



                          "...., the sum of Twelve Hundred and No/100 DOLLARS
                          ($1,200.00)...."

                  4.  That part of Section 4a. of said lease which now reads as
          follows:


                          "a.  That if within 10 years...."

shall be and hereby is amended to read as follows:



                          "a.  That if within 20 years...."

                  5. That part of Section 4b. of said lease which now reads as
          follows:


                          "b.  That if within 15 years...."

shall be and hereby is amended to read as follows:

                          "b.  That if within 25 years...."

                  6. To implement the foregoing, Lessor does hereby grant,
demise, lease and let unto Lessee all those certain lands particularly described
in said lease for the term and purposes and subject to all of the other
provisions of said lease as hereby amended. Lessor agrees that said lease as
hereby amended is in good standing and in full force and effect. Lessor
acknowledges receipt of rental in full under said lease to February 16, 1975.

                  7.     This agreement shall bind and inure to the benefit of
the respective heirs, executors, administrators, successors, and assigns of the
parties hereto;

                  IN WITNESS WHEREOF, this agreement has been executed as of the
day and year first herein written.

               LESSEE                                 LESSOR

STANDARD OIL COMPANY OF CALIFORNIA

By: /s/ Indecipherable                      /s/ John D. Jackson
   -------------------------------          --------------------------------
         Contract Agent                     JOHN D. JACKSON, Conservator for the


By: /s/ Indecipherable                      Estate of APHIA JACKSON WALLAN
   -------------------------------          --------------------------------

         Assistant Secretary







STATE OF CALIFORNIA               )
                                    ss.:
City and County of San Francisco  )

                  On September 24, 1973, before me, Edmond Lee Kelly, a Notary
Public in and for said City and County and State, residing therein, duly
commissioned and sworn, personally appeared A. T. SMITH and J. D. FROGGATF known
to me to be CONTRACT AGENT and ASSISTANT SECRETARY, respectively, of STANDARD
OIL COMPANY OF CALIFORNIA the Corporation described in and that executed the
within instrument, and also known to me to be the persons who executed it on
behalf of the said Corporation therein named, and they acknowledged to me that
such Corporation executed the same.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Official Seal, at
my offices in the City and County and State aforesaid the day and year in this
certificate above written.

                                    /s/ Edmond Lee Kelly
                                    --------------------------------------------
                                    Notary Public in and for said City and
                                    County of San Francisco, State of California











                          AMENDMENT OF LEASE AGREEMENT

                  THIS AGREEMENT, made this 1st day of October, 1979, between
the party or parties whose names are subscribed hereto under the designation of
"Lessor", hereinafter called "Lessor" (whether one or more), and CHEVRON U.S.A.
INC. successor in interest to STANDARD OIL COMPANY OF CALIFORNIA, a corporation,
hereinafter called "Lessee",

                              W I T N E S S E T H :

                  THAT, REFERENCE IS HEREBY HAD to certain Lease Agreement dated
February 16, 1964 (such lease being of record in the Office of the County
Recorder of Imperial County, California, in Book 1193, at Page 106, et seq., of
Official Records), whereby Lessor did grant, let and lease unto Lessee for the
purposes therein described certain lands situate in said County and State
particularly described in such lease; such lease being hereinafter referred to
as "said lease";

                  AND, WHEREAS, by amendment of lease agreement dated July 9,
1973, a short form of which was recorded in B-1354, P-385, et seq. of official
records of Imperial County, California, said lease was amended;

                  AND, WHEREAS, Lessor and Lessee have agreed to further amend
said lease in the particulars hereinafter set forth:

                  NOW, THEREFORE, in consideration of the sum of ONE DOLLAR
($1.00) and other valuable consideration paid to Lessor by Lessee, receipt of
which is hereby acknowledged, Lessor and Lessee agree as follows:

                  1. Effective with the rental period that begins in 1980, that
part of the first sentence of Section 4 of said lease which now reads as
follows:

                           "...., the sum of Twelve Hundred and No/100 DOLLARS
                           ($1,200.00)...."

shall be and hereby is amended to read as follows:

                           "...., the sum of Two Thousand and No/100 DOLLARS
                           ($2,000.00)...."

                  2. To implement the foregoing, Lessor does hereby grant,
demise, lease and let unto Lessee all those certain lands particularly described
in said lease for the term and purposes and subject to all of the other
provisions of said lease as hereby amended. Lessor agrees that said lease as
hereby amended is in good standing and in full force and effect. Lessor
acknowledges receipt of rental in full under said lease to February 16, 1980.

                  3.     This agreement shall bind and inure to the benefit of
the respective heirs, executors, administrators, successors, and assigns of the
parties hereto.




IN WITNESS WHEREOF, this agreement has been executed as of the day and year
first herein written.

           LESSEE                                     LESSOR

CHEVRON U.S.A. INC.

By: /s/ J. Turner                           /s/ John D. Jackson
   -----------------------------------      ------------------------------------
       Its Attorney-in-Fact                 JOHN D. JACKSON, Conservator for the



                                            Estate of Aphia Jackson Wallan



                                                                 Exhibit 10.4.12


                                 LEASE AGREEMENT

              THIS AGREEMENT, made and entered into as of the 17 day of March,
1964, by and between HELEN S. FUGATE, a widow hereinafter called "Lessor"
(whether one or more) and STANDARD OIL COMPANY OF CALIFORNIA, a corporation ,
hereinafter called "Lessee,"

                               W I T N E S S E T H

              1. Lessor, for and in consideration of the sum of $10 in hand
paid, and of the royalties herein provided and of the covenants and agreements
hereinafter contained, hereby grants, demises, leases and lets unto Lessee, the
land hereinafter described with the sole and exclusive right to Lessee to drill
for, produce, extract, take and remove therefrom water, brine, steam, steam
power, minerals (other than oil), salts, chemicals, gases (other than gas
associated with oil), and other products produced or extracted by Lessee from
any thereof. Each of the foregoing is hereinafter sometimes termed "a lease
product" and all thereof are sometimes termed "the lease products." For the same
consideration Lessee is hereby granted the right to store, utilize, process,
convert, and otherwise use such lease products upon said land and to sell the
same or any part thereof off said land during the term hereof, with the right of
entry thereon at all times for said purposes, and to construct, use, maintain,
erect, repair and replace thereon, and to remove therefrom all roads, pipelines,
ditches and lanes, telephone and telegraph lines, utility installations, power
lines, poles, tanks, evaporation or settling basins, extraction or processing
plants, machinery, equipment, buildings, electric power plants, and equipment
for generation and transmission of steam power, and electric power, and for the
handling, treatment or storage of lease products, and all structures and
facilities relating thereto, which Lessee may desire to erect, construct or
install in carrying on Lessee's business and operations on or from said land and
other lands in the vicinity of said land; and Lessee shall have the further
right to erect, maintain, operate and remove a plant or plants, structures and
facilities, with all necessary appurtenances for the conversion of steam to
electric power, and for the extraction of lease products from steam, brine or
water produced from said land, and other lands in the vicinity of said land,
including all rights necessary or convenient thereto, together with rights of
way for passage over, upon and across and ingress and egress to and from said
land for any or all of the above mentioned purposes. Lessee shall also have the
right to dispose of waste brine and other waste products in a well or wells
drilled or converted for that purpose on the leased land or on other land in the
vicinity, and the right to inject water, brine, steam and gases in a well or
wells on said land or such other land for the purpose of maintaining or
restoring pressure in the productive zones beneath said land or other land in
the vicinity thereof. The said land included in this lease is situated in the
County of Imperial, State of California, and is described as follows, to wit:

              Tract No. 44 Township 16 South, Range 14 East, S.B.M. containing
80 acres of land more or less.

This lease shall cover all the interest in said land now owned or hereafter
acquired by Lessor, even though greater than the undivided interest (if any)
described above. For the purpose of calculating any payments based on acreage,
Lessee, at Lessee's option, may act as if said land and its constituent parcels
contain the acreage above stated, whether they actually contain more or less.



              2. Subject to the other provisions herein contained, this lease
shall remain in force for a period of twenty (20) years from the date hereof,
called the "primary term," and thereafter so long as lease products, or any one
or more of them, is produced from, or Lessee is engaged in drilling, extraction,
processing or reworking operations on said land hereunder or on land pooled or
unitized with said land, as provided in Section 19 hereof, (said land, together
with such pooled or unitized land, being hereinafter sometimes called "the unit
area").

              3. Lessee shall pay to Lessor, on or before the last day of each
calendar month, the royalties accrued and payable for the preceding calendar
month, and in making such payments Lessee shall furnish to Lessor statements
setting forth the basis for computation of such royalty.

As royalty and rental, Lessee shall pay to Lessor 10% of the value at the well
of all lease products produced, saved and sold. As used herein, the term "value
at the well" shall mean the actual price received by Lessee for the sale of
lease products at the well. If such products are not sold by Lessee at the well
but are sold at a plant or plants on or in the vicinity of said land, then the
value at the well shall be determined by deducting from the actual price
received by Lessee for the sale of such lease products all costs and expenses
incurred by Lessee in transporting, manufacturing, processing and otherwise
handling such lease products prior to the actual sale thereof. If lease products
are not sold by Lessee at the well or at such a plant but are otherwise used by
Lessee in its chemical operations or disposed of for value, then the value of
such lease products at the well shall be determined by deducting from the price
thereof at the nearest point where the same or similar products are sold in
substantial quantities, the cost of transporting, manufacturing, processing and
otherwise handling such lease products prior to sale thereof. Lessee shall
meter, gauge or otherwise determine the volume and quality of all lease products
commingled and such metering or gauging shall furnish the basis for computing
Lessor's royalties hereunder. Lessee may use, free of royalty, steam, steam
power, electric power, and water developed from said land by Lessee, for all
operations hereunder, and Lessee shall not be required to account to Lessor for,
or pay royalty on any lease product or products reasonably lost or consumed in
operations hereunder.

              4. Lessee agrees to commence drilling, extraction or processing
operations on said land or on the unit area within the period of thirty (30)
years from the date hereof and to prosecute such operations with reasonable
diligence until lease products or any thereof shall have been found, extracted
and processed in quantities deemed paying quantities by Lessee, or until further
operations would, in the judgment of Lessee, be unprofitable or impracticable,
or Lessee may at any time within said primary term terminate this lease and
surrender said land provided that, commencing with the 17th day of March, l965,
if Lessee has not theretofore commenced any such operations on said land or on
the unit area or terminated this lease, Lessee shall pay or tender to Lessor
annually, in advance, as rental, the sum of Eight-hundred and no/100 DOLLARS
($800.00) (each of such annual periods being hereinafter referred to as "rental
period") until operations are commenced on said land or lands which have been
pooled or unitized therewith, pursuant to paragraph 19 hereof, or this lease
terminated as herein provided; it being understood that in the event of the
surrender or termination of this lease as to any portion or portions of the land
covered thereby, said rental shall be reduced proportionately as provided in
paragraph 16 hereof. The consideration expressed in paragraph 1 hereof covers
all rental to the date last above mentioned. If Lessee shall elect not to
commence operations on said land or on the unit area during the primary term, as
above provided, this lease shall terminate.

                                       2


              It is expressly understood and agreed by the parties hereto:

                  a.  That if within 10 years from the date hereof Lessee has
                      not completed one or more wells or a processing plant on
                      the unit area or on said land, capable of producing or
                      processing lease products or any thereof in quantities and
                      quality deemed paying quantities by Lessee, then Lessor
                      may, at his option, terminate this lease; and

                  b.  That if within 15 years from the date hereof Lessee has
                      not made or arranged for a sale or sales of lease products
                      or any thereof, produced from or allocated to said land,
                      then Lessor may, at his option, terminate this lease.

              5. If at any time or times after the primary term or within three
(3) months before expiration of the primary term, all operations and all
production hereunder on said land or on the unit area shall cease for any cause
other than those for which specific provision is made herein, this lease shall
not terminate if Lessee shall commence or resume drilling, processing,
extraction or reworking operations or production within three (3) months after
such cessation.

              6. Lessee shall be obligated to produce only such quantity or
quantities of lease products as it may be able to market at the well or wells,
plant or plants. It is recognized that the market demand for lease products may
vary from time to time and during such periods as there is no market at the
wells or plant for any lease product or products, Lessee's obligation to
produce, process and extract such lease product or products shall be suspended.

Subject to the foregoing and except as herein otherwise provided, it is agreed
that the Lessee shall drill such wells and operate each completed well with
reasonable diligence and in accordance with good operating practice so long as
such wells shall produce lease products in paying quantities while this lease is
in force as to the portion of said land on which such well or wells are
situated; but in conformity with any reasonable conservation program affecting
the drilling of wells or the production of lease products from said land, which
the Lessee may either voluntarily or by order of any authorized governmental
agency adopt, subscribe to or be subject to.

              7. The possession by Lessee of said land shall be sole and
exclusive excepting only that Lessor reserves the right to occupy and use or to
lease the surface of said land for agricultural, horticultural or other surface
uses, except those granted to Lessee hereunder, which uses shall be carried on
by Lessor subject to, and with no interference with, the rights or operations of
Lessee hereunder. No well shall be drilled closer than 100 feet to any residence
or barn now on said land without written consent of Lessor. Lessee shall pay for
damages caused by Lessee's operations to houses, barns, growing crops, fences
and irrigation systems. Lessee shall have the right to drill such wells on said
land as Lessee may deem desirable for the purposes hereof and Lessee shall
utilize or use only so much of said land as is necessary or reasonably
convenient for Lessee's operations hereunder and shall interfere as little as
reasonably necessary with the use and occupancy of said land by Lessor. No
default of Lessee hereunder with respect to any well, or portion of this lease,
shall impair Lessee's rights with respect to any other well or portion of this
lease.

                                       3



              8. The rights of Lessor and Lessee hereunder may be assigned in
whole or in part. No present or future division of Lessor's ownership as to
different portions or parcels of said land shall operate to enlarge the
obligations or diminish the rights of Lessee, and Lessee's operations may be
conducted without regard to any such division. If all or any part of this lease
is assigned, no leasehold owner shall be liable for any act or omission of any
other leasehold owner, and failure by one to pay rental shall not affect the
rights of others--rental being apportionable in proportion to acreage.

              9. The obligations of Lessee hereunder shall be suspended (but
without impairment of Lessor's rights under (a) and (b) of paragraph 4 hereof)
while Lessee is prevented or hindered from complying therewith in part or in
whole, by strikes, lockouts, labor distrubances, acts of God, unavoidable
accidents, laws, rules, regulations or orders of any Federal, state, municipal
or other governmental agency, acts of war or conditions arising out of or
attributable to war, shortage of necessary material, equipment or labor, or
restrictions in, or limitations upon the use thereof, inability to secure or
absence of a market for the sale of lease products which can be produced or
recovered in commercial quantities from said land, delays in transportation, and
also matters beyond the control of Lessee, whether similar to the matters herein
specifically enumerated or not. This lease shall remain in full force and effect
during any suspension of Lessee's obligations under any provisions of this
paragraph, and for a reasonable time thereafter, provided that after the removal
of the cause or causes preventing or hindering the performance of such
obligation, Lessee, subject to the other provisions of this Lease, diligently
commences or resumes the performance of such obligation. Notwithstanding
anything to the contrary herein provided, if any of Lessee's obligations
hereunder conflict with or violate the provisions of any reasonable conservation
program or plan of orderly development, whether now or hereafter adopted, to
which Lessee may voluntarily subscribe, or of any conservation program or plan
which is now or may hereafter be prescribed by any order of any governmental
agency, Lessee shall not be obligated to perform such obligation.

              10. If Lessee shall fail to pay any installment of royalty or
rental when due and if such default shall continue for a period of 15 days after
receipt by Lessee of written notice thereof from Lessor to Lessee, then at the
option of Lessor, this lease shall terminate as to the portion or portions
thereof as to which Lessee is in default; provided, however, that if there be a
bona fide dispute as to the amount due and all undisputed amounts are paid, said
15-day period shall be extended until 5 days after such dispute is settled by
final court decree, arbitration or agreement.

If lessee shall be in default in the performance of any obligations under this
Lease, other than the payment of rentals or royalties, and if, for a period of
90 days after written notice is given to Lessee by Lessor of such default,
Lessee shall fail to commence and thereafter diligently and in good faith
prosecute action to remedy such default, Lessor may terminate this Lease.

              11. Lessee shall pay all taxes that may be levied against the
improvements, plant, machinery and personal property owned by Lessee and located
upon any part of said land.

                                       4


              12. Lessee shall also pay Lessee's share of any and all taxes
assessed during the term of this lease upon any products of Lessee's operations
hereunder, together with Lessee's share of all severance, production and license
taxes or other taxes or assessments levied or assessed on account of the
production of lease products or any thereof on or from said land, or on or from
such portion of said land as Lessee may be holding under this lease on the date
of such tax lien.

              13. Lessor agrees to pay Lessor's share of any and all taxes
assessed upon any products of Lessee's operations hereunder, together with
Lessor's share of all severance, production and license taxes or other taxes or
assessments levied or assessed on account of the production of lease products
from said land and to pay all, other taxes assessed against said land, whether
the same are assessed to Lessor or Lessee or otherwise, and Lessee is hereby
authorized to pay all such taxes and assessments on behalf of Lessor and to
deduct the amount so paid from any royalties or moneys due Lessor hereunder.
"Lessee's share" and "Lessor's share", as used above refers to Lessee's and
Lessor's respective proportionate parts of the gross proceeds from the sale of
any and all lease products produced, saved and sold from said land by Lessee or
allocated to said land under the terms of any unit or pooling plan during the
preceding calendar year.

              14. All royalties, rentals and other payments payable in money
hereunder shall be paid to Lessor by Lessee mailing or delivering a check
therefor to Lessor at 515 - Sandalwood Drive, El Centro, California, or Lessee
may, at its option, pay any or all royalties, rentals and other payments payable
in money hereunder by mailing or delivering a check therefor to Bank of America
at El Centro, California its successors and assigns, herein designated by Lessor
as depositary, hereby granting to said depositary full power and authority on
behalf of Lessor and on behalf of the heirs, executors, administrators,
successors and assigns of Lessor, and each of them, to collect and receipt for
all sums of money due and payable from Lessee to Lessor hereunder, and to settle
all accounts and accounting of rentals, royalties and other payments payable in
money hereunder. No change in the ownership of the land or minerals covered by
this lease and no assignment of rentals or royalties shall be binding upon
Lessee or the depositary until both Lessee and the depositary have been
furnished with written evidence thereof satisfactory to them. Said depositary
above named shall continue to act as such until the owners and holders of at
least two-thirds of Lessor's estate hereunder shall in writing designate a
different depositary and notify Lessee in writing at P.O. Box 3495, San
Francisco, California, 94120, of the name and address of such new depositary.
The payment of any and all rentals, royalties and other payments hereunder by
Lessee to the depositary designated herein or to any other depositary hereafter
designated by Lessor, as aforesaid, shall be a full acquittance and discharge of
Lessee of and from any and all liability to Lessor, and to the heirs, executors,
administrators, successors and assigns of Lessor, and each of them, for any part
of such rentals, royalties or other payments, and Lessee will not be responsible
at any time for the disposition or disbursement by any such depositary of all or
any part of any moneys received by it hereunder.

              15. It is agreed that if Lessor owns a less interest in the sole
and exclusive rights herein granted Lessee, than the entire and undivided fee
simple estate therein, then any royalties, rentals and other payments herein
provided for shall be paid Lessor only in the proportion which Lessor's interest
bears to the whole and undivided fee. In the event Lessee's estate hereunder
shall fail, for a cause other than Lessee's default hereunder, in regard to any
portion of said land or any interest therein, such failure shall not affect or
invalidate Lessee's estate hereunder in

                                       5


regard to the remaining portions of said lands or the remaining interests
therein and this lease shall nevertheless continue in full force and effect with
respect to said remaining portions of said land or remaining interests therein,
and Lessee shall not be accountable to Lessor for any payment theretofore made
with respect to said portion of said land or such interest in regard to which
Lessee's estate hereunder has failed. If and whenever it shall be necessary so
to do in order to protect Lessee's interest under this lease, Lessee may at its
option pay and discharge at any time any mortgage or other lien now or hereafter
attaching to said land or any part thereof and in such event lessee shall be
subrogated to all of the rights of the owner or holder of such mortgage or other
lien and Lessee may in addition thereto, at its option, apply to the discharge
of any such mortgage or other lien, or to the reimbursement to lessee for any
amount so paid by it, any rentals, royalties or other sums accruing or payable
hereunder, to the owner of the lands to which such mortgage or other lien
attaches.

              16. Lessee may at any time or times surrender this lease as to all
or any portion of said land and be relieved of all obligations thereafter
accruing as to the acreage surrendered, and thereafter the rental shall be
reduced in the same proportion that the acreage covered hereby is reduced. In
the event this lease shall be surrendered under the provisions of this
paragraph, or assigned as hereinabove provided as to any portion or portions of
said land, Lessee shall have such rights of way or easements hereunder, over,
upon and across the land as to which this lease is so surrendered or assigned as
shall be necessary or convenient for Lessee' s operations on the land retained
by it and other lands in the vicinity thereof. Upon any surrender or assignment
of this lease as to all or any portion of said land, Lessee shall be relieved of
all further obligations hereunder with respect to the lands so surrendered or
assigned. Any such surrender shall become effective upon delivery to Lessor, or
to the depositary bank herein designated, or the deposit in the United States
mail, postage prepaid, of a duly executed duplicate of an instrument of
surrender properly addressed to Lessor or to such depositary bank. Within a
reasonable time thereafter, Lessee shall record the original of such instrument
of surrender.

              17. Lessee shall have the right at any time and from time to time
during the continuance hereof and within a reasonable time after the surrender
or any termination of this lease, to remove from said land all equipment,
machinery, installations, and any other property or improvements belonging to or
furnished by Lessee or Lessee's permitees.

              18. All labor to be performed and material to be furnished in the
operations of Lessee hereunder shall be at the cost and expense of Lessee, and
Lessor shall not be chargeable with nor liable for any part thereof. Lessee
shall protect said land from liens arising from Lessee's operations thereon.

              19. (a) Lessee is given the sole right and option by written
declaration of pooling at any time or from time to time, within twenty (20)
years from the date hereof, to combine, pool or unitize in whole or in part as
to any stratum or strata all or any part of said lands with other lands not
subject to this lease so as to create one or more reasonably compact operating
units for any operating or producing purpose. Such written declaration of
pooling shall describe the pooled lands and shall become effective when recorded
in the Office of the County Recorder in the county where the land is situated.
Lessee shall give written notice of such pooling to those Lessors whose lands
are so pooled. Lessors agree that with respect to all lease products obtained
from any lands included within any such operating unit, whether or not from
lands covered by

                                       6


this lease, there shall be allocated to and deemed to have been produced from
the lands covered by this lease and included in such operating unit, only that
proportion of the entire production from such operating unit that the amount of
acreage within the lands herein leased and included in such operating unit bears
to the total acreage of all of the land in such operating unit, and royalty
payable under this lease with respect to leased land included in such operating
unit shall be computed only on that portion of such production so allocated to
such leased lands. The entire acreage so pooled or unitized shall be treated as
if it were covered by one lease and the drilling of a well or performance of any
other obligations in any part of such operating unit, whether or not on land
subject to this lease, shall fulfill Lessee's drilling and other obligations
under this lease to the same extent as if such well were drilled and other
obligations performed on land subject to this lease. No offset obligation shall
accrue under this lease as a result of any well drilled within any such
operating unit. Lessee may, at its sole option, at any time when there is no
production in such operating unit of lease products in quantities deemed paying
by Lessee terminate such operating unit by a written declaration thereof, in the
same manner in which it was created.

              (b) Lessee is hereby granted the right at any time or times within
the period hereinafter provided to unitize this lease and the lands covered
hereby, in whole or in part or as to any stratum or strata, with other lands and
leases and to increase or decrease the size of any such unit. Any change in the
amount of Lessor's royalties resulting from unitization of this lease or from
any increase or decrease in the size of any such unit shall not be retroactive.
In the event of any such unitization, this lease, unless sooner terminated by
Lessee, shall continue in effect for so long as any of the lands hereby leased
remain subject to such unit. The drilling and producing operations conducted on
any of the unitized lands shall constitute full compliance with the drilling and
producing obligations of Lessee hereunder and Lessor shall be entitled to the
royalties in this lease provided, on the fractional part only, if any, of the
unit production allocated to this lease in accordance with the provisions of
said unit. The method of allocation of production from lands subject to said
unit shall be set forth therein and may be based upon the surface acreage or the
estimated volumetric content of recoverable lease products, or any weighing of
either or both thereof, of lands within such unit or within the estimated
productive limits of such unit, or such allocation may be made upon any other
basis approved by State or Federal authorities having jurisdiction thereof. The
provisions of this paragraph authorizing the establishment and enlargement or
contraction of such unit and change of the ratio of participation thereunder
shall not extend beyond the period of twenty (20) years from the date of this
lease; provided, however, that if such unit is established before the expiration
of said twenty-year period, such unit may continue in effect beyond said
twenty-year period. Any such unit may be established, enlarged, or diminished,
and, in the absence of production therefrom, may be dissolved by Lessee's filing
for record an instrument so declaring. A copy of such instrument shall be
delivered to Lessor or to the depositary.

              20. Whenever used herein, the expression "drilling operations"
shall mean, for all purposes hereof, any work or actual operations undertaken or
commenced for the purpose of drilling of a well, including without limiting the
generality hereof, the preparation of the ground therefor, the building of roads
and other facilities therefor, the construction of a derrick and other necessary
structures for the drilling of a well followed by the actual operation of
drilling in the ground. Any such work or operations preliminary to the drilling
in the ground may be

                                       7


undertaken in any order Lessee shall see fit. All such work and operations shall
be prosecuted with reasonable diligence.

              21. This agreement may be executed in any number of counterparts
with the same force and effect as if all parties signed the same document.

              22. This lease shall be binding upon all who execute it, whether
or not they are named in the granting clause hereof and whether or not all
parties named in the granting clause execute this lease. All the provisions of
this lease shall inure to the benefit of and be binding upon the heirs,
executors, administrators, successors and assigns of Lessor and Lessee.

IN WITNESS WHEREOF, the parties hereto have executed this agreement.



STANDARD OIL COMPANY OF AMERICA

By:  /s/ Indecipherable
   ------------------------------------        ---------------------------------
   Contract Agent

By:  /s/ Indecipherable                         /s/ Helen S. Fugate
   ------------------------------------        ---------------------------------
   Assistant Secretary                                  HELEN S. FUGATE


   ------------------------------------        ---------------------------------
              LESSEE                                        LESSOR


           Witness to the above signature(s)  /s/ Kenneth B. Masre
                                            -----------------------------




                                       8



CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                                                 EXHIBIT 10.4.13

                                 LEASE AGREEMENT

THIS AGREEMENT, made and entered into as of the 16 day of February, l964, by and
between JOHN D. JACKSON and FRANCES J. JACKSON, husband and wife hereinafter
called "Lessor" (whether one or more) and STANDARD OIL COMPANY OF CALIFORNIA, a
corporation, hereinafter called "Lessee,"

W I T N E S S E T H

1. Lessor, for and in consideration of the $l0 in hand paid, and of the
royalties herein provided and of the covenants and agreements hereinafter
contained, hereby grants, demises, leases and lets unto Lessee, the land
hereinafter described with the sole and exclusive right to Lessee to drill for,
produce, extract, take and remove therefrom water, brine, steam power, minerals
(other than oil), salts, chemicals, gases (other than gas associated with oil),
and other products produced or extracted by Lessee from any thereof. Each of the
foregoing is hereinafter sometimes termed "a lease product" and all thereof are
sometimes termed "the lease products." For the same consideration Lessee is
hereby granted the right to store, utilize, process, convert, and otherwise use
such lease products upon said land and to sell the same or any part thereof off
said land during the term hereof, with the right of entry thereon at all times
for said purposes, and to construct, use, maintain, erect, repair and replace
thereon, and to remove therefrom all roads, pipelines, ditches and lanes,
telephone and telegraph lines, utility installations, power lines, poles, tanks,
evaporation or settling basins, extraction or processing plants, machinery,
equipment, buildings, electric power plants, and equipment for generation and
transmission of steam power, and electric power, and for the handling, treatment
or storage of lease products, and all structures and facilities relating
thereto, which Lessee may desire to erect, construct or install in carrying on
Lessee's business and operations on or from said land and other lands in the
vicinity of said land; and Lessee shall have the further right to erect,
maintain, operate and remove a plant or plants, structures and facilities, with
all necessary appurtenances for the conversion of steam to electric power, and
for the extraction of lease products from steam, brine or water produced from
said land, and other lands in the vicinity of said land, including all rights
necessary or convenient thereto, together with rights of way for passage over,
upon and across and ingress and egress to and from said land for any and all of
the above mentioned purposes. Lessee shall also have the right to dispose of
waste brine and other waste products in a well or wells drilled or converted for
that purpose on the leased land or on other land in the vicinity, and the right
to inject water, brine, steam and gases in a well or wells on said land or such
other land for the purpose of maintaining or restoring pressure in the
productive zones beneath said land or other land in the vicinity thereof. The
said land included in this lease is situated in the County of Imperial, State of
California, and is described as follows, to wit:




The NE 1/4 of the N 1/2 of Tract No. 5l, Township 16 South, Range 14 East,
according to the United States Government Plat of Resurvey, approved and on file
in the United States Land Office at Los Angeles, California containing 40 acres
of land more or less.

This lease shall cover all the interest in said land now owned or hereafter
acquired by Lessor, even though greater than the undivided interest (if any)
described above. For the purpose of calculating any payments based on acreage,
Lessee, at Lessee's option, may act as if said land and its constituent parcels
contain the acreage above stated, whether they actually contain more or less.

2. Subject to the other provisions herein contained, this lease shall remain in
force for a period of ten (10) years from the date hereof, called the "primary
term," and thereafter so long as lease products, or any one or more of them, is
produced from, or Lessee is engaged in drilling, extraction, processing or
reworking operations on said land hereunder or on land pooled or unitized with
said land, as provided in Section 19 hereof, (said land, together with such
pooled or unitized land, being hereinafter sometimes called "the unit area").

3. Lessee shall pay to Lessor, on or before the last day of each calendar month,
the royalties accrued and payable for the preceding calendar month, and in
making such payments Lessee shall furnish to Lessor statements setting forth the
basis for computation of such royalty.

As royalty and rental, Lessee shall pay to Lessor ***

*** Confidential material redacted and filed separately with the Commission.
                                       2


4. Lessee agrees to commence drilling, extraction or processing operations on
said land or on the unit area within the period of ten (10) years from the date
hereof and to prosecute such operations with reasonable diligence until lease
products or any thereof shall have been found, extracted and processed in
quantities deemed paying quantities by Lessee, or until further operations
would, in the judgment of Lessee, be unprofitable or impracticable, or Lessee
may at any time within said primary term terminate this lease and surrender said
land; provided that, commencing with the 16th day of February, 1965, if Lessee
has not theretofore commenced any such operations on said land or on the unit
area or terminated this lease, Lessee shall pay or tender to Lessor annually, in
advance, as rental, the sum of *** (each of such annual periods being
hereinafter referred to as "rental period") until operations are commenced on
said land or lands which have been pooled or unitized therewith, pursuant to
paragraph 19 hereof, or this lease terminated as herein provided; it being
understood that in the event of the surrender or termination of this lease as to
any portion or portions of the land covered thereby, said rental shall be
reduced proportionately as provided in paragraph 16 hereof. The consideration
expressed in paragraph 1 hereof covers all rental to the date last above
mentioned. If Lessee shall elect not to commence operations on said land or on
the unit area during the primary term, as above provided, this lease shall
terminate.

It is expressly understood and agreed by the parties hereto:

a. That if within 10 years from the date hereof Lessee has not completed one or
more wells or a processing plant on the unit area or on said land, capable of
producing or processing lease products or any thereof in quantities and quality
deemed paying quantities by Lessee, then Lessor may, at his option, terminate
this lease; and

b. That if within 25 years from the date hereof Lessee has not made or arranged
for a sale or sales of lease products or any thereof, produced from or allocated
to said land, then Lessor may, at his option, terminate this lease.

5. If at any time or times after the primary term or within three (3) months
before expiration of the primary term, all operations and all production
hereunder on said land or on the unit area shall cease for any cause other then
those for which specific provision is made herein, this lease shall not
terminate if Lessee shall commence or resume drilling, processing, extraction or
reworking operations or production within three (3) months after such cessation.

6. Lessee shall be obligated to produce only such quantity or quantities of
lease products as it may be able to market at the well or wells, plant or
plants. It is recognized that the market demand for lease products may vary from
time to time and during such periods as there is no market at the wells or plant
for any lease product or products, Lessee's


*** Confidential material redacted and filed separately with the Commission.

                                       3


obligation to produce, process and extract such lease product or products shall
be suspended.

Subject to the foregoing and except as herein otherwise provided, it is agreed
that the Lessee shall drill such wells and operate each completed well with
reasonable diligence and in accordance with good operating practice so long as
such wells shall produce lease products in paying quantities while this lease is
in force as to the portion of said land on which such well or wells are
situated; but in conformity with any reasonable conservation program affecting
the drilling of wells or the production of lease products from said land, which
the Lessee may either voluntarily or by order of any authorized governmental
agency adopt, subscribe to or be subject to.

7. The possession by Lessee of said plant shall be sole and exclusive excepting
only that Lessor reserves the right to occupy and use or to lease the surface of
said land for agricultural, horticultural or other surface uses, except those
granted to Lessee hereunder, which uses shall be carried on by Lessor subject
to, and with no interference with, the rights or operations of Lessee hereunder.
No well shall be drilled closer than 100 feet to any residence or barn now on
said land without written consent of Lessor. Lessee shall pay for damages caused
by Lessee's operations to houses, barns, growing crops, fences and irrigation
systems. Lessee shall have the right to drill such wells on said land as Lessee
may deem desirable for the purposes hereof and Lessee shall utilize or use only
so much of said land as is necessary or reasonably convenient for Lessee's
operations hereunder and shall interfere as little as reasonably necessary with
the use and occupancy of said land by Lessor. No default of Lessee hereunder
with respect to any well, or portion of this lease, shall impair Lessee's rights
with respect to any other well or portion of this lease.

8. The rights of Lessor and Lessee hereunder may be assigned in whole or in
part. No present or future division of Lessor's ownership as to different
portions or parcels of said land shall operate to enlarge the obligations or
diminish the rights of Lessee, and Lessee's operations may be conducted without
regard to any such division. If all or any part of this lease is assigned, no
leasehold owner shall be liable for any act or omission of any other leasehold
owner, and failure by one to pay rental shall not affect the rights of
others--rental being apportionable in proportion to acreage.

9. The obligations of Lessee hereunder shall be suspended (but without
impairment of Lessor's rights under (a) and (b) of paragraph 4 hereof) while
Lessee is prevented or hindered from complying therewith in part or in whole, by
strikes, lockouts, labor disturbances, acts of God, unavoidable accidents, laws,
rules, regulations or orders of any


                                       4


Federal, state, municipal or other governmental agency, acts of war or
conditions arising out of or attributable to war, shortage of necessary
material, equipment or labor, or restrictions in, or limitations upon the use
thereof, inability to secure or absence of a market for the sale of lease
products which can be produced or recovered in commercial quantities from said
land, delays in transportation, and also matters beyond the control of Lessee,
whether similar to the matters herein specifically enumerated or not. This lease
shall remain in full force and effect during any suspension of Lessee's
obligations under any provisions of this paragraph, and for a reasonable time
thereafter, provided that after the removal of the cause or causes preventing or
hindering the performance of such obligation, Lessee, subject to the other
provisions of this Lease, diligently commences or resumes the performance of
such obligation. Notwithstanding anything to the contrary herein provided, if
any of Lessee's obligations hereunder conflict with or violate the provisions of
any reasonable conservation program or plan of orderly development, whether now
or hereafter adopted, to which Lessee may voluntarily subscribe, or of any
conservation program or plan which is now or may hereafter be prescribed by any
order of any governmental agency, Lessee shall not be obligated to perform such
obligation.

10. If Lessee shall fail to pay any installment of royalty or rental when due
and if such default shall continue for a period of 15 days after receipt by
Lessee of written notice thereof from Lessor to Lessee, then at the option of
Lessor, this lease shall terminate as to the portion or portions thereof as to
which Lessee is in default; provided, however, that if there be a bona fide
dispute as to the amount due and all undisputed amounts are paid, said l5-day
period shall be extended until 5 days after such dispute is settled by final
court decree, arbitration or agreement.

If lessee shall be in default in the performance of any obligations under this
Lease, other than the payment of rentals or royalties, and if, for a period of
90 days after written notice is given to Lessee by Lessor of such default,
Lessee shall fail to commence and thereafter diligently and in good faith
prosecute action to remedy such default, Lessor may terminate this Lease.

11. Lessee shall pay all taxes that may be levied against the improvements,
plant, machinery and personal property owned by Lessee and located upon any part
of said land.

12. Lessee shall also pay Lessee's share of any and all taxes assessed during
the term of this lease upon any products of Lessee's operations hereunder,
together with Lessee's share of all severance, production and license taxes or
other taxes or assessments levied or assessed on account of the production of
lease products or any thereof on or from said land, or on or from such portion
of said land as Lessee may be holding under this lease on the date of such tax
lien.



                                       5


13. Lessor agrees to pay Lessor's share of any and all taxes assessed upon any
products of Lessee's operations hereunder, together with Lessor's share of all
severance, production and license taxes or other taxes or assessments levied or
assessed on account of the production of lease products from said land, and to
pay all other taxes assessed against said land, whether the same are assessed to
Lessor or Lessee or otherwise, and Lessee is hereby authorized to pay all such
taxes and assessments on behalf of Lessor and to deduct the amount so paid from
any royalties or moneys due Lessor hereunder. "Lessee's share" and "Lessor's
share", as used above refers to Lessee's and Lessor's respective proportionate
parts of the gross proceeds from the sale of any and all lease products
produced, saved and sold from said land by Lessee or allocated to said land
under the terms of any unit or pooling plan during the preceding calendar year.

14. All royalties, rentals and other payments payable in money hereunder shall
be paid to Lessor by Lessee mailing or delivering a check therefor to Lessor at
P.O. Box 78, EL CENTRO, California, or Lessee may, at its option, pay any and
all royalties, rentals and other payments payable in money hereunder by mailing
or delivering a check therefor to BANK OF AMERICA, N.T. & S.A., El Centro Branch
its successors and assigns, herein designated by Lessor as depositary, hereby
granting to said depositary full power and authority on behalf of Lessor and on
behalf of the heirs, executors, administrators, successors and assigns of
Lessor, and each of them, to collect and receipt for all sums of money due and
payable from Lessee to Lessor hereunder, and to settle all accounts and
accounting of rentals, royalties and other payments payable in money hereunder.
No change in the ownership of the land or minerals covered by this lease and no
assignment of rentals or royalties shall be binding upon Lessee or the
depositary until both Leseee and the depositary have been furnished with written
evidence thereof satisfactory to them. Said depositary above named shall
continue to act as such until the owners and holders of at least two-thirds of
Lessor's estate hereunder shall in writing designate a different depositary and
notify Lessee in writing as P.O. Box 3495, San Francisco, California, 94120, of
the name and address of such new depositary. The payment of any and all rentals,
royalties and other payments hereunder by Lessee to the depositary designated
herein or to any other depositary hereafter designated by Lessor, as aforesaid,
shall be a full acquittance and discharge of Lessee of and from any and all
liability to Lessor, and to the heirs, executors, administrators, successors and
assigns of Lessor, and each of them, for any part of such rentals, royalties or
other payments, and Lessee will not be responsible at any tine for the
disposition or disbursement by any such depositary of all or any part of any
moneys received by it hereunder.

15. It is agreed that if Lessor owns a less interest in the sole and exclusive
rights herein granted Lessee, than the entire and undivided fee simple estate
therein, then any royalties, rentals and other payments herein provided for
shall be paid Lessor only in the proportion which Lessor's interest bears to the
whole and undivided fee. In the event Lessee's estate hereunder shall fail, for
a cause other then Lessee's default hereunder, in regard to any


                                       6


portion of said, land or any interest therein, such failure shall not affect or
invalidate Lessee's estate hereunder in regard to the remaining portions of said
lands or the remaining interests therein and this lease shall nevertheless
continue in full force and effect with respect to said remaining portions of
said land or remaining interests therein, and Lessee shall not be accountable to
Lessor for any payment theretofore made with respect to said portion of said
land or such interest in regard to which Lessee's estate hereunder has failed.
If and whenever it shall be necessary so to do in order to protect Lessee's so
interest under this lease, Lessee may at its option pay and discharge at any
time any mortgage or other lien now or hereafter attaching to said land or any
part thereof and in such event Lessee shall be subrogated to all of the rights
of the owner or holder of such mortgage or other lien and Lessee may in addition
thereto, at its option, apply to the discharge of any such mortgage or other
lien, or to the reimbursement to Lessee for any amount so paid by it, any
rentals, royalties or other sums accruing or payable hereunder, to the owner of
the lands to which such mortgage or other lien attaches.

16. Lessee stay at any time or times surrender this lease as to all or any
portion of said land and be relieved of all obligations thereafter accruing as
to the acreage surrendered, and thereafter the rental shall be reduced in the
same proportion that the acreage covered hereby is reduced. In the event this
lease shall be surrendered under the provisions of this paragraph, or assigned
as hereinabove provided as to any portion or portions of said land, Lessee shall
have such rights of way or easements hereunder, over, upon and across the land
as to which this lease is so surrendered or assigned as shall be necessary or
convenient or Lessee's operations on the land retained by it and other lands in
the vicinity thereof. Upon any surrender or assignment of this lease as to all
or any portion of said land, Lessee shall be relieved of all further obligations
hereunder with respect to the lands so surrendered or assigned. Any such
surrender shall become effective upon delivery to Lessor, or to the depositary
bank herein designated, or the deposit in the United States mail, postage
prepaid, of a duly executed duplicate of an instrument of surrender properly
addressed to Lessor or to such depositary bank. Within a reasonable time
thereafter, Lessee shall record the original of such instrument of surrender.

17. Lessee shall have the right at any time and from time to time during the
continuance hereof and within a reasonable time after the surrender or any
termination of this lease, to remove from said land all equipment, machinery,
installations, and any other property or improvements belonging to or furnished
by Lessee or Lessee's permitees.

18. All labor to be performed and material to be furnished in the operations of
Lessee hereunder shall be at the cost and expense of Lessee, and Lessor shall
not be chargeable with nor liable for any part thereof. Lessee shall protect
said land from liens arising from Lessee's operations thereon.


                                       7


19.(a) Lessee is given the sole right and option by written declaration of
pooling at any time or from time to time, within twenty (20) years from the date
hereof, to combine, pool or unitize in whole or in part as to any stratum or
strata all or any part of said lands with other lands not subject to this lease.
So as to create one or more reasonably compact operating units for any operating
or producing purpose. Such written declaration of pooling shall describe the
pooled lands and shall become effective when recorded in the Office of the
County Recorder in the county where the land is situated. Lessee shall give
written notice of such pooling to those Lessors whose lands are so pooled.
Lessors agree that with respect to all lease products obtained from any lands
included within any such operating unit, whether or not from lends covered by
this lease, there shall be allocated to and deemed to have been produced from
the lands covered by this lease and included in such operating unit, only that
proportion of the entire production from such operating unit that the amount of
acreage within the lands herein leased and included in such operating unit bears
to the total acreage of all of the land in such operating unit, and royalty
payable under this lease with respect to leased land molded in such operating
unit shall be computed only on that portion of such production so allocated to
such leased lands. The entire acreage so pooled or unitized shall be treated as
if it were covered by one lease and the drilling of a well or performance of any
other obligations in any part of such operating unit, whether or not on land
subject to this lease, shall fulfill Lessee's drilling and other obligations
under this lease to the same extent as if such well were drilled and other
obligations performed on land subject to this lease. No offset obligation shall
accrue under this lease as a result of any well drilled within any such
operating unit. Lessee may, at its sole option, at any time when there is no
production in such operating unit of lease products in qauntities deemed paying
by lessee terminate such operating unit by a written declaration thereof, in the
same manner in which it was created.

(b) Lessee is hereby granted the right at any time or times within the period
hereinafter provided to unitize this lease and the lands covered hereby, in
whole or in part or as to any stratum or strata, with other lands and leases and
to increase or decrease the size of any such unit. Any change in the amount of
Lessor's royalties resulting from unitization of this lease or from any increase
or decrease in the size of any such unit shall not be retroactive. In the event
of any such unitization, this lease, unless sooner terminated by Lessee, shall
continue in effect for so long as any of the lands hereby leased remain subject
to such unit. The drilling and producing operations conducted on any of the
unitized lands shall constitute full compliance with the drilling and producing
obligations of Lessee hereunder and Lessor shall be entitled to the royalties in
this lease provided, on the fractional part only, if any, of the unit production
allocated to this lease in accordance with the provisions of said unit. The
method of allocation of production from lands subject to said unit shall be set
forth therein and may be based upon the surface acreage or the estimated
volumetric content of recoverable lease products, or any weighing of either or
both thereof, of lands within such unit or within the estimated productive
limits


                                       8


of such unit, or such allocation may be made upon any other basis approved by
State or Federal authorities having jurisdiction thereof. The provisions of this
paragraph authorizing the establishment and enlargement or contraction of such
unit and change of the ratio of participation thereunder shall not extend beyond
the period of twenty (20) years from the date of this lease; provided, however,
that if such unit is established before the expiration of said twenty-year
period, such unit may continue in effect beyond said twenty-year period. Any
such unit may be established, enlarged, or diminished, and, in the absence of
production therefrom may be dissolved by Lessee's filing for record an
instrument so declaring. A copy of instrument shall be delivered to Lessor or to
the depositary.

20. Whenever used herein, the expression "drilling operations" shall mean, for
all purposes hereof, any work or actual operations undertaken or commenced for
the purpose of drilling of a well, including without limiting the generality
hereof, the preparation of the ground therefor, the building of roads and other
facilities therefor, the construction of a derrick and other necessary
structures for the drilling of a well followed by the actual operation of
drilling in the ground. Any such work or operations preliminary to the drilling
in the ground may be undertaken in any order Lessee shall see fit. All such work
and operations shall be prosecuted with reasonable diligence.

21. This agreement may be executed in any number of counterparts with the same
force and effect as if all parties signed the same document.

22. This lease shall be binding upon all who execute it, whether or not they are
named in the granting clause hereof and whether or not all parties named in the
granting clause execute this lease. All the provisions of this lease shall inure
to the benefit of and be binding upon the heirs, executors, administrators,
successors and assigns of Lessor and Lessee.

IN WITNESS WHEREOF, the parties hereto have executed this agreement.

STANDARD OIL COMPANY OF CALIFORNIA

By:   /s/ Indecipherable                 /s/ John D. Jackson
     -------------------------------     -----------------------------------
       Contract Agent                          JOHN D. JACKSON husband

By:  /s/ Indecipherable                  /s/ Frances J. Jackson
     -------------------------------     -----------------------------------
       Assistant Secretary                     FRANCES J. JACKSON wife

---------------------------------     --------------------------------
         LESSEE                                     LESSOR


          Witness to the above signature(s) /s/
                                            --------------------------------

                                        9



                    AMENDMENT OF LEASE AGREEMENT (SHORT FORM)

THIS AGREEMENT, made this 9th day of July, 1973, between the party or parties
whose names are subscribed hereto under the designation of "Lessor", hereinafter
called "Lessor" (whether one or more), and STANDARD OIL COMPANY OF CALIFORNIA, a
corporation, hereinafter called "Lessee",

                              W I T N E S S E T H :

THAT, REFERENCE IS HEREBY HAD to that certain Lease Agreement dated February 16,
1964 (such lease being of record in the Office of the County Recorder of
Imperial County, California, in Book 1193, at Page 298 et seq., of Official
Records), whereby Lessor did grant, let and lease unto Lessee for the purposes
therein described certain lands situate in said County and State particularly
described in such lease such lease being hereinafter referred to as "said
lease";

AND, WHEREAS, Lessor and Lessee have agreed to amend said lease in the
particulars hereinafter sat forth:

NOW, THEREFORE, in consideration of the sun of ONE DOLLAR ($1.00) and other
valuable consideration paid to Lessor by Lessee, receipt of which is hereby
acknowledged, Lessor and Lessee agree as follows:

1. That part of the first sentence of Section 2 of said lease which now reads as
follows:

     "...., this lease shall remain in force for a period of ten (10) years from
     the date hereof, called the 'primary term', ...."

     shall be and hereby is amended to read as follows:

     "...., this lease shall remain in force for a period of twenty (20) years
     from the date hereof, called the 'primary term'...."

2. That part of the first sentence of Section 4 of said lease which now reads as
follows:

     "4. Lessee agrees to commence drilling, extraction or processing operations
     on said land or on the unit area within the period of ten (10) years from
     the date hereof...."

shall be and hereby is amended to read as follows:

                                       10


     "4. Lessee agrees to commence drilling, extraction or processing operations
     on said land or on the unit area within the period of twenty (20) years
     from the date hereof...."

3. That part of Section 4a. of said lease which now reads as follows:

     "a. That if within 10 years...."

shall be and hereby is amended to read as follows:

     "a. That if within 20 years...."

4. That part of Section 4b. of said lease which now reads as follows:

     "b. That if within 15 years...."

shall be and hereby is amended to read as follows:

"b. That if within 25 years....."

5. Said lease is further amended as set forth in that certain Amendment of Lease
Agreement bearing even date herewith by and between the parties hereto and
covering the lands described in Section 1 of said lease, and by this reference
incorporated into this Amendment of Lease Agreement.

6. To implement the foregoing, Lessor does hereby grant, demise, lease and let
unto Lessee all those certain lands particularly described in said lease for the
term and purposes and subject to all of the other provisions of said lease as
hereby amended. Lessor agrees that said lease as hereby amended is in good
standing and in full force and effect. Lessor acknowledges receipt of rental in
full under said lease to February 16, 1975.

7. This agreement shall bind and inure to the benefit of the respective heirs,
executors, administrators, successors, and assigns of the parties hereto.

                                       11


IN WITNESS WHEREOF, this agreement has been executed as of the day and year
first herein written.

       LESSEE                                            LESSOR

STANDARD OIL COMPANY OF CALIFORNIA

By:  /s/ Indecipherable                  /s/ John D. Jackson
     -------------------------------     --------------------------------------
              Contract Agent            JOHN D. JACKSON

By:  /s/ Indecipherable                  /s/ Frances J. Jackson
     -------------------------------     --------------------------------------
           Assistant Secretary           FRANCES J. JACKSON, his wife

                                         P.O. Box 78
                                         El Centro, CA










                                       12



                          AMENDMENT OF LEASE AGREEMENT

THIS AGREEMENT, made this 9th day of July, 1973, between the party or parties
whose names are subscribed hereto under the designation of "Lessor", hereinafter
called "Lessor" (whether one or more), and STANDARD OIL COMPANY OF CALIFORNIA, a
corporation, hereinafter called "Lessee",

W I T N E S S E T H :

THAT, REFERENCE IS HEREBY HAD to that certain Lease Agreement dated February 16,
1964 (such lease being of record in the Office of the County Recorder of
Imperial County, California, in Book 1193, at Page 298, et seq., of Official
Records), whereby Lessor did grant, let and lease unto Lessee for the purposes
therein described certain lands situate in said County and State particularly
described in such lease; such lease being hereinafter referred to as "said
lease";

AND, WHEREAS, Lessor and Lessee have agreed to amend said lease in the
particulars hereinafter set forth:

NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00) and other
valuable consideration paid to Lessor by Lessee, receipt of which is hereby
acknowledged, Lessor and Lessee agree as follows:

1. That part of the first sentence of Section 2 of said lease which now reads as
follows:

     "...., this lease shall remain in force for a period of ten (10) years from
     the date hereof, called the 'primary term',...."

shall be and hereby is amended to read as follows:

     "...., this lease shall remain in force for a period of twenty (20) years
     from the date hereof, called the 'primary term',...."

2. That part of the first sentence of Section 4 of said lease which now reads as
follows:

     "4. Lessee agrees to commence drilling, extraction or processing operations
     on said land or on the unit area within the period of ten (10) years from
     the date hereof...."

shall be and hereby is amended to read as follows:

                                       13


     "4. Lessee agrees to commence drilling, extraction or processing operations
     on said land or on the unit area within the period of twenty (20) years
     from the date hereof...."

3. Effective with the rental period that begins in 1974, that part of the first
sentence of Section 4 of said lease which now reads as follows:

     "...., the sum of *** ...."

shall be and hereby is amended to read as follows:

     "...., the sum of ***."

4. That part of Section 4a. of said lease which now reads as follows:

     "a. That if within 10 years...."

shall be and hereby is amended to read as follows:

     "a. That if within 20 years...."

5. That part of Section 4b. of said lease which now reads a follows:

     "b. That if within 15 years...."

shall be and hereby is amended to read as follows:

     "b. That if within 25 years...."

6. To implement the foregoing, Lessor does hereby grant, demise, lease and let
unto Lessee all those certain lands particularly described in said lease for the
term and purposes and subject to all of the other provisions of said lease as
hereby amended. Lessor agrees that said lease as hereby amended is in good
standing and in full force and effect. Lessor acknowledges receipt of rental in
full under said lease to February 16, 1975.

7. This agreement shall bind and inure to the benefit of the respective heirs,
executors, administrators, successors, and assigns of the parties hereto.


*** Confidential material redacted and filed separately with the Commission.

                                       14


IN WITNESS WHEREOF, this agreement has been executed as of the day and year
first herein written.

             LESSEE                                    LESSOR

STANDARD OIL COMPANY OF CALIFORNIA


By:  /s/ Indecipherable                  /s/ John D. Jackson
     -------------------------------     --------------------------------------
              Contract Agent            JOHN D. JACKSON

By:  /s/ Indecipherable                  /s/ Frances J. Jackson
     -------------------------------     --------------------------------------
           Assistant Secretary           FRANCES J. JACKSON, his wife

                                         P.O. Box 78
                                         El Centro, CA






                                       15



                    AMENDMENT OF LEASE AGREEMENT (SHORT FORM)

THIS AGREEMENT, made this 1st day of October, 1979, between the party or parties
whose names are subscribed hereto under the designation of "Lessor", hereinafter
called "Lessor" (whether one or more), and CHEVRON U.S.A. INC. successor in
interest to STANDARD OIL COMPANY OF CALIFORNIA, a corporation, hereinafter
called "Lessee",

                              W I T N E S S E T H:

THAT, REFERENCE IS HEREBY HAD to certain Lease Agreement dated February 16, 1964
(such lease being of record in the Office of the County Recorder of Imperial
County, California, in Book 1193, at Page 298, et seq., of Official Records),
whereby Lessor did grant, let and lease unto Lessee for the purposes therein
described certain lands situate in said County and State particularly described
in such lease; such lease being hereinafter referred to as "said lease";

AND, WHEREAS, by amendment of lease agreement dated July 9, 1973, a short form
of which was recorded in B-1353, P-10, et seq. of official records of Imperial
County, California, said lease was amended;

AND, WHEREAS, Lessor and Lessee have agreed to further amend said lease in the
particulars hereinafter set forth:

NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00) and other
valuable consideration paid to Lessor by Lessee, receipt of which is hereby
acknowledged, Lessor and Lessee agree as follows:

1. Said lease is further amended as set forth in that certain Amendment of Lease
Agreement bearing even date herewith by and between the parties hereto and
covering the lands described in Section 1 of said lease, and by this reference
incorporated into this Amendment of Lease Agreement.

2. To implement the foregoing, Lessor does hereby grant, demise, lease and let
unto Lessee all those certain lands particularly described in said lease for the
term and purposes and subject to all of the other provisions of said lease as
hereby amended. Lessor agrees that said lease as hereby amended is in good
standing and in full force and effect. Lessor acknowledges receipt of rental in
full under said lease to February 16, 1980.

3. This agreement shall bind and inure to the benefit of the respective heirs,
executors, administrators, successors, and assigns of the parties hereto.


                                       16


IN WITNESS WHEREOF, this agreement has been executed as of the day and year
first herein written.

           LESSEE                                    LESSOR

CHEVRON U.S.A. INC.

By:  /s/ J. H. Turner                    /s/ John D. Jackson
     -------------------------------     --------------------------------------
         Its Attorney-in-Fact            JOHN D. JACKSON

                                         /s/ Frances J. Jackson
                                         --------------------------------------
                                         FRANCES J. JACKSON, his wife


                                       17



                          AMENDMENT OF LEASE AGREEMENT

THIS AGREEMENT, made this day of 1st day of October, 1979, between the party or
parties whose names are subscribed hereto under the designation of "Lessor",
hereinafter called "Lessor" (whether one or more), and CHEVRON U.S.A. INC.
successor in interest to STANDARD OIL COMPANY OF CALIFORNIA, a corporation,
hereinafter called "Lessee",

                              W I T N E S S E T H :

THAT, REFERENCE IS HEREBY HAD to certain Lease Agreement dated February 16, 1964
(such lease being of record in the office of the County Recorder of Imperial
County, California, in Book 1193, at Page 298, et seq., of Official Records),
whereby Lessor did grant, let and lease unto Lessee for the purposes therein
described certain lands situate in said County and State particularly described
in such lease; such lease being hereinafter referred to as "said lease";

AND WHEREAS, by amendment of lease agreement dated July 9, 1973, a short form of
which was recorded in B-1353, P-l0 et seq. of official records of Imperial
County, California, said lease was amended;

AND, WHEREAS, Lessor and Lessee have agreed to further amend said lease in the
particulars hereinafter set forth:

NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00) and other
valuable consideration paid to Lessor by Lessee, receipt of which is hereby
acknowledged, Lessor and Lessee agree as follows:

1. Effective with the rental period that begins in 1980, that part of the first
sentence of Section 4 of said lease which now reads as follows:

     "...., the sum of *** ...."

shall be and hereby is amended to read as follows:

     "...., the sum of *** ...."

2. To implement the foregoing, Lessor does hereby grant, demise, lease and let
unto Lessee all those certain lands particularly described in said lease for the
term and purposes and subject to all of the other provisions of said lease as
hereby amended. Lessor agrees that said lease as hereby amended is in good
standing and in full force and effect. Lessor acknowledges receipt of rental in
full under said lease to February 16, 1980.


*** Confidential material redacted and filed separately with the Commission.


                                       18


3. This agreement shall bind and inure to the benefit of the respective heirs,
executors, administrators, successors, and assigns of the parties hereto.

IN WITNESS WHEREOF, this agreement has been executed as of the day and year
first herein written.

           LESSEE                                    LESSOR

CHEVRON U.S.A. INC.

By:  /s/ J. H. Turner                    /s/ John D. Jackson
     -------------------------------     --------------------------------------
         Its Attorney-in-Fact            JOHN D. JACKSON

                                         /s/ Frances J. Jackson
                                         --------------------------------------
                                         FRANCES J. JACKSON, his wife




                                       19



                                                                 Exhibit 10.4.14


                                 LEASE AGREEMENT

              THIS AGREEMENT, made and entered into as of the 20th day of
February, 1964, by and between John A. Straub and Edith D. Straub, also known as
John A. Straub and Edythe D. Straub, husband and wife hereinafter called
"Lessor" (whether one or more) and Standard Oil Company of California, a
corporation, hereinafter called "Lessee,"

                               W I T N E S S E T H

              1. Lessor, for and in consideration of the sum of $10 in hand
paid, and of the royalties herein provided and of the covenants and agreements
hereinafter contained, hereby grants, demises, leases and lets unto Lessee, the
land hereinafter described with the sole and exclusive right to Lessee to drill
for, produce, extract, take and remove therefrom water, brine, steam, steam
power, minerals (other than oil), salts, chemicals, gases (other than gas
associated with oil), and other products produced or extracted by Lessee from
any thereof. Each of the foregoing is hereinafter sometimes termed "a lease
product" and all thereof are sometimes termed "the lease products " For the same
consideration Lessee is hereby granted the right to store, utilize, process,
convert, and otherwise use such lease products upon said land and to sell the
same or any part thereof off said land during the term hereof, with the right of
entry thereon at all times for said purposes, and to construct, use, maintain,
erect, repair and replace thereon, and to remove therefrom all roads, pipelines,
ditches and lanes, telephone and telegraph lines, utility installations, power
lines, poles, tanks, evaporation or settling basins, extraction or processing
plants, machinery, equipment, buildings, electric power plants, and equipment
for generation and transmission of steam power, and electric power, and for the
handling, treatment or storage of lease products, and all structures and
facilities relating thereto, which Lessee may desire to erect, construct or
install in carrying on Lessee's business and operations on or from said land and
other lands in the vicinity of said land, and Lessee shall have the further
right to erect, maintain, operate and remove a plant or plants, structures and
facilities, with all necessary appurtenances for the conversion of steam to
electric power, and for the extraction of lease products from steam, brine or
water produced from said land, and other lands in the vicinity of said land,
including all rights necessary or convenient thereto, together with rights of
way for passage over, upon and across and ingress and egress to and from said
land for any or all of the above mentioned purposes. Lessee shall also have the
right to dispose of waste brine and other waste products in a well or wells
drilled or converted for that purpose on the leased land or on other land in the
vicinity, and the right to inject water, brine, steam and gases in a well or
wells on said land or such other land for the purpose of maintaining or
restoring pressure in the productive zones beneath said land or other land in
the vicinity thereof. The said land included in this lease is situated in the
County of Imperial, State of California, and is described as follows,
to wit:


Tract 42 and the South Half of Tract 41-1/2, Township 16 South, Range 14 East,
S.B.M., containing 239.76 acres of land more or less.

This lease shall cover all the interest in said land now owned or hereafter
acquired by Lessor, even though greater than the undivided interest (if any)
described above. For the purpose of calculating any payments based on acreage,
Lessee, at Lessee's option, may act as if said land and its constituent parcels
contain the acreage above stated, whether they actually contain more or less.

              2. Subject to the other provisions herein contained, this lease
shall remain in force for a period of twenty (20) years from the date hereof,
called the "primary term," and thereafter so long as lease products, or any one
or more of them, is produced from, or Lessee is engaged in drilling, extraction,
processing or reworking operations on said land hereunder or on land pooled or
unitized with said land, as provided in Section 19 hereof, (said land, together
with such pooled or unitized land, being hereinafter sometimes called "the unit
area").

              3. Lessee shall pay to Lessor, on or before the last day of each
calendar month, the royalties accrued and payable for the preceding calendar
month, and in making such payments Lessee shall furnish to Lessor statements
setting forth the basis for computation of such royalty.

As royalty and rental, Lessee shall pay to Lessor 10% of the value at the well
of all lease products produced, saved and sold. As used herein, the term "value
at the well" shall mean the actual price received by Lessee for the sale of
lease products at the well. If such products are not sold by Lessee at the well
but are sold at a plant or plants on or in the vicinity of said land, then the
value at the well shall be determined by deducting from the actual price
received by Lessee for the sale of such lease products all costs and expenses
incurred by Lessee in transporting, manufacturing, processing and otherwise
handling such lease products prior to the actual sale thereof. If lease products
are not sold by Lessee at the well or at such a plant but are otherwise used by
Lessee in its chemical operation or disposed of for value, then the value of
such lease products at the well shall be determined by deducting from the price
thereof at the nearest point where the same or similar products are sold in
substantial quantities, the cost of transporting, manufacturing, processing and
otherwise handling such lease products prior to sale thereof. Lessee shall
meter, gauge or otherwise determine the volume and quality of all lease products
commingled and such metering or gauging shall furnish the basis for computing
Lessor's royalties hereunder. Lessee may use, free of royalty, steam, steam
power, electric power, and water developed from said land by Lessee, for all
operations hereunder, and Lessee shall not be required to account to Lessor for,
or pay royalty on any lease product or products reasonably lost or consumed in
operations hereunder.

                                       2


              4. Lessee agrees to commence drilling, extraction or processing
operations on said land or on the unit area within the period twenty (20) years
from the date hereof and to prosecute such operations with reasonable diligence
until lease products or any thereof shall have been found, extracted and
processed in quantities deemed paying quantities by Lessee, or until further
operations would, in the judgment of Lessee, be unprofitable or impracticable,
or Lessee may at any time within said primary term terminate this lease and
surrender said land; provided that, commencing with the 20th day of February,
l965, if Lessee has not theretofore commenced any such operations on said land
or on the unit area or terminated the lease, Lessee shall pay or tender to
Lessor annually, in advance, as rental, the sum of One Hundred Nineteen and
88/100 DOLLARS ($119.88) (each of such annual periods being hereinafter referred
to as "rental period") until operations are commenced on said land or lands
which have been pooled or unitized therewith, pursuant to paragraph 19 hereof,
or this lease terminated as herein provided; it being understood that in the
event of the surrender or termination of this lease as to any portion or
portions of the land covered thereby, said rental shall be reduced
proportionately as provided in paragraph 16 hereof. The consideration expressed
in paragraph 1 hereof covers all rental to the date last above mentioned. If
Lessee shall elect not to commence operations on said land or on the unit area
during the primary term, as above provided, this lease shall terminate.

              It is expressly understood and agreed by the parties hereto:

              a. That if within 10 years from the date hereof Lessee has not
completed one or more wells or a processing plant on the unit area or on said
land, capable of producing or processing lease products or any thereof in
quantities and quality deemed paying quantities by Lessee, then Lessor may, at
his option, terminate this lease; and

              b. That if within 15 years from the date hereof Lessee has not
made or arranged for a sale or sales of lease products or any thereof, produced
from or allocated to said land, then Lessor may, at his option, terminate this
lease.

              5. If at any time or times after the primary term or within three
(3) months before expiration of the primary term, all operations and all
production hereunder on said land or on the unit area shall cease for any cause
other than those for which specific provision is made herein, this lease shall
not terminate it Lessee shall commence or resume drilling, processing,
extraction or reworking operations or production within three (3) months after
such cessation.

              6. Lessee shall be obligated to produce only such quantity or
quantities of lease products as it may be able to market at the well or wells,
plant or plants. It is recognized that the market demand for lease products may
vary from time to time and during such periods as there is no market at the
wells or plant for any lease product or

                                       3


products, Lessee's obligation to produce, process and extract such lease product
or products shall be suspended.

Subject to the foregoing and except as herein otherwise provided, it is agreed
that the Lessee shall drill such wells and operate each completed well with
reasonable diligence and in accordance with good operating practice so long as
such wells shall produce lease products in paying quantities while this lease is
in force as to the portion of said land on which such well or wells are
situated; but in conformity with any reasonable conservation program affecting
the drilling of wells or the production of lease products from said land, which
the Lessee may either voluntarily or by order of any authorized governmental
agency adopt, subscribe to or be subject to.

              7. The possession by Lessee of said land shall be sole and
exclusive excepting only that Lessor reserves the right to occupy and use or to
lease the surface of said land for agricultural, horticultural or other surface
uses, except those granted to Lessee hereunder, which uses shall be carried on
by Lessor subject to, and with no interference with, the rights or operations of
Lessee hereunder. No well shall be drilled closer than 100 feet to any residence
or barn now on said land without written consent of Lessor. Lessee shall pay for
damages caused by Lessee's operations to houses, barns, growing crops, fences
and irrigation systems. Lessee shall have the right to drill such wells on said
land as Lessee may deem desirable for the purposes hereof and Lessee shall
utilize or use only so much of said land as is necessary or reasonably
convenient for Lessee's operations hereunder and shall interfere as little as
reasonably necessary with the use and occupancy of said land by Lessor. No
default of Lessee hereunder with respect to any well, or portion of this lease,
shall impair Lessee's rights with respect to any other well or portion of this
lease.

              8. The rights of Lessor and Lessee hereunder may be assigned in
whole or in part. No present or future division of Lessor's ownership as to
different portions or parcels of said land shall operate to enlarge the
obligations or diminish the rights of Lessee, and Lessee's operations may be
conducted without regard to any such division. If all or any part of this lease
is assigned, no leasehold owner shall be liable for any act or omission of any
other leasehold owner, and failure by one to pay rental shall not affect the
rights of others--rental being apportionable in proportion to acreage.

              9. The obligations of Lessee hereunder shall be suspended (but
without impairment of Lessor's rights under (a) and (b) of paragraph 4 hereof)
while Lessee is prevented or hindered from complying therewith in part or in
whole, by strikes, lockouts, labor disturbances, acts of God, unavoidable
accidents, laws, rules, regulations or orders


                                       4


of any Federal, state, municipal or other governmental agency, acts of war or
conditions arising out of or attributable to war, shortage of necessary
material, equipment or labor, or restrictions in, or limitations upon the use
thereof, inability to secure or absence of a market for the sale of lease
products which can be produced or recovered in commercial quantities from said
land, delays in transportation, and also matters beyond the control of Lessee,
whether similar to the matters herein specifically enumerated or not. This lease
shall remain in full force and effect during any suspension of Lessee's
obligations under any provisions of this paragraph, and for a reasonable time
thereafter, provided that after the removal of the cause or causes preventing or
hindering the performance of such obligation, Lessee, subject to the other
provisions of this Lease, diligently commences or resumes the performance of
such obligation. Notwithstanding anything to the contrary herein provided, if
any of Lessee's obligations hereunder conflict with or violate the provisions of
any reasonable conservation program or plan of orderly development, whether now
or hereafter adopted, to which Lessee may voluntarily subscribe, or of any
conservation program or plan which is now or may hereafter be prescribed by any
order of any governmental agency, Lessee shall not be obligated to perform such
obligation.

              10. If Lessee shall fail to pay any installment of royalty or
rental when due and if such default shall continue for a period of 15 days after
receipt by Lessee of written notice thereof from Lessor to Lessee, then at the
option of Lessor, this lease shall terminate as to the portion or portions
thereof as to which Lessee is in default, provided, however, that if there be a
bona fide dispute as to the amount due and all undisputed amounts are paid, said
15-day period shall be extended until 5 days after such dispute is settled by
final court decree, arbitration or agreement.

              If lessee shall be in default in the performance of any
obligations under this Lease, other than the payment of rentals or royalties,
and if, for a period of 90 days after written notice is given to Lessee by
Lessor of such default, Lessee shall fail to commence and thereafter diligently
and in good faith prosecute action to remedy such default, Lessor may terminate
this Lease.

              11. Lessee shall pay all taxes that may be levied against the
improvements, plant, machinery and personal property owned by Lessee and Located
upon any part of said land.

              12. Lessee shall also pay Lessee's share of any and all taxes
assessed during the term of this lease upon any products of Lessee's operations
hereunder, together with Lessee's share of all severance, production and license
taxes or other taxes or assessments levied or assessed on account of the
production of lease products or any thereof on or from said land, or on or from
such portion of said land as Lessee may be holding under this lease on the date
of such tax lien.

                                       5


              13. Lessor agrees to pay Lessor's share of any and all taxes
assessed upon any products of Lessee's operations hereunder, together with
Lessor's share of all severance, production and license taxes or other taxes or
assessments levied or assessed on account of the production of lease products
from said land, and to pay all other taxes assessed against said land, whether
the same are assessed to Lessor or Lessee or otherwise, and Lessee is hereby
authorized to pay all such taxes and assessments on behalf of Lessor and to
deduct the amount so paid from any royalties or moneys due Lessor hereunder
"Lessee's share" and "Lessor's share", as used above refers to Lessee's and
Lessor's respective proportionate parts of the gross proceeds from the sale of
any and all lease products produced, saved and sold from said land by Lessee or
allocated to said land under the terms of any unit or pooling plan during the
preceding calendar year.

              l4. All royalties, rentals and other payments payable in money
hereunder shall be paid to Lessor by Lessee mailing or delivering a check
therefor to Lessor at 705 Desert Gardens Drive EL CENTRO, California or Lessee
may, at its option, pay any or all royalties, rentals and other payments payable
in money hereunder by mailing or delivering a check therefor to SECURITY FIRST
NATIONAL BANK OF LOS ANGELES, El Centro Branch at EL CENTRO California its
successors and assigns, herein designated by Lessor as depositary, hereby
granting to said depositary full power and authority on behalf of Lessor and on
behalf of the heirs, executors, administrators, successors and assigns of
Lessor, and each of them, to collect and receipt for all sums of money due and
payable from Lessee to Lessor hereunder, and to settle all accounts and
accounting of rentals, royalties and other payments payable in money hereunder.
No change in the ownership of the Land or minerals covered by this Lease and no
assignment of rentals or royalties shall be binding upon Lessee or the
depositary until both Lessee and the depositary have been furnished with written
evidence thereof satisfactory to them. Said depositary above named shall
continue to act as such until the owners and holders of at least two-thirds of
Lessor's estate hereunder shall in writing designate a different depositary and
notify Lessee in writing at 3495, San Francisco, California, 94120, of the name
and address of such new depositary. The payment of any and all rentals,
royalties and other payments hereunder by Lessee to the depositary designated
herein or to any other depositary hereafter designated by Lessor, as aforesaid,
shall be a full acquittance and discharge of Lessee of and from any and all
liability to Lessor, and to the heirs, executors, administrators, successors and
assigns of Lessor, and each of them, for any part of such rentals, royalties or
other payments, and Lessee will not be responsible at any time for the
disposition or disbursement by any such depositary of all or any part of any
moneys received by it hereunder.

                                       6


              15. It is agreed that if Lessor owns a less interest in the sole
and exclusive rights herein granted Lessee, than the entire and undivided fee
simple estate therein, then any royalties, rentals and other payments herein
provided for shall be paid Lessor only in the proportion which Lessor's interest
bears to the whole and undivided fee. In the event Lessee's estate hereunder
shall fail, for a cause other than Lessee's default hereunder, in regard to any
portion of said land or any interest therein, such failure shall not affect or
invalidate Lessee's estate hereunder in regard to the remaining portions of said
lands or the remaining interests therein and this lease shall nevertheless
continue in full force and effect with respect to said remaining portions of
said land or remaining interests therein, and Lessee shall not be accountable to
Lessor for any payment theretofore made with respect to said portion of said
land or such interest in regard to which Lessee's estate hereunder has failed.
If and whenever it shall be necessary so to do in order to protect Lessee's
interest under this lease, Lessee may at its option pay and discharge at any
time any mortgage or other lien now or hereafter attaching to said land or any
part thereof and in such event Lessee shall be subrogated to all of the rights
of the owner or holder of such mortgage or other lien and Lessee may in addition
thereto, at its option, apply to the discharge of any such mortgage or other
lien, or to the reimbursement to Lessee for any amount so paid by it, any
rentals, royalties or other sums accruing or payable hereunder, to the owner of
the lands to which such mortgage or other lien attaches.

              16. Lessee may at any time or times surrender this lease as to all
or any portion of said land and be relieved of all obligations thereafter
accruing as to the acreage surrendered, and thereafter the rental shall be
reduced in the some proportion that the acreage covered hereby is reduced. In
the event this lease shall be surrendered under the provisions of this
paragraph, or assigned as hereinabove provided as to any portion or portions of
said land, Lessee shall have such rights of way or easements hereunder, over,
upon and across the land as to which this lease is so surrendered or assigned as
shall be necessary or convenient for Lessee's operations on the land retained by
it and other lands In the vicinity thereof. Upon any surrender or assignment of
this lease as to all or any portion of said land, Lessee shall be relieved of
all further obligations hereunder with respect to the lands so surrendered or
assigned. Any such surrender shall become effective upon delivery to Lessor, or
to the depositary bank herein designated, or the deposit in the United States
mail, postage prepaid, of a duly executed duplicate of an instrument of
surrender properly addressed to Lessor or to such depositary bank. Within a
reasonable time thereafter, Lessee shall record the original of such instrument
of surrender.

              17. Lessee shall have the right at any time and from time to time
during the continuance hereof and within a reasonable time after the surrender
or any termination of this lease, to remove from said land all equipment,
machinery, installations, and any other property or improvements belonging to or
furnished by Lessee or Lessee's permitees.

                                       7


              18. All labor to be performed and material to be furnished in the
operations of Lessee hereunder shall be at the cost and expense of Lessee, and
Lessor shall not be chargeable with nor liable for any part thereof. Lessee
shall protect said land from liens arising from Lessee's operations thereon.

              19.(a) Lessee is given the sole right and option by written
declaration of pooling at any time or from time to time, within twenty (20)
years from the date hereof, to combine, pool or unitize in whole or in part as
to any stratum or strata all or any part of said lands with other lands not
subject to this lease so as to create one or more reasonably compact operating
units for any operating or producing purpose. Such written declaration of
pooling shall describe the pooled lands and shall become effective when recorded
in the Office of the County Recorder in the county where the land is situated.
Lessee shall give written notice of such pooling to those Lessors whose lands
are so pooled. Lessors agree that with respect to all lease products obtained
from any lands included within any such operating unit, whether or not from
lands covered by this lease, there shall be allocated to and deemed to have been
produced from the lands covered by this lease and included in such operating
unit, only that proportion of the entire production from such operating unit
that the amount of acreage within the lands herein leased and included in such
operating unit bears to the total acreage of all of the land in such operating
unit, and royalty payable under this lease with respect to leased land included
in such operating unit shall be computed only on that portion of such production
so allocated to such leased lands. The entire acreage so pooled or unitized
shall be treated as if it were covered by one lease and the drilling of a well
or performance of any other obligations in any part of such operating unit,
whether or not on land subject to this lease, shall fulfill Lessee's drilling
and other obligations under this lease to the same extent as if such well were
drilled and other obligations performed on land subject to this lease. No offset
obligation shall accrue under this lease as a result of any well drilled within
any such operating unit. Lessee may, at its sole option, at any time when there
is no production in such operating unit of lease products in quantities deemed
paying by Lessee terminate such operating unit by a written declaration thereof,
in the same manner in which it was created.

              (b) Lessee is hereby granted the right at any time or times within
the period hereinafter provided to unitize this lease and the lands covered
hereby, in whole or in part or as to any stratum or strata, with other lands and
leases and to increase or decrease the size of any such unit. Any change in the
amount of Lessor's royalties resulting from unitization of this lease or from
any increase or decrease in the size of any such unit shall not be retroactive.
In the event of any such unitization, this lease, unless sooner terminated by
Lessee, shall continue in effect for so long as any of the lands hereby leased
remain subject to such unit. The drilling and producing operations conducted on
any of the Unitized lands shall constitute full compliance with the drilling and
producing obligations of Lessee hereunder and Lessor shall be entitled to the
royalties in this lease


                                       8


provided, on the fractional part only, if any, of the unit production allocated
to this lease in accordance with the provisions of said unit. The method of
allocation of production from lands subject to said unit shall be set forth
therein and may be based upon the surface acreage or the estimated volumetric
content of recoverable lease products, or any weighing of either or both
thereof, of lands within such unit or within the estimated productive limits of
such unit, or such allocation may be made upon any other basis approved by State
or Federal authorities having jurisdiction thereof. The provisions of this
paragraph authorizing the establishment and enlargement or contraction of such
unit and change of the ratio of participation thereunder shall not extend beyond
the period of twenty (20) years from the date of this lease; provided, however,
that if such unit is established before the expiration of said twenty-year
period, such unit may continue in effect beyond said twenty-year period. Any
such unit may be established, enlarged, or diminished, and, In the absence of
production therefrom, may be dissolved by Lessee's filing for record an
instrument so declaring. A copy of such instrument shall be delivered to Lessor
or to the depositary.

              20. Whenever used herein, the expression "drilling operations"
shall mean, for all purposes hereof, any work or actual operations undertaken or
commenced for the purpose of drilling of a well, including without limiting the
generality hereof, the preparation of the ground therefor, the building of roads
and other facilities therefor, the construction of a derrick and other necessary
structures for the drilling of a well followed by the actual operation of
drilling in the ground. Any such work or operations preliminary to the drilling
in the ground may be undertaken in any order Lessee shall see fit. All such work
and operations shall be prosecuted with reasonable diligence.

              21. This agreement may be executed in any number of counterparts
with the same force and effect as if all parties signed the same document.

              22. This lease shall be binding upon all who execute it, whether
or not they are named in the granting clause hereof and whether or not all
parties named in the granting clause execute this lease. All the provisions of
this lease shall inure to the benefit of and be binding upon the heirs,
executors, administrators, successors and assigns of Lessor and Lessee.



                                       9



IN WITNESS WHEREOF, the parties hereto have executed this agreement.

STANDARD OIL COMPANY
OF CALIFORNIA

By: /s/ Indecipherable                       /s/ John A. Straub
    ------------------------                -----------------------------
       Contract Agent                            JOHN A. STRAUB

    /s/ Indecipherable                       /s/ Edith D. Straub, also known as
By: ------------------------                -----------------------------
       Assistant Secretary                       EDITH D. STRAUB


                                             /s/ Edythe D. Straub, wife
---------------------------                 -----------------------------
           LESSEE                               Edythe D. Straub, LESSOR


                                             Witness to the above signatures

                                             /s/ Indecipherable
                                             ----------------------------



                                       10





                    AMENDMENT OF LEASE AGREEMENT (SHORT FORM)

              THIS AGREEMENT, made this 9th day of July, 1973, between the party
or parties whose names are subscribed hereto under the designation of "Lessor",
hereinafter called "Lessor" (whether one or more), and STANDARD OIL COMPANY OF
CALIFORNIA, a corporation, hereinafter called "Lessee";

                               W I T N E S S E T H :
                               - - - - - - - - - -

              THAT, REFERENCE IS HEREBY HAD to that certain Lease Agreement
dated February 20, 1964 (such lease being of record in the Office of the County
Recorder of Imperial County, California, in Book 1193, at Page 74 et seq., of
Official Records), whereby Lessor's predecessor in interest did grant, let and
lease unto Lessee for the purposes therein described certain lands situate in
said County and State particularly described in such lease; such lease being
hereinafter referred to as "said lease";

              AND, WHEREAS, Lessor and Lessee have agreed to amend said lease in
the particulars hereinafter set forth:

              NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00)
and other valuable consideration paid to Lessor by Lessee, receipt of which is


hereby acknowledged, Lessor and Lessee agree as follows:

              1. That part of the first sentence of Section 2 of said lease
which now reads as follows:

              "...., this lease shall remain in force for a period of ten (10)
years from the date hereof, called the 'primary term',...."


shall be and hereby is amended to read as follows:

              "...., this lease shall remain in force for a period of twenty
(20) years from the date hereof, called the 'primary term'...."

              2. That part of the first sentence of Section 4 of said lease
which now reads as follows:

              "4. Lessee agrees to commence drilling, extraction or processing
operations on said land or on the unit area within the period of ten (10) years
from the date hereof...."

shall be and hereby is amended to read as follows:



              "4. Lessee agrees to commence drilling, extraction or processing
operations on said land or on the unit area within the period of twenty (20)
years from the date hereof...."

              3.   That part of Section 4a. of said lease which now reads as
follows:

              "a. That if within 10 years...."

shall be and hereby is amended to read as follows:

              "a. That if within 20 years...."

              4.     That part of Section 4b. of said lease which now reads as
follows:

              "b. That if within 15 years...."

shall be and hereby is amended to read as follows:

              "b. That it within 25 years...."

              5. Said Lease is further amended as set forth in that certain
Amendment of Lease Agreement bearing even date herewith by and between the
parties hereto and covering the lands described in Section 1 of said lease, and
by this reference incorporated into this Amendment of Lease Agreement.

              6. Lessor does hereby grant, demise, lease and let unto Lessee
only those certain lands included in said lease, situated in the County of
Imperial, State of California, that are particularly described as follows:

                  Tract 42, Township 16 South, Range 14 East, S.B.M.

containing 160 acres of land more or less, for the term and purposes and subject
to all of the other provisions of said lease as hereby amended, and Lessor and
Lessee further agree that all provisions of that certain lease agreement above
referred to shall apply separately and distinctly to the above-described lands
and this amendment shall constitute and create a separate and distinct holding
under that certain lease agreement above referred to. Lessor further agrees that
said lease as hereby amended is in good standing and in full force and effect.
Lessor acknowledges receipt of rental in full under said lease to February 20,
1975.

              7. This agreement shall bind and inure to the benefit of the
respective heirs, executors, administrators, successors, and assigns of the
parties hereto.









              IN WITNESS WHEREOF, this agreement has been executed as of the day
and year first herein written.

LESSEE                                             LESSOR

STANDARD OIL COMPANY
OF CALIFORNIA

     /s/ F. Hargrave                                 /s/ John D. Jackson, Jr.
By: -----------------------                        ---------------------------
        Contract Agent                                JOHN D. JACKSON, JR.


     /s/ Indecipherable                              /s/ Carole Jackson
By: -----------------------                        ---------------------------
     Assistant Secretary                                CAROLE JACKSON

                                                                 P.O. Box 1679
                                                                 El Centro, CA






                    AMENDMENT OF LEASE AGREEMENT (SHORT FORM)

              THIS AGREEMENT, made this 14th day of March, 1975, by and
between JOHN D. JACKSON, JR. and CAROLE JACKSON, his wife, hereinafter called
"Lessor", and STANDARD OIL COMPANY OF CALIFORNIA, a corporation, hereinafter
called "Lessee";

                              W I T N E S S E T H :
                              - - - - - - - - - -

              THAT, WHEREAS, by that certain Lease Agreement dated February 20,
1964 and recorded in this Office of the County Recorder of Imperial County,
California, in Book 1193, at Page 74 et seq. of Official Records, John A.
Straub and Edith D. Straub, his wife, as Lessors, therein did grant, let and
lease unto Lessee for the purposes therein described certain lands situate in
said County and State particularly described in such lease; such lease being
hereinafter referred to as "said lease"; and

              WHEREAS, by instrument dated June 11, 1969 and recorded in the
Office of the County Recorder of Imperial County California, in Book 1279 at
Page 799 of Official Records, Lessor became the owner and holder of the Lessor's
interest under said lease only as to those certain lands included in said lease
described as follows: Tract 42, Township 16 South, Range 14 East, SBM, County of
Imperial, State of California, containing 160 acres of land more or less,
hereinafter referred to as "said land"; and

              WHEREAS, by that certain amendment of Lease Agreement dated July
9, 1973, a Short Form of which was recorded in the Office of the County Recorder
of Imperial County, California, in Book 1353 at Page 25, et. seq. of Official
Records, said lease was amended as therein provided insofar as it covered said
land; and

              WHEREAS, Lessor and Lessee have agreed to further amend said lease
as hereinafter set forth:

              NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00)
and other valuable consideration, receipt of which is hereby acknowledged,
Lessor and Lessee agree as follows:

              1. Said Lease is further amended as set forth in that certain
Amendment of Lease Agreement bearing even date herewith by and between the
parties hereto and covering the lands above as said land and by this reference
incorporated into this Amendment of Lease Agreement.

              2. Lessor hereby ratifies said lease, as amended, insofar as it
covers said land and acknowledges full performance by Lessee of all of its
obligations thereunder to


the date hereof and, as herein amended, said lease shall remain in full force
and effect and, to implement this amendment, Lessor does hereby lease, let and
demise unto Lessee said lands pursuant to the terms of said lease, as amended.

              3. The provisions of this agreement shall be binding upon and
shall inure to the benefit of the respective heirs, executors, administrators,


successors and assigns of the parties hereto.

              IN WITNESS WHEREOF, this agreement has been executed as of the day
and year first herein written.

LESSEE                                            LESSOR

STANDARD OIL COMPANY
OF CALIFORNIA


     /s/ Indecipherable                            /s/ John D. Jackson, Jr.
By: -----------------------                        ---------------------------
             Contract Agent                        JOHN D. JACKSON, JR.


    /s/ Barbara F. Perez                           /s/ Carole Jackson
By: -----------------------                        ---------------------------
        Assistant Secretary                        CAROLE JACKSON, his wife


                                                   P.O. Box 633
                                                   ---------------------------
                                                   EL CENTRO, California

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

State of California                 )
                                     ss
City and County of San Francisco    )

              On May 5, 1975, before me, Edmond Lee Kelly, a Notary Public in
and for county and State, residing therein, duly commissioned and sworn,
personally appeared A. T. SMITH and BARBARA F. PEREZ known to me to be CONTRACT
AGENT and ASSISTANT SECRETARY, respectively, of STANDARD OIL COMPANY OF
CALIFORNIA the Corporation described in and that executed the within instrument,
and also known to me to be the persons who executed it on behalf of the said
Corporation therein named, and they acknowledged to me that such Corporation
executed the same.


              IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
Official Seal, at my office in the City and County and State aforesaid the day
and year in this certificate above written.


                                    /s/ Edward Lee Kelly
                                    ----------------------------------
                                    Notary Public in and for said City and



                                    County of San Francisco, State of California



                                                                 Exhibit 10.4.15

                                 LEASE AGREEMENT

         THIS AGREEMENT, made and entered into as of the 1st day of July, 1971,
by and between MARIE L. GISLER and HARRY R. GISLER hereinafter called "Lessor"
(whether one or more) and STANDARD OIL COMPANY OF CALIFORNIA, a corporation,
hereinafter called "Lessee,"

                               W I T N E S S E T H

         1. Lessor, for and in consideration of the sum of $10 in hand paid, and
of the royalties herein provided and of the covenants and agreements hereinafter
contained, hereby grants, demises, leases and lets unto Lessee, the land
hereinafter described with the sole and exclusive right to Lessee to drill for,
produce, extract, take and remove therefrom water, brine, steam, steam power,
minerals (other than oil), salts, chemicals, gases (other than gas associated
with oil), and other products produced or extracted by Lessee from any thereof.
Each of the foregoing is hereinafter sometimes termed "a lease product" and all
thereof are sometimes termed "the lease products". For the same consideration
Lessee is hereby granted the right to store, utilize, process, convert, and
otherwise use such lease products upon said land and to sell the same or any
part thereof off said land during the term hereof, with the right of entry
thereon at all times for said purposes, and to construct, use, maintain, erect,
repair and replace thereon, and to remove therefrom all roads, pipelines,
ditches and lanes, telephone and telegraph lines, utility installations, power
lines, poles, tanks, evaporation or settling basins, extraction or processing
plants, machinery, equipment, buildings, electric power plants, and equipment
for generation and transmission of steam power, and electric power, and for the
handling, treatment or storage of lease products, and all structures and
facilities relating thereto, which Lessee may desire to erect, construct or
install in carrying on Lessee's business and operations on or from said land and
other lands in the vicinity of said land; and Lessee shall have the further
right to erect, maintain, operate and remove a plant or plants, structures and
facilities, with all necessary appurtenances for the conversion of steam to
electric power, and for the extraction of lease products from steam, brine or
water produced from said land, and other lands in the vicinity of said land,
including all rights necessary or convenient thereto, together with rights of
way for passage over, upon and across and ingress and egress to and from said
land for any or all, of the above mentioned purposes. Lessee shall also have the
right to dispose of waste brine and other waste products in a well or wells
drilled or converted for that purpose on the leased land or on other land in the
vicinity, and the right to inject water, brine, steam and gases in a well or
wells on said land or such other land for the purpose of maintaining or
restoring pressure in the productive zones beneath said land or other land in
the vicinity thereof. The said land included in this lease is situated in the
County of Imperial, State of California, and is described as follows, to wit:



         The North Half of Tract No. 49, Township 16 South, Range 14 East,
S.B.B.&M., containing 160 acres of land more or less.

         This lease shall cover all the interest in said land now owned or
hereafter acquired by Lessor, even though greater than the undivided interest
(if any) described above. For the purpose of calculating any payments based on
acreage, Lessee, at Lessee's option, may act as if said land and its constituent
parcels contain the acreage above stated, whether they actually contain more or
less.

         2. Subject to the other provisions herein contained, this lease shall
remain in force for a period of ten (10) years from the date hereof, called the
"primary term," and thereafter so long as lease products, or any one or more of
them, is produced from, or Lessee is engaged in drilling, extraction, processing
or reworking operations on said land hereunder or on land pooled or unitized
with said land, as provided in Section 19 hereof, (said land, together with such
pooled or unitized land, being hereinafter sometimes called "the unit area").

         3. Lessee shall pay to Lessor, on or before the last day of each
calendar month, the royalties accrued and payable for the preceding calendar
month, and in making such payments Lessee shall furnish to Lessor statements
setting forth the basis for computation of such royalty.

         As royalty and rental, Lessee shall pay to Lessor 10% of the value at
the well of all lease products produced, saved and sold. As used herein, the
term "value at the well" shall mean the actual price received by Lessee for the
sale of lease products at the well. If such products are not sold by Lessee at
the well but are sold at a plant or plants on or in the vicinity of said land,
then the value at the well shall be determined by deducting from the actual
price received by Lessee for the sale of such lease products all costs and
expenses incurred by Lessee in transporting, manufacturing, processing and
otherwise handling such lease products prior to the actual sale thereof. If
lease products are not sold by Lessee at the well or at such a plant but are
otherwise used by Lessee in its chemical operation or disposed of for value,
then the value of such lease products at the well shall be determined by
deducting from the price thereof at the nearest point where the same or similar
products are sold in substantial quantities, the cost of transporting,
manufacturing, processing and otherwise handling such lease products prior to
sale thereof. Lessee shall meter, gauge or otherwise determine the volume and
quality of all lease products commingled and such metering or gauging shall
furnish the basis for computing Lessor's royalties hereunder. Lessee may use,
free of royalty, steam, steam power, electric power, and water developed from
said land by Lessee, for all operations hereunder, and Lessee shall not be
required to account to Lessor for, or pay royalty on any lease product or
products reasonably lost or consumed in operations hereunder.

                                       2


         4. Lessee agrees to commence drilling, extraction or processing
operations on said land or on the unit area within the period of ten (10) years
from the date hereof and to prosecute such operations with reasonable diligence
until lease products or any thereof shall have been found, extracted and
processed in quantities deemed paying quantities by Lessee, or until further
operations would, in the judgment of Lessee, be unprofitable or impracticable,
or Lessee may at any time within said primary term terminate this lease and
surrender said land; provided that, commencing with the 1st day of July, 1972,
if Lessee has not terminated this lease, Lessee shall pay or tender to Lessor
annually, in advance, as rental, the sum of Eight Hundred and no/100 DOLLARS ($
800.00) (each of such annual periods being hereinafter referred to as "rental
period") until royalty is payable on said land or lands, which have been pooled
or unitized therewith, pursuant to paragraph 19 hereof, or this lease terminated
as herein provided; it being understood that in the event of the surrender or
termination of this lease as to any portion or portions of the land covered
thereby, said rental shall be reduced proportionately as provided in paragraph
16 hereof. The consideration expressed in paragraph 1 hereof covers all rental
to the date last above mentioned. If Lessee shall elect not to commence
operations on said land or on the unit area during the primary term, as above
provided, this lease shall terminate.

         It is expressly understood and agreed by the parties hereto:

         a. That if within 10 years from the date hereof Lessee has not
     completed one c more wells or a processing plant on the unit area or on
     said land, capable of producing or processing lease products or any thereof
     in quantities and quality deemed paying quantities by Lessee, then Lessor
     may, at his option, terminate this lease; and

         b. That if within 15 years from the date hereof Lessee has not made or
     arrange for a sale or pales of lease products or any thereof, produced from
     or allocated to said land, then Lessor may, at his option, terminate this
     lease.

         5. If at any time or times after the primary term or within three (3)
months before expiration of the primary term, all operations and all production
hereunder on said land or on the unit area shall cease for any cause other than
those for which specific provision is made herein, this lease shall not
terminate if Lessee shall commence or resume drilling, processing, extraction or
reworking operations or production within three (3) months after such cessation.

         6. Lessee shall be obligated to produce only such quantity or
quantities of lease products as it may be able to market at the well or wells,
plant or plants. It is recognized that the market demand for lease products may
vary from time to time and during such periods as there is no market at the
wells or plant for any lease product or

                                       3


products, Lessee's obligation to produce, process and extract such lease product
or products shall be suspended.

         Subject to the foregoing and except as herein otherwise provided, it is
agreed that the Lessee shall drill such wells and operate each completed well
with reasonable diligence and in accordance with good operating practice so long
as such wells shall produce lease products in paying quantities while this lease
is in force as to the portion of said land on which such well or wells are
situated; but in conformity with any reasonable conservation program affecting
the drilling of wells or the production of lease products from said land, which
the Lessee may either voluntarily or by order of any authorized governmental
agency adopt, subscribe to or be subject to.

         7. The possession by Lessee of said land shall be sole and exclusive
excepting only that Lessor reserves the right to occupy and use or to lease the
surface of said land for agricultural, horticultural or other surface uses,
except those granted to Lessee hereunder, which uses shall be carried on by
Lessor subject to, and with no interference with, the rights or operations of
Lessee hereunder. No well shall be drilled closer than 100 feet to any residence
or barn now on said land without written consent of Lessor. Lessee shall pay for
damages caused by Lessee's operations to houses, barns, growing crops, fences
and irrigation systems. Lessee shall have the right to drill such wells on said
land as Lessee may deem desirable for the purposes hereof and Lessee shall
utilize or use only so much of said land as is necessary or reasonably
convenient for Lessee's operations hereunder and shall interfere as little as
reasonably necessary with the use and occupancy of said land by Lessor. No
default of Lessee hereunder with respect to any well, or portion of this lease,
shall impair Lessee's rights with respect to any other well or portion of this
lease.

         8. The rights of Lessor and Lessee hereunder may be assigned in whole
or in part. No present or future division of Lessor's ownership as to different
portions or parcels of said land shall operate to enlarge the obligations or
diminish the rights of Lessee, and Lessee's operations may be conducted without
regard to any such division. If all or any part of this lease is assigned, no
leasehold owner shall be liable for any act or omission of any other leasehold
owner, and failure by one to pay rental shall not affect the rights of
others--rental being apportionable in proportion to acreage.

         9. The obligations of Lessee hereunder shall be suspended (but without
impairment of Lessor's rights under (a) and (b) of paragraph 4 hereof) while
Lessee is prevented or hindered from complying therewith in part or in whole, by
strikes, lockouts, labor distrubances, acts of God, unavoidable accidents, laws,
rules, regulations or orders of any Federal, state, municipal or other
governmental agency, acts of war or conditions arising out of or attributable to
war, shortage of necessary material, equipment or labor, or restrictions in, or
limitations upon the use thereof, inability to secure or absence of a

                                       4


market for the sale of lease products which can be produced or recovered in
commercial quantities from said land, delays in transportation, and also matters
beyond the control of Lessee, whether similar to the matters herein specifically
enumerated or not. This lease shall remain in full force and effect during any
suspension of Lessee's obligations under any provisions of this paragraph, and
for a reasonable time thereafter, provided that after the removal of the cause
or causes preventing or hindering the performance of such obligation, Lessee,
subject to the other provisions of this Lease, diligently commences or resumes
the performance of such obligation. Notwithstanding anything to the contrary
herein provided, if any of Lessee's obligations hereunder conflict with or
violate the provisions of any reasonable conservation program or plan of orderly
development, whether now or hereafter adopted, to which Lessee may voluntarily
subscribe, or of any conservation program or plan which is now or may hereafter
be prescribed by any order of any governmental agency, Lessee shall not be
obligated to perform such obligation.

         10. If Lessee shall fail to pay any installment of royalty or rental
when due and if such default shall continue for a period of 15 days after
receipt by Lessee of written notice thereof from Lessor to Lessee, then at the
option of Lessor, this lease shall terminate as to the portion or portions
thereof as to which Lessee is in default; provided, however, that if there be a
bona fide dispute as to the amount due and all undisputed amounts are paid, said
15-day period shall be extended until 5 days after such dispute is settled by
final court decree, arbitration or agreement.

         If lessee shall be in default in the performance of any obligations
under this Lease, other than the payment of rentals or royalties, and if, for a
period of 90 days after written notice is given to Lessee by Lessor of such
default, Lessee shall fail to commence and thereafter diligently and in good
faith prosecute action to remedy such default, Lessor may terminate this Lease.

         11. Lessee shall pay all taxes that may be levied against the
improvements, plant, machinery and personal property owned by Lessee and located
upon any part of said land.

         12. Lessee shall also pay Lessee's share of any and all taxes assessed
during the term of this lease upon any products of Lessee's operations
hereunder, together with Lessee's share of all severance, production and license
taxes or other taxes or assessments levied or assessed on account of the
production of lease products or any thereof on or from said land, or on or from
such portion of said land as Lessee may be holding under this lease on the date
of such tax lien.

         13. Lessor agrees to pay Lessor's share of any and all taxes assessed
upon any products of Lessee's operations hereunder, together with Lessor's share
of all severance, production and license taxes or other taxes or assessments
levied or assessed

                                       5


on account of the production of lease products from said land, and to pay all
other taxes assessed against said land, whether the same are assessed to Lessor
or Lessee or otherwise, and Lessee is hereby authorized to pay all such taxes
and assessments on behalf of Lessor and to deduct the amount so paid from any
royalties or moneys due Lessor hereunder. "Lessee's share" and "Lessor's share",
as used above refers to Lessee's and Lessor's respective proportionate parts of
the gross proceeds from the sale of any and all lease products produced, saved
and sold from said land by Lessee or allocated to said land under the terms of
any unit or pooling plan during the preceding calendar year.

         14. All royalties, rentals and other payments payable in money
hereunder shall be paid to Lessor by Lessee mailing or delivering a check
therefor to Lessor at 2122 Westwood, Santa Ana, California or Lessee may, at its
option, pay any or all royalties, rentals and other payments payable in money
hereunder by mailing or delivering a check therefor to
_______________________________ at ______________________ its successors and
assigns, herein designated by Lessor as depositary, hereby granting to said
depositary full power and authority on behalf of Lessor and on behalf of the
heirs, executors, administrators, successors and assigns of Lessor, and each of
them, to collect and receipt for all sums of money due and payable from Lessee
to Lessor hereunder, and to settle all accounts and accounting of rentals,
royalties and other payments payable in money hereunder. No change in the
ownership of the Land or minerals covered by this lease and no assignment of
rentals or royalties shall be binding upon Lessee or the depositary until both
Lessee and the depositary have been furnished with written evidence thereof
satisfactory to them. Said depositary above named shall continue to act as such
until the owners and holders of at least two-thirds of Lessor's estate hereunder
shall in writing designate a different depositary and notify Lessee in writing
at P.O. Box 3495, San Francisco, California 94120, of the name and address of
such new depositary. The payment of any and all rentals, royalties and other
payments hereunder by Lessee to the depositary designated herein or to any other
depositary hereafter designated by Lessor, as aforesaid, shall be a full
acquittance and discharge of Lessee of and from any and all liability to Lessor,
and to the heirs, executors, administrators, successors and assigns of Lessor,
and each of them, for any part of such rentals, royalties or other payments, and
Lessee will not be responsible at any time for the disposition or disbursement
by any such depositary of all or any part of any moneys received by it
hereunder.

         15. It is agreed that if Lessor owns a less interest in the sole and
exclusive rights herein granted Lessee, than the entire and undivided fee simple
estate therein, then any royalties, rentals and other payments herein provided
for shall be paid Lessor only in the proportion which Lessor's interest bears to
the whole and undivided fee. In the event Lessee's estate hereunder shall fail,
for a cause other than Lessee's default hereunder, in regard to any portion of
said land or any interest therein, such failure shall not affect or

                                       6


invalidate Lessee's estate hereunder in regard to the remaining portions of said
lands or the remaining interests therein and this lease shall nevertheless
continue in full force and effect with respect to said remaining portions of
said land or remaining interests therein, and Lessee shall not be accountable to
Lessor for any payment theretofore made with respect to said portion of said
land or such interest in regard to which Lessee's estate hereunder has failed.
If and whenever it shall be necessary so to do in order to protect Lessee's
interest under this lease, Lessee may at its option pay and discharge at any
time any mortgage or other lien now or hereafter attaching to said land or any
part thereof and in such event Lessee shall be subrogated to all of the rights
of the owner or holder of such mortgage or other lien and Lessee may in addition
thereto, at its option, apply to the discharge of any such mortgage or other
lien, or to the reimbursement to Lessee for any amount so paid by it, any
rentals, royalties or other sums accruing or payable hereunder, to the owner of
the lands to which such mortgage or other lien attaches.

         16. Lessee may at any time or times surrender this lease as to all or
any portion of said land and be relieved of all obligations thereafter accruing
as to the acreage surrendered, and thereafter the rental shall be reduced in the
same proportion that the acreage covered hereby is reduced. In the event this
lease shall be surrendered under the provisions of this paragraph, or assigned
as hereinabove provided as to any portion or portions of said land, Lessee shall
have such rights of way or easements hereunder, over, upon and across the land
as to which this lease is so surrendered or assigned as shall be necessary or
convenient for Lessee's operations on the land retained by it and other lands in
the vicinity thereof. Upon any surrender or assignment of this lease as to all
or any portion of said land, Lessee shall be relieved of all further obligations
hereunder with respect to the lands so surrendered or assigned. Any such
surrender shall become effective upon delivery to Lessor, or to the depositary
bank herein designated, or the deposit in the United States mail, postage
prepaid, of a duly executed duplicate of an instrument of surrender properly
addressed to Lessor or to such depositary bank. Within a reasonable time
thereafter, Lessee shall record the original of such instrument of surrender.

         17. Lessee shall have the right at any time and from time to time
during the continuance hereof and within a reasonable time after the surrender
or any termination of this lease, to remove from said land all equipment,
machinery, installations, and any other property or improvements belonging to or
furnished by Lessee or Lessee's permitees.

         18. All labor to be performed and material to be furnished in the
operations of Lessee hereunder shall be at the cost and expense of Lessee, and
Lessor shall not be chargeable with nor liable for any part thereof. Lessee
shall protect said land from liens arising from Lessee's operations thereon.

                                       7


         19.(a) Lessee is given the sole right and option by written declaration
of pooling at any time or from time to time, within twenty (20) years from the
date hereof, to combine, pool or unitize in whole or in part as to any stratum
or strata all or any part of said lands with other lands not subject to this
lease so as to create one or more reasonably compact operating units for any
operating or producing purpose. Such written declaration of pooling shall
describe the pooled lands and shall become effective when recorded in the Office
of the County Recorder in the county where the land is situated. Lessee shall
give written notice of such pooling to those Lessors whose lands are so pooled.
Lessors agree that with respect to all lease products obtained from any lands
included within any such operating unit, whether or not from lands covered by
this lease, there shall be allocated to and deemed to have been produced from
the lands covered by this lease and included in such operating unit, only that
proportion of the entire production from such operating unit that the amount of
acreage within the lands herein leased and included in such operating unit bears
to the total acreage of all of the land in such operating unit, and royalty
payable under this lease with respect to leased land included in such operating
unit shall be computed only on that portion of such production so allocated to
such leased lands. The entire acreage so pooled or unitized shall be treated as
if it were covered by one lease and the drilling of a well or performance of any
other obligations in any part of such operating unit, whether or not on laud
subject to this lease, shall fulfill Lessee's drilling and other obligations
under this lease to the same extent as if such well were drilled and other
obligations performed on land subject to this lease. No offset obligation shall
accrue under this lease as a result of any well drilled within any such
operating unit. Lessee may, at its sole option, at any time when there is no
production in such operating unit of lease products in quantities deemed paying
by Lessee terminate such operating unit by a written declaration thereof, in the
same manner in which it was created.

         (b) Lessee is hereby granted the right at any time or times within the
period hereinafter provided to unitize this lease and the lands covered hereby,
in whole or in part or as to any stratum or strata, with other lands and leases
and to increase or decrease the size of any such unit. Any change in the amount
of Lessor's royalties resulting from unitization of this lease or from any
increase or decrease in the size of any such unit shall not be retroactive. In
the event of any such unitization, this lease, unless sooner terminated by
Lessee, shall continue in effect for so long as any of the lands hereby leased
remain subject to such unit. The drilling and producing operations conducted on
any of the unitized lands shall constitute full compliance with the drilling and
producing obligations of Lessee hereunder and Lessor shall be entitled to the
royalties in this lease provided, on the fractional part only, if any, of the
unit production allocated to this lease in accordance with the provisions of
said unit. The method of allocation of production from lands subject to said
unit shall be set forth therein and may be based upon the surface acreage or the
estimated volumetric content of recoverable lease products, or any

                                       8


weighing of either or both thereof, of lands within such unit or within the
estimated productive limits of such unit, or such allocation may be made upon
any other basis approved by State or Federal authorities having jurisdiction
thereof. The provisions of this paragraph authorizing the establishment and
enlargement or contraction of such unit and change of the ratio of participation
thereunder shall not extend beyond the period of twenty (20) years from the date
of this lease; provided, however, that if such unit is established before the
expiration of said twenty-year period, such unit may continue in effect beyond
said twenty-year period. Any such unit may be established, enlarged, or
diminished, and, in the absence of production therefrom, may be dissolved by
Lessee's filing for record an instrument so declaring. A copy of such instrument
shall be delivered to Lessor or to the depositary.

         20. Whenever used herein, the expression "drilling operations" shall
mean, for all purposes hereof, any work or actual operations undertaken or
commenced for the purpose of drilling of a well, including without limiting the
generality hereof, the preparation of the ground therefor, the building of roads
and other facilities therefor, the construction of a derrick and other necessary
structures for the drilling of a well followed by the actual operation of
drilling in the ground. Any such work or operations preliminary to the drilling
in the ground may be undertaken in any order Lessee shall see fit. All such work
and operations shall be prosecuted with reasonable diligence.

         21. This agreement may be executed in any number of counterparts with
the same force and effect as if all parties signed the same document.

         22. This lease shall be binding upon all who execute it, whether or not
they are named in the granting clause hereof and whether or not all parties
named in the granting clause execute this lease. All the provisions of this
lease shall inure to the benefit of and be binding upon the heirs, executors,
administrators, successors and assigns of Lessor and Lessee.

         23. Notwithstanding anything to the contrary contained herein, it is
understood and agreed that this lease shall not grant any interest in and Lessee
has no rights whatsoever with respect to any portion of the surface and upper
500 feet of the subsurface of said land. All operations in and on a well
directionally drilled from other lands and bottomed within the subsurface zones
herein leased shall be considered operations on said land for all purposes of
this lease.

WITNESS TO THE ABOVE SIGNATURE(s) /s/ Indecipherable
                                  ----------------------

                                       9


     State of California                  )   ss
     City and County of San Francisco     )

         On July 8, 1971, before me, Edmond Lee Kelly, a Notary Public in and
for said City and County and State, residing therein, duly commissioned and
sworn, personally appeared A. T. SMITH and J. P. BOWMAN known to me to be
CONTRACT AGENT and ASSISTANT SECRETARY, respectively, of STANDARD OIL COMPANY OF
CALIFORNIA the Corporation described in and that executed the within instrument,
and also known to me to be the persons who executed it on behalf of the said
Corporation therein named, and they acknowledged to me that such Corporation
executed the same.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Official
Seal, at my office in the City and County and State aforesaid the day and year
in this certificate above written.

                                                  /s/ Indecipherable          19
                                    ------------------------------------------
                                    Notary Public in and for said City and
                                    County of San Francisco, State of California




                                       10


                          AMENDMENT OF LEASE AGREEMENT

         THIS AGREEMENT, made this 1st day of July, 1981 between the party or
parties whose names are subscribed hereto under the designation of "Lessor",
hereinafter called "Lessor" (whether one or more), and CHEVRON U.S.A. INC.,
successor in interest to Standard Oil Company of California, a corporation,
hereinafter called "Lessee",

                              W I T N E S S E T H:

         THAT REFERENCE IS HEREBY HAD to that certain Lease Agreement, dated
July 1, 1971 (the short form of which is of record in the Office of the County
Recorder of Imperial County, California, in Book 1315, at Page 107, et seq., of
Official Records), whereby Lessor and/or Lessor's predecessor in interest did
grant, let and lease unto Lessee for the purposes therein described in such
lease; such lease being hereinafter referred to as "said lease";

         AND, WHEREAS, Lessor and Lessee have agreed to amend said lease in the
particulars hereinafter set forth:

         NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00) and
other valuable consideration paid to Lessor by Lessee, receipt of which is
hereby acknowledged, Lessor and Lessee agree as follows:

         1. That part of the first sentence of Section 2 of said lease which now
reads as follows:

         "...., this lease shall remain in force for a period of ten (10) years
     from the date hereof, called the 'primary term'...."

shall be and hereby is amended to read as follows:

         "...., this lease shall remain in force for a period of fifteen (15)
     years from the date hereof, called the 'primary term'...."

         2. That part of the first sentence of Section 4 of said lease which now
reads as follows:

         "4. Lessee agrees to commence drilling, extraction or processing
     operations on said land or on the unit area within the period of ten (10)
     years from the date hereof...."

shall be and hereby is amended to read as follows:

                                       11


         "4. Lessee agrees to commence drilling, extraction or processing
     operations on said land or on the unit area within the period of fifteen
     (15) years from the date hereof...."

         3. Effective with the rental period that begins in 1982, that part of
the first sentence of Section 4 of said lease which now reads as follows:

         "...., the sum of Eight Hundred and no/l00 ($800.00)...."

shall be and hereby is amended to read as follows:

         "...., the sum of Four Thousand and no/l00 ($4,000.00)...."

         4. That part of Section 4a. of said lease which now reads as follows:

         "a. That if within 10 years...."

         shall be and hereby is amended to read as follows:

         "a. That if within 15 years...."

         5. That part of Section 4b. of said lease which now reads as follows:

         "b. That if within 15 years...."

shall be and hereby is amended to read as follows:

         "b. That it within 20 years...."

         6. There is added to said lease the following Section 24:

         "24. Subject to Lessor's rights under Section 4b. hereof and
notwithstanding anything else to the contrary contained herein, if Lessee
completes a well or wells or a processing plant on said land or on the unit area
capable of producing or processing lease products in quantities and quality
deemed paying quantities by Lessee, Lessee may continue to pay or tender to
Lessor, annually in advance of each lease anniversary date, rental until Lessee
has made a sale of lease products produced from or allocated to said land. So
long as such annual rental payments are paid or tendered, this lease shall
remain in force and effect even though extended thereby beyond the primary term,
and all payments so paid or tendered after the expiration of said primary term
shall be deemed advance royalties, and so long as same are paid, each well or
wells shall be deemed to be actually producing lease products in paying
quantities under the terms hereof."

                                       12


         7. To Implement the foregoing, Lessor does hereby grant, demise, lease
and let unto Lessee all those certain lands particularly described in said lease
for the term and purposes and subject to all of the other provisions of said
lease as hereby amended. Lessor agrees that said lease as hereby amended is in
good standing and in full force and effect. Lessor acknowledges receipt of
rental in full under said lease to July 1, 1982.

         8. This agreement shall bind and inure to the benefit of the respective


heirs, executors, administrators, successors, and assigns of the parties hereto.

         IN WITNESS WHEREOF, this agreement has been executed as of the day and
year first herein written.

LESSEE                                      LESSOR



CHEVRON U.S.A. INC.

By /s/ J. H. Turner                         /s/ MARIE L. GISLER
  --------------------------                ----------------------------
                                            MARIE L. GISLER

                                            /s/ HARRY R. GISLER

                                            ----------------------------
                                            HARRY R. GISLER


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

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




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



                                                                 Exhibit 10.4.16

                                 LEASE AGREEMENT

              THIS AGREEMENT, made and entered into as of the 28 day of February
1964, by and between GUS KURUPAS and GUADALUPE KURUPAS, Husband and Wife
hereinafter called "Lessor" (whether one or more) and STANDARD OIL COMPANY OF
CALIFORNIA, a corporation, hereinafter called "Lessee,"

                               W I T N E S S E T H

              1. Lessor, for and in consideration of the sum of $10 in hand
paid, and of the royalties herein provided and of the covenants and agreements
hereinafter contained, hereby grants, demises, leases and lets unto Lessee, the
land hereinafter described with the sole and exclusive right to Lessee to drill
for, produce, extract, take and remove therefrom water, brine, steam, steam
power, minerals (other than oil), salts, chemicals, gases (other than gas
associated with oil), and other products produced or extracted by Lessee from
any thereof. Each of the foregoing is hereinafter sometimes termed "a lease
product" and all thereof are sometimes termed "the lease products." For the same
consideration Lessee is hereby granted the right to store, utilize, process,
convert, and otherwise use such lease products upon said land and to sell the
same or any part thereof off said land during the term hereof, with the right of
entry thereon at all times for said purposes, and to construct, use, maintain,
erect, repair and replace thereon, and to remove therefrom all roads, pipelines,
ditches and lanes, telephone and telegraph lines, utility installations, power
lines, poles, tanks, evaporation or settling basins, extraction or processing
plants, machinery, equipment, buildings, electric power plants, and equipment
for generation and transmission of steam power, and electric power, and for the
handling, treatment or storage of lease products, and all structures and
facilities relating thereto, which Lessee may desire to erect, construct or
install in carrying on Lessee's business and operations on or from said land and
other lands in the vicinity of said land; and Lessee shall have the further
right to erect, maintain, operate and remove a plant or plants, structures and
facilities, with all necessary appurtenances for the conversion of steam to
electric power, and for the extraction of lease products from steam, brine or
water produced from said land, and other lands in the vicinity of said land,
including all, rights necessary or convenient thereto, together with rights of
way for passage over, upon and across and ingress and egress to and from said
land for any or all of the above mentioned purposes. Lessee shall also have the
right to dispose of waste brine and other waste products in a well or wells
drilled or converted for that purpose on the leased land or on other land in the
vicinity, and the right to inject water, brine, steam and gases in a well or
wells on said land or such other land for the purpose of maintaining or
restoring pressure in the productive zones beneath said land or other land in
the vicinity thereof. The said land included in this lease is situated in the
County of Imperial, State of California, and is described as follows, to wit:



The West 80 acres of the North Half of Tract 51, Township 16 South, Range 14
East S.B.M. containing 80 acres of land more or less.

This lease shall cover all the interest in said land now owned or hereafter
acquired by Lessor, even though greater than the undivided interest (if any)
described above. For the purpose of calculating any payments based on acreage,
Lessee, at Lessee's option, may act as if said land and its constituent parcels
contain the acreage above stated, whether they actually contain more or less.

              2. Subject to the other provisions herein contained, this lease
shall remain in force for a period ten (10) years from the date hereof, called
the "primary term," and thereafter so long as lease products, or any one or more
of them, is produced from, or Lessee is engaged in drilling, extraction,
processing or reworking operations on said land hereunder or on land pooled or
unitized with said land, as provided in Section 19 hereof, (said land, together
with such pooled or unitized land, being hereinafter sometimes called "the unit
area").

              3. Lessee shall pay to Lessor, on or before the last day of each
calendar month, the royalties accrued and payable for the preceding calendar
month, and in making such payments Lessee shall furnish to Lessor statements
setting forth the basis for computation of such royalty.

              As royalty and rental, Lessee shall pay to Lessor 10% of the value
at the well of all lease products produced, saved and sold. As used herein, the
term "value at the well" shall mean the actual price received by Lessee for the
sale of lease products at the well. If such products are not sold by Lessee at
the well but are sold at a plant or plants on or in the vicinity of said land,
then the value at the well shall be determined by deducting from the actual
price received by Lessee for the sale of such lease products all costs and
expenses incurred by Lessee in transporting, manufacturing, processing and
otherwise handling such lease products prior to the actual sale thereof. If
lease products are not sold by Lessee at the well or at such a plant but are
otherwise used by Lessee in its chemical operations or disposed of for value,
then the value of such lease products at the well shall be determined by
deducting from the price thereof at the nearest point where the same or similar
products are sold in substantial quantities, the cost of transporting,
manufacturing, processing and otherwise handling such lease products prior to
sale thereof. Lessee shall meter, gauge or otherwise determine the volume and
quality of all lease products commingled and such metering or gauging shall
furnish the basis for computing Lessor's royalties hereunder. Lessee may use,
free of royalty, steam, steam power, electric power, and water developed from
said land by Lessee, for all operations hereunder, and Lessee shall not be
required to account to Lessor for, or pay royalty on any lease product or
products reasonably lost or consumed in operations hereunder.

                                       2


              4. Lessee agrees to commence drilling, extraction or processing
operations on said land or on the unit area within the period of ten (10)
years from the date hereof and to prosecute such operations with reasonable
diligence until lease products or any thereof shall have been found, extracted
and processed in quantities deemed paying quantities by Lessee, or until further
operations would, in the judgment of Lessee, be unprofitable or impracticable,
or Lessee may at any time within said primary term terminate this lease and
surrender said land; provided that, commencing with the 28th day of February,
1965, if Lessee has not theretofore commenced any such operations on said land
or on the unit area or terminated this lease, Lessee shall pay or tender to
Lessor annually, in advance, as rental, the sum of Forty and no/100 ($40.00)
(each of such annual periods being hereinafter referred to as "rental period")
until operations are commenced on said land or lands which have been pooled or
unitized therewith, pursuant to paragraph 19 hereof, or this lease terminated as
herein provided; it being understood that in the event of the surrender or
termination of this lease as to any portion or portions of the land covered
thereby, said rental shall be reduced proportionately as provided in paragraph
16 hereof. The consideration expressed in paragraph 1 hereof covers all rental
to the date last above mentioned. If Lessee shall elect not to commence
operations on said land or on the unit area during the primary term, as above
provided, this lease shall terminate.

              It is expressly understood and agreed by the parties hereto:

              a.  That if within 10 years from the date hereof Lessee has not
                  completed one or more wells or a processing plant on the unit
                  area or on said land, capable of producing or processing lease
                  products or any thereof in quantities and quality deemed
                  paying quantities by Lessee, then Lessor may, at his option,
                  terminate this lease; and

              b.  That if within 15 years from the date hereof Lessee has not
                  made or arranged for a sale or sales of lease products or any
                  thereof, produced from or allocated to said land, then Lessor
                  may, at his option, terminate this lease.

              5. If at any time or times after the primary term or within three
(3) months before expiration of the primary term, all, operations and all
production hereunder on said land or on the unit area shall cease for any cause
other than those for which specific provision is made herein, this lease shall
not terminate if Lessee shall commence or resume drilling, processing,
extraction or reworking operations or production within three (3) months after
such cessation.

              6. Lessee shall be obligated to produce only such quantity or
quantities of lease products as it may be able to market at the well or wells,
plant or plants. It is

                                       3


recognized that the market demand for lease products may vary from time to time
and during such periods as there is no market at the wells or plant for any
lease product or products, Lessee's obligation to produce, process and extract
such lease product or products shall be suspended.

              Subject to the foregoing and except as herein otherwise provided,
it is agreed that the Lessee shall drill such wells and operate each completed
well with reasonable diligence and in accordance with good operating practice so
long as such wells shall produce lease products in paying quantities while this
lease is in force as to the portion of said land on which such well or wells are
situated; but in conformity with any reasonable conservation program affecting
the drilling of wells or the production of lease products from said land, which
the Lessee may either voluntarily or by order of any authorized governmental
agency adopt, subscribe to or be subject to.

              7. The possession by Lessee of said land shall be sole and
exclusive excepting only that Lessor reserves the right to occupy and use or to
lease the surface of said land for agricultural, horticultural or other surface
uses, except those granted to Lessee hereunder, which uses shall be carried on
by Lessor subject to, and with no interference with, the rights or operations of
Lessee hereunder. No well shall be drilled closer than 100 feet to any residence
or barn now on said land without written consent of Lessor. Lessee shall pay all
damages caused by Lessee's operations to houses, barns, growing crops, fences
and irrigation systems. Lessee shall have the right to drill such wells on said
land as Lessee may deem desirable for the purposes hereof and Lessee shall
utilize or use only so much of said land as is necessary or reasonably
convenient for Lessee's operations hereunder and shall interfere as little as
reasonably necessary with the use and occupancy of said land by Lessor. No
default of Lessee hereunder with respect to any well, or portion of this lease,
shall impair Lessee's rights with respect to any other well or portion of this
lease. If Lessee elects to use all or any part of the surface of said land for
evaporation or settling basins or extraction, power, or processing plants Lessee
may, at its option, purchase the surface rights to the land so utilized by it at
the actual market value or going price for similar rights in the vicinity.

              8. The rights of Lessor and Lessee hereunder may be assigned in
whole or in part. No present or future division of Lessor's ownership as to
different portions or parcels of said land shall operate to enlarge the
obligations or diminish the rights of Lessee, and Lessee's operations may be
conducted without regard to any such division. If all or any part of this lease
is assigned, no leasehold owner shall be liable for any act or omission of any
other leasehold owner, and failure by one to pay rental shall not affect the
rights of others--rental being apportionable in proportion to acreage.

              9. The obligations of Lessee hereunder shall be suspended (but
without impairment of Lessor's rights under (a) and (b) of paragraph 4 hereof)
while Lessee is

                                       4


prevented or hindered from complying therewith in part or in whole, by strikes,
lockouts, labor disturbances, acts of God, unavoidable accidents, laws, rules,
regulations or orders of any Federal, state, municipal or other governmental
agency, acts of war or conditions arising out of or attributable to war,
shortage of necessary material, equipment or labor, or restrictions in, or
limitations upon the use thereof, inability to secure or absence of a market for
the sale of lease products which can be produced or recovered in commercial
quantities from said land, delays in transportation, and also matters beyond the
control of Lessee, whether similar to the matters herein specifically enumerated
or not. This lease shall remain in full force and effect during any suspension
of Lessee's obligations under any provisions of this paragraph, and for a
reasonable time thereafter, provided that after the removal of the cause or
causes preventing or hindering the performance of such obligation, Lessee,
subject to the other provisions of this Lease, diligently commences or resumes
the performance of such obligation. Notwithstanding anything to the contrary
herein provided, if any of Lessee's obligations hereunder conflict with or
violate the provisions of any reasonable conservation program or plan of orderly
development, whether now or hereafter adopted, to which Lessee may voluntarily
subscribe, or of any conservation program or plan which is now or may hereafter
be prescribed by any order of any governmental agency, Lessee shall not be
obligated to perform such obligation.

              10. If Lessee shall fail to pay any installment of royalty or
rental when due and if such default shall continue for a period of 15 days after
receipt by Lessee of written notice thereof from Lessor to Lessee, then at the
option of Lessor, this lease shall terminate as to the portion or portions
thereof as to which Lessee is in default; provided, however, that if there be a
bona fide dispute as to the amount due and all undisputed amounts are paid, said
15-day period shall be extended until 5 days after such dispute is settled by
final, court decree, arbitration or agreement.

              If lessee shall be in default in the performance of any
obligations under this lease, other than the payment of rentals or royalties,
and if, for a period of 90 days after written notice is given to Lessee by
Lessor of such default, Lessee shall fail to commence and thereafter diligently
and in good faith prosecute action to remedy such default, Lessor may terminate
this Lease.

              11. Lessee shall pay all taxes that may be levied against the
improvements, plant, machinery and personal property owned by Lessee and located
upon any part of said land.

              12. Lessee shall also pay Lessee's share of any and all taxes
assessed during the term of this lease upon any products of Lessee's operations
hereunder, together with Lessee's share of all severance, production and license
taxes or other taxes or assessments levied or assessed on account of the
production of lease products or any

                                       5


thereof on or from said land, or on or from such portion of said land as Lessee
may be holding under this lease on the date of such tax lien.

              13. Lessor agrees to pay Lessor's share of any and all taxes
assessed upon any products of Lessee's operations hereunder, together with
Lessor's share of all severance, production and license taxes or other taxes or
assessments levied or assessed on account of the production of lease products
from said land, and to pay all other taxes assessed against said land, whether
the same are assessed to Lessor or Lessee or otherwise, and Lessee is hereby
authorized to pay all such taxes and assessments on behalf of Lessor and to
deduct the amount so paid from any royalties or moneys due Lessor hereunder.
"Lessee's share" and "Lessor's share", as used above refers to Lessee's and
Lessor's respective proportionate parts of the gross proceeds from the sale of
any and all lease products produced, saved and sold from said land by Lessee or
allocated to said land under the terms of any unit or pooling plan during the
preceding calendar year.

              14. All royalties, rentals and other payments payable in money
hereunder shall be paid to Lessor by Lessee mailing or delivering a check
therefor to Lessor at Route 2, Box 63, El Centro, California or Lessee may, at
its option, pay any or all royalties, rentals and other payments payable in
money hereunder by mailing or delivering a check therefor to SECURITY FIRST
NATIONAL BANK of LOS ANGELES, El Centro Branch at El Centro, California its
successors and assigns, herein designated by Lessor as depositary, hereby
granting to said depositary full power and authority on behalf of Lessor and on
behalf of the heirs, executors, administrators, successors and assigns of
Lessor, and each of them, to collect and receipt for all sums of money due and
payable from Lessee to Lessor hereunder, and to settle all accounts and
accounting of rentals, royalties and other payments payable in money hereunder.
No change in the ownership of the land or minerals covered by this lease and no
assignment of rentals or royalties shall be binding upon Lessee or the
depositary until both Lessee and the depositary have been furnished with written
evidence thereof satisfactory to them. Said depositary above named shall
continue to act as such until the owners and holders of at least two-thirds of
Lessor's estate hereunder shall in writing designate a different depositary and
notify Lessee in writing at P.O. Box 3495, San Francisco, California 94120, of
the name and address of such new depositary. The payment of any and all rentals,
royalties and other payments hereunder by Lessee to the depositary designated
herein or to any other depositary hereafter designated by Lessor, as aforesaid,
shall be a full acquittance and discharge of Lessee of and from any and all
liability to Lessor, and to the heirs, executors, administrators, successors and
assigns of Lessor, and each of them, for any part of such rentals, royalties or
other payments, and Lessee will not be responsible at any time for the
disposition or disbursement by any such depositary of all or any part of any
moneys received by it hereunder.

                                       6


              15. It is agreed that if Lessor owns a less interest in the sole
and exclusive rights herein granted Lessee, than the entire and undivided fee
simple estate therein, then any royalties, rentals and other payments herein
provided for shall be paid Lessor only in the proportion which Lessor's interest
bears to the whole and undivided fee. In the event Lessee's estate hereunder
shall fail, for a cause other than Lessee's default hereunder, in regard to any
portion of said land or any interest therein, such failure shall not affect or
invalidate Lessee's estate hereunder in regard to the remaining portions of said
lands or the remaining interests therein and this lease shall nevertheless
continue in full force and effect with respect to said remaining portions of
said land or remaining interests therein, and Lessee shall not be accountable to
Lessor for any payment theretofore made with respect to said portion of said
land or such interest in regard to which Lessee's estate hereunder has failed.
If and whenever it shall be necessary so to do in order to protect Lessee's
interest under this lease, Lessee may at its option pay and discharge at any
time any mortgage or other lien now or hereafter attaching to said land or any
part thereof and in such event Lessee shall be subrogated to all of the rights
of the owner or holder of such mortgage or other lien and Lessee may in addition
thereto, at its option, apply to the discharge of any such mortgage or other
lien, or to the reimbursement to Lessee for any amount so paid by it, any
rentals, royalties or other sums accruing or payable hereunder, to the owner of
the lands to which such mortgage or other lien attaches.

              16. Lessee may at any time or times surrender this lease as to all
or any portion of said land and be relieved of all obligations thereafter
accruing as to the acreage surrendered, and thereafter the rental shall be
reduced in the same proportion that the acreage covered hereby is reduced. In
the event this lease shall be surrendered under the provisions of this
paragraph, or assigned as hereinabove provided as to any portion or portions of
said land, Lessee shall have such rights of way or easements hereunder, over,
upon and across the land as to which this lease is so surrendered or assigned as
shall be necessary or convenient for Lessee's operations on the land retained by
it and other lands in the vicinity thereof. Upon any surrender or assignment of
this lease as to all or any portion of said land, Lessee shall be relieved of
all further obligations hereunder with respect to the lands so surrendered or
assigned. Any such surrender shall become effective upon delivery to Lessor, or
to the depositary bank herein designated, or the deposit in the United States
mail, postage prepaid, of a duly executed duplicate of an instrument of
surrender properly addressed to Lessor or to such depositary bank. Within a
reasonable time thereafter, Lessee shall record the original of such instrument
of surrender.

              17. Lessee shall have the right at any time and from time to time
during the continuance hereof and within a reasonable time after the surrender
or any termination of this lease, to remove from said land all equipment,
machinery, installations, and any other property or improvements belonging to or
furnished by Lessee or Lessee's permitees.

                                       7


              18. All labor to be performed and material to be furnished in the
operations of Lessee hereunder shall be at the cost and expense of Lessee, and
Lessor shall not be chargeable with nor liable for any part thereof. Lessee
shall protect said land from liens arising from Lessee's operations thereon.

              19.(a) Lessee is given the sole right and option by written
declaration of pooling at any time or from time to time, within twenty (20)
years from the date hereof, to combine, pool or unitize in whole or in part as
to any stratum or strata all or any part of said lands with other lands not
subject to this lease so as to create one or more reasonably compact operating
units for any operating or producing purpose. Such written declaration of
pooling shall describe the pooled lands and shall become effective when recorded
in the Office of the County Recorder in the county where the land is situated.
Lessee shall give written notice of such pooling to those Lessors whose lands
are so pooled. Lessors agree that with respect to all lease products obtained
from any lands included within any such operating unit, whether or not from
lands covered by this lease, there shall be allocated to and deemed to have been
produced from the lands covered by this lease and included in such operating
unit, only that proportion of the entire production from such operating unit
that the amount of acreage within the lands herein leased and included in such
operating unit bears to the total acreage of all of the land in such operating
unit, and royalty payable under this lease with respect to leased land included
in such operating unit shall be computed only on that portion of such production
so allocated to such leased lands. The entire acreage so pooled or unitized
shall be treated as if it were covered by one lease and the drilling of a well
or performance of any other obligations in any part of such operating unit,
whether or not on land subject to this lease, shall fulfill Lessee's drilling
and other obligations under this lease to the same extent as if such well were
drilled and other obligations performed on land subject to this lease. No offset
obligation shall accrue under this lease as a result of any well drilled within
any such operating unit. Lessee may, at its sole option, at any time when there
is no production in such operating unit of lease products in quantities deemed
paying by Lessee terminate such operating unit by a written declaration thereof,
in the same manner in which it was created.

              (b) Lessee is hereby granted the right at any time or times within
the period hereinafter provided to unitize this lease and the lands covered
hereby, in whole or in part or as to any stratum or strata, with other lands and
leases and to increase or decrease the size of any such unit. Any change in the
amount of Lessor's royalties resulting from unitization of this lease or from
any increase or decrease in the size of any such unit shall not be retroactive.
In the event of any such unitization, this lease, unless sooner terminated by
Lessee, shall continue in effect for so long as any of the lands hereby leased
remain subject to such unit. The drilling and producing operations conducted on
any of the unitized lands shall constitute full compliance with the drilling and
producing obligations of Lessee hereunder and Lessor shall be entitled to the
royalties in this lease

                                       8


provided, on the fractional part only, if any, of the unit production allocated
to this lease in accordance with the provisions of said unit. The method of
allocation of production from lands subject to said unit shall be set forth
therein and may be based upon the surface acreage or the estimated volumetric
content of recoverable lease products, or any weighing of either or both
thereof, of lands within such unit or within the estimated productive limits of
such unit, or such allocation may be made upon any other basis approved by State
or Federal authorities having jurisdiction thereof. The provisions of this
paragraph authorizing the establishment and enlargement or contraction of such
unit and change of the ratio of participation thereunder shall not extend beyond
the period of twenty (20) years from the date of this lease; provided, however,
that if such unit is established before the expiration of said twenty-year
period, such unit may continue in effect beyond said twenty-year period. Any
such unit may be established, enlarged, or diminished, and, in the absence of
production therefrom, may be dissolved by Lessee's filing for record an
instrument so declaring. A copy of such instrument shall be delivered to Lessor
or to the depositary.

              20. Whenever used herein, the expression "drilling operations"
shall mean, for all purposes hereof, any work or actual operations undertaken or
commenced for the purpose of drilling of a well, including without limiting the
generality hereof the preparation of the ground therefor, the building of roads
and other facilities therefor, the construction of a derrick and other necessary
structures for the drilling of a well followed by the actual operation of
drilling in the ground. Any such work or operations preliminary to the drilling
in the ground may be undertaken in any order Lessee shall see fit. All such work
and operations shall be prosecuted with reasonable diligence.

              21. This agreement may be executed in any number of counterparts
with the same force and effect as if all parties signed the same document.

              22. This lease shall be binding upon all who execute it, whether
or not they are named in the granting clause hereof and whether or not all
parties named in the granting clause execute this lease. All the provisions of
this lease shall inure to the benefit of and be binding upon the heirs,
executors, administrators, successors and assigns of Lessor and Lessee.

              IN WITNESS WHEREOF, the parties hereto have executed this
agreement.

STANDARD OIL COMPANY
OF CALIFORNIA


By: /s/ Indecipherable                     /s/ Gus Kurupas
   --------------------------------        ------------------------------------
   Contract Agent                          GUS KURUPAS

                                       9


By: /s/ Indecipherable                     /s/ Guadalupe Kurupas
   --------------------------------        ------------------------------------
   Assistant Secretary                     GUADALUPE KURUPAS


-----------------------------------        ------------------------------------
LESSEE                                     LESSOR

         Witness to the above signature(s) /s/ Russell E. Larson
                                         ---------------------------------------


                                       10


                          AMENDMENT OF LEASE AGREEMENT

              THIS AGREEMENT, made this 18th day of April, 1973, between the
party or parties whose names are subscribed hereto under the designation of
"Lessor", hereinafter called "Lessor" (whether one or more), and STANDARD OIL
COMPANY OF CALIFORNIA, a corporation, hereinafter called "Lessee",

                              W I T N E S S E T H:

              THAT, REFERENCE IS HEREBY HAD to that certain Lease Agreement
dated February 28, 1964 (such lease being of record in the Office of the County
Recorder of Imperial County, California, in Book 1193, at Page 129, et seq., of
Official Records), whereby Lessor did grant, let and lease unto Lessee for the
purposes therein described certain lands situate in said County and State
particularly described in such lease, such lease being hereinafter referred to
as "said lease";

              AND, WHEREAS, Lessor and Lessee have agreed to amend said lease in
the particulars hereinafter set forth:

              NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00)
and other valuable consideration paid to Lessor by Lessee, receipt of which is


hereby acknowledged, Lessor and Lessee agree as follows:

              1. That part of the first sentence of Section 2 of said lease
which now reads as follows:

                  "...., this lease shall remain in force for a period of ten
              (10) years from the date hereof, called the `primary term,...."

shall be and hereby is amended to read as follows:

                  ".... this lease shall remain in force for a period of twenty

              (20) years from the date hereof, called the `primary term' ,...."

              2. That part of the first sentence of Section 4 of said lease
which now reads as follows:

                  "4. Lessee agrees to commence drilling, extraction or
              processing operations on said land or on the unit area within the
              period of ten (10) years from the date hereof...."

shall be and hereby is amended to read as follows:

                                       11


                  "4. Lessee agrees to commence drilling, extraction or
              processing operations on said land or on the unit area within the
              period of twenty (20) years from the date hereof...."

              3. Effective with the rental period that begins in 1974, that part
of the first sentence of Section 4 of said lease which now reads as follows:

                  "...., the sum of Forty and no/100 DOLLARS ($40.00)...."

shall be and hereby is amended to read as follows:



                  "...., the sum of Four Hundred and no/100 DOLLARS
              ($400.00)...."

              4. That part of Section 4a. of said lease which now reads as
follows:


                  "a.  That if within 10 years...."



shall be and hereby is amended to read as follows:

                  "a.  That if within 20 years...."

              5. That part of Section 4b. of said lease which now reads as
follows:


                  "b.  That if within 15 years...."

shall be and hereby is amended to read as follows:

                  "b.  That if within 25 years...."

              6. To implement the foregoing, Lessor does hereby grant, demise,
lease and let unto Lessee all those certain lands particularly described in said
lease for the term and purposes and subject to all of the other provisions of
said lease as hereby amended. Lessor agrees that said lease as hereby amended is
in good standing and in full force and effect. Lessor acknowledges receipt of
rental in full under said lease to February 28, 1975.

              7. This agreement shall bind and inure to the benefit of the
respective heirs, executors, administrators, successors, and assigns of the
parties hereto.

                                       12


              IN WITNESS WHEREOF, this agreement has been executed as of the day
and year first herein written.

LESSEE


STANDARD OIL COMPANY
OF CALIFORNIA
                                                           LESSOR


By /s/ Indecipherable                   /s/ Guadalupe Kurupas
  ------------------------------        -------------------------------------
           Contract Agent               GUADALUPE KURUPAS

By /s/ Barbara Perez
  ------------------------------        -------------------------------------
        Assistant Secretary



State of California                   )
City and County of San Francisco      ) ss

              On June 27, 1973, before me, Edmond Lee Kelly, a Notary Public in
and for said City and County and State, residing therein, duly commissioned and
sworn, personally appeared A.T. SMITH and BARBARA F. PEREZ known to me to be
CONTRACT AGENT and ASSISTANT SECRETARY, respectively, of STANDARD OIL COMPANY OF
CALIFORNIA the Corporation described in and that executed the within instrument,
and also known to me to be the persons who executed it on behalf of the said
Corporation therein named, and they acknowledged to me that such Corporation
executed the same.

              IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
Official Seal, at my office in the City and County and State aforesaid the day
and year in this certificate above written.

                                 /s/ Edmond Lee Kelly
                                 --------------------------------------
                                 Notary Public in and for said City and
                                 County of San Francisco, State of California








                                       13


                                                                 EXHIBIT 10.4.17

                                 LEASE AGREEMENT


     THIS AGREEMENT, made and entered into as of the 7th day of April, 1972, by
and between NOWLIN PARTNERSHIP, a general partnership, hereinafter called
"Lessor" (whether one or more) and STANDARD OIL COMPANY OF CALIFORNIA, a
corporation, hereinafter called "Lessee,"

                               W I T N E S S E T H


1. Lessor, for and in consideration of the sum of $10 in hand paid, and of the
royalties herein provided and of the covenants and agreements hereinafter
contained, hereby grants, demises, leases and lets unto Lessee, the land
hereinafter described with the sole and exclusive right to Lessee to drill for,
produce, extract, take and remove therefrom water, brine, steam, steam power,
minerals in solution or suspension in liquid or steam (other than oil), salts,
chemicals, gases (other than gas associated with oil), and other products
produced or extracted by Lessee from any thereof. Each of the foregoing is
hereinafter sometimes termed "a lease product" and all thereof are sometimes
termed "the lease products." For the same consideration Lessee is hereby granted
the right to store, utilize, process, convert, and otherwise use such lease
products upon said land and to sell the same or any part thereof off said land
during the term hereof, with the right of entry thereon at all times for said
purposes, and to construct, use, maintain, erect, repair and replace thereon,
and to remove therefrom all roads, pipelines, ditches and lanes, telephone and
telegraph lines, utility installations, power lines, poles, tanks, evaporation
or settling basins, extraction or processing plants, machinery, equipment,
buildings, electric power plants, and equipment for generation and transmission
of steam power, and electric power, and for the handling, treatment or storage
of lease products, and all structures and facilities relating thereto, which
Lessee may desire to erect, construct or install in carrying on Lessee's
business and operations on or from said land and other lands in the vicinity of
said land; and Lessee shall have the further right to erect, maintain, operate
and remove a plant or plants, structures and facilities, with all necessary
appurtenances for the conversion of steam to electric power, and for the
extraction of lease products from steam, brine or water produced from said land,
and other lands in the vicinity of said land, including all rights necessary or
convenient thereto, together with rights of way for passage over, upon and
across and ingress and egress to and from said land for any or all of the above
mentioned purposes. Lessee shall also have the right to dispose of waste brine
and other waste products in a well or wells drilled or converted for that
purpose on the leased land or on other land in the vicinity, and the right to
inject water, brine, steam and gases in a well or wells on said land or such
other land for the purpose of maintaining or restoring pressure in the
productive zones beneath said land or other land in the vicinity thereof. The
said land included in this lease is situated in the County of Imperial, State of
California, and is described as follows, to wit:




                  The West Half of Tract No.  45, Township 16 South,
                  Range 14 East, S.B.B.& M.,

containing 160 acres of land, more or less;
without right of entry, however, upon the surface or the upper 500 feet of the
subsurface thereof except as to four (4) two-acre surface use sites as described
hereinafter, together with necessary and convenient ingress and egress rights
and pipeline, power and communication rights of way in, on, over, under and
through said West Half of Tract No. 45 for the purposes and uses provided
herein.

Said surface use sites are described as follows:

          Beginning at the southwest corner of Tract 45, Township 16 South,
          Range 14 East, S.B.B.& M; thence easterly along the southerly line of
          said Tract, 512 feet; thence northerly at right angles 85 feet to the
          true point of beginning; thence continuing northerly 295.l6 feet;
          thence easterly parallel with said southerly line, 295.16 feet; thence
          southerly at right angles, 295.16 feet to a point 85 feet northerly of
          the said southerly line; thence westerly parallel with said southerly
          line 295.16 feet to the point of beginning, containing 2.00 acres.

          Beginning at the southeast corner of the west one-half of Tract 45,
          Township 16 South, Range 14 East, S.B.B.& M; thence westerly along the
          southerly line of said Tract, 512 feet; thence northerly at right
          angles 85 feet to the true point of beginning; thence continuing
          northerly 295.16 feet; thence westerly parallel with said southerly
          line, 295.16 feet; thence southerly at right angles, 295.16 feet to a
          point 85 feet northerly of the said southerly line; thence easterly,
          parallel with sand southerly line 295.16 feet to the point of
          beginning, containing 2.00 acres.

          Beginning at the northwest corner of Tract 45, Township 16 South,
          Range 14 East, S.B.B.& M.; thence easterly along the northerly line of
          said Tract, 512 feet; thence southerly at right angles 85 feet to the
          true point of beginning; thence continuing southerly 295.16 feet;
          thence easterly parallel with said northerly line, 295.16 feet; thence
          northerly at right angles, 295.16 feet to a point 85 feet southerly of
          the said northerly line; thence westerly parallel with said northerly
          line 295.16 feet to the point of beginning, containing 2.00 acres.

          Beginning at the northeast corner of the west one-half of Tract 45,
          Township 16 South, Range 14 East, S.B.B.& M.; thence westerly along
          the northerly line of said Tract, 512 feet, thence southerly at right
          angles 85 feet to the true point of beginning; thence continuing
          southerly 295.16


                                       2


          feet; thence westerly parallel with said northerly line, 295.16 feet;
          thence northerly at right angles, 295.16 feet to a point 85 feet
          southerly of the said northerly line; thence easterly, parallel with
          said northerly line 295.16 feet to the point of beginning, containing
          2.00 acres,

all of which subsurface and surface lands are herein referred to collectively as
"said land".

This lease shall cover all the interest in said land now owned or hereafter
acquired by Lessor, even though greater than the undivided interest (if any)
described above. For the purpose of calculating any payments based on acreage,
Lessee at Lessee's option, may act as if said land and its constituent parcels
contain the acreage above stated, whether they actually contain more or less.

1.A. As rental, in addition to the other rental provisions and the damage
compensation provisions of this lease, Lessee agrees to pay Lessor $100.00 per
acre per year for so much of Lessor's surface acreage described in Paragraph 1
hereof actually used or occupied by Lessee at any time or times during such
annual periods. Payments required under this paragraph shall be made within
thirty (30) days following the first anniversary of the initial such surface use
or occupancy and at like annual periods thereafter for so long as any such use
or occupancy continues.

2. Subject to the other provisions herein contained, this lease shall remain in
force for a period of five (5) years from the date hereof, called the "primary
term", and thereafter so long as lease products, or any one or more of them, is
produced in commercial quantities (as hereinafter defined) from, or Lessee is
engaged in drilling, extraction, processing or reworking operations on said land
hereunder or on land pooled or unitized with said land, as provided an
Paragraphs 21(a) and 21(b) hereof, (said land, together with such pooled or
unitized land, being hereinafter sometimes called "the unit area"). The phrase
"commercial quantities" is hereby defined (for the purposes of this paragraph
and this paragraph only) as those quantities of lease products which would
provide Lessor an annual royalty equal to no less than a 6% annual return on an
amount constituting four (4) times the assessed value of said land.

3. Lessee shall pay to Lessor, on or before the last day of each calendar month,
the royalties accrued and payable for the preceding calendar month, and in
making such payments Lessee shall furnish to Lessor statements setting forth the
basis for computation of such royalty.

As royalty and rental, Lessee shall pay to Lessor 12 1/2% of the value at the
well of all lease products produced, saved and sold. As used herein, the term
"value at the well" shall mean the actual price received by Lessee for the sale
of lease products at the well.


                                       3


If such products are not sold by Lessee at the well but are sold at a plant or
plants on or in the vicinity of said land, then the value at the well shall be
determined by deducting from the actual price received by Lessee for the sale of
such lease products all costs and expenses incurred by Lessee in transporting,
manufacturing, processing and otherwise handling such lease products prior to
the actual sale thereof. If lease products are not sold by Lessee at the well or
at such a plant but are otherwise used by Lessee in its chemical operations or
disposed of for value, then the value of such lease products at the well shall
be determined by deducting from the price thereof at the nearest point where the
same or similar products are sold in substantial quantities, the cost of
transporting, manufacturing, processing and otherwise handling such lease
products prior to sale thereof. Lessee shall meter, gauge or otherwise determine
the volume and quality of all lease products commingled and such metering or
gauging shall furnish the basis for computing Lessor's royalties hereunder.
Lessee may use, free of royalty, steam, steam power, electric power, and water
developed from said land by Lessee, for all operations hereunder, and Lessee
shall not be required to account to Lessor for, or pay royalty on any lease
product or products reasonably lost or consumed in operations hereunder.

4. Lessee agrees to commence drilling, extraction or processing operations on
said land or on the unit area within the period of five (5) years from the date
hereof and to prosecute such operations with reasonable diligence until lease
products or any thereof shall have been found, extracted and processed in
quantities deemed paying quantities by Lessee, or until further operations
would, in the judgment of Lessee, be unprofitable or impracticable, or Lessee
may at any time within said primary term terminate this lease and surrender said
land; provided that, commencing with the 7th day of April, 1973, if Lessee has
not theretofore commenced any such operations on said land or on the unit area
or terminated this lease, Lessee shall pay or tender to Lessor annually, in
advance, as rental, the sum of ONE THOUSAND SIX HUNDRED AND NO/100 DOLLARS
($l,600.00) (each of such annual periods being hereinafter referred to as
"rental period") until operations are commenced on said land or lands which have
been pooled or unitized therewith, pursuant to paragraphs 21(a) and 21(b)
hereof, or this lease terminated as herein provided; it being understood that in
the event of the surrender or termination of this lease as to any portion or
portions of the land covered thereby, said rental shall be reduced
proportionately as provided in paragraph 18 hereof. The consideration expressed
an paragraph 1 hereof covers all rental to the date last above mentioned. If
Lessee shall elect not to commence operations on said land or on the unit area
during the primary term, as above provided, this lease shall terminate.

It is expressly understood and agreed by the parties hereto:

          a.   That if within 5 years from the date hereof Lessee has not
               completed one or more wells or a processing plant on the unit
               area or on said land, capable of producing or processing lease
               products or any thereof


                                       4


               in quantities and quality deemed paying quantities by Lessee,
               then Lessor may, at his option, terminate this lease; and

          b.   That if within 10 years from the date hereof Lessee has not made
               or arranged for a sale or sales of lease products or any thereof,
               produced from or allocated to said land, then Lessor may, at his
               option, terminate this lease.

5. If at any time or times after the primary term or within three (3) months
before expiration of the primary term, all operations and all production
hereunder on said land or on the unit area shall cease for any cause other than
those for which specific provision is made herein, this lease shall not
terminate if Lessee shall commence or resume drilling, processing, extraction or
reworking operations of production within three (3) months after such cessation.

6. Lessee shall be obligated to produce only such quantity or quantities of
lease products as it may be able to market at the well or wells, plant or
plants. It is recognized that the market demand for lease products may vary from
time to time and during such periods as there is no market at the wells or plant
for any lease product or products, Lessee's obligation to produce, process and
extract such lease product or products shall be suspended. If such period or
periods occur after royalty producing production is first commenced, Lessee
shall pay Lessor monthly in advance the sum of $250.00, which payments, shall
continue until royalty producing production has been reestablished or the lease
has been surrendered an accordance with its terms.

Subject to the foregoing and except as herein otherwise provided, it is agreed
that the Lessee shall drill such wells and operate each completed well with
reasonable diligence and an accordance with good operating practice so long as
such wells shall produce lease products in paying quantities while this lease is
in force as to the portion of said land on which such well or wells are
situated; but in conformity with any reasonable conservation program affecting
the drilling of wells or the production of lease products from said land, which
the Lessee may either voluntarily or by order of any authorized governmental
agency adopt, subscribe to or be subject to.

7. Subject to the provisions of Paragraph 10 hereinafter, and all other
provisions of this lease notwithstanding, Lessee agrees, as additional
consideration for this lease, to commence actual drilling on said land of an
"initial exploratory well" within one year of the date of this lease and to
diligently pursue the drilling of said well to a depth of 1500 feet or to a
depth at which temperatures of 212(0) F or more are encountered, whichever depth
as the lesser. Lessee's obligation to drill such well shall not be avoided by
any prior purported surrender of rights, payment of annual delay rental or
otherwise, and neither commencement of drilling nor any operations whatsoever of
said "initial


                                       5


exploratory well" shall avoid Lessee's obligation to pay rental under the
provisions of Paragraph 4 hereinabove. Lessee further agrees, as aforesaid, that
in the event Lessee, in Lessee's sole opinion, determines that the results of
said "initial exploratory well" warrants the drilling of a well for the
production of lease products as provided for in said Paragraph 4, Lessee shall
complete the drilling of said second well on said land within one year after the
date of completion of drilling of said "initial exploratory well". In the event
said second well is capable of producing lease products in commercial quantities
and quality, Lessee shall pay Lessor, in absence of royalty producing
production, an annual "shut-in" payment in the amount of $6,000.00, subject to
Lessee's right of surrender hereunder. Said payment shall be made annually in
advance beginning two years after the date of this lease. Said payment shall
continue, in absence of surrender by Lessee, until royalty producing production
as first commenced, either from said second well or from any subsequently
drilled well on said land or on lands pooled or unitized with said land under
the provisions of Paragraphs 21(a) and 21(b) hereinafter.

8. The possession by Lessee of said land shall be sole and exclusive excepting
only that Lessor reserves the right to occupy and use or to lease the surface of
said land for agriculture, horticultural or other surface uses, except those
granted to Lessee hereunder, which uses shall be carried on by Lessor subject
to, and with no interference with, the rights or operations of Lessee hereunder.
No well shall be drilled closer than 100 feet to any residence or barn new on
said land without written consent of Lessor. Lessee shall pay for damages caused
by Lessee's operations to houses, barns, growing crops, fences and irrigation
systems. Lessee shall have the right to drill such wells on said land as Lessee
may deem desirable for the purposes hereof and Lessee shall utilize or use only
so much of said land as is necessary or reasonably convenient for Lessee's
operations hereunder and shall interfere as little as reasonably necessary with
the use and occupancy of said land by Lessor. No default of Lessee hereunder
with respect to any well, or portion of this lease, shall impair Lessee's rights
with respect to any other well or portion of this lease. Lessee shall exercise
all reasonable care in Lessee's operations on said land to avoid damage to the
fresh water table.

9. The rights of Lessor and Lessee hereunder may be assigned in whole or in
part, provided that in absence of Lessor's further written consent, no
assignment shall be made of all or any part of the Lessee's estate in this lease
to any person or entity having a net worth of less than Ten Million Dollars
($10,000,000.00).

No present or future division of Lessor's ownership as to different portions or
parcels of said land shall operate to enlarge the obligations or diminish the
rights of Lessee, and Lessee's operations may be conducted without regard to any
such division. If all or any part of this lease is assigned, no leasehold owner
shall be liable for any act or omission of any other leasehold owner, and
failure by one to pay rental shall not affect the rights of others--rental being
apportionable in proportion to acreage.



                                       6


10. The obligations of Lessee hereunder shall be suspended (but without
impairment of Lessor's rights under (a) and (b) of paragraph 4 hereof) while
Lessee is prevented or hindered from complying therewith in part or in whole, by
strikes, lockouts, labor disturbances, acts of God, unavoidable accidents, laws,
rules, regulations or orders of any Federal, state, municipal or other
governmental agency, acts of war or conditions arising out of or attributable to
war, shortage of necessary material, equipment or labor, or restrictions in, or
limitations upon the use thereof, inability to secure or absence of a market for
the sale of lease products which can be produced or recovered an commercial
quantities from said land, delays in transportation, and also matters beyond the
control of Lessee, whether similar to the matters herein specifically enumerated
or not. This lease shall remain in full force and effect during any suspension
of Lessee's obligations under any provisions of this paragraph, and for a
reasonable time thereafter, provided that after the removal of the cause or
causes preventing or hindering the performance of such obligation, Lessee,
subject to the other provisions of this Lease, diligently commences or resumes
the performance of such obligation. Notwithstanding anything to the contrary
herein provided, if any of Lessee's obligations hereunder conflict with or
violate the provisions of any reasonable conservation program or plan or orderly
development, whether now or hereafter adopted, to which Lessee may voluntarily
subscribe, or of any conservation program or plans which is now or may hereafter
be prescribed by any order of any governmental agency, Lessee shall not be
obligated to perform such obligation. If the permission or approval of any
governmental agency is necessary before drilling operations may be commenced on
said land, then if such permission or approval has been applied for at least 30
days prior to the date upon which such operations must be commenced under the
terms hereof, the obligation to commence such operations shall be suspended
until thirty (30) days after the governmental permit is granted or approval
given, or if such permit or approval is denied initially, then so long as Lessee
in good faith appeals from such denial or conducts further proceedings in an
attempt to secure such permit or approval and thirty (30) days thereafter.
However, in no case whatsoever shall Lessee's obligations wider this lease be
suspended in any individual instance under this paragraph for more than three
(3) years. Notwithstanding anything to the contrary herein provided, the
inability to secure or absence of a market for the sale of lease products which
can be produced or recovered in commercial quantities from said land shall not
suspend the obligation of Lessee as to the monthly payments provided for in
Paragraph 6 or the annual shut-in payment provided for in Paragraph 7 hereof.

11. If Lessee shall fail to pay any installment of royalty or rental when due
and if such default shall continue for a period of 15 days after receipt by
Lessee of written notice thereof from Lessor to Lessee, then at the option of
Lessor, this lease shall terminate as to the portion or portions thereof as to
which Lessee is in default; provided, however, that if there be a bona fide
dispute as to the amount due and all undisputed amounts are paid,


                                       7


said 15-day period shall be extended until 5 days after such dispute as settled
by final court decree, arbitration or agreement.

If Lessee shall be in default in the performance of any obligations under this
Lease, other than the payment of rentals or royalties, and if, for a period of
90 days after written notice is given to Lessee by Lessor of such default,
Lessee shall fail to commence and thereafter diligently and in good faith
prosecute action to remedy such default, Lessor may terminate this Lease.

12. Lessee agrees to defend and indemnify Lessor against, and to hold Lessor
harmless from, all claims for damages to or destruction of property and injury
to or death of persons that result from Lessee's operations in or on said land
or from a condition caused by Lessee.

13. Lessee shall pay all taxes that may be levied against the improvements,
plant, machinery and personal property owned by Lessee and located upon any part
of said land.

14. Lessee shall also pay Lessee's share of any and all taxes assessed during
the term of this lease upon any products of Lessee's operations hereunder,
together with Lessee's share of all severance, production and license taxes or
other taxes or assessments levied or assessed on account of the production of
lease products or any thereof on or from said land, or on or from such portion
of said land as Lessee may be holding under this lease on the date of such tax
lien.

15. Lessor agrees to pay Lessor's share of any and all taxes assessed upon any
products of Lessee's operations hereunder, together with Lessor's share of all
severance, production and license taxes or other taxes or assessments levied or
assessed on account of the production of lease products from said land, and to
pay all other taxes assessed against said land, whether the same are assessed to
Lessor or Lessee or otherwise, and Lessee is hereby authorized to pay all such
taxes and assessments on behalf of Lessor and to deduct the amount so paid from
any royalties or moneys due Lessor hereunder. "Lessee's share" and "Lessor's
share", as used above refers to Lessee's and Lessor's respective proportionate
parts of the gross proceeds from the sale of any and all lease products
produced, saved and sold from said land by Lessee or allocated to said land
under the terms of any unit or pooling plan during the preceding calendar year.

16. All royalties, rentals and other payments payable in money hereunder shall
be paid to Lessor by Lessee mailing or delivering a check therefor to Lessor at
c/o Miss G. Nowlin, 1031 East Mountain Drive, Santa Barbara, California 93108,
or Lessee may, at its option, pay any or all royalties, rentals and other
payments payable in money hereunder by mailing or delivering a check therefor to
Crocker National Bank, Santa


                                       8


Barbara Main Office at 1001 State Street, Santa Barbara, California 93101 its
successors and assigns, herein designated by Lessor as depositary, hereby
granting to said depositary full power and authority on behalf of Lessor and on
behalf of the heirs, executors, administrators, successors and assigns of
Lessor, and each of them, to collect and receipt for all sums of money due and
payable from Lessee to Lessor hereunder, and to settle all accounts and
accounting of rentals, royalties and other payments payable in money hereunder.
No change in the ownership of the land or minerals covered by this lease and no
assignment of rentals or royalties shall be binding upon Lessee or the
depositary until both Lessee and the depositary have been furnished with written
evidence thereof satisfactory to them. Said depositary above named shall
continue to act as such until the owners and holders of at least two-thirds of
Lessor's estate hereunder shall in writing designate a different depositary and
notify Lessee in writing at 225 Bush Street, San Francisco, CA 94120, of the
name and address of such new depositary. The payment of any and all rentals,
royalties and other payments hereunder by Lessee to the depositary designated
herein or to any other depositary hereafter designated by Lessor, as aforesaid,
shall be a full acquittance and discharge of Lessee of and from any and all
liability to Lessor, and to the heirs, executors, administrators, successors and
assigns of Lessor, and each of them, for any part of such rentals, royalties or
other payments, and Lessee will not be responsible at any time for the
disposition or disbursement by any such depositary of all or any part of any
moneys received by it hereunder.

17. It is agreed that if Lessor owns a less interest in the sole and exclusive
rights herein granted Lessee, than the entire and undivided fee simple estate
therein, then any royalties, rentals and other payments herein provided for
shall be paid Lessor only in the proportion which Lessor's interest bears to the
whole and undivided fee. In the event Lessee's estate hereunder shall fail, for
a cause other than Lessee' s default hereunder, in regard to any portion of said
land or any interest therein, such failure shall not affect or invalidate
Lessee's estate hereunder in regard to the remaining portions of said lands or
the remaining interests therein and this lease shall nevertheless continue in
full force and effect with respect to said remaining portions of said land or
remaining interests therein, and Lessee shall not be accountable to Lessor for
any payment theretofore made with respect to said portion of said land or such
interest in regard to which Lessee's estate hereunder has failed. If and
whenever it shall be necessary so to do in order to protect Lessee's interest
under this lease, Lessee may at its option pay and discharge at any time any
mortgage or other lien now or hereafter attaching to said land or any part
thereof and in such event Lessee shall be subrogated to all of the rights of the
owner or holder of such mortgage or other lien and Lessee may in addition
thereto, at its option, apply to the discharge of any such mortgage or other
lien, or to the reimbursement to Lessee for any amount so paid by it, any
rentals, royalties or other sums accruing or payable hereunder, to the owner of
the lands to which such mortgage or other lien attaches.



                                       9


18. Lessee may at any time or times surrender this lease as to all or any
portion of said land and be relieved of all obligations thereafter accruing as
to the acreage surrendered, and thereafter the rental shall be reduced in the
same proportion that the acreage covered hereby is reduced. In the event this
lease shall be surrendered under the provisions or this paragraph, or assigned
as hereinabove provided as to any portion or portions of said land, Lessee shall
have such rights of way or easements hereunder, over, upon and across the land
as to which this lease is so surrendered or assigned as shall be necessary or
convenient for Lessee's operations on the land retained by it and other lands in
the vicinity thereof. Upon any surrender or assignment of this lease as to all
or any portion of said land, Lessee shall be relieved of all further obligations
hereunder with respect to the lands so surrendered or assigned. Any such
surrender shall become effective upon delivery to Lessor, or to the depositary
bank herein designated, or the deposit in the United States mail, postage
prepaid,of a duly executed duplicate of an instrument of surrender properly
addressed to Lessor or to such depositary bank. Within a reasonable time
thereafter, Lessee shall record the original of such instrument of surrender.

19. Lessee shall have the right at any time and from time to time during the
continuance hereof and within a reasonable time after the surrender or any
termination of this lease, to remove from said land all equipment, machinery,
installations, and any other property or improvements belonging to or furnished
by Lessee or Lessee's permittee. In the abandonment of any and all wells drilled
by Lessee under the terms hereunder, Lessee shall comply with the regulations of
all governmental authorities having jurisdiction over such abandonments.

20. All labor to be performed and material to be furnished in the operations of
Lessee hereunder shall be at the cost and expense of Lessee, and Lessor shall
not be chargeable with nor liable for any part thereof. Lessee shall protect
said land from liens arising from Lessee's operations thereon.

21. (a) Lessee is given the sole right and option by written declaration of
pooling at any time or from time to time, within twenty (20) years from the date
hereof (provided this lease is still in effect) to combine, pool or unitize in
whole or in part as to any stratum or strata all (and no less than all) of said
lands with other lands not subject to this lease so as to create one or more
reasonably compact operating unit for any operating or producing purpose. Such
written declaration of pooling shall describe the pooled lands and shall become
effective when recorded in the Office of the County Recorder in the county where
the land is situated. Lessee shall give written notice of such pooling to those
Lessors whose lands are so pooled. Lessors agree that with respect to all lease
products obtained from any lands included within any such operating unit,
whether or not from lands covered by this lease, there shall be allocated to and
deemed to have been produced from the lands covered by this lease and included
in such operating unit, only that proportion of the entire production from such
operating unit that the amount of acreage


                                       10


within the lands herein leased and included in such operating unit bears to the
total acreage of all of the land in such operating unit, and royalty payable
under this lease with respect to leased land included in such operating unit
shall be computed only on that portion of such production so allocated to such
leased lands. The entire acreage so pooled or unitized shall he treated as if it
were covered by one lease and the drilling of a well or performance of any other
obligations in any part of such operating unit, whether or not on land subject
to this lease, shall fulfill Lessee's drilling and other obligations under this
lease to the same extent as if such well were drilled and other obligations
performed on land subject to this lease. No offset obligation shall accrue under
this lease as a result of any well drilled within any such operating unit.
Lessee may, at its sole option, at any time when there is no production in such
operating unit of lease products in quantities deemed paying by Lessee terminate
such operating unit by a written declaration thereof, in the same manner in
which it was created.

              (b) Lessee is hereby granted the right at any time or times within
the period hereinafter provided to unitize this lease and all (and no less than
all) of the lands covered hereby, in whole, or in part as to any stratum or
strata, with other lands and leases and to increase or decrease the size of any
such unit. Any change in the amount of Lessor's royalties resulting from
unitization of this lease or from any increase or decrease in the size of any
such unit shall not be retroactive. In the event of any such unitization, this
lease, unless sooner terminated by Lessee, shall continue in effect for so long
as any of the lands hereby leased remain subject to such unit. The drilling and
producing operations conducted on any of the unitized lands shall constitute
full compliance with the drilling and producing obligations of Lessee hereunder
and Lessor shall be entitled to the royalties in this lease provided, on the
fractional part only, if any, of the unit production allocated to this lease in
accordance with the provisions of said unit. The method of allocation of
production from lands subject to said unit shall be set forth therein and may be
based upon the surface acreage or the estimated volumetric content of
recoverable lease products, or any weighing of either or both thereof, of lands
within such unit or within the estimated productive limits of such wait, or such
allocation may be made upon any other basis approved by State or Federal
authorities having jurisdiction thereof; except that any use whatsoever of
volumetric content as a method of allocation shall be contingent on the further
written consent by Lessor prior to such use. The provisions of this paragraph
authorizing the establishment and enlargement or contraction of such unit and
change of the ratio of participation thereunder shall not extend beyond the
period of twenty (20) years from the date of this lease; provided, however, that
if such unit is established before the expiration of said twenty-year period,
such unit may continue in effect beyond said twenty-year period. Any such unit
may be established, enlarged, or diminished, and, in the absence of production
therefrom, may be dissolved by Lessee's filing for record an instrument so
declaring. A copy of such instrument shall be delivered to Lessor or to the
depositary.



                                       11


22. Whenever used herein, the expression "drilling operations" shall mean, for
all purposes hereof, any work or actual operations undertaken or commenced for
the purpose of drilling of a well, including without limiting the generality
hereof, the preparation of the ground therefor, the building of roads and other
facilities therefor, the construction of a derrick and other necessary
structures for the drilling of a well followed by the actual operation of
drilling in the ground. Any such work or operations preliminary to the drilling
in the ground may be undertaken an any order Lessee shall see fit. All such work
and operations shall be prosecuted with reasonable diligence.

23. This agreement may be executed in any number of counterparts with the same
force and effect as if all parties signed the same document.

24. This lease shall be binding upon all who execute it, whether or not they are
named in the granting clause hereof and whether or not all parties named in the
granting clause execute this lease. All the provisions of this lease shall inure
to the benefit of and be binding upon the successors and assigns of Lessor and
Lessee.

IN WITNESS WHEREOF, the parties hereto have executed this agreement,

STANDARD OIL COMPANY OF CALIFORNIA             NOWLIN PARTNERSHIP

By  /s/ Indecipherable                     By   /s/ Mary Ellen Nowlin Hudspeth
   --------------------------------------      -------------------------------
                  Contract Agent

    /s/ Indecipherable                     By   /s/ Indecipherable
-----------------------------------------      -------------------------------
           Assistant Secretary

                LESSEE                     By   /s/ Edward B. Nowlin
                                               -------------------------------

                                           By   /s/ Indecipherable
                                               -------------------------------



                                                             Partners


                                                        LESSOR





                                       12



                                                                 Exhibit 10.4.18


                                                  Geothermal Lease and Agreement
                                                 Union Oil Company of California

                                     UNION

              THIS GEOTHERMAL LEASE AND AGREEMENT, (herein sometimes referred to
as "Lease") made and entered into as of this 18th day of July, 1979, by and
between CHARLES K. CORFMAN, an unmarried man as his sole and separate property,
hereinafter referred to is "Lessor", whether one or more, and UNION OIL COMPANY
OF CALIFORNIA, a California corporation, hereinafter referred to as "Lessee";

                                   WITNESSETH:

              1. That Lessor, for and in consideration of Ten Dollars ($10.00)
in hand paid to Lessor by Lessee, the rentals provided for hereinafter, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and in consideration of the covenants and agreements
hereinafter contained, to be kept and performed, Lessor has granted, leased, let
and demised and by these presents does grant, lease, let and demise exclusively
to Lessee, its grantees, successors and assigns, upon and subject to the terms
and conditions hereinafter set forth, all that certain land

(herein sometimes referred to as the "leased land") situate, in the County of
Imperial,

State of California, and more particularly described as follows, to-wit:

Reference is made to Exhibit "A" attached hereto and made a part hereof.



containing 80.0, acres, more or less, including all accretions thereto and all
lakes, streams, canals, waterways, dikes, roads, streets, alleys, easements and
rights of way, on, within, or adjoining the lands above described and including
all strips or parcels of land contiguous, adjacent to or adjoining the above
described land, and owned or claimed by Lessor. This lease shall cover all the
interest in tire leased land now owned or hereinafter acquired by Lessor. For
the purpose of calculating any payments based on acreage, Lessee, at Lessee's
option, may act as if the leased land and its constituent parcels contain the
acreage above stated, whether they actually contain more or less.

              By the use of such methods as Lessee may desire, Lessee shall have
the soil and exclusive right to explore for, drill for, test, develop, operate,
produce, extract, take,



remove and sell Hot Water, Steam and Thermal Energy and Extractable Minerals
from the leased land, and to store, utilize, process, convert and otherwise
treat such Hot Water, Steam and Thermal Energy upon the leased land, end to
extract any Extractable Minerals during the term hereof and to transport same
from the leased land, and to inject or reinject in the leased land effluents
from wells located on the leased lands or on lands in the vicinity thereof; or
inject water, gas or other fluids or substances by artificial means into
formations containing Hot Water, Steam or Thermal Energy, with the right of
entry on the leased lands and use and occupancy thereof at all times for said
purposes and the furtherance thereof, including the right to construct, use and
maintain thereon roads, ponds, pipelines, utility lines, power and transmission
lines, plants, structures, facilities and installations and to remove same.
Further, the Lessee or anyone purchasing Leased Substances (as hereinafter
defined) from Lessee is hereby granted the use of the roads and ponds on the
leased land, together with such rights of way and easements across said land,
for the construction of such roads, ponds, pipelines, utility lines, power and
transmission lines, plants, structures, facilities and installations as are
necessary or convenient for the exploration, drilling, testing, operation,
production, development, extraction, taking, processing, conversion, removal,
sales and transportation of Leased Substances and/or Geothermal Resources (as
hereinafter defined) on the leased lands or lands in the vicinity thereof. In
the event this lease should terminate with respect to a portion of the rights
granted Lessee, it shall nevertheless continue in full force and effect with
respect to those roads, ponds, pipelines, utility lines, power and transmission
lines, plants, structures, facilities and installations, as well as the rights
of way and/or easements appurtenant thereto that are being used at the time of
such termination and shall continue in effect so long as such roads, ponds,
pipelines, utility lines, power and transmission lines, plants, structures,
facilities, installations and rights of way and/or easements or any of them are
being used for the purposes above described or for the production and
utilization of Geothermal Resources from lands in the vicinity thereof by
Lessee, or anyone formerly purchasing Leased Substances from Lessee, their
successors and assigns. The possession by Lessee of the leased land shall be
sold and exclusive for the purposes hereof and for purposes incident or related
thereto, except that Lessor reserves the right to use and occupy said land or to
lease or otherwise deal with the same for mining or extraction and utilization
of minerals lying on the surface or in vein deposits on or in said land or for
the extraction of oil, natural hydrocarbon gas and other hydrocarbon substances,
or for any and all uses other than the use and rights permitted to Lessee
hereunder; provided that such use and occupancy does not interfere with Lessee's
rights hereunder. Lessee agrees to conduct its activities in a manner which will
not unreasonably interfere with the rights reserved to Lessor.

              For the purposes hereof the following definitions shall apply:

              (a) The terms "Hot Water", "Steam" and "Thermal Energy" each shall
     mean natural geothermal water and/or steam, and shall also mean the natural
     heat of the

                                       2


     earth and the energy present in, resulting from or created by, or which may
     be extracted from, the natural heat of the earth or the heat present below
     the surface of the earth, in whatever form such heat or energy occurs;

              (b) The term "Extractable Minerals" shall mean any minerals in
     solution in the well effluence and all minerals and gases produced from or
     by means of any well or wells on the leased land or by means of condensing
     steam or processing water produced from or the effluence from any such well
     or wells; said term shall also include any water so produced or obtained
     from condensation of steam; and further provided that the term "gases"
     shall not include hydrocarbon gases that can be produced separately from
     the well effluents;

              (c) The term "Leased Substances" shall collectively mean the
     matter, substances and resources defined in subsections 1 (a) and 1 (b)
     that are the subject of this lease;

              (d) The term "Geothermal Resources" shall collectively mean the
     matter, substances and resources defined in subsections 1 (a) and 1 (b)
     that are not subject to this lease but are located on adjacent land or
     lands in reasonable proximity thereto;

              (e) The term "Power Potential" shall mean, when used herein with
     respect to any well or wells, the quantity, or units, of energy capable of
     being recovered from the Hot Water, Steam or Thermal Energy produced
     therefrom by means of any energy conversion or utilization facility
     (including, but not limited to, electrical generating facilities) or
     equipment designed for use thereof;

              (f) The term "Sufficient Power Potential" shall mean that Power
     Potential which, in the judgment of Lessee shall be sufficient for the
     commercial sale or utilization thereof, or shall warrant the construction
     of facilities for the commercial sale or other utilization thereof, or
     shall justify additional drilling or other operations on the leased land;

              (g) The term "Commercial" shall mean those quantities of leased
     Substances produced, sold or used, the value of which, after determining
     Lessee's direct operating costs (or extraction costs in the case of
     extractable minerals) will be capable of providing a sufficient return to
     cause Lessee, its sole judgment, to continue production thereof or to elect
     to proceed with further development or exploratory operations on the leased
     land.

              2. This lease shall be for a term of five (5) years from and after
the date hereof (herein called "primary term") and so long thereafter as Leased
Substances, or any of them, be derived or produced in Commercial quantities from
the leased land or lands


                                       3


pooled, unitized or combined therewith, an for so long as Lessee is prevented
from producing same, or the obligations of Lessee hereunder are suspended, for
the causes hereinafter set forth, or this lease is continued in force by reason
of any other provision hereof.

              If at the expiration of the primary term Lessee has not completed
one or more wells on the leased land or lands pooled, unitized or combined
therewith, separately or collectively producing or being capable of producing
Hot Water, Steam or Thermal Energy of Sufficient Power Potential and/or
Extractable Minerals in Commercial quantities but Lessee is then engaged in
operations for drilling, reworking, recompleting or redrilling of any well on
the leased land or lands pooled, unitized or combined therewith, this lease
shall remain in force so long as drilling, reworking, recompleting or redrilling
operations are prosecuted (whether on the same or different wells) with no
cessation of more than six (6) months, and if they result in production or the
establishment to the satisfaction of the Lessee of the existence of Sufficient
Power Potential and/or Extractable Minerals in Commercial quantities, such well
or wells will be deemed to have been completed and such existence so established
during the primary term of this lease.

              3. It is understood and agreed that the initial consideration paid
upon the execution hereof, covers both the rental in full hereunder for a period
of one (1) year from the date of this Lease and for all other rights conferred
hereunder. If on or before one (1) year from the date hereof Lessee has not
drilled a well or wells on the leased land or lands pooled, unitized or combined
therewith as to indicate or establish to the satisfaction of Lessee the
existence of Sufficient Power Potential and/or Extractable Minerals in
Commercial quantities, then, but subject to Lessee's right of surrender, on or
before said anniversary date, Lessee shall pay or tender to Lessor an annual
rental in the amount of Two Thousand Eight Hundred and no/100 Dollars
($2,800.00), which shall constitute rental until the next anniversary date
hereof, and thereafter Lessee shall, on or before each succeeding anniversary
date during the primary term hereunder, pay or tender to Lessor an annual rental
in the aforesaid amount, this until such time as from the drilling of a well or
wells on the leased land, or lands pooled, unitized or combined therewith, there
has been established to the satisfaction of the Lessee the existence of
Sufficient Power Potential and/or Extractable Minerals in Commercial quantities.
Upon such establishing as aforesaid, Lessee may nevertheless continue to pay or
tender annual rental payments on or before each anniversary date, this until
Lessee has commenced the actual sale of one or more Leased Substances, and so
long as such annual rental payments be so paid or tendered this lease shall
remain in force and effect, even though thereby extended past the primary term,
and all payments so paid or tendered after the expiration of said primary term
shall be deemed advance royalties, and Lessee Shall have the right to reimburse
itself for any such payment out of one-half (1/2) of any royalties which shall
thereafter become payable hereunder, and so long as same are paid each well or
wells

                                       4


shall be deemed to be actually producing one or more Leased Substances in
Commercial quantities under the terms hereof; provided, however, that if within
five (5) years from the date of expiration of the primary term hereof Lessee
shall have failed to make, or make arrangements for by executed contract or
contracts, a bona fide Commercial sale of one or more Leased Substances then
Lessor, at its option, may consider Lessee in default hereunder. Additionally,
should Lessee fail to make any annual payment herein provided for on or before a
particular anniversary date, Lessor may, at its option, consider Lessee in
default hereunder.

              4. Lessee shall pay to Lessor as royalty Ten Percent (10%) of the
gross proceeds received by Lessee from the sale of Hot Water, Steam or Thermal
Energy, as such, produced from the leased land at and as of the point of origin
on the leased land; royalty on Hot Water, Steam or Thermal Energy may be
computed and paid for on the basis of the amount produced, saved and sold by
Lessee, or may be computed on the basis of the number of kilowatt hours of
electric power generated by the use of such Hot Water, Steam or Thermal Energy,
but Shall be computed and paid for on whatever basis which shall properly
reflect the royalty portion of the gross proceeds received by Lessee from the
sale of Hot Water, Steam and Thermal Energy, as such, produced from the leased
land at and as of the point of origin on the leased land. With respect to
Extractable Minerals, Lessee shall pay as royalty to Lessor Ten Percent (10%) of
the net proceeds received by Lessee from the sale of any gases (as herein
defined) and from the sale of effluence (containing minerals and/or minerals in
solution) produced and sold from any well or wells on the leased and, or, in the
event Lessee extracts from the effluence minerals and/or minerals in solution,
Ten Percent (10%) of the proceeds received by Lessee from the sale of minerals
and/or minerals in solution contained in and extracted from the effluence
produced and sold from such well or wells less costs of transportation and
extraction. If Lessee consumes Leased Substances or electric power generated
therefrom, by either use or exchange, for purposes other than its operations on
or with respect to the leased land, then such Leased Substances or electric
power generated therefrom shall be deemed sold for royalty purposes and the
above described royalty shall be paid on the same value basis as of such Leased
Substances or electric power generated therefrom had been sold by Lessee at the
time of production under Lessee's then existing sales contract. Lessee shall pay
to Lessor on or before the twenty-fifth day of each month the royalties accrued
and payable for the preceding calendar month, or on or before the twenty-fifth
day of the month next following that in which Lessee receives payment therefor
from the purchaser thereof, whichever method shall apply, and in making such
royalty payments Lessee shall deliver to Lessor statements setting forth the
basis for computation and determination of such royalty.

              Lessee shall not be required to account to Lessor for or to pay
any royalty on Hot Water, Steam, Thermal Energy or Extractable Minerals produced
by Lessee on the leased land which is not utilized, saved and sold, or which is
used by Lessee in its

                                       5


operations on or with respect to the leased land for or in connection with the
developing, recovering, producing, extracting and/or processing of Hot Water,
Steam, Thermal Energy and/or minerals in solution or in facilities used in
connection therewith, including operations of facilities for the generation of
electric power, or which are unavoidably lost.

              Lessee shall have the right from time to time and at any time to
commingle (for purposes of storing, transporting, utilizing, selling or
processing, or any of them) the Leased Substances or any of them that are
produced or extracted from the leased land or lands pooled, unitized or combined
therewith with Geothermal Resources or any of them produced from other lands or
units in the vicinity of the leased land, and in the event of such commingling,
Lessee shall meter, gauge, or measure the production from the leased land, or
from the unit or units, including leased land and other units or lands, as the
case may be, and compute and pay Lessor's royalty payable under the provision,
hereof on the basis of such production so determined or allocated, as the case
may be.

              5. Lessee shall have the right to drill such well or wells on the
leased land as Lessee may deem desirable, including welts for injection or
reinjection purposes, and shall have the further right to dispose in any such
wells waste brine, water and other substances, waste products from a well or
wells, power plants or other facilities, located on the leased lands or from
wells, power plants or other facilities, located in the vicinity of the leased
lands. Lessee shall further have the right for testing purposes, to freely
transfer Leased Substances and Geothermal Resources produced from wells located
on the leased lands or lands in the vicinity thereof to and from the leased
lands and to inject such geothermal substance into a well or wells located on
the leased lands.

              6. Lessee may, at any time or from time to time, as a recurring
right within twenty (20) years from the date hereof, for drilling, development,
production or operating purposes pool, unitize or combine all or any part of the
leased land into a unit with any other land or lands or lease or leases (whether
held by Lessee or others) adjacent, adjoining or in the immediate vicinity of
the leased land which Lessee desires to develop or operate as a unit, provided
that the total acreage to be embraced within any such drilling, development,
production, or operating unit shall not exceed one thousand nine hundred twenty
(1,920) acres, plus an acreage tolerance of Ten Percent (10%), except that a
larger unit may be created to conform to Stale or Federal regulations. In the
event a unit is so created, either Lessee shall record in the office of the
county recorder in the county in which the leased land is situated a written
declaration of such unit or Lessee shall give written notice of such declaration
to Lessor. Any well (whether or not Lessee's well) commenced, drilled, drilling
and/or producing or being capable of producing in any part of such unit shall
for all purposes of this lease be deemed a well commenced, drilled, drilling
and/or producing on the leased land, and Lessee shall have the same rights and
obligations with respect thereto and to drilling and producing operations upon
the lands from time to time included within any such unit as Lessee would have
if such lands


                                       6


constituted the leased land; provided, however, that notwithstanding this or any
other provision or provisions of this lease to the contrary:

              (a) production as to which royalty is payable from any such well
     or wells drilled upon any such unit, whether located upon the leased land
     or other lands, shall be allocated to the leased land in the proportion
     that the surface acreage of the leased land in such unit bears to the total
     surface acreage of such unit, and such allocated portion thereof shall for
     all purposes of this lease be considered as having been produced from the
     leased land and the royalty payable under this lease with respect to the
     leased land included in such unit shall be payable only upon that
     proportion of such production so allocated thereto, and

              (b) if any taxes of any kind are levied or assessed (other than
     taxes on the land and on Lessor's improvements), any portion of which is
     chargeable to Lessor under Section 15 hereof, then the share of such taxes
     to be borne by Lessor as provided in this lease, shall be in proportion to
     the share of the production from such unit allocated to the leased land.

              Allocation of production from any such unit, whether to the leased
land or in like manner to other lands therein, shall continue notwithstanding
any termination, either in whole or in part (by surrender, forfeiture or
otherwise), of this or any other lease covering lands in such unit until such
time as the owner of such lands so terminated shall enter into an agreement to
drill for or produce or shall drill for or produce or permit or cause the
drilling for or production from any part of such lands, whereupon all such lands
formerly included in such unit and as to which the lease covering the same shall
have terminated shall be excluded in determining the production to be allocated
to the respective lands in such unit; additionally, in the event of the failure
of Lessor's, or any other owner's, title as to any portion of the land included
in any such unit, such portion of such land shall likewise be excluded in
allocating production from such unit; provided, however, Lessee shall not be
held to account for any production allocated to any lands excluded from any such
operating unit unless and until Lessee has actual knowledge of the circumstances
requiring such exclusion. Any exclusion shall be deemed effective the first day
of the month next following the date upon which such exclusion becomes finally
established.

              Lessee may, at its sole option, at any time when there is no
Commercial production in such unit, terminate such unit by a written declaration
thereof, in the same manner in which it was created.

              7. No well shall be drilled within Three Hundred (300) feet of any
residence or barn now on leased land without Lessor's consent. Lessee shall have
free use of water from leased land for all operations thereon or on land or
lands pooled, unitized or


                                       7


combined therewith, provided that such free use shall not interfere with
Lessor's own use for domestic, commercial, stock or agricultural purposes, nor
interfere with any contractual commitments of Lessor relating thereto and
existing on the date hereof. Lessee shall not be entitled to free use of any
water which has been or is being purchased by Lessor.

              Lessee agrees to fence all sump holes or other excavations, and
upon abandonment of any well on the leased land, or the termination of the
lease, Lessee shall level and fill all sump holes and excavations, shall remove
all debris and shall leave the locations or premises used by Lessee in a clean
and sanitary condition, and farmable condition.

              Lessee shall protect Lessor's interest in the leased land against
liens of every character arising from its operations thereon. Lessee, at its own
expense, prior to commencing operations on the leased land shall obtain, and
thereafter while this lease is in effect shall maintain, adequate Workmens
Compensation Insurance. Lessee shall protect and hold harmless Lessor against
damages of every kind and character arising out of the operations or working of
Lessee or those under Lessee's control upon the leased land, but Lessee shall
not be liable hereunder in the event of the negligence or willful misconduct of
parties other than Lessee. In the event any building or personal properly be
damaged or destroyed, or grazing or agricultural lands be damaged by Lessee's
operations, then Lessee shall be liable for such damages.

              Lessee shall have the right at any time and from time to time to
remove from the leased land any and all casing, machinery, equipment,
structures, installations and property of every kind and character placed upon
said leased land by or pursuant to permission of Lessee, provided that if such
removal should occur after termination of all rights granted herein same shall
be completed within a reasonable time thereafter.

              8. If Lessee or anyone purchasing Leased Substances or Geothermal
Resources from Lessee constructs a plant on the leased land for the conversion
of Leased Substances or Geothermal Resources into heat, power or another form of
energy or for the extraction and processing of by-products or both, and
production from the leased land subsequently ceases or this Lease expires,
terminates or is forfeited, then Lessee or such purchaser upon payment of an
annual rental equal to 10% of the market value as determined from the previous
year's tax assessment attributable to Lessor's interest in the surface of the
lands so occupied shall have the continuing right to retain the plant on the
leased land together with the right and easement to go over, upon and across
said land together with rights of ingress and egress for purposes of maintaining
and operating such plant and connected pipelines, transmission lines and other
associated facilities so long as such plant utilizes Leased Substances or
Geothermal Resources from other lands in the vicinity thereof.

                                       8


              9. For the consideration paid at the time of execution of this
Lease and without any additional consideration to be paid therefor, except as
provided below, Lessor hereby grants to Lessee, its successors and assigns, the
following rights, rights of way and easements in, under, upon, through and
across the leased land or other lands contiguous, adjacent to or adjoining the
leased lands which may be exercised at any time or from time to time during the
duration of this lease and as long thereafter as Lessee exercises any of the
rights granted in this section:

              (a) The sole and exclusive right to locate a well or wells on the
     surface of the leased land and to slant drill said well or wells into,
     under, across and through the leased land and into and under lands other
     than the leased land together with the right to repair, redrill, deepen,
     maintain, inject in, rework and operate or abandon such well or wells for
     the production of Geothermal Resources from such other lands together with
     the right to develop water from the leased land for any of Lessee's
     operations pursuant to this Section and together with the right to
     construct, erect, maintain, use, operate, replace, or remove all roads,
     ponds, pipelines, utility lines, power and transmission lines, plants,
     structures, facilities and installations, together with all other rights
     necessary or convenient for Lessee's operations under this Section and
     together with rights of way for passage over and upon and across and
     ingress and egress to and from the leased land or other lands contiguous,
     adjacent to or adjoining the leased lands;

              (b) The sole and exclusive right to drill into and through the
     leased land below a depth of five hundred feet (500') from the surface
     thereof, by means of a well or wells drilled from the surface of lands
     other than the leased land, and the right to abandon or repair, redrill,
     deepen, maintain, inject in, rework and operate such well or wells for the
     production of Geothermal Resources from lands other than the leased lands;

              (c) The sole and exclusive right to move Leased Substances and
     Geothermal Resources to, from and across leased lands when Lessee or anyone
     purchasing Leased Substances or Geothermal Resources is required to comply
     with the laws and regulations of Federal, State, County, Municipal or other
     governmental agencies, authority, or representative.

              If Lessee exercises the rights granted by Lessor in subsection (a)
hereof, Lessee shall pay to Lessor an annual rental computed at the rate of One
Hundred Dollars ($100.00) per acre for each surface acre of the leased land
being exclusively occupied by Lessee pursuant to such grant. If Lessee exercises
the rights granted in subsection (b) hereof, and thereafter completes a well
capable of producing Geothermal Resources in quantities deemed Commercial by
Lessee or the well is operated by Lessee as an injection well, then Lessee shall
within sixty (60) days after such completion pay Lessor

                                       9


an annual rental computed at the rate of One Dollar ($1.00) per rod of
horizontal projection of the survey course of that part of the bore hole of such
well traversing the subsurface of the leased land. Any such rentals shall
continue until such well is abandoned. Any well drilled under the provisions of
this Section shall be drilled so that the producing or injecting interval
thereof shall lie wholly outside the boundary of the leased land and Lessor
recognizes and agrees that Lessor has no interest in any such well or wells
drilled pursuant to this Section or any production therefrom.

              Any surrender or termination under any other provision of this
lease shall be effective notwithstanding the fact that Lessee in and by such
surrender or termination reserves the rights granted to Lessee under this
Section, and regardless of such surrender or termination, the rights granted
under this Section shall continue for the term hereinabove granted in this
Section.

              10. Lessor, or its agents, at Lessor's sole risk, may during hours
of operation examine the leased land and the workings, installations and
structures thereon and operations of Lessee thereon, and may at reasonable times
inspect the books and records of Lessee with respect to matters pertaining to
the payment of royalties to Lessor.

              11. Upon the violation of any of the terms and conditions of this
lease by Lessee (including but not limited to payment of rental, advance royalty
and/or royalty) and the failure of Lessee to, as to monetary matters, make
payment, and as to other violations begin in good faith to remedy the same,
within sixty (60) days after written notice from Lessor so to do, specifying in
said notice the nature of such default, then at the option of Lessor this lease
shall forthwith cease and terminate and all rights of Lessee in and to the
leased land shall be at an end, save and excepting five (5) acres surrounding
each and any well then being drilled, or capable of producing or injecting, or
producing or injecting, and in respect to which Lessee shall not be in default,
together with the rights, rights of way and easements which may be retained by
Lessee by virtue of the granting clause of this lease, and together with rights
granted Lessee in Sections 8 and 9 hereof.

              12. Notwithstanding any other provisions of this lease, and in
consideration of the payment made by the Lessee to the Lessor for the execution
of this lease, Lessee shall have the right at any time prior to or after default
hereunder, to quitclaim and surrender to Lessor all right, title and interest of
Lessee in and to the leased land, or any part thereof, and thereupon all rights
and obligations of the parties hereto one to the other shall cease and terminate
as to the lands or areas so quitclaimed and surrendered, save and except as to
any then accrued monetary obligations or royalty obligations of Lessee then
payable as to which Lessee shall remain liable to Lessor, and save and except
the rights, rights of way and easements which may be retained by Lessee by
virtue of the granting clause of this lease and Sections 8 and 9, and provided
that in the event of a

                                       10


partial quitclaim and surrender, any future rentals will be reduced
proportionately by the number of acres in the area so quitclaimed and
surrendered.

              13. In the event Lessor at the time of making this lease owns a
less interest in the leased land than One Hundred Percent (100%) of the right,
title and interest herein granted or leased to Lessee, then any payments due
Lessor hereunder shall be paid to Lessor only in the proportions which Lessor's
interest bears to a One Hundred Percent (100%) interest therein in the leased
land. Notwithstanding the foregoing, should Lessor hereafter acquire any
additional right, title or interest in or to the leased land, it shall be
subject to the provisions hereof to the same extent as if owned by Lessor at the
date hereof, and any increase in payments of money hereunder necessitated
thereby shall commence with the payment next following receipt by Lessee of
satisfactory evidence of Lessor's acquisition of such additional interest. In
the event Lessor has no interest in the Leased Substances produced hereunder,
but has an interest in said land, Lessee shall pay Lessor an annual rental equal
to 10% of the market value as determined from the previous year's tax assessment
for the proportionate part attributable to Lessor's interest in the surface
occupied by Lessee in the conduct of its operations hereunder.

              14. Lessor hereby warrants and agree, to defend title to the
leased land and agrees that Lessee, at its option, may pay and discharge any
taxes, mortgages, trust deeds or other liens or encumbrances existing, levied or
assessed on or against the leased land, and in the event Lessee exercises such
option, Lessee shall be subrogated to the rights of any holder or holders
thereof, and shall have, among other rights, the right of applying to the
discharge of any such mortgage, tax or other lien or encumbrance any payments
accruing to Lessor hereunder.

              15. Lessee shall pay all taxes levied on Lessee's structures and
improvements placed on the leased land by Lessee. Lessee shall pay Ninety
Percent (90%) and the Lessor shall pay Ten Percent (10%) of any taxes assessed
against any Leased Substances stored on the leased land. In the event any taxes
are levied or assessed against the right to produce Leased Substances from the
leased land or in the event any Increase in the taxes levied or assessed against
the leased land shall be based upon the production from the leased land of
Leased Substances, then in either such event Lessee shall pay Ninety Percent
(90%) of any such taxes or increase, as the case may be, and Lessor shall pay
Ten Percent (10%) thereof. Lessor shall pay all taxes levied or assessed against
the leased land as such without reference to the production of Leased Substances
therefrom and shall pay all taxes levied and assessed against any and all rights
in or to or with respect to the leased land not covered by this lease and shall
pay all taxes levied and assessed against all structures and improvements owned
by Lessor or placed on the leased land by or pursuant to permission of Lessor.

                                       11


              16. The rights of either party hereunder may be assigned in whole
or in part, and the right and privilege so to do is hereby reserved by each
party, and the provisions hereof shall extend to the heirs, personal
representatives, successors and assigns of the parties hereto, but no change or
division in ownership of the land, rentals or royalties, however accomplished,
shall operate to enlarge the obligations or diminish the rights of Lessee, and
Lessee may continue to operate the leased land and to pay and settle rentals or
royalties as an entirety, and no such change in ownership shall be binding upon
Lessee until the expiation of thirty (30) days after Lessee is furnished with
written notice of such transfer or assignment, together with a certified copy of
the instruments of transfer or assignment. In the event of assignment of this
lease as to a segregated portion of said land, the rentals payable hereunder
shall be apportionable between the several leasehold owners ratably according to
the surface area of each, and default in rental payment by one shell not alter
the rights of other leasehold owners hereunder.

              17. The obligation of the Lessee hereunder shall be suspended and
the terms of this lease shall be extended as the case may be, while Lessee is
prevented from complying therewith, in whole or in part, by strikes, lockouts,
riots, war or the results thereof, acts of God or the elements, fire, flood,
accidents, delay in transportation, inability to secure labor or material in the
open market, laws, orders, rules, or regulations of Federal, State, County,
Municipal, or other governmental agencies, authority, or representative, or any
other matter or condition beyond reasonable control of Lessee, whether or not
similar to the conditions or matters herein specifically enumerated, or while
litigation contesting Lessor's title to the leased land or the rights granted
Lessee hereunder or litigation involving Lessee's operations hereunder shall be
pending and undetermined or during any period when Lessee has no market for the
products it is then capable of producing from the leased land or the market
price then available for such products will not produce an acceptable profit,
Lessee, without impairment of its rights hereunder, shall be excused from
performance of all obligations hereunder except payment of taxes and protection
of the leased land. It is expressly agreed that the prevention or settlement of
any litigation or strike or labor disturbance shall not be considered a matter
subject to Lessee's control within the meaning of this Section.

              If the permission or approval of any governmental agency is
necessary before drilling or producing operations may be commenced on the leased
land, then if such permission or approval has been applied for at least thirty
(30) days prior to the date upon which such operations must be commenced under
the terms hereof, the obligation to commence such operations shall be suspended
until ninety (90) days after the governmental permit is granted or approval
given, or if such permit or approval is denied initially, then so long as Lessee
in good faith appeals from such denial or conducts further proceedings in an
attempt to secure such permit or approval and ninety (90) days thereafter.
Lessor agrees to fully support and cooperate with Lessee in securing permits and
authorization to conduct geothermal operations on the leased lands.

                                       12


              If at any time after the expiration of fifteen (15) years from
date hereof the production of all Leased Substances ceases for any cause other
than one or more of the causes hereinabove enumerated, this lease shall
nevertheless remain in full force and effect for an additional period of one (1)
year from cessation and thereafter if, and so long as, Lessee commences and
continues diligently and in good faith the steps, operations or procedures to
cause a resumption of such production until such production be resumed.

              18. All statements of production and royalty and all payments to
be made by Lessee to Lessor hereunder shall be sent to the persons hereinafter
set forth, respectively, at the addresses indicated and each such person shall
be entitled to receive that portion of the total rentals and royalty payable
hereunder as is hereinafter set forth after the name of such person:

                                                           Taxpayer's Ident. No.
                                                           ---------------------
Charles K.  Corfman                             100%            000-00-0000
1590 Nichols Road
El Centro, CA  92243



              Lessee shall, upon notification of change of ownership in the
lands or in rentals or royalties hereunder, as provided in Section 16 hereof,
divide and distribute the same to the new owners of such interest; provided,
however, that if at any time there are three or more persons entitled to rentals
or royalties hereunder, Lessee may, at its option, withhold payment of such
rentals or royalties until a majority in interest of such persons designate in
writing in a recordable instrument delivered to Lessee, a bank, trust company or
corporation, as a common agent and depositary, to receive all payments due
hereunder to such persons. Such designation may be changed at any time in the
same manner. Delivery of all statements and payments hereunder may be made by
depositing the same in the United States mail duly addressed to Lessor at the
above address or addresses or to such agent and depositary which shall
constitute full performance of Lessee's obligation to make such delivery. In the
event that the amount payable under this lease shall result in a payment of less
than Ten Dollars ($10.00) becoming due Lessor, Lessee may, at its option,
withhold and accrue sufficient periodic payments until the total due Lessor
exceeds Ten Dollars ($10.00).

19. Any notice herein required or permitted to be given or furnished by one
party to the other shall be in writing. Delivery of such written notice to
Lessor shall be made by depositing the same in the United States mail duly
certified and addressed to Lessor at same as set forth in paragraph 18 and
delivery of such written notice to Lessee shall be made by depositing the same
in the United States mail duly certified and addressed to Lessee at Union Oil
Center, 461 South Boylston Street, Los Angeles, California 90017.

                                       13


Either party hereto may by written notice to the other party change its address
to any other location.

20. All express and implied covenants of this lease shall be made subject to all
applicable laws, governmental orders, rules and regulations. In the event any
part or portion or provision of this instrument shall be found or declared to be
null, void or unenforceable for any reason whatsoever by any Court of competent
jurisdiction, then and in such event only such part, portion or provision shall
be affected thereby, and such finding, ruling or decision shall not in any way
affect the remainder of this instrument or any of the other terms or conditions
hereof; which said remaining terms and conditions shall remain binding, valid
and subsisting and in full force and effect between the parties hereto, it being
specifically understood and agreed that the provisions hereof are severable to,
the purposes of the provisions of this clause. In this connection, this lease
shall not in any event extend beyond such term as may be legally permissible
under present applicable laws, and should any such applicable law limit the term
hereof to less than that herein provided, then this lease shall not be void but
shall be deemed to be in existence for such term and no longer.

21. If more than one person is named as a Lessor herein and one or more of them
fails to execute this lease, said lease shall nevertheless (when accepted by
Lessee) become effective as a lease from such of said named parties Lessor as
may have executed the same.

22. This lease may be executed in any number of counterparts and all such
counterparts shall be deemed to constitute a single lease and the execution of
one counterpart by any party Lessor shall have the some force and effect as if
such party had signed all the other counterparts.



                                       14



23. This Geothermal Lease and Agreement and all of the terms, covenants and
conditions hereof shall extend to the benefit of and be binding upon the
respective heirs, personal representatives, successors and assigns of the
parties hereto.

See Addendum attached hereto and made a part of.

IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed
as of the date hereinabove first written.



                                              /s/ Charles K. Corfman
-----------------------------------     ----------------------------------
                                        CHARLES K. CORFMAN

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


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


-----------------------------------     ----------------------------------
              Subscribing Witness

                                        UNION OIL COMPANY OF
                                        CALIFORNIA


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



                                                                   Lessee



CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                                                 EXHIBIT 10.4.19


                                             Lease and Agreement
                                             Union Oil Company of California

                                     [LOGO]

     THIS LEASE AND AGREEMENT, made and entered into as of this 1st day of
January, 1972, by and between HOLLY OBERLY THOMSON, also known as HOLLY F.
OBERLY THOMSON, also known as HOLLY FELICIA THOMSON, hereinafter referred to as
"Lessor", whether one or more, and UNION OIL COMPANY OF CALIFORNIA, a California
corporation, hereinafter referred to as "Lessee".

     WITNESSETH: That Lessor, for and in consideration of Ten Dollars ($10.00)
in hand paid to Lessor by Lessee, the rentals provided for hereinafter and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and in consideration of the covenants and agreements hereinafter
contained by the Lessee to be kept and performed, Lessor has granted, leased,
let and demised and by these presents does grant, lease, let and demise to
Lessee, its grantees, successors and assigns, upon and subject to the terms and
conditions hereinafter set forth, all that certain land (herein sometimes
referred to as the "leased land") situate in the County of Imperial, State of
California, and more particularly described as follows, to wit:

TRACT 1: 131.72 acres more or less being the Southwest Quarter of Section 4,
Township 17 South, Range 14 East, S.B.M., EXCEPT that portion lying South of the
South line of Parcel "A" as shown on Licensed Survey Map filed in Book 10, Page
7 of Licensed Surveys.

TRACT 2: 169.00 acres more or less being Portion of S/2 of School Sec. 36, T16S,
R13E and Lots 3 & 8 and portion of Lot 4 Sec. 31; and Tr. 150 and portion of Tr.
292 T16S Rl4E described as follows: Beg. at a point on S 1i of S/2 of School
Sec. 36 T16S R13E shown as portion of Sec. 31 T16S R14E 2l74.54 ft. E of SW cor
thereof; th N 00(0) 03'W 2476.94 ft; th Ely to a pt. 20 ft. Sly of cor #5; th
Nly 20 ft. to sd cor; th Ely to Wly li of Tr. 40; th Sly alg sd Wly li to SE cor
of sd School Sec. 36; th Wly alg S li thereof to P.O.B. and Lots 3 & 8 of Sec.
31 and Tr. 150 and that portion of Lot 4 of Sec. 31 ly Ely of Sly ext of E. li
of sd W 2174.54 ft. of S/2 of School Sec. 36 and that por. of Tr. 292 ly Ely of
Sly ext of E li of sd W 2174.54 ft of S/2 of School Sec. 36.

TRACT 3: 240.00 acres more or less being Tract 89, and North 1/2 of West 1/2 of
Tract 90, Township 16 South, Range 13 East, S.B.M.

(deemed to contain, for the purposes hereof, 540.72 acres, whether there be more
or less) with the sale and exclusive right to Lessee to explore for (by such
methods as it may desire), drill for, produce, extract, take, remove and sell
hot water, steam and thermal



energy and extractable minerals from, and to store, utilize, process, convert
and otherwise treat such hot water, steam and thermal energy upon, said land,
and to extract any extractable minerals during the term hereof, and to inject or
reinject in the leased land effluence from wells located on the leased land or
on lands in the vicinity thereof, with the right of entry on the leased land and
use and occupancy thereof at all times for said purposes and the furtherance
thereof, including the right to construct, use and maintain thereon and to
remove therefrom structures, facilities and installations, pipe lines, utility
lines, power and transmission lines. Further, the Lessee is hereby granted the
use of roads and ponds on said land together with such rights of way and
easements across said land for the construction of roads, ponds, pipe lines,
power and telephone transmission lines as are necessary or convenient for the
exploration, operation and development of Leased Substances on the leased land
or in the vicinity thereof. The possession by Lessee of the leased land shall be
sole and exclusive for the purposes hereof and for purposes incident or related
thereto, excepting that Lessor reserves the right to use and occupy said land,
or to lease or otherwise deal with the same, without unreasonable interference
with Lessee's rights, for mining or extraction and utilization of minerals lying
on the surface of or in vein deposits on or in said land, or for the extraction
of oil, natural hydrocarbon gas and other hydrocarbon substances, or for any and
all uses other than the use and rights permitted to Lessee hereunder. Lessee
agrees to conduct its activities in a manner which will not unreasonably
interfere with the rights reserved to Lessor. The leased land includes also any
rights of Lessor, presently owned or hereafter acquired, in and under roads,
underlying ditches, and rights of way traversing or adjacent to said land.

     For the purposes hereof the following definitions shall apply:

     (a) The terms "hot water", "steam" and "thermal energy" shall mean natural
geothermal water and/or steam, and shall also mean the natural heat of the earth
and the energy present in, resulting from or created by, or which may be
extracted from, the natural heat of the earth or the heat present below the
surface of the earth, in whatever form such heat or energy occurs;

     (b) The term "extractable minerals" shall mean any minerals in solution in
the well effluence and all minerals and gases produced from or by means of any
well or wells on the leased land or by means of condensing steam or processing
water produced from or the effluence from any such well or wells; said term
shall also include any water so produced or obtained from condensation of steam;
and further provided that the term "gases" shall not include hydrocarbon gases
that can be produced separately from the hot water, steam and associated
minerals;

     (c) The term "Leased Substances" shall collectively refer to the matter,
substances and resources, defined in (a) and (b) above, that are the subject of
this lease;

                                       2


     (d) The term "power potential" as used herein with respect to any well or
wells shall mean the quantity, or units, of energy capable of being recovered
from the hot water, steam or thermal energy produced therefrom by means of any
energy conversion or utilization facility (including, but not limited to,
electrical generating facilities) or equipment designed for use thereof;

     (e) The term "sufficient power potential" as used herein shall be deemed to
mean that power potential which, in the judgment of Lessee shall be sufficient
for the commercial sale or utilization thereof, or shall warrant the
construction of facilities for the commercial sale or other utilization thereof,
or shall justify additional drilling or other operations on the leased land;

     (f) The word "commercial" used in connection with various phrases herein
shall mean those quantities of Leased Substances produced, sold or used, the
value of which, after deducting Lessee's operating costs (or extraction costs in
case of extractable minerals), will provide to Lessee a net return over such
costs sufficient to cause Lessee to continue production thereof or to elect to
proceed with further development or exploratory operations on the leased land.

     The terms and conditions of this Lease and Agreement are as follows, to
wit:

     1. This lease shall be for a term of five (5) years from and after the date
hereof (herein called "primary term") and so long thereafter as Leased
Substances, or any of them, be derived or produced in commercial quantities from
the leased land and for so long, as well, as Lessee is prevented from producing
same, or the obligations of Lessee hereunder are suspended, for the causes
hereinafter set forth.

     If at the expiration of the primary term Lessee has not completed one or
more wells on the leased land, separately or collectively producing or being
capable of producing steam of sufficient power potential and/or extractable
minerals in commercial quantities but Lessee is then engaged in operations for
drilling or reworking of any well on the leased land; this lease shall remain in
force so long as drilling or reworking operations are prosecuted (whether on the
same or different wells) with no cessation of more than six (6) months, and if
they result in production or the establishment to the satisfaction of the Lessee
of the existence of sufficient power potential and/or extractable minerals in
commercial quantities, such well or wells will be deemed to have been completed
and such existence so established during the primary term of this lease.

                                      ***

     2. It is understood and agreed that the initial consideration paid upon the
execution hereof covers not only the privileges granted to the date when a
rental is payable as hereinafter provided, but any and all other rights
conferred hereunder. On or before one (1) year from the date of this lease,
Lessee shall pay or tender to Lessor an


*** Confidential material redacted and filed separately with the Commission.

                                       3


annual rental in the amount of *** Dollars ($***), which shall constitute rental
until the next anniversary date hereof, and thereafter Lessee shall, on or
before each succeeding anniversary date during the primary term hereunder, pay
or tender to Lessor an annual rental in the aforesaid amount. The obligation to
pay rentals during the primary term hereunder is a firm obligation of Lessee and
must be paid even in the event of the abandonment, cancellation or quitclaim of
this lease. If at the expiration of the primary term, a well or wells has been
completed on the leased land as above provided then in such event Lessee may
continue to pay or tender annual rental payments on or before each anniversary
date, until Lessee has commenced the actual sale of one or more Leased
Substances, and so long as such annual rental payments be so paid or tendered
this lease shall remain in force and effect and all payments so paid or tendered
after the expiration date of said primary term shall be deemed advance
royalties, and so long as same are paid each well or wells shall be deemed to be
actually producing one or more Leased Substances in commercial quantities under
the terms hereof; provided, however, that if within five (5) years from the date
of expiration of the primary term hereof Lessee shall have failed to make, or
make arrangements for by executed contract or contracts, a bona fide commercial
sale of one or more Leased Substances then Lessor, at its option, may consider
Lessee in default hereunder. Additionally, should Lessee fail to make any annual
payment herein provided for on or before a particular anniversary date, Lessor
may, at its option, consider Lessee in default hereunder.

     3. Lessee shall pay to Lessor as royalty ***. Lessee shall pay to Lessor on
or before the twenty-fifth day of each month the royalties, accrued and payable
for the preceding calendar month, or on or before the twenty-fifth day of each
month next following that in which Lessee

*** Confidential material redacted and filed separately with the Commission.

                                       4


receives payment therefor from the purchase thereof, whichever method shall
apply, and in making such royalty payments Lessee shall deliver to Lessor
statements setting forth the basis for computation and determination of such
royalty.

     Lessee shall not be required to account to Lessor for or to pay any royalty
on hot water, steam, thermal energy or extractable minerals produced by Lessee
on the leased land which are not utilized, saved and sold, or which are used by
Lessee in its operations on or with respect to the leased land for or in
connection with the developing, recovering, producing, extracting and/or
processing of hot water, steam and/or minerals in solution or in facilities used
in connection therewith, including operations of facilities for the generation
of electric power, or which are unavoidably lost.

     Lessee shall have the right, from time to time and at any time, to
commingle (for purposes of storing, transporting, utilizing, selling or
processing, or any of them) the or any of the Leased Substances produced or
extracted from production from the leased land with like Leased Substances, or
any of them, produced from other lands or units in the vicinity of the leased
land, and in the event of such commingling Lessee shall meter, gauge or measure
the production from the leased land, or from the unit or units including same or
other units or lands, as the case may be, and compute and pay Lessor's royalty
payable under the provisions hereof on the basis of such production so
determined or allocated, as the case may be.

     Royalties payable hereunder shall never be less than *** Dollars ($***)
per acre per year for the lands then covered by this Lease plus the amount of
taxes levied or assessed against production or the right to produce Leased
Substances from the lands covered by this Lease that are paid by Lessor pursuant
to Paragraph 12 hereof.

     4. In the event of any disagreement between the parties as to the
application of any provision of this lease or as to any of the factors involved
in such application, that shall be determined by arbitration, for which purpose
the parties shall, when determination of such question becomes necessary, each
promptly appoint a qualified disinterested arbitrator who, in addition to other
qualifications, shall be knowledgeable in the field of geothermal operations if
the question to be determined shall involve such operations as distinguished
from agricultural rental value. The two thus appointed shall promptly proceed
with determination of the question involved and if they shall be unable to agree
with respect thereto they shall promptly appoint a third such qualified,
disinterested arbitrator. The determination of the question involved by any two
of said arbitrators shall be final and binding upon the parties who shall bear
the expense of such arbitration in inverse proportion to that in which their
respective contentions on such arbitration shall prevail (and the arbitrators
shall likewise determine that proportion). Should any arbitrator so appointed
fail to act the party or parties appointing him shall promptly appoint another
in his place.

*** Confidential material redacted and filed separately with the Commission.


                                       5


     In the event it becomes desirable to construct a generating plant or other
generating facility on the leased land, Lessee shall purchase the surface of
such plant or facility site together with the necessary rights of way,
servitudes and other surface easements required to service production from the
leased land or lands in the vicinity thereof, for twice the fair market value of
such lands with right of reverter in Lessor without payment.

     5. At such time as Lessee shall have drilled and completed such well or
wells on the leased land which shall indicate to the satisfaction of Lessee a
sufficient power potential, or the existence of extractable minerals in
commercial quantities, Lessee may at any time thereafter construct and install
on the leased land facilities for the commercial sale or use of hot water, steam
or thermal energy produced from the leased land or lands in the vicinity thereof
or for the extraction of extractable minerals, or for development of electric
power from the use of steam or thermal energy produced from the leased land or
lands in the vicinity thereof.

     In the event it becomes desirable to construct a generating plant or other
generating facility on the leased land, Lessee shall purchase the surface of
such plant or facility site together with the necessary rights of way,
servitudes and other surface easements required to service production from the
leased land or lands in the vicinity thereof, for twice the fair market value of
such lands with right of reverter in Lessor without payment.

     6. Lessee shall have the right to drill such well or wells on the leased
land as Lessee may deem desirable for the purposes hereof, including wells for
injection or re-injection purposes; provided, however, that Lessee agrees to
utilize for such purpose or purposes only so much of the leased land as shall be
reasonably necessary for Lessee's operations and activities thereon. No well
shall be drilled within one hundred (100) feet of any residence or barn now on
said land without Lessor's consent. Lessee shall have free use of water from
said land for all operations thereon, provided that such free use shall not
interfere with Lessor's own use for domestic, commercial, stock or agricultural
purposes, nor interfere with any contractual commitments of Lessor relating
thereto and existing on the date hereof. Lessee shall not be entitled to free
use of any water which has been or is being purchased by Lessor or his tenants.

     Lessee agrees to conduct drilling operations hereunder from such location
or locations on the leased land as Lessor shall designate, together with
adequate right-of-way from a county road to such drill sites. Lessor agrees to
make such designation within fifteen (15) days after receipt of written request
from Lessee to make such designations. The failure by Lessor to act within the
time prescribed shall be deemed a waiver of such right and Lessee may then
designate the location and right-of-way. Further, Lessee shall not have the
right to construct any new roads upon


                                       6


the leased property except roads necessary for ingress and egress from presently
existing roads to such drill sites as Lessor may designate. In the event pipe
lines, utility lines, power and/or transmission lines are deemed necessary,
Lessee agrees to secure Lessor's consent as to the location of same.

     Lessee shall pay Lessor for using the surface of any of the leased lands
for well locations, roads constructed solely and used principably by Lessee,
rights-of-way, ponds, production facilities or other facilities and structures
(except generating plants or facilities) or other surface uses by Lessee in its
operations herein at one of the following rates to be chosen by Lessor:

     a. Lessee shall pay Lessor for the actual surface acreage to be used at the
applicable rental rate determined annually then being paid in the area for the
use of the surface of like or similar lands; or

     b. Lessee shall purchase the surface acreage required for its operations at
twice its fair market value with right of reverter in Lessor without payment.

     Lessee shall reimburse Lessor for any loss of all or a part of any
agricultural rental due Lessor from a surface tenant where such loss is caused
by Lessee's operations hereunder.

     Should the agricultural rental value of the leased land (exclusive of any
portion thereof devoted exclusively to Lessee's use and for which rental is
separately payable under other provisions of this lease) be impaired or
diminished as a result of Lessee's operations, then for the period of such
impairment or diminution Lessee shall pay Lessor the difference between the top
agricultural rental value for comparable land in the area (including only
comparable land unaffected by conditions such as those resulting from Lessee's
operations) and the amount of the agricultural rental value of Lessor's land as
impaired or reduced by such operations; which payment shall be made for time to
time in like installments as the agricultural rental for the affected period is
payable for Lessor's land -- the amounts so payable to be adjusted and
determined annually on such basis.

     Lessee agrees that if because of its operations it becomes necessary to
relocate any of the concrete irrigation ditches, tile lines or other
appurtenances to the land, it shall do so at Lessee's expense.

     Lessee agrees to fence all sump holes or other excavations, and upon
abandonment of any well on the leased land, or the termination of the lease,
Lessee shall level and fill all sump excavations, shall remove all debris and
shall restore the surface to as near its original condition as is practicable.



                                       7


     Lessee shall protect said land against liens of every character arising
from its operations thereon. Lessee, at its own expense, prior to commencing
operations on the leased land, shall obtain, and thereafter while this lease is
in effect shall maintain, adequate Workmens Compensation Insurance. Lessee shall
protect Lessor against damages of every kind and character arising out of the
operations or working of Lessee or those under Lessee's control upon the leased
land, but Lessee shall not be liable hereunder in the event of the negligence or
willful misconduct of parties other than Lessee. In the event any building or
personal property be damaged or destroyed, or grazing or agricultural lands be
destroyed by Lessee's operations, then Lessee shall be liable for, and to the
extent of, the reasonable value thereof.

     Lessee shall have the right at any time and from time to time to remove
from the leased land any and all casing, machinery, equipment, structures,
installations and property of every kind and character placed upon said leased
land by or pursuant to permission of Lessee, provided that if such removal
should occur after termination hereof same shall be completed within a
reasonable time thereafter.

     7. Lessor, or its agents, at Lessor's sole risk, may at all times examine
said land and the workings, installations and structures thereon and operations
of Lessee thereon, and may at reasonable times inspect the books and records of
Lessee with respect to matters pertaining to the payment of royalties to Lessor.

     8. Upon the violation of any of the terms and conditions of this lease by
Lessee (including but not limited to payment of rental and/or advance royalty)
and the failure of Lessee to, as to monetary matters, make payment, and as to
other violations begin in good faith to remedy the same, within sixty (60) days
after written notice from Lessor so to do, specifying in said notice the nature
of such default, then at the option of Lessor this lease shall forthwith cease
and terminate and all rights of Lessee in and to the leased land shall be at an
end, save and excepting five (5) acres surrounding each and any well then
producing or capable of producing or being drilled, and in respect to which
Lessee shall not be in default, together with the rights, rights of way and
easements which may be retained by Lessee by virtue of the granting clause of
this lease, and together with rights granted Lessee in Paragraph 5, hereof.

     9. Notwithstanding any other provisions of this lease, and in consideration
of the payment made by the Lessee to the Lessor for the execution of this lease,
Lessee shall have the right at any time prior to or after default hereunder, to
quitclaim and surrender to Lessor all right, title and interest of Lessee in and
to the leased land, or any part thereof, and thereupon all rights and
obligations of the parties hereto one to the other shall cease and terminate as
to the lands or areas so quitclaimed and surrendered, save and except as to any
then accrued monetary obligations or royalty obligations of Lessee then payable
as to which Lessee shall remain liable to Lessor.



                                       8


     10. In the event Lessor at the time of making this lease owns a less
interest in the leased land than One Hundred Percent (100%) of the rights and
interests herein granted or leased to Lessee, then the rentals and royalties
accruing hereunder shall be paid to Lessor only in the proportions which
Lessor's interest bears to a One Hundred Percent (100%) interest therein in the
leased land. Notwithstanding the foregoing, should Lessor hereafter acquire any
additional right, title or interest in or to the leased land, it shall be
subject to the provisions hereof to the same extent as if owned by Lessor at the
date hereof, and any increase in payments of money hereunder necessitated
thereby shall commence with the payment next following receipt by Lessee of
satisfactory evidence of Lessor's acquisition of such additional interest.

     11. Lessor hereby warrants and agrees to defend title to the leased land
and agrees that Lessee, at its option, may pay and discharge any taxes,
mortgages, trust deeds or other liens or encumbrances existing, levied or
assessed on or against the leased land, and in the event Lessee exercises such
option, Lessee shall be subrogated to the rights of any holder or holders
thereof, and shall have, among other rights, the right of applying to the
discharge of any such mortgage, tax or other lien or encumbrance any royalties
or rentals accruing to Lessor hereunder.

     12. Lessee shall pay all taxes levied on Lessee's structures and
improvements placed on the leased land by Lessee. Lessee shall pay 90% and the
Lessor shall pay 10% of any taxes assessed against any Leased Substances stored
on the leased land. In the event any taxes are levied or assessed against the
right to produce Leased Substances from the leased land or in the event any
increase in the taxes levied or assessed against the leased land shall be based
upon the production from the leased land of Leased Substances, then in either
such event prior to the date Lessor receives from Lessee its first royalty
payment, Lessee will pay all such taxes without right of recoupment; after which
date Lessee shall pay 90% of any such taxes or increase as the case may be, and
Lessor shall pay 10% thereof. Lessor shall pay all taxes levied or assessed
against the leased land as such without reference to the production of Leased
Substances therefrom and shall pay all taxes levied and assessed against any and
all rights in or to or with respect to the leased land not covered by this lease
and shall pay all taxes levied and assessed against all structures and
improvements owned by Lessor or placed on the leased land by or pursuant to
permission of Lessor.

     13. The rights of either party hereunder may be assigned in whole or in
part, and the right and privilege so to do is hereby reserved by each party, and
the provisions hereof shall extend to the heirs, successors and assigns of the
parties hereto, but no change or division in ownership of the land, rentals or
royalties, however accomplished, shall operate to enlarge the obligations or
diminish the rights of Lessee, and Lessee may continue to operate the leased
land and to pay and settle rentals or royalties as an entirety, and no such
change in ownership shall be binding upon Lessee until the expiration of


                                       9


thirty (30) days after Lessee is furnished with satisfactory written evidence
thereof. In the event of assignment of this lease as to a segregated portion of
said land, the rentals payable hereunder shall be apportionable between the
several leasehold owners ratably according to the surface area of each, and
default in rental payment by one shall not affect the rights of other leasehold
owners hereunder.

     14. The obligations of Lessee hereunder shall be suspended and the term of
this lease shall be extended, as the case may be, while Lessee is prevented from
complying therewith, in whole or in part, by strikes, lockouts, riots, actions
of the elements, accidents, delays in transportation, inability to secure labor
or materials in the open market, laws, rules or regulations of any federal,
state, municipal or other governmental agency, authority or representative, or
other matters or conditions beyond the reasonable control of Lessee, whether or
not similar to the conditions or matters herein specifically enumerated.

     If at any time after the expiration of fifteen (15) years from date hereof
the production of all Leased Substances ceases for any cause other than one or
more of the causes hereinabove enumerated, this lease shall nevertheless remain
in full force and effect for an additional period of one (1) year from cessation
and thereafter if, and so long as, Lessee commences and continues diligently and
in good faith the steps, operations or procedures to cause a resumption of such
production (either through the existing wells or the drilling of new wells),
until such production be resumed.

     15. All statements of production and royalty and all payments to be made by
Lessee to Lessor hereunder shall be sent to persons hereinafter set forth,


respectively, at the addresses indicated and each such person shall be entitled
to receive that portion of the total rentals and royalty payable hereunder as is
hereinafter set forth after the name of such person:


Holly Oberly Thomson               100%        Tax Payer Indentification No.
3278 Wilshire Boulevard                           000-00-0000
Los Angeles, California 90005

Lessee shall, upon notification of change of ownership in the lands or in
rentals or royalties hereunder, as provided in Paragraph 13 hereof, divide and
distribute the same to the new owners of such interests; provided, however, that
if at any time there are three or more persons entitled to rentals or royalties
hereunder, Lessee may, at its option, withhold payment of such rentals or
royalties until a majority in interest of such persons designate in writing in a
recordable instrument delivered to Lessee, a bank, trust company or corporation,
as a common agent and depositary, to receive all payments due hereunder to such
persons. Such designation may be changed at any time in the same manner.
Delivery of all statements and payments hereunder may be made by depositing the
same


                                       10


in the United States mail duly addressed to Lessor at the above address or
addresses or to such agents and depositary which shall constitute full
performance of Lessee's obligation to make such delivery. In the event that the
amount payable under this lease shall result in a payment of less than Five
Dollars ($5.00) becoming due Lessor, Lessee may, at its option, withhold and
accrue sufficient periodic payments until the total due Lessor exceeds Five
Dollars ($5.00).

     16. Any notice herein required or permitted to be given or furnished by one
party to the other shall be in writing. Delivery of such written notice to
Lessor shall be made by depositing the same in the United States mail duly
certified and addressed to Lessor at 3278 Wilshire Boulevard, Los Angeles,
California 90005 and delivery of such written notice to Lessee shall be made by
depositing the same in the United States mail duly certified and addressed to
Lessee at Union Oil Center, 461 South Boylston Street, Los Angeles, California
90017. Either party hereto may by written notice to the other party change its
address to any other location.

     17. In the event any part or portion or provision of this instrument shall
be found or declared to be null, void or unenforceable for any reason whatsoever
by any Court of competent jurisdiction or any governmental agency having
authority thereover then, and in such event only such part, portion or provision
shall be affected thereby, and such finding, ruling or decision shall not in any
way affect the remainder of this instrument or any of the other terms or
conditions hereof, which said remaining terms and conditions shall remain
binding, valid and subsisting and in full force and effect between the parties
hereto, it being specifically understood and agreed that the provisions hereof
are severable for the purposes of the provisions of this clause. In this
connection, this lease shall not in any event extend beyond such term as may be
legally permissible under present applicable laws, and should any such
applicable law limit the term hereof to less than that herein provided, then
this lease shall not be void but shall be deemed to be in existence for such
term and no longer.

     18. If more than one person is named as a Lessor herein and one or more of
them fails to execute this lease, said lease shall nevertheless (when accepted
by Lessee) become effective as a lease from such of said named parties Lessor as
may have executed the same.

     19. This lease may be executed in any number of counterparts and all such
counterparts shall be deemed to constitute a single lease and the execution of
one counterpart by any party Lessor shall have the same force and effect as if
such party had signed all the other counterparts.

                                       11


     20. This Lease and Agreement and all of the terms, covenants and conditions
hereof shall extend to the benefit of and be binding upon the respective heirs,
successors and assigns of the parties hereto.

     IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed as of the date hereinabove first written.

                                           /s/ Holly Oberly Thomson
----------------------------               -------------------------------------
                                           Holly Oberly Thomson, also known as


                                           Holly F. Oberly Thomson, also known
                                           Holly Felicia Thomson


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




----------------------------               -------------------------------------
         Subscribing Witness                                              Lessor

                                           UNION OIL COMPANY OF CALIFORNIA

                                           By  /s/ indecipherable

                                              ---------------------------------
                                                                          Lessee



                                       12


                   AMENDMENT TO GEOTHERMAL LEASE AND AGREEMENT
                   -------------------------------------------

     THIS AGREEMENT made and entered into as of this 21st day of June, 1976, by
and between HOLLY OBERLY THOMSON, also known as Holly F. Oberly Thomson, also
known as Holly Felicia Thomson hereinafter called "Lessor" and UNION OIL COMPANY
OF CALIFORNIA, a California corporation, hereinafter called "Lessee";

                              W I T N E S S E T H:

     THAT WHEREAS, Lessee presently holds all of the Lessee's right, title and
interest under that certain Geothermal Lease and Agreement dated January 1,
1972, entered into by and between Lessor and Lessee herein, covering 540.72
acres, more or less, situate in Imperial County, California, more particularly
described in said lease, a Memorandum of which was recorded April 11, 1972 , in
Book 1325, at Page 1037, Official Records of said County and State; and

     WHEREAS, it is the desire of the parties hereto to amend said lease by
modifying the primary term, rental rider, royalty rider and quitclaim clause
thereof as hereinafter provided;

     NOW, THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid by
Lessee to Lessor and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Lessor does hereby lease said land to
Lessee


                                                        Heber 603422





for the same purposes and upon all the same terms, provisions and conditions, as
contained in said lease of January 1, 1972, and the parties hereto agree:

     1.   That the first paragraph of the habendum clause which appears on Page
          2 of said lease is hereby deleted in its entirety and the following is
          hereby substituted therefor:

          "This lease shall be for a term of ten (10) years from and after the
          date hereof (herein called "primary term") and so long thereafter as
          Leased Substances, or any of them, be derived or produced in
          commercial quantities from the leased land and for so long as well, as
          Lessee is prevented from producing same, or the obligations of Lessee
          hereunder are suspended, for the causes hereinafter set forth or this
          lease is continued in force by reason of any other provision hereof."

     2.   The rental payments due hereunder have been paid by Lessee and
          received by Lessor and operate to defer the commencement of drilling
          operations until January 1, 1977.

     3.   That the rental clause rider which appears on Page 2 of said lease is
          hereby deleted in its entirety and the following is hereby substituted
          therefor:

          "It is understood and agreed that the initial consideration paid upon
          the execution hereof covers not only the privileges granted to the
          date when a rental is payable as hereinafter provided, but any and all
          other rights conferred hereunder. If on or before one (1) year from
          January 1, 1976 Lessee has not drilled such well or wells on the
          leased land as to indicate or establish to the satisfaction of Lessee
          the existence of sufficient power potential and/or extractable
          minerals in commercial quantities, then, but subject to Lessee's right
          of surrender, on or before said anniversary date, Lessee shall pay or
          tender to Lessor an annual rental in the amount of *** Dollars ($***)
          which shall constitute rental until the next anniversary date hereof,
          and thereafter Lessee shall, on or before each succeeding anniversary
          date during the primary term hereunder, pay or tender to Lessor an
          annual rental in the

*** Confidential material redacted and filed separately with the Commission.

                                        2


          aforesaid amount, this until such time as from the drilling of well or
          wells on the leased land, there has been established to the
          satisfaction of the Lessee the existence of sufficient power potential
          and/or extractable minerals in commercial quantities. Upon such
          establishing as aforesaid, Lessee may nevertheless continue to pay or
          tender annual rental payments on or before each anniversary date, this
          until Lessee has commenced the actual sale of one or more Leased
          Substances, and so long as such annual rental payments be so paid or
          tendered this lease shall remain in force and effect, even though
          thereby extended past the primary term, and all payments so paid or
          tendered after the expiration of said primary term shall be deemed
          advance royalties, and so long as same are paid each well or wells
          shall be deemed to be actually producing one or more Leased Substances
          in commercial quantities under the terms hereof; provided, however,
          that if within five (5) years from the date of expiration of the
          primary term hereof Lessee shall have failed to make, or make
          arrangements for by executed contract or contracts, a bona fide
          commercial sale of one or more Leased Substances then Lessor, at its
          option, may consider Lessee in default hereunder. Additionally, should
          Lessee fail to make any annual payment herein provided for on or
          before a particular anniversary date, Lessor may, at its option,
          consider Lessee in default hereunder."


     4.   That the royalty clause rider which appears on Page 3 of said lease is
          hereby deleted in its entirety and the following is hereby substituted
          therefor:

          "Royalties payable hereunder shall never be less than Fifteen Dollars
          ($15.00) per acre per year for the lands then covered by this Lease
          plus the amount of taxes levied or assessed against production or the
          right to produce Leased Substances from the lands covered by this
          Lease that are paid by Lessor pursuant to Paragraph 12 hereof."

     5.   That the quitclaim clause which appears on Page 4 of said lease is
          hereby deleted in its entirety and the following is hereby substituted
          therefor:

          "9. Notwithstanding any other provisions of this lease, and in
          consideration of the payment made by the Lessee to the Lessor for the
          execution of this lease, Lessee shall have the right at any time prior
          to or after default hereunder, to quitclaim and surrender to Lessor
          all right, title


                                        3


          and interest of Lessee in and to the leased land, and thereupon all
          rights and obligations of the parties hereto one to the other shall
          cease and terminate as to the lands or areas so quitclaimed and
          surrendered, save and except as to any then accrued monetary
          obligations or royalty obligations of Lessee then payable as to which
          Lessee shall remain liable to Lessor.

     As hereby amended said lease shall be and remain in full force and effect
as to all its terms and provisions.

     This agreement shall be binding upon and shall inure to the benefit of the
heirs personal representatives, successors and assigns of the parties hereto.

     This agreement may be executed in any number of counterparts with the same
force and effect as though all parties signed the same document.

     IN WITNESS WHEREOF, the parties hereto have executed this instrument the
day and year first hereinabove written.

                                         /s/ Holly Oberly Thomson
                                         ---------------------------------------
                                         Holly Oberly Thomson, also known as
                                         Holly F. Oberly Thomson, also know
                                         Holly Felicia Thomson
                                         LESSOR

                                         UNION OIL COMPANY OF CALIFORNIA
                                         By __________________________
                                            Its Attorney in Fact
                                         LESSEE






                                        4



CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                                                 EXHIBIT 10.4.20


                                             Lease and Agreement
                                             Union Oil Company of California

                                  [UNION LOGO]

     THIS LEASE AND AGREEMENT, made and entered into as of this 14th day of
June, 1971, by and between FITZHUGH LEE BREWER, JR., a married man as his
separate property, DONNA HAWK, a married woman as her separate property, and TED
DRAPER and HELEN DRAPER, husband and wife hereinafter referred to as "Lessor",
whether one or more, and UNION OIL COMPANY OF CALIFORNIA, a California
corporation, hereinafter referred to as "Lessee".

     WITNESSETH: That Lessor, for and in consideration of Ten Dollars ($10.00)
in hand paid to Lessor by Lessee, the rentals provided for hereinafter, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged and in consideration of the covenants and agreements
hereinafter contained by the Lessee to be kept and performed. Lessor has
granted, leased, let and demised and by these presents does grant, lease, let
and demise to Lessee, its grantees, successors and assigns, upon and subject to
the terms and conditions hereinafter set forth, all that certain land (herein
sometimes referred to as the "leased land") situate in the County of Imperial,
State of California, and more particularly described as follows, to-wit:

     Tract 47-1/2 and Lot 7, Subdivision of Tract 48, Township 16 South, Range
     14 East, S.B.M., as per Licensed Surveyor's Map filed in Book 2, Page 7,
     Record of Surveys, in the office of the County Recorder of said County.

(deemed to contain, for the purposes hereof, 640.00 acres, whether there be
more or less) with the sole and exclusive right to Lessee to explore for (by
such methods as it may desire), drill for, produce, extract, take, remove and
sell hot water, steam and thermal energy and extractable minerals from, and to
store, utilize, process, convert and otherwise treat such hot water, steam and
thermal energy upon, said land, and to extract any extractable minerals during
the term hereof, and to inject or reinject in the leased land effluence from
wells located on the leased land or on lands in the vicinity thereof, with the
right of entry on the leased land and use and occupancy thereof at all times for
said purposes and the furtherance thereof, including the right to construct, use
and maintain thereon and to remove therefrom structures, facilities and
installations, pipe lines, utility lines, power and transmission lines. Further,
the Lessee is hereby granted the use of roads and ponds on said land together
with such rights of way and easements across said land for the construction of
roads, ponds, pipe lines, power and telephone transmission lines as are
necessary or convenient for the exploration, operation and development of Leased
Substances on the leased land or in the vicinity thereof. In the event this
lease should terminate with respect to all other rights for any reason, the
rights herein granted with respect to such roads, ponds, rights of way and/or
easements as are being used at the time of such termination shall remain in
effect so long as such roads, ponds, rights of way and/or easements are being
used by the Lessee, its successors and assigns. Following such termination,
Lessee agrees to pay an annual rental during the period of use at the rate of
ten per cent (10%) of the then current value used in tax assessments of the land
occupied by such roads, ponds, rights of way and/or easements being used. The
possession by Lessee of the leased land shall be sole and exclusive for the
purposes hereof and for purposes incident or related thereto, excepting that




Lessor reserves the right to use and occupy said land, or to lease or otherwise
deal with the same, without unreasonable interference with Lessee's rights, for
mining or extraction and utilization of minerals lying on the surface of or in
vein deposits on or in said land, or for the extraction of oil, natural
hydrocarbon gas and other hydrocarbon substances, or for any and all uses other
than the use and rights permitted to Lessee hereunder. Lessee agrees to conduct
its activities in a manner which will not unreasonably interfere with the rights
reserved to Lessor. The leased land includes also any rights of Lessor,
presently owned or hereafter acquired, in and under roads, underlying ditches,
and rights of way traversing or adjacent to said land.

     For the purposes hereof the following definitions shall apply:

     (a) The terms "hot water", "steam" and "thermal energy" shall mean natural
geothermal water and/or steam, and shall also mean the natural heat of the earth
and the energy present in, resulting from or created by, or which may be
extracted from, the natural heat of the earth or the heat present below the
surface of the earth, in whatever form such heat or energy occurs;

     (b) The term "extractable minerals" shall mean any minerals in solution in
the well effluence and all minerals and gases produced from or by means of any
well or wells on the leased land or by means of condensing steam or processing
water produced from or the effluence from any such well or wells; said term
shall also include any water so produced or obtained from condensation of steam;
and further provided that the term "gases" shall not include hydrocarbon gases
that can be produced separately from the hot water, steam and associated
minerals;

     (c) The term "Leased Substances" shall collectively refer to the matter,
substances and resources, defined in (a) and (b) above, that are the subject of
this lease;

     (d) The term "power potential" as used herein with respect to any well or
wells shall mean the quantity, or units, of energy capable of being recovered
from the hot water, steam or thermal energy produced therefrom by means of any
energy conversion or utilization facility (including, but not limited to,
electrical generating facilities) or equipment designed for use thereof;

     (e) The term "sufficient power potential" as used herein shall be deemed to
mean that power potential which, in the judgment of Lessee shaft be sufficient
for the commercial sale or utilization thereof, or shall warrant the
construction of facilities for the commercial sale or other utilization thereof,
or shall justify additional drilling or other operations on the leased land;

     (f) The word "commercial" used in connection with various phrases herein
shall mean those quantities of Leased Substances produced, sold or used, the
value of which, after deducting Lessee's operating costs (or extraction costs in
case of extractable minerals), will provide to Lessee a net return over such
costs sufficient to cause Lessee to continue production thereof or to elect to
proceed with further development or exploratory operations on the leased land.

     The terms and conditions of this Lease and Agreement are as follows,
to-wit;

     1. This lease shall be for a term of ten (10) years from and after the date
hereof (herein called "primary term") and so long thereafter as Leased
Substances, or any of them, be derived or produced in commercial quantities from
the leased land or lands pooled or combined therewith,


                                       2


and for so long, as well, as Lessee is prevented from producing same, or the
obligations of Lessee hereunder are suspended, for the causes hereinafter set
forth.

     If at the expiration of the primary term Lessee has not completed one or
more wells on the leased land, or land pooled therewith, separately or
collectively producing or being capable of producing steam of sufficient power
potential and/or extractable minerals in commercial quantities but Lessee is
then engaged in operations for drilling or reworking of any well on the leased
land or land pooled therewith, this lease shall remain in force so long as
drilling or reworking operations are prosecuted (whether on the same or
different wells) with no cessation of more than six (6) months, and if they
result in production or the establishment to the satisfaction of the Lessee of
the existence of sufficient power potential and/or extractable minerals in
commercial quantities, such well or wells will be deemed to have been completed
and such existence so established during the primary term of this lease.

     2. It is understood and agreed that the initial consideration paid upon the
execution hereof covers not only the privileges granted to the date when a
rental is payable as hereinafter provided, but any and all other rights
conferred hereunder. If on or before one (1) year from the date hereof Lessee
has not drilled such well or wells on the leased land or land pooled therewith
as to indicate or establish to the satisfaction of Lessee the existence of
sufficient power potential and/or extractable minerals in commercial quantities,
then, but subject to Lessee's right of surrender, on or before said anniversary
date, Lessee shall pay or tender to Lessor an annual rental in the amount of
*** Dollars ($***), which shall constitute rental until the next anniversary
date hereof, and thereafter Lessee shall, on or before each succeeding
anniversary date during the primary term hereunder, pay or tender to Lessor an
annual rental in the aforesaid amount, this until such time as from the drilling
of well or wells on the leased land, or land pooled therewith, there has been
established to the satisfaction of the Lessee the existence of sufficient power
potential and/or extractable minerals in commercial quantities. Upon such
establishing as aforesaid, Lessee may nevertheless continue to pay or tender
annual rental payments on or before each anniversary date, this until Lessee has
commenced the actual sale of one or more Leased Substances, and so long as such
annual rental payments be so paid or tendered this lease shall remain in force
and effect, even though thereby extended past the primary term, and all payments
so paid or tendered after the expiration of said primary term shall be deemed
advance royalties, and so long as same are paid each well or wells shall be
deemed to be actually producing one or more Leased Substances in commercial
quantities under the terms hereof; provided, however, that if within five (5)
years from the date of expiration of the primary term hereof Lessee shall have
failed to make, or make arrangements for by executed contract or contracts, a
bona fide commercial sale of one or more Leased Substances then Lessor, at its
option, may consider Lessee in default hereunder. Additionally, should Lessee
fail to make any annual payment herein provided for on or before a particular
anniversary date, Lessor may, at its option, consider Lessee in default
hereunder.

     3. Lessee shall pay to Lessor as royalty ***


*** Confidential material redacted and filed separately with the Commission.

                                       3


*** Lessee shall pay to Lessor on or before the twenty-fifth day of each month
the royalties accrued and payable for the preceding calendar month, or on or
before the twenty-fifth day of the month next following that in which Lessee
receives payment therefor from the purchaser thereof, whichever method shall
apply, and in making such royalty payments Lessee shall deliver to Lessor
statements setting forth the basis for computation and determination of such
royalty.

     Lessee shall not be required to account to Lessor for or to pay any royalty
on hot water, steam, thermal energy or extractable minerals produced by Lessee
on the leased land which are not utilized, saved and sold, or which are used by
Lessee in its operations on or with respect to the leased land for or in
connection with the developing, recovering, producing, extracting and/or
processing of hot water, steam and/or minerals in solution or in facilities used
in connection therewith, including operations of facilities for the generation
of electric power, or which are unavoidably lost.

     Lessee shall have the right, from time to time and at any time, to
commingle (for purposes of storing, transporting, utililizing, selling or
processing, or any of them) the or any of the Leased Substances produced or
extracted from production from the leased land or lands pooled therewith with
like Leased Substances, or any of them, produced from other lands or units in
the vicinity of the leased land, and in the event of such commingling Lessee
shall meter, gauge or measure the production from the leased land, or from the
unit or units including same or other units or lands, as the case may be, and
compute and pay Lessor's royalty payable under the provisions hereof on the
basis of such production so determined or allocated, as the case may be.

     4. Lessee may, at any time or from time to time as a recurring right,
either before of after production but within twenty (20) years from the date
hereof, for drilling, development, or operating purposes, pool, unitize or
combine all or any part of the leased land into a unit with any other land or
lands or lease or leases (whether held by Lessee or others) adjacent, adjoining
or in the immediate vicinity of the leased land which Lessee desires to develop
or operate as a unit, provided that the total acreage to be embraced within any
such drilling, development, or operating unit shall not exceed one thousand nine
hundred twenty (1,920) acres, plus an acreage tolerance of Ten Percent (10%).
Such a unit shall become in existence upon Lessee's filing in the office of the
County Recorder in the county in which the leased land is situated a notice of
such unitization, describing said unit. Lessee shall also mail a copy of such
notice to Lessor. Any well (whether or not Lessee's well) commenced, drilled,
drilling and/or producing or being capable of producing in any part of such unit
shall for all purposes of this lease be deemed a well commenced, drilled,
drilling and/or producing on the leased land, and Lessee shall have the same
rights and obligations with respect thereto and to drilling and producing
operations upon the

*** Confidential material redacted and filed separately with the Commission.


                                       4


lands from time to time included within any such unit as Lessee would have if
such lands constituted the leased land; provided, however, that notwithstanding
this or any other provision or provisions of this lease to the contrary:

     (1) production as to which royalty is payable from any such well or wells
drilled upon any such unit, whether located upon the leased land or other lands,
shall be allocated to the leased land in the proportion that the surface acreage
of the leased land in such unit bears to the total surface acreage of such unit,
and such allocated portion thereof shall for all purposes of this lease be
considered as having been produced from the leased land, and the royalty payable
under this lease with respect to the leased land included in such unit shall be
payable only upon that proportion of such production so allocated thereto, and,

     (2) if any taxes of any kind are levied or assessed (other than taxes on
the land and on Lessor's improvements), any portion of which is chargeble to
Lessor under Paragraph 12 hereof, then the share of such taxes to be borne by
Lessor as provided in this lease, shall be in proportion to the share of the
production from such unit allocated to the leased land.

     Allocation as aforesaid of production from any such unit, whether to the
leased land or in like manner to other lands therein, shall continue
notwithstanding any termination, either in whole or in part (by surrender,
forfeiture or otherwise), of this or any other lease covering lands in such unit
until such time as the owner of such lands so terminated shall enter into an
agreement to drill for or produce or shall drill for or produce or permit or
cause the drilling for or production from any part of such lands, whereupon all
such lands formerly included in such unit and as to which the lease covering the
same shall have terminated shall be excluded in determining the production to be
allocated to the respective lands in such unit; additionally, in the event of
the failure of Lessor's, or any other owner's, title as to any portion of the
land included in any such unit, such portion of such land shall likewise be
excluded in allocating production from such unit; provided, however, Lessee
shall not be held to account for any production allocated to any lands excluded
from any such operating unit unless and until Lessee has actual knowledge of the
aforesaid circumstances requiring such exclusion. Any exclusion shall be deemed
effective the first day of the month next following the date upon which such
exclusion becomes finally established.

     Lessee may, at its sole option, at any time when there is no production in
such unit of Leased Substances in quantities deemed paying by Lessee, terminate
such unit by a written declaration thereof, in the same manner in which it was
created.

     5. At such time as Lessee shall have drilled and completed such well or
wells on the leased land or land pooled therewith which shall indicate to the
satisfaction of Lessee a sufficient power potential, or the existence of
extractable minerals in commercial quantities, Lessee may at any time thereafter
construct and install on the leased land facilities for the commercial sale or
use of hot water, steam or thermal energy produced from the leased land or lands
in the vicinity thereof or pooled therewith, or for the extraction of
extractable minerals, or for development of electric power from the use of steam
or thermal energy produced from the leased land or lands in the vicinity thereof
or pooled therewith.

                                       5


     6. Lessee shall have the right to drill such well or wells on the leased
land as Lessee may deem desirable for the purposes hereof, including wells for
injection or re-injection purposes; provided, however, that Lessee agrees to
utilize to such purpose or purposes only so much of the leased land as shall be
reasonably necessary for Lessee's operations and activities thereon. No well
shall be drilled within one hundred (100) feet of any residence or barn now on
said land without Lessor's consent. Lessee shall have free use of water from
said land for all operations thereon or on land pooled therewith, provided that
such free use shall not interfere with Lessor's own use for domestic,
commercial, stock or agricultural purposes, nor interfere with any contractual
commitments of Lessor relating thereto and existing on the date hereof. Lessee
shall not be entitled to free use of any water which has been or is being
purchased by Lessor.

     Lessee agrees to fence all sump holes or other excavations, and upon
abandonment of any well on the leased land, or the termination of the lease,
Lessee shall level and fill all sump holes and excavations, shall remove all
debris and shall leave the locations or premises used by Lessee in a clean and
sanitary condition.

     Lessee shall protect said land against liens of every character arising
from its operations thereon. Lessee, at its own ex-_____________ shall obtain
and thereafter while this lease is in effect shall main-__________

     6A Notwithstanding anything to the contrary contained herein, Lessee agrees
to hold Lessor harmless as to all losses of agricultural rental and all claims
and demands of any nature whatsoever, including damages, expenses, costs and
attorneys' fees, in any claim against or loss by Lessor based upon or caused by
Lessee's activities on the leased land.

     7. Lessor, or its agents, at Lessor's sole risk, may at all times examine
said land and the workings, installations and structures thereon and operations
of Lessee thereon, and may at reasonable times inspect the books and records of
Lessee with respect to matters pertaining to the payment of royalties to Lessor.

     8. Upon the violation of any of the terms and conditions of this lease by
Lessee (including but not limited to payment of rental and/or advance royalty)
and the failure of Lessee to, as to monetary matters, make payment, and as to
other violations begin in good faith to remedy the same, within sixty (60) days
after written notice from Lessor so to do, specifying in said notice the nature
of such default, then at the option of Lessor this lease shall forthwith cease
and terminate and all rights of Lessee in and to the leased land shall be at an
end, save and excepting five (5) acres surrounding each and any well then
producing or capable of producing or being drilled, and in respect to which
Lessee shall not be in default, together with the rights, rights of way and
easements which may be retained by Lessee by virtue of the granting clause of
this lease, and together with rights granted Lessee in Paragraph 5, hereof.

     9. Notwithstanding any other provisions of this lease, and in consideration
of the payment made by the Lessee to the Lessor for the execution of this lease,
Lessee shall have the


                                       6


right at any time prior to or after default hereunder, to quitclaim and
surrender to Lessor all right, title and interest of Lessee in and to the leased
land or any part thereof, and thereupon all rights and obligations of the
parties hereto one to the other shall cease and terminate as to the lands or
areas so quitclaimed and surrendered, save and except as to any then accrued
monetary obligations or royalty obligations of Lessee then payable as to which
Lessee shall remain liable to Lessor, and save and except the rights, rights of
way and easements which may be retained by Lessee by virtue of the granting
clause of this lease, and provided that in the event of a partial quitclaim and
surrender, any future rentals will be reduced proportionately by the number of
acres in the area so quitclaimed and surrendered.

     10. In the event Lessor at the time of making this lease owns a less
interest in the leased land than One Hundred Percent (100%) of the rights and
interests herein granted or leased to Lessee, then the rentals and royalties
accruing hereunder shall be paid to Lessor only in the proportions which
Lessor's interest bears to a One Hundred Percent (100%) interest therein in the
leased land. Notwithstanding the foregoing, should Lessor hereafter acquire any
additional right, title or interest in or to the leased land, it shall be
subject to the provisions hereof to the same extent as if owned by Lessor at the
date hereof, and any increase in payments of money hereunder necessitated
thereby shall commence with the payment next following receipt by Lessee of
satisfactory evidence of Lessor's acquisition of such additional interest.

     11. Lessor hereby warrants and agrees to defend title to the leased land
and agrees that Lessee, at its option, may pay and discharge any taxes,
mortgages, trust deeds or other liens or encumbrances existing, levied or
assessed on or against the leased land, and in the event Lessee exercises such
option Lessee shall be subrogated to the rights of any holder or holders
thereof, and shall have, among other rights, the right of applying to the
discharge of any such mortgage, tax or other lien or encumbrance any royalties
or rentals accruing to Lessor hereunder.

     12. Lessee shall pay all taxes levied on Lessee's structures and
improvements placed on the leased land by Lessee. Lessee shall pay 90% and the
Lessor shall pay 10% of any taxes assessed against any Leased Substances stored
on the leased land. In the event any taxes are levied or assessed against the
right to produce Leased Substances from the leased land or in the event any
increase in the taxes levied or assessed against the leased land shall be based
upon the production from the leased land of Leased Substances, then in either
such event Lessee shall pay 90% of any such taxes or increase, as the case may
be, and Lessor shall pay 10% thereof. Lessor shall pay all taxes levied or
assessed against the leased land as such without reference to the production of
Leased Substances therefrom and shall pay all taxes levied and assessed against
any and all rights in or to or with respect to the leased land not covered by
this lease and shall pay all taxes levied and assessed against all structures
and improvements owned by Lessor or placed on the leased land by or pursuant to
permission of Lessor.

     13. The rights of either party hereunder may be assigned in whole or in
part, and the right and privilege so to do is hereby reserved by each party, and
the provisions hereof shall extend to the heirs, successors and assigns of the
parties hereto, but no change or division in ownership of the land, rentals or
royalties, however accomplished, shall operate to enlarge the obligations or
diminish the rights of Lessee, and Lessee may continue to operate the leased
land and to pay and settle rentals or royalties as an entirety, and no such
change in ownership shall be binding upon Lessee until the expiration of thirty
(30) days after Lessee is furnished with


                                       7


satisfactory written evidence thereof. In the event of assignment of this lease
as to a segregated portion of said land, the rentals payable hereunder shall be
apportionable between the several leasehold owners ratably according to the
surface area of each, and default in rental payment by one shall not affect the
rights of other leasehold owners hereunder.

     14. The obligations of Lessee hereunder shall be suspended and the term of
this lease shall be extended, as the case may be, while Lessee is prevented from
complying therewith, in whole or in part, by strikes, lockouts, riots, actions
of the elements, accidents, delays in transportation, inability to secure labor
or materials in the open market, laws, rules or regulations of any federal,
state, municipal or other governmental agency, authority or representative or
other matters or conditions beyond the reasonable control of Lessee, whether or
not similar to the conditions or matters herein specifically enumerated.

     If at any time after the expiration of fifteen (15) years from date hereof
the production of all Leased Substances cease for any cause other than one or
more of the causes hereinabove enumerated, this lease shall nevertheless remain
in full force and effect for an additional period of one (1) year from cessation
and thereafter if, and so long as, Lessee commences and continues diligently and
in good faith the steps, operations or procedures to cause a resumption of such
production (either through the existing wells or the drilling of new wells),
until such production be resumed.


                                       8


     15. All statements of production and royalty and all payments to be made by
Lessee to Lessor hereunder shall be sent to the persons hereinafter set forth,
respectively, at the addresses indicated and each such person shall be entitled
to receive that portion of the total rentals and royalty payable hereunder as is
hereinafter set forth after the name of such person:

     Lessee shall, upon notification of change of ownership in the lands or in
rentals or royalties hereunder, as provided in Paragraph 13 hereof, divide and
distribute the same to the new owners of such interests; provided, however, that
if at any time there are three or more persons entitled to rentals or royalties
hereunder, Lessee may, at its option, withhold payment of such rentals or
royalties, until a majority in interest of such persons designate in writing in
a recordable instrument delivered to Lessee, a bank, trust company on
corporation, as a common agent and depositary, to receive all payments due
hereunder to such persons. Such designation may be changed at any time in the
same manner. Delivery of all statements and payments hereunder may be made by
depositing the same in the United States mail duly addressed to Lessor at the
above address or adds or to such agent and depositary which shall constitute
full performance of Lessee's obligation to make such delivery In the event that
the amount payable under this lease shall result in a payment of less than Five
Dollars ($5.00) becoming due Lessor, Lessee may, at its option, withhold and
accrue sufficient periodic payments until the total due Lessor exceeds Five
Dollars($5.00).

     16. Any notice herein required or permitted to be given or furnished by one
party to the other shall be in writing. Delivery of such written notice to
Lessor shall be made by depositing the same in the United States mail duly
certified and addressed to Lessor at 1121 North Cerritos, Fullerton California
and delivery of such written notice to Lessee shall be made by depositing the
same in the United States mail duly certified and addressed to Lessee at Union
Oil Center, 461 South Boylston Street, Los Angeles, California 90017. Either
party hereto may by written notice to the other party change its address to any
other location.

     17. In the event any part or portion or provision of this instrument shall
be found or declared to be null, void or unenforceable for any reason whatsoever
by any Court of competent jurisdiction or any governmental agency having
authority thereover, then and in such event only


                                       9


such part, portion or provision shall be affected thereby, and such finding,
ruling or decision shall not in any way affect the remainder of this instrument
or any of the other terms or condition hereof, which said remaining terms and
conditions shall remain binding, valid and subsisting and in full force and
effect between the parties hereto, it being specifically understood and agreed
that the provisions hereof are severable for the purposes of the provisions of
this clause. In this connection, this lease shall not in any event extend beyond
such term as may be legally permissible under present applicable laws, and
should any such applicable law limit the term hereof to less than that herein
provided, then this lease shall not be void but shall be deemed to be in
existence for such term and no longer.

     18. If more than one person is named as a Lessor herein and one or more of
them fails to execute this lease, said lease shall nevertheless (when accepted
by Lessee) become effective as a lease from such of said named parties Lessor as
may have executed the same.

     19. This lease may be executed in any number of counterparts and all such
counterparts shall be deemed to constitute a single lease and the execution of
one counterpart by any party Lessor shall have the same force and effect as if
such party had signed all the other counterparts.

     20. This Lease and Agreement and all of the terms, covenants and conditions
hereof shall extend to the benefit of and be binding upon the respective heirs,
successors and assigns of the parties hereto.

     21. Any portion of the surface of the leased land used by Lessee in its
operations shall be subject to an annual rental payment, payable in advance on
the date the use begins and yearly thereafter until the use is terminated, equal
to rentals paid for comparable lands in the area for agricultural purposes, but
such rental shall not exceed $100.00 per acre per year. Further, the Lessee
recognizes that surface of the leased land is now subject to an unrecorded lease
for agricultural purposes, and agrees to recognize the rights of the Lessee of
said agricultural lease so long as his present lease is valid together with any
extensions of the lease period and/or amendments thereto. The Lessee herein
agrees with the Lessor to enter into negotiations with the Lessee of said
agricultural lease regarding the use of the surface prior to any operations on
the leased land by the Lessee herein.

     IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed as of the date hereinabove first written.


/s/ Indecipherable                         /s/ Fitzhugh Lee Brewer, Jr.
---------------------------------------    -------------------------------------
___ Harris, Subscribing Witness to the     Fitzhugh Lee Brewer, Jr.
signature of Fitzhugh Lee Brewer, Jr.

/s/ Indecipherable                         /s/ Donna Hawk
---------------------------------------    -------------------------------------
___ Harris, Subscribing Witness to the     Donna Hawk
signature of Donna Hawk



                                       10


/s/ Indecipherable                         /s/ Ted Draper
---------------------------------------    -------------------------------------
___ Harris, Subscribing Witness to the     Ted Draper
signature of Ted Draper

/s/ Indecipherable                         /s/ Helen Draper
---------------------------------------    -------------------------------------
___ Harris, Subscribing Witness to the     Helen Draper
signature of Helen Draper                                         Lessor

                                           UNION OIL COMPANY OF CALIFORNIA

                                           By /s/ B.J. Taylor
                                              ----------------------------------
                                                                      LESSEE

                                                      B.J. TAYLOR
                                                 ITS ATTORNEY-IN-FACT







                                       11




CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                                                 Exhibit 10.4.21


                                  Lease and Agreement
                                  Union Oil Company of California



                                 [COMPANY LOGO]

              THIS LEASE AND AGREEMENT, made and entered into as of this 13th
day of May, 1971, by and between MATHEW J. LA BRUCHERIE and JANE E. LA
BRUCHERIE, HUSBAND AND WIFE; and ROBERT T. O'DELL and PHYLLIS M. O'DELL, husband
and wife hereinafter referred to as "Lessor", whether one or more, and UNION OIL
COMPANY OF CALIFORNIA, a California corporation, hereinafter referred to as
"Lessee",

              WITNESSETH: That Lessor, for and in consideration of Ten Dollars
($10.00) in hand paid to Lessor by Lessee, the rentals provided for hereinafter,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged and in consideration of the covenants and agreements
hereinafter contained by the Lessee to be kept and performed, Lessor has
granted, leased, let and demised and by these presents does grant, lease, let
and demise to Lessee, its grantees, successors and assigns, upon and subject to
the terms and conditions hereinafter set forth, all that certain land (herein
sometimes referred to as the "leased land") situate in the County of IMPERIAL,
State of CALIFORNIA, and more particularly described as follows, to-wit:

PARCEL 1:  Lot 29, subdivision of Tract 48, Township 16 South, Range 14 East,
--------   S.B.B. & M., 71.30 Acres, more or less, lying Southwesterly of
           Southern Pacific Railroad.

PARCEL 2:  Lot 28, subdivision of Tract 48, Township 16 South, Range 14 East,
--------   S.B.B. & M., 82.20 Acres, more or less, lying Northwesterly of
           Southern Pacific Railroad.




(deemed to contain, for the purposes hereof, 154 acres, whether there be more or
less) with the sole and exclusive right to Lessee to explore for (by such
methods as it may desire), drill for, produce, extract, take, remove and sell
hot water, steam and thermal energy and extractable minerals from, and to store,
utilize, process, convert and otherwise treat such hot water, steam and thermal
energy upon, said land, and to extract any extractable minerals during the term
hereof, and to inject or reinject in the leased land effluence from wells
located on the leased land or on lands in the vicinity thereof, with the right
of entry on the leased land and use and occupancy thereof at all times for said
purposes and the furtherance thereof, including the right to construct, use and
maintain thereon and to remove therefrom structures, facilities and

                                      -1-


installations, pipe lines, utility lines, power and transmission lines. Further,
the Lessee is hereby granted the use of roads and ponds on said land together
with such rights of way and easements across said land for the construction of
roads, ponds, pipe lines, power and telephone transmission lines as are
necessary or convenient for the exploration, operation and development of Leased
Substances on the leased land or in the vicinity thereof. In the event this
lease should terminate with respect to all other rights for any reason, the
rights herein granted with respect to such roads, ponds, rights of way and/or
easements as are being used at the time of such termination shall remain in
effect so long as such roads, ponds, rights of way and/or easements are being
used by the Lessee, its successors and assigns. Following such termination,
Lessee agrees to pay an annual rental during the period of use at the rate of
ten per cent (10%) of the then current value used in tax assessments of the land
occupied by such roads, ponds, rights of way and/or easements being used. The
possession by Lessee of the leased land shall be sole and exclusive for the
purposes hereof and for purposes incident or related thereto, excepting that
Lessor reserves the right to use and occupy said land, or to lease or otherwise
deal with the same, without unreasonable interference with Lessee's rights, for
mining or extraction and utilization of minerals lying on the surface of or in
vein deposits on or in said land, or for the extraction of oil, natural
hydrocarbon gas and other hydrocarbon substances, or for any and all uses other
than the use and rights permitted to Lessee hereunder. Lessee agrees to conduct
its activities in a manner which will not unreasonably interfere with the rights
reserved to Lessor. The leased land includes also any rights of Lessor,
presently owned or hereafter acquired, in and under roads, underlying ditches,
and rights of way traversing or adjacent to said land.

For the purposes hereof the following definitions shall apply:

(a) The terms "hot water", "steam" and "thermal energy" shall mean natural
geothermal water and/or steam, and shall also mean the natural heat of the earth
and the energy present in, resulting from or created by, or which may be
extracted from, the natural heat of the earth or the heat present below the
surface of the earth, in whatever form such heat or energy occurs;

(b) The term "extractable minerals" shall mean any minerals in solution in the
well effluence and all minerals and gases produced from or by means of any well
or wells on the leased land or by means of condensing steam or processing water
produced from or the effluence from any such well or wells; said term shall also
include any water so produced or obtained from condensation of steam; and
further provided that the term "gases" shall not include hydrocarbon gases that
can be produced separately from the hot water, steam and associated minerals;

(c) The term "Leased Substances" shall collectively refer to the matter,
substances and resources, defined in (a) and (b) above, that are the subject of
this lease;

(d) The term "power potential" as used herein with respect to any well or wells
shall mean the quantity, or units, of energy capable of being recovered from the
hot water, steam or thermal energy produced therefrom by means of any energy
conversion or utilization facility (including, but not limited to, electrical
generating facilities) or equipment designed for use thereof;

(e) The term "sufficient power potential" as used herein shall be deemed to mean
that power potential which, in the judgment of Lessee shaft be sufficient for
the commercial sale or

                                      -2-


utilization thereof, or shall warrant the construction of facilities for the
commercial sale or other utilization thereof, or shall justify additional
drilling or other operations on the leased land;

(f) The word "commercial" used in connection with various phrases herein shall
mean those quantities of Leased Substances produced, sold or used, the value of
which, after deducting Lessee's operating costs (or extraction costs in case of
extractable minerals), will provide to Lessee a net return over such costs
sufficient to cause Lessee to continue production thereof or to elect to proceed
with further development or exploratory operations on the leased land.

The terms and conditions of this Lease and Agreement are as follows, to-wit;

1. This lease shall be for a term of ten (10) years from and after the date
hereof (herein called "primary term") and so long thereafter as Leased
Substances, or any of them, be derived or produced in commercial quantities from
the leased land or lands pooled or combined therewith, and for so long, as well,
as Lessee is prevented from producing same, or the obligations of Lessee
hereunder are suspended, for the causes hereinafter set forth.

If at the expiration of the primary term Lessee has not completed one or more
wells on the leased land, or land pooled therewith, separately or collectively
producing or being capable of producing steam of sufficient power potential
and/or extractable minerals in commercial quantities but Lessee is then engaged
in operations for drilling or reworking of any well on the leased land or land
pooled therewith, this lease shall remain in force so long as drilling or
reworking operations are prosecuted (whether on the same or different wells)
with no cessation of more than six (6) months, and if they result in production
or the establishment to the satisfaction of the Lessee of the existence of
sufficient power potential and/or extractable minerals in commercial quantities,
such well or wells will be deemed to have been completed and such existence so
established during the primary term of this lease.

         2. It is understood and agreed that the initial consideration paid upon
the execution hereof covers not only the privileges granted to the date when a
rental is payable as hereinafter provided, but any and all other rights
conferred hereunder. If on or before one (1) year from the date hereof Lessee
has not drilled such well or wells on the leased land or land pooled therewith
as to indicate or establish to the satisfaction of Lessee the existence of
sufficient power potential and/or extractable minerals in commercial quantities,
then, but subject to Lessee's right of surrender, on or before said anniversary
date, Lessee shall pay or tender to Lessor an annual rental in the amount of
*** Dollars ($***), which shall constitute rental until the next anniversary
date hereof, and thereafter Lessee shall, on or before each succeeding
anniversary date during the primary term hereunder, pay or tender to Lessor an
annual rental in the aforesaid amount, this until such time as from the drilling
of well or wells on the leased land, or land pooled therewith, there has been
established to the satisfaction of the Lessee the existence of sufficient power
potential and/or extractable minerals in commercial quantities. Upon such
establishing as aforesaid, Lessee may nevertheless continue to pay or tender
annual rental payments on or before each anniversary date, this until Lessee has
commenced the actual sale of one or more Leased Substances, and so long as such
annual rental payments be so paid or tendered this lease shall remain in force
and effect, even though thereby extended past the primary term, and all payments
so paid or tendered after the expiration of said primary term shall be deemed
advance royalties, and so long as same are paid each well or wells

*** Confidential material redacted and filed separately with the Commission.

                                      -3-


shall be deemed to be actually producing one or more Leased Substances in
commercial quantities under the terms hereof; provided, however, that if within
five (5) years from the date of expiration of the primary term hereof Lessee
shall have failed to make, or make arrangements for by executed contract or
contracts, a bona fide commercial sale of one or more Leased Substances then
Lessor, at its option, may consider Lessee in default hereunder. Additionally,
should Lessee fail to make any annual payment herein provided for on or before a
particular anniversary date, Lessor may, at its option, consider Lessee in
default hereunder.

              3. Lessee shall pay to Lessor as royalty ***. Lessee shall pay to
Lessor on or before the twenty-fifth day of the month next the royalties accrued
and payable for the preceding calendar month, or on or before the twenty-fifth
day of the month next following that in which Lessee receives payment therefore
from the purchaser thereof, whichever method shall apply, and in making such
royalty payments Lessee shall deliver to Lessor statements setting forth the
basis for computation and determination of such royalty.

              Lessee shall not be required to account to Lessor for or to pay
any royalty on hot water, steam, thermal energy or extractable minerals produced
by Lessee on the leased land which are not utilized, saved and sold, or which
are used by Lessee in its operations on or with respect to the leased land for
or in connection with the developing, recovering, producing, extracting and/or
processing of hot water, steam and/or minerals in solution or in facilities used
in connection therewith, including operations of facilities for the generation
of electric power, for its own consumption, or which are unavoidably lost.

              Lessee shall have the right, from time to time and at any time, to
commingle (for purposes of storing, transporting, utilizing, selling or
processing, or any of them) the or any of the Leased Substances produced or
extracted from production from the leased land or lands pooled therewith with
the Leased Substances, or any of them, produced from other lands or units in the
vicinity of the leased land, and in the event of such commingling Lessee shall
meter, gauge or measure the production from the leased land, or from the unit or
units including same or other units or lands, as the case may be, and compute
and pay Lessor's royalty payable under the provisions hereof on the basis of
such production so determined or allocated, as the case may be.

*** Confidential material redacted and filed separately with the Commission.

                                      -4-


              4. Lessee may, at any time or from time to time as a recurring
right, either before or after production but within twenty (20) years from the
date hereof, provided this lease is then in effect and Lessee is not in default,
for drilling, development, or operating purposes, pool, utilize or combine all
of the leased land into a unit with any other land or lands or leased or leases
(whether held by Lessee or others) adjacent , adjoining or in the immediate
vicinity of the leased land which Lessee desires to develop or operate as a
unit, provided that the total acreage to be embraced within any such drilling,
development, or operating unit shall not exceed one thousand nine-hundred twenty
(1,920) acres, plus an acreage tolerance of Ten Percent (10%). Such a unit shall
become in existence upon Lessee's filing in the office of the County Recorder in
the county in which the leased land is situated a notice of such unitization ,
describing said unit. Lessee shall also mail a copy of such notice to Lessor.
Any well (whether or not Lessee's well commenced, drilled, drilling and/or
producing or being capable of producing in any part of such unit shall for all
purposes of this lease be deemed a well commenced, drilled, drilling and/or
producing on the leased land, and Lessee shall have the same rights and
obligations with respect thereto and to drilling and producing operations upon
the lands from time to time include within any such unit as Lessee would have if
such lands constituted the leased land; provided, however, that notwithstanding
this or any other provision or provisions of this lease to the contrary:

              (1) production as to which royalty is payable from any such well
or wells drilled upon any such unit, whether located upon the leased land or
other lands, shall be allocated to the leased land in the proportion that the
surface acreage of the leased land in such unit bears to the total surface
acreage of such unit, and such allocated portion thereof shall for all purposes
of this lease be considered as having been produced from the leased land, and
the royalty payable under this lease with respect to the leased land included in
such unit shall be payable only upon that proportion of such production so
allocated thereto, and

              (2) if any taxes of any kind are levied or assessed (other than
taxes on the land and on Lessor's improvements), and a portion of which is
chargeable to Lessor under Paragraph 12 hereof, then the share of such taxes to
be borne by Lessor as provided in this lease, shall be in proportion to the
share of the production from such unit allocated to the leased land.

              Allocation as aforesaid of production from any such unit, whether
to the leased land or in like manner to other land therein, shall continue
notwithstanding any termination, either in whole or in part (by surrender,
forfeiture or otherwise), on this or any other lease covering lands in such unit
until such time as the owner of such lands so terminated shall enter into an
agreement to drill for or produce or shall drill for or produce or permit or
cause the drilling for or production from any part of such lands, whereupon all
such lands formerly included in such unit and as to which the lease covering the
same shall have terminated shall be excluded in determining the production to be
allocated to the respective lands in such unit; additionally, in the event of
the failure of Lessor's, or in any other owner's, title as to any portion of the
land included in any such unit, such portion of such land shall likewise be
excluded in allocating production from such unit; provided, however, Lessee
shall not be held to account for any production allocated to any lands excluded
from any such operating unit unless and until Lessee has actual knowledge of the
aforesaid circumstances requiring such exclusion. Any exclusion shall be deemed
effective the first day of the month next following the date upon which such
exclusion becomes finally established.

                                      -5-


              Lessee may, at its sole option, at any time when there is no
production in such unit of Leased Substances in quantities deemed paying by
Lessee, terminate such unit by a written declaration thereof, in the same manner
in which it was created.

              5. At such time as Lessee shall have drilled and completed such
well or wells on the leased land or land pooled therewith which shall indicate
to the satisfaction of Lessee a sufficient power potential, or the existence of
extractable minerals commercial quantities, Lessee may at any time thereafter
construct and install in the leased land facilities for the commercial sale or
use of hot water, steam or thermal energy produced from the leased land or lands
in the vicinity thereof or pooled therewith, or for the extraction of
extractable minerals, or for development of electric power from the use of steam
or thermal energy produced from the leased land or lands in the vicinity thereof
or pooled therewith.

              6. Lessee shall have the right to drill such well or wells on the
leased land as Lessee may deem desirable for the purposes hereof, including
wells for injection or re-injection purposes; provided, however, that Lessee
agrees to utilize for such purpose or purposes only so much of the leased land
as shall be reasonably necessary for Lessee's operations and activities thereon.
No well shall be drilled within one hundred (100) feet of any residence or barn
now on said land without Lessor's consent. Lessee shall have free use of water
from said land for all operations thereon or on land pooled therewith, provided
that such free use shall not interfere with Lessor's own use for domestic,
commercial, stock or agricultural purposes, nor interfere with any contractual
commitments of Lessor relating thereto and existing on the date hereof. Lessee
shall not be entitled to free use of any water which has been or is being
purchased by Lessor, Lessee shall not allow the fluid level of any effluence it
may inject or re-inject hereunder to be less than a depth of 200 feet below the
present surface of the leased land.

              Lessee agrees to fence all sump holes or other excavations, and
upon abandonment of any well on the leased land, the termination of the lease,
Lessee shall level and fill all sump holes and excavations, shall remove all
debris and shall leave the locations or premises used by Lessee in a clean and
sanitary condition. Abandonment of any well drilled by Lessee on the leased land
shall be accomplished in accordance with all applicable laws or regulation of
the governing municipality

              Lessee shall protect said land against liens of every character
arising from its operations thereon. Lessee, at its own expense, prior to
commencing operations on the leased land, shall obtain, and thereafter while
this lease is in effect shall maintain, adequate Workmen's Compensation
Insurance. Lessee shall protect Lessor against damages of every kind and
character arising out of the operations or working of Lessee or those under
Lessee's control upon the leased land, but Lessee shall not be liable hereunder
in the event of the negligence or willful misconduct of parties other than
Lessee. In the event any building or personal property be damaged or destroyed,
or grazing or agricultural lands be damaged or destroyed by Lessee's operations,
then Lessee shall be liable for, and to the extent of, the reasonable value
thereof.

              Lessee shall have the right at any time and from time to time to
remove from the leased land any and all casing, machinery, equipment,
structures, installations and property of every kind and character placed upon
said leased land by or pursuant to permission of Lessee,

                                      -6-


provided that if such removal should occur after termination hereof same shall
be completed within a reasonable time thereafter.

              7. Lessor, or its agents, at Lessor's sole risk, may at all times
examine said land and the workings, installations and structures thereon and
operations of Lessee thereon, and may at reasonable times inspect the books and
records of Lessee with respect [MISSING TEXT]

                  6-a     Any provision contained in Paragraph 6 hereof
                          notwithstanding, Lessee shall drill no well from the,
                          surface of the leased land except from drillsites
                          thereon to be designated by Lessor. Lessor agrees to
                          designate, with fifteen (15) days after receiving
                          Lessee's written request to do so, one (1) such
                          drillsite for every forty (40) acres or major fraction
                          thereof of the leased land together with adequate
                          rights of way from such drill site to a public
                          roadway. Such drillsites shall be, as near as
                          practicable in the form of a square containing five
                          (5) acres. In the event pipelines, utility lines,
                          power and/or transmission lines are deemed necessary,
                          Lessee agrees to secure Lessor's consent as to the
                          location of same.

                  6-b     Lessee agrees that upon entering upon the surface of
                          the leased land as provided in Paragraph 6-a hereof,
                          it shall pay Lessor a rental in an amount equal to
                          rentals paid for comparable lands in the area for
                          agricultural purposes but not to exceed *** Dollars
                          ($***) per acre per year. Such rentals shall be
                          payable annually in advance until Leased Substances
                          are produced from the leased land in commercial
                          quantities, until Lessee shall quitclaim its right to
                          enter upon the surface of said land or until this
                          lease shall terminate, whichever shall first occur.

              12. Lessee shall pay all taxes levied on Lessee's structures and
improvements placed on the leased land by Lessee. Lessee shall pay 90% and the
Lessor shall pay 10% of any taxes assessed against any Leased Substances stored
on the leased land. In the event any taxes are levied or assessed against the
right to produce Leased Substances from the leased land or in the event any
increase in the taxes levied or assessed against the leased land shall be based
upon the production from the leased land of Leased Substances, then in either
such event Lessee shall pay 90% of any such taxes or increase, as the case may
be, and Lessor shall pay 10% thereof. Lessor shall pay all taxes levied or
assessed against the leased land as such without reference to the production of
Leased Substances therefrom and shall pay all taxes levied and assessed against
any and all rights in or to or with respect to the leased land not covered by
this lease and shall pay all taxes levied and assessed against all structures
and improvements owned by Lessor or placed on the leased land by or pursuant to
permission of Lessor.

              13. The rights of either party hereunder may be assigned in whole
or in part, and the right and privilege so to do is hereby reserved by each
party, provided, however, that the Lessee shall not assign all or any part of
its interest except to a major oil or utility company, and the provisions hereof
shall extend to the heirs, successors and assigns of the parties hereto, but no
change or division in ownership of the land, rentals or royalties, however
accomplished, shall

*** Confidential material redacted and filed separately with the Commission.

                                      -7-


operate to enlarge the obligations or diminish the rights of Lessee, and Lessee
may continue to operate the leased land and to pay and settle rentals or
royalties as an entirety, and no such change in ownership shall be binding upon
Lessee until the expiration of thirty (30) days after Lessee is furnished with
satisfactory written evidence thereof. In the event of assignment of this lease
as to a segregated portion of said land, the rentals payable hereunder shall be
apportionable between the several leasehold owners ratably according to the
surface area of each, and default in rental payment by one shall not affect the
rights of other leasehold owners hereunder.

              14. The obligations of Lessee hereunder shall be suspended and the
term of this lease shall be extended, as the case may be, while Lessee is
prevented from complying therewith, in whole or in part, by strikes, lockouts,
riots, actions of the elements, accidents, delays in transportation, inability
to secure labor or materials in the open market, laws, rules or regulations of
any federal, state, municipal or other governmental agency, authority or
representative, or other matters or conditions beyond the reasonable control of
Lessee, whether or not similar to the conditions or matters herein specifically
enumerated.

              If any time after the expiration of fifteen (15) years from date
hereof the production of all Leased Substances ceases for any cause other than
one or more of the causes hereinabove enumerated, this lease shall nevertheless
remain in full force and effect for an additional period of one (1) year from
cessation and thereafter if, and so long as, Lessee commences and continues
diligently and in good faith the steps, operations or procedures to cause a
resumption of such production (either through the existing wells or the drilling
of new wells), until such production be resumed.

              15. All statements of production and royalty and all payments to
be made by Lessee to Lessor hereunder shall be sent to the persons hereinafter


set forth, respectively, at the addresses indicated and each such person shall
be entitled to receive that portion of the total rentals and royalty payable
hereunder as is hereinafter set froth after the name of such person:

Mathew J. LaBrucheri and Jane E. LaBrucherie    50%     Taxpayer's Indent

Robert T. O'Dell and Phyllis M. O'Dell          50%     No. 558 24 7862

P.O. Box 1420                                           Taxpayer's Indent
El Centro, California  92243                            No. 000-00-0000

Lessee shall, upon notification of change of ownership in the lands or in
rentals or royalties hereunder, as provided in Paragraph 13 hereof, divide and
distribute the same to the new owners of such interests; provided, however, that
if at any time there are three or more persons entitled to rentals or royalties
hereunder, Lessee may at its option, withhold payment of such rentals or
royalties until a majority in interest of such persons designate in writing in a
recordable instrument delivered to Lessee, a bank, trust company or corporation,
as a common agent and depositary to, receive all payments due hereunder to such
persons. Such designation may be changed at any time in the same manner.
Delivery of all statements and payments hereunder may be made by depositing the
same in the United States mail duly addressed to Lessor at the above address or
addresses or to such agent and depositary which shall constitute full
performance of Lessee's obligation to make such delivery. In the event that the
amount payable under this lease shall result in a payment of less than Five
Dollars ($5.00) becoming due Lessor,

                                      -8-


Lessee may, at its option, withhold and accrue sufficient periodic payments
until the total due Lessor exceeds Five Dollars ($5.00).

              16. Any notice herein required or permitted to be given or
furnished by one party to the other shall be in writing, Delivery of such
written notice to Lessor shall be made by depositing the same in the United
States mail duly certified and addressed to Lessor at P.O. Box 1420 El Centro,
California, 92243 and delivery of such written notice to Lessee shall be made by
depositing the same in the United States mail duly certified and addressed to
Lessee at Union Oil Center, 461 South Boylston Street, Los Angeles, California
90017. Either party hereto may by written notice to the other party change its
address to any other location.

              17. In the event any part or portion or provision of this
instrument shall be found or declared to be null, void or unenforceable for any
reason whatsoever by any Court of competent jurisdiction or any governmental
agency having authority thereover, then and in such event only such part,
portion or provision shall be affected thereby, and such finding, ruling or
decision shall not in any way affect the remainder of this instrument or any of
the other terms or condition hereof, which said remaining terms and conditions
shall remain binding, valid and subsisting and in full force and effect between
the parties hereto, it being specifically understood and agreed that the
provisions hereof are severable for the purposes of the provisions of this
clause. In this connection, this lease shall not in any event extend beyond such
term as may be legally permissible under present applicable laws, and should any
such applicable law limit the term hereof to less than that herein provided,
then this lease shall not be void but shall be deemed to be in existence for
such term and no longer.

              18. If more than one person is named as a Lessor herein and one or
more of them fails to execute this lease, said lease shall nevertheless (when
accepted by Lessee) become effective as a lease from such of said named parties
Lessor as may have executed the same.

              19. This lease may be executed in any number of counterparts and
all such counterparts shall be deemed to constitute a single lease and the
execution of one counterpart by any party Lessor shall have the same force and
effect as if such party had signed all the other counterparts.

              20. This Lease and Agreement and all of the terms, covenants and
conditions hereof shall extend to the benefit of and be binding upon the
respective heirs, successors and assigns of the parties hereto.

                                      -9-


              IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed as of the date hereinabove first written.

/s/ Stanley Harris                             /s/ Matthew J. LaBrucherie
------------------------------------------     ------------------------------
Stanley Harris, Subscribing Witness to the     Matthew J. LaBrucherie
Signature of Mathew J. LaBrucherie


/s/ Stanley Harris                             /s/ Jane E. LaBrucherie
------------------------------------------     ------------------------------
Stanley Harris, Subscribing Witness to the     Jane E. LaBrucherie
Signature of Jane E. LaBrucherie

/s/ Stanley Harris                             /s/ Robert T. O'Dell
------------------------------------------     ------------------------------
Stanley Harris, Subscribing Witness to the     Robert T. O'Dell
Signature of Robert T. O'Dell

/s/ Stanley Harris                             /s/ Phyllis M. O'Dell
------------------------------------------     ------------------------------
Stanley Harris, Subscribing Witness to the     Phyllis M. O'Dell
Signature of Phyllis M. O'Dell
                                                          LESSOR

                                               UNION OIL COMPANY OF CALIFORNIA

                                               By:
                                                  ---------------------------
                                                           LESSEE

                                      -10-


                   AMENDMENT TO GEOTHERMAL LEASE AND AGREEMENT

         THIS AGREEMENT made and entered into as of this fifth day of April,
1976, by and between MATHEW J. LA BRUCHERIE and JANE E. LA BRUCHERIE, husband
and wife; and ROBERT T. O'DELL and PHYLLIS M. O'DELL, husband and wife,
hereinafter called "Lessor" and UNION OIL COMPANY OF CALIFORNIA, a California
corporation, hereinafter called "Lessee";

                              W I T N E S S E T H:

         THAT WHEREAS, Lessee presently holds all of the Lessee's right, title
and interest under that certain Geothermal Lease and Agreement dated May 13,
1971, entered into by and between Lessor and Lessee herein, covering 154.00
acres, more or less, situate in Imperial, more particularly described in said
lease; a Memorandum of which was recorded July 1, 1971 in Book 1311, at Page
996, Official Records of said County and State; and

         WHEREAS, it is the desire of the parties hereto to amend said lease by
modifying the primary term and rental clause thereof as hereinafter provided;

         NOW, THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid
by Lessee to Lessor and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Lessor does hereby lease said land to
Lessee for the same purposes and upon all the same terms, provisions and
conditions, as contained in said lease of May 13, 1971, and the parties hereto
agree:

                  1.  That the first paragraph of the habendum clause which
                      appears on Page 2 of said lease is hereby deleted in its
                      entirety and the following is hereby substituted therefor:

                                      -11-


                      "This lease shall be for a term of ten (10) years from and
                      after the date hereof (herein called "primary term") and
                      so long thereafter as Leased Substances, or any of them,
                      be derived or produced in commercial quantities from the
                      leased land or lands pooled or combined therewith, and for
                      so long, as well, as Lessee is prevented from producing
                      same, or the obligations of Lessee hereunder are
                      suspended, for the causes hereinafter set forth or this
                      lease is continued in force by reason of any other
                      provision hereof."

                  2.  The words and numbers "***" appearing in the 6th and 7th
                      printed lines of Paragraph 2 are hereby deleted and the
                      words and numbers "***" are hereby substituted
                      therefor.

                  3.  The rental payments due hereunder have been paid by Lessee
                      and received by Lessor and operate to defer the
                      commencement of drilling operations until May 13, 1977.

         As hereby amended said lease shall be and remain in full force and
effect as to all its terms and provisions.

         This agreement shall be binding upon and shall inure to the benefit of
the heirs, personal representatives, successors and assigns of the parties
hereto.

         This agreement may be executed in any number of counterparts with the
same force and effect as though all parties signed the same document.

         IN WITNESS WHEREOF, the parties hereto have executed this instrument
the day and year first hereinabove written.

                                 /s/ Mathew J. La Brucherie
                                 ----------------------------------------------
                                 MATHEW J. LA BRUCHERIE

                                 /s/ Jane E. La Brucherie
                                 ----------------------------------------------
                                 JANE E. LA BRUCHERIE

*** Confidential material redacted and filed separately with the Commission.



                                      -12-




                                 /s/ Robert T. O'Dell
                                 ----------------------------------------------
                                 ROBERT T. O'DELL



                                 /s/ Phyllis M. O'Dell
                                 ----------------------------------------------
                                 PHYLLIS M. O'DELL


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


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

                                                    LESSOR

                                 UNION OIL COMPANY OF CALIFORNIA

                                 By:
                                    --------------------------------------------
                                                            Its Attorney in Fact

                                                     LESSEE






                                      -13-




CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                                                 EXHIBIT 10.4.22

                                             Lease and Agreement
                                             Union Oil Company of California

                                      UNION

     THIS LEASE AND AGREEMENT, made and entered into as of this 2nd day of June
1971, by and between DOROTHY GISLER, a widow, JOAN C. HILL and JEAN C. BROWNING

hereinafter referred so as "Lessor", whether one or more, and UNION OIL COMPANY
OF CALIFORNIA, a California corporation, hereinafter referred to as "Lessee".

     WITNESSETH: That Lessor, for and in consideration of Ten Dollars ($10.00)
in hand paid to Lessor by Lessee, the rentals provided for hereinafter, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and in consideration of the covenants and agreements
hereinafter contained by the Lessee to be kept and performed. Lessor has
granted, leased, let and demised and by these presents does grant, lease, let
and demise to Lessee, its grantees, successors and assigns, upon end subject to
the terms and conditions hereinafter set forth, all that certain land (herein
sometimes referred to as the "leased land") situate in the County of Imperial,
State of California, and more particularly described as follows, to-wit:

























(deemed to contain, for the purposes hereof, 204.52 acres, whether there be more
or less) with the sole and exclusive right to Lessee to explore for (by such
methods as it may desire), drill for, produce, extract, take, remove and sell
hot water, steam and thermal energy and extractable

                                                         Lease No. Weber 602051
                                                                         ------



minerals from, and to store, utilize, process, convert and otherwise treat such
hot water, steam and thermal energy upon, said land, and to extract any
extractable minerals during the term hereof, and to inject or reinject in the
leased land effluence from wells located on the leased land or on lands in the
vicinity thereof, with the right of entry on the leased land and use and
occupancy thereof-at all times for said purposes and the furtherance thereof,
including the right to construct, use and maintain thereon and to remove
therefrom structures, facilities and installations, pipe lines, utility lines,
power and transmission lines. Further, the Lessee is hereby granted the use of
roads and ponds on said land together with such rights of way and easements
across said land for the construction of roads, ponds, pipe lines, power and
telephone transmission lines as are necessary or convenient for the exploration,
operation and development of Leased Substances on the leased land or in the
vicinity thereof. In the event this lease should terminate with respect to all
other rights for any reason, the rights herein granted with respect to such
roads, ponds, rights of way and/or easements as are being used at the time of
such termination shall remain in effect so long as such roads, ponds, rights of
way and/or easements are being used by the Lessee, its successors and assigns.
Following such termination, Lessee agrees to pay an annual rental during the
period of use at the rate of ten per cent (10%) of the then current value used
in tax assessments of the land occupied by such roads, ponds, rights of way
and/or easements being used. The possession by Lessee of the leased land shall
be sole and exclusive for the purposes hereof and for purposes incident or
related thereto, excepting that Lessor reserves the right to use and occupy said
land, or to lease or otherwise deal with the same, without unreasonable
interference with Lessee's rights, for mining or extraction and utilization of
minerals lying on the surface of or in vein deposits on or in said land, or for
the extraction of oil, natural hydrocarbon gas and other hydrocarbon substances,
or for any and all uses other than the use and rights permitted to Lessee
hereunder. Lessee agrees to conduct Its activities in a manner which will not
unreasonably interfere with the rights reserved to Lessor. The leased land
includes also any rights of Lessor, presently owned or hereafter acquired, in
and under roads, underlying ditches, and rights of way traversing or adjacent to
said land.

     For the purposes hereof the following definitions shall apply:

     (a) The terms "hot water", "steam" and "thermal energy" shall mean natural
geothermal water and/or steam, and shall also mean the natural heat of the earth
and the energy present in, resulting from or created by, or which may be
extracted from, the natural heat of the earth or the heat present below the
surface of the earth, in whatever form such heat or energy occurs;

     (b) The term "extractable minerals" shall mean any minerals in solution in
the well effluence and all minerals and gases produced from or by means of any
well or wells on the leased land or by means of condensing steam or processing
water produced from or the effluence from any such well or wells; said term
shall also include any water so produced or obtained from condensation of steam;
and further provided that the term "gases" shall not include hydrocarbon gases
that can be produced separately from the hot water, steam and associated
minerals;

     (c) The term "Leased Substances" shall collectively refer to the matter,
substances and resources, defined in (a) and (b) above, that are the subject of
this lease;



     (d) The term "power potential" as used herein with respect to any well or
wells shall mean the quantity, or units, of energy capable of being recovered
from the hot water, steam or thermal energy produced therefrom by means of any
energy conversion or utilization facility (including, but not limited to,
electrical generating facilities) or equipment designed for use thereof;

     (e) The term "sufficient power potential" as used herein shall be deemed to
mean that power potential which, in the judgment of Lessee shall be sufficient
for the commercial sale or utilization thereof, or shall warrant the
construction of facilities for the commercial sale or other utilization thereof,
or shall justify additional drilling or other operations on the leased land;

     (f) The word "commercial" used in connection with various phrases herein
shall mean those quantities of Leased Substances produced, sold or used, the
value of which, after deducting Lessee's operating costs (or extraction costs in
case of extractable minerals), will provide to Lessee a net return over such
costs sufficient to cause Lessee to continue production thereof or to elect to
proceed with further development or exploratory operations on the leased land.

     The terms and conditions of this Lease and Agreement are as follows,
to-wit:

     1. This lease shall be for a term of ten (10) years from and after the date
hereof (herein called "primary term") and so long thereafter as Leased
Substances, or any of them, be derived or produced in commercial quantities from
the leased land or lands pooled or combined therewith, and for so long, as well,
as Lessee is prevented from producing same, or the obligations of Lessee
hereunder are suspended, for the causes hereinafter set forth.

     If at the expiration of the primary term Lessee has not completed one or
more wells on the leased land, or land pooled therewith, separately or
collectively producing or being capable of producing steam of sufficient power
potential and/or extractable minerals in commercial quantities but Lessee is
then engaged in operations for drilling or reworking of any well on the leased
land or land pooled therewith, this lease shall remain in force so long as
drilling or reworking operations are prosecuted (whether on the same or
different wells) with no cessation of more than six (6) months, and if they
result in production or the establishment to the satisfaction of the Lessee of
the existence of sufficient power potential and/or extractable minerals in
commercial quantities, such well or wells will be deemed to have been completed
and such existence so established during the primary term of this lease.

     2. It is understood and agreed that the initial consideration paid upon the
execution hereof covers not only the privileges granted to the date when a
rental is payable as hereinafter provided, but any and all other rights
conferred hereunder. If on or before one (1) year from the date hereof Lessee
has not drilled such well or wells on the leased land or land pooled therewith
as to indicate or establish to the satisfaction of Lessee the existence of
sufficient power potential and/or extractable minerals in commercial quantities,
then, but subject to Lessee's right of surrender, on or before said anniversary
date, Lessee shall pay or tender to Lessor an annual rental in the amount of One
Thousand Twenty-Two and 60/100 - - - - - Dollars ($1,022.60), which shall
constitute rental until the next anniversary date hereof, and thereafter Lessee
shall, on or before each succeeding anniversary date during the primary term
hereunder, pay or tender



to Lessor an annual rental in the aforesaid amount, this until such time as from
the drilling of well or wells on the leased land, or tend pooled therewith,
there has been established to the satisfaction of the Lessee the existence of
sufficient power potential and/or extractable minerals in commercial quantities.
Upon such establishing as aforesaid, Lessee may nevertheless continue to pay or
tender annual rental payments on or before each anniversary date, this until
Lessee has commenced the actual sale of one or more Leased Substances, and so
long as such annual rental payments be so paid or tendered this lease shall
remain in force and effect, even though thereby extended past the primary term,
and all payments so paid or tendered after the expiration of said primary term
shall be deemed advance royalties, and so long as same are paid each well or
wells shall be deemed to be actually producing one or more Leased Substances in
commercial quantities under the terms hereof; provided, however, that if within
five (5) years from the date of expiration of the primary term hereof Lessee
shall have failed to make, or make arrangements for by executed contract or
contracts, a bona fide commercial sale of one or more Leased Substances then
Lessor, at its option, may consider Lessee in default hereunder. Additionally,
should Lessee fail to make any annual payment herein provided for on or before a
particular anniversary date, Lessor may, at its option, consider Lessee in
default hereunder.

     3. Lessee shall pay to Lessor a royalty Ten Percent (10%) of the gross
proceeds received by Lease from the sale of hot water, steam or thermal energy,
as such, produced from the leased land at and as of the point of origin on the
leased land; royalty on steam may be computed and paid for on the basis of
pounds of steam produced, saved and sold by Lessee, or may be computed on the
basis of the number of kilowatt hours of electric power generated by the use of
such steam, but shall be computed and paid for on whatever basis which shall
properly reflect the royalty portion of the gross proceeds received by Lessee
from sale of hot water, steam and thermal energy, as such, produced from the
leased land at and as of the point of origin on the leased land. With respect to
extractable minerals, a royalty Lessee shall pay to Lessor Ten Percent (10%) of
the net proceeds received by Lessee from the sale of any gas (as herein defined)
and from the sale of effluence (containing minerals and/or minerals in solution)
produced and sold from any well or walls on the leased land, or, in the event
Lessee extracts from the effluence minerals and/or minerals in solution Ten
Percent (10%) of the proceeds received by Lessee from the sale of minerals
and/or minerals in solution contained in and extracted from the effluence
produced and sold from such well or wells less costs of transportation and
extraction. Lessee shall pay to Lessor on or before the twenty-fifth day of each
month the royalties accrued and payable for the preceding calendar month, or on
or before the twenty-fifth day of the month next following that in which Lessee
receives payment therefor from the purchaser thereof, whichever method shall
apply, and in making such royalty payments Lessee shall deliver to Lessor
statements setting forth the basis for computation and determination of such
royalty.

     Lessee shall not be required to account to Lessor for or to pay any royalty
on hot water, steam, thermal energy or extractable minerals produced by Lessee
on the leased land which are not utilized, saved and sold, or which are used by
Lessee in its operations on or with respect to the leased land for or in
connection with the developing, recovering, producing, extracting and/or
processing of hot water, steam and/or minerals in solution or in facilities used
in connection therewith, including operations of facilities for the generation
of electric power, or which are unavoidably lost.




     Lessee shall have the right, from time to time and at any time, to
commingle (for purposes of storing, transporting, utilizing, selling or
processing, or any of them) the or any of the Leased Substances produced or
extracted from production from the leased land or lands pooled therewith with
like Leased Substances, or any of them, produced from other lands or units in
the vicinity of the leased land, and in the event of such commingling Lessee
shall meter, gauge or measure the production from the leased land, or from the
unit or units including same or other units or lands, as the case may be, and
compute and pay Lessor's royalty payable under the provisions hereof on the
basis of such production so determined or allocated, as the case may be.

     4. Lessee may, at any time or from time to time as a recurring right,
either before of after production but within twenty (20) years from the date
hereof, for drilling, development, or operating purposes, pool, unitize or
combine all or any part of the leased land into a unit with any other land or
lands or lease or leases (whether held by Lessee or others) adjacent, adjoining
or in the immediate vicinity of the leased land which Lessee desires to develop
or operate as a unit, provided that the total acreage to be embraced within any
such drilling, development, or operating unit shall not exceed one thousand nine
hundred twenty (1,920) acres, plus an acreage tolerance of Ten Percent (10%).
Such a unit shall become in existence upon Lessee's filing in the office of the
County Recorder in the county in which the leased land is situated a notice of
such unitization, describing said unit. Lessee shall also mail a copy of such
notice to Lessor. Any well (whether or not Lessee's well) commenced, drilled,
drilling and/or producing or being capable of producing in any part of such unit
shall for all purposes of this lease be deemed a well commenced, drilled,
drilling and/or producing on the leased land, and Lessee shall have the same
rights and obligations with respect thereto and to drilling and producing
operations upon the lands from time to time included within any such unit a
Lessee would have if such lands constituted the leased land; provided, however,
that notwithstanding this or any other provision or provisions of this lease to
the contrary:

     (1) production as to which royalty is payable from any such well or wells
drilled upon any such unit, whether located upon the leased land or other lands,
shall be allocated to the leased land in the proportion that the surface acreage
of the leased land in such unit bears to the total surface acreage of such unit,
and such allocated portion thereof shall for all purposes of this lease be
considered as having been produced from the leased land, and the royalty payable
under this lease with respect to the leased land included in such unit shall be
payable only upon that proportion of such production so allocated thereto, and,

     (2) if any taxes of any kind are levied or assessed (other than taxes on
the land and on Lessor's improvements), any portion of which is chargeable to
Lessor under Paragraph 12 hereof, then the share of such taxes to be borne by
Lessor as provided in this lease, shall be in proportion to the share of the
production from such unit allocated to the leased land.

     Allocation as aforesaid of production from any such unit, whether to the
leased land or in like manner to other lands therein, shall continue
notwithstanding any termination, either in whole or in part (by surrender,
forfeiture or otherwise), of this or any other lease covering lands in such unit
until such time as the owner of such lands so terminated shall enter into an
agreement to drill for or produce or shall drill for or produce or permit or
cause the drilling for or production from any part of such lands, whereupon all
such lands formerly included in such unit and as to which the lease covering the
same shall have terminated shall be excluded in



determining the production to be allocated to the respective lands in such unit;
additionally, in the event of the failure of Lessor's, or any other owner's,
title as to any portion of the land included in any such unit, such portion of
such land shall likewise be excluded in allocating production from such unit;
provided, however, Lessee shall not be held to account for any production
allocated to any lands excluded from any such operating unit unless and until
Lessee has actual knowledge of the aforesaid circumstances requiring such
exclusion. Any exclusion shall be deemed effective the first day of the month
next following the date upon which such exclusion becomes finally established.

     Lessee may, at its sole option, at any time when there is no production in
such unit of Leased Substances in quantities deemed paying by Lessee, terminate
such unit by a written declaration thereof, in the same manner in which it was
created.

     5. At such time as Lessee shall have drilled and completed such well or
wells on the leased land or land pooled therewith which shall indicate to the
satisfaction of Lessee a sufficient power potential, or the existence of
extractable minerals in commercial quantities, Lessee may at any time thereafter
construct and install on the leased land facilities for the commercial sale or
use of hot water, steam or thermal energy produced from the leased land or lands
in the vicinity thereof or pooled therewith, or for the extraction of
extractable minerals, or for development of electric power from the use of steam
or thermal energy produced from the leased land or lands in the vicinity thereof
or pooled therewith.

     6. Lessee shall have the right to drill such well or wells on the leased
land as Lessee may deem desirable for the purposes hereof, including wells for
injection or re-injection purposes; provided, however, that Lessee agrees to
utilize for such purpose or purposes only so much of the leased land as shall be
reasonably necessary for Lessee's operations and activities thereon. No well
shall be drilled within one hundred (100) feet of any residence or barn now on
said land without Lessor's consent. Lessee shall have free use of water from
said land for all operations thereon or on land pooled therewith, provided that
such free use shall not interfere with Lessor's own use for domestic,
commercial, stock or agricultural purposes, nor interfere with any contractual
commitments of Lessor relating thereto and existing on the date hereof. Lessee
shall not be entitled to free ___________ which has been or is being purchased
by Lessor.

     6-a. Notwithstanding any provisions to the contrary contained herein, this
lease and all rights granted to Lessee hereunder are expressly limited to those
depths lying below 500 feet below the surface of the leased lands and Lessee
shall not have the right to enter upon or use any portion of said leased lands
lying above said depth.

     Lessee shall protect said land against liens of every character arising
from its operation thereon. Lessee, at its own expense, prior to commencing
operations on the leased land, shall obtain, and thereafter while this lease is
in effect shall maintain, adequate Workmens Compensation Insurance. Lessee shall
protect Lessor against damages of every kind and character arising out of the
operations or working of Lessee or those under Lessee's control upon the leased
land, but Lessee shall not be liable hereunder in the event of the negligence or
willful misconduct of parties other than Lessee. In the event any building or
personal property be



damaged or destroyed, or grazing or agricultural lands be destroyed by Lessee's
operations, then Lessee shall be liable for, and to the extent of, the
reasonable value thereof.

     Lessee shall have the right at any time and from time to time to remove
from the leased land any and all casing, mach-

     6-a. Notwithstanding any provisions to the contrary contained herein, this
lease and all rights granted to Lessee hereunder are expressly limited to those
depths lying below 500 feet below the surface of the leased lands and Lessee
shall not have the right to enter upon or use any portion of said leased lands
lying above said depth.

then producing or capable of producing or being drilled, and in respect to which
Lessee shall not be in default, together with the rights, rights of way and
easements which may be retained by Lessee by virtue of the granting clause of
this lease, and together with rights granted Lessee in Paragraph 5, hereof.

     9. Notwithstanding any other provisions of this lease, and in consideration
of the payment made by the Lessee to the Lessor for the execution of this lease,
Lessee shall have the right at any time prior to or after default hereunder, to
quitclaim and surrender to Lessor all right, title and interest of Lessee in and
to the leased land, or any part thereof, and thereupon all rights and
obligations of the parties hereto one to the other shall cease and terminate as
to the lands or areas so quitclaimed and surrendered, save and except as to any
then accrued monetary obligations or royalty obligations of Lessee then payable
as to which Lessee shall remain liable to Lessor, and save and except the
rights, rights of way and easements which may be retained by Lessee by virtue of
the granting clause of this lease, and provided that in the event of a partial
quitclaim and surrender, any future rentals will be reduced proportionately by
the number of acres in the area so quitclaimed and surrendered.

     10. In the event Lessor at the time of making this lease owns a less
interest in the leased land than One Hundred Percent (100%) of the rights and
interests herein granted or leased to Lessee, then the rentals and royalties
accruing hereunder shall be paid to Lessor only in the proportions which
Lessor's interest bears to a One Hundred Percent (100%) interest therein in the
leased land. Notwithstanding the foregoing, should Lessor hereafter acquire any
additional right, title or interest in or to the leased land, it shall be
subject to the provisions hereof to the same extent as if owned by Lessor at the
date hereof, and any increase in payments of money hereunder necessitated
thereby shall commence with the payment next following receipt by Lessee of
satisfactory evidence of Lessor's acquisition of such additional interest.

     11. Lessor hereby warrants and agrees to defend title to the leased land
and agrees that Lessee, at its option, may pay and discharge any taxes,
mortgages, trust deeds or other liens or encumbrances existing, levied or
assessed on or against the leased land, and in the event Lessee exercises such
option, Lessee shall be subrogated to the rights of any holder or holders
thereof, and shall have, among other rights, the right of applying to the
discharge of any such mortgage, tax or other lien or encumbrance any royalties
or rentals accruing to Lessor hereunder.

     12. Lessee shall pay all taxes levied on Lessee's structures and
improvements placed on the leased land by Lessee. Lessee shall pay 90% and the
Lessor shall pay 10% of any taxes



assessed against any Leased Substances stored on the leased land. In the event
any taxes are levied or assessed against the right to produce Leased Substances
from the leased land or in the event any increase in the taxes levied or
assessed against the leased land shall be based upon the production from the
leased land of Leased Substances, then in either such event Lessee shall pay 90%
of any such taxes or increase, as the case may be, and Lessor shall pay 10%
thereof. Lessor shall pay all taxes levied or assessed against the leased land
as such without reference to the production of Leased Substances therefrom and
shall pay all taxes levied and assessed against any and all rights in or to or
with respect to the leased land not covered by this lease and shall pay all
taxes levied and assessed against all structures and improvements owned by
Lessor or placed on the leased land by or pursuant to permission of Lessor.

     13. The rights of either party hereunder may be assigned in whole or in
part, and the right and privilege so to do is hereby reserved by each party, and
the provisions hereof shall extend to the heirs, successors and assigns of the
parties hereto, but no change or division in ownership of the land, rentals or
royalties, however accomplished, shall operate to enlarge the obligations or
diminish the rights of Lessee, and Lessee may continue to operate the leased
land and to pay and settle rentals or royalties as an entirety, and no such
change in ownership shall be binding upon Lessee until the expiration of thirty
(30) days after Lessee is furnished with satisfactory written evidence thereof.
In the event of assignment of this lease as to a segregated portion of said
land, the rentals payable hereunder shall be apportionable between the several
leasehold owners ratably according to the surface area of each, and default in
rental payment by one shall not affect the rights of other leasehold owners
hereunder.

     14. The obligations of Lessee hereunder shall be suspended and the term of
this lease shall be extended, as the case may be, while Lessee is prevented from
complying therewith, in whole or in part, by strikes, lockouts, riots, actions
of the elements, accidents, delays in transportation, inability to secure labor
or materials in the open market, laws, rules or regulations of any federal,
state, municipal or other governmental agency, authority or representative, or
other matters or conditions beyond the reasonable control of Lessee, whether or
not similar to the conditions or matters herein specifically enumerated.

     If at any time after the expiration of fifteen (15) years from date hereof
the production of all Leased Substances ceases for any cause other than one or
more of the causes hereinabove enumerated, this lease shall nevertheless remain
in full force and effect for an additional period of one (1) year from cessation
and thereafter if, and so long as, Lessee commences and continues diligently and
in good faith the steps, operations or procedures to cause a resumption of such
production (either through the existing wells or the drilling of new wells),
until such production be resumed.

     15. All statements of production and royalty and all payments to be made by
Lessee to Lessor hereunder shall be sent to the persons hereinafter set forth,
respectively, at the addresses indicated and each such person shall be entitled
to receive that portion of the total rentals and royalty payable hereunder as is
hereinafter set forth after the name of such person:




Lessee shall, upon notification of change of ownership in the lands or in
rentals or royalties hereunder, as provided in Paragraph 13 hereof, divide and
distribute the same to the new owners of such interests; provided, however, that
if at any time there are three or more persons entitled to rentals or royalties
hereunder, Lessee may, at its option, withhold payment of such rentals or
royalties until a majority in interest of such persons designate in writing in a
recordable instrument delivered to Lessee, a bank, trust company or corporation,
as a common agent and depositary, to receive all payments due hereunder to such
persons. Such designation may be changed at any time in the same manner.
Delivery of all statements and payments hereunder may be made by depositing the
same in the United States mail duly addressed to Lessor at the above address or
addresses or to such agent and depositary which shall constitute full
performance of Lessee's obligation to make such delivery. In the event that the
amount payable under this lease shall result in a payment of less than Five
Dollars ($5.00) becoming due Lessor, Lessee may, at its option, withhold and
accrue sufficient periodic payments until the total due Lessor exceeds Five
Dollars ($5.00).

     16. Any notice herein required or permitted to be given or furnished by one
party to the other shall be in writing. Delivery of such written notice to
Lessor shall be made by depositing the same in the United States mail duly
certified and addressed to Lessor at c/o James R. Moore, Rutan & Tucker, 401
Civic Center Drive West, Santa Ana, California 92701 and delivery of such
written notice to Lessee shall be made by depositing the same in the United
States mail duly certified and addressed to Lessee at Union Oil Center, 461
South Boylston Street, Los Angeles, California 90017. Either party hereto may by
written notice to the other party change its address to any other location.

     17. In the event any part or portion or provision of this instrument shall
be found or declared to be null, void or unenforceable for any reason whatsoever
by any Court of competent jurisdiction or any governmental agency having
authority thereover, then and in such event only such part, portion or provision
shall be affected thereby, and such finding, ruling or decision shall not in any
way affect the remainder of this instrument or any of the other terms or
condition hereof, which said remaining terms and conditions shall remain
binding, valid and subsisting and in full force and effect between the parties
hereto, it being specifically understood and agreed that the provisions hereof
are severable for the purposes of the provisions of this clause. In this
connection, this lease shall not in any event extend beyond such term as may be
legally permissible under present applicable laws, and should any such
applicable law limit the term hereof to less than that herein provided, then
this lease shall not be void but shall be deemed to be in existence for such
term and no longer.

     18. If more than one person is named as a Lessor herein and one or more of
them fails to execute this lease, said lease shall nevertheless (when accepted
by Lessee) become effective as a lease from such of said named parties Lessor as
may have executed the same.



     19. This lease may be executed in any number of counterparts and all such
counterparts shall be deemed to constitute a single lease and the execution of
one counterpart by any party Lessor shall have the same force and effect as if
such party had signed all the other counterparts.

     20. This Lease and Agreement and all of the terms, covenants and conditions
hereof shall extend to the benefit of and be binding upon the respective heirs,
successors and assigns of the parties hereto.

     IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed as of the date hereinabove first written.

                                              /s/
------------------------------------          ----------------------------------
                                                 Dorothy Gisler

                                              /s/
------------------------------------          ----------------------------------
                                                 John C. Hill



                                              /s/
------------------------------------          ----------------------------------
                                                 Jean C. Browning

------------------------------------          ----------------------------------
                 Subscribing Witness                                      Lessor

                                              UNION OIL COMPANY OF CALIFORNIA

                                              By

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



                                                                          Lessee





CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                                                 Exhibit 10.4.23

                         GEOTHERMAL LEASE AND AGREEMENT

     THIS LEASE AND AGREEMENT is made this 15th day of February, 1977, by and
between the undersigned WALTER J. HOLTZ, as Lessor, and MAGMA ENERGY, INC., a
corporation, as Lessee.

     1. WITNESSETH: For and in consideration of ten dollars ($10.00) to the
Lessor paid and other good and valuable consideration, the receipt of which is
hereby acknowledged and in consideration of the covenants and agreements as
herein provided, the Lessor does grant, lease, let and demise unto the Lessee,
its successors and assigns, the land and premises hereinafter described, with
the sole and exclusive right to the Lessee to enter upon and to use and occupy
the said land to explore for, drill for, develop, mine, produce and utilize
geotherma1 steam, geotherma1 fluids, hot water, brines, electric energy and the
heat and energy of the Earth in all its forms (hereinafter called "Geothermal
Resources"), and by-products thereof and products associated therewith (except
oil, gas and other hydrocarbons), and to take, store, remove, dispose of and use
same and for uses and purposes incidental thereto, together with the right to
utilize the leased land and to construct, maintain and use any and all
facilities thereon and therein as may be necessary for Lessee's operations on
the leased land or other land in the vicinity of the leased land and for
utilization of the geotherma1 resources and other products produced therefrom,
including but not limited to well sites, pipelines, power stations and
transmission lines, roads, structures and installations relating thereto,
service facilities,




tanks, ponds, wells for injection or reinjection of waste geothermal resources,
gases and other residual products.

     2. Lessor reserves the exclusive right to utilize said land for all other
purposes which do not unreasonably interfere with Lessee's operations. If
Lessee's operations on the land cause damage or loss of stock, crops, or
property, Lessee shall compensate the injured party for such loss within 90 days
after demand therefore, Lessee agrees to indemnify and hold Lessor harmless from
any loss or injury to any party not a party hereto, by reason of any act or
omission of Lessee during its tenancy hereunder. Lessee before commencing any
operations on the leased land shall procure public liability and property damage
insurance with limits not less than $500,000.00 as to public liability and
$100,000.00 as to property damage, naming Lessor as a co-insured and shall
deliver a certificate of such insurance to Lessor. Lessee through its actions
shall not permit any mechanics lien, or other claim of any kind to become an
encumbrance upon Lessor's title to the leased land. If Lessee fails to take
action to remove any lien or claim that may be filed within 30 days after demand
by Lessor, Lessor at its option, may terminate this lease upon 10 days written
notice.

     3. This lease shall be for a period of five (5) years from the date hereof
(hereinafter called "primary term") and so long thereafter as rent or royalty is
being paid hereunder or any of the aforesaid substances is produced therefrom or
from land pooled or unitized therewith, or drilling, development, testing or
producing operations are conducted thereon, or excused under the terms hereof.

                                       2


     4. In addition to the initial consideration, the first year's rental of
$*** will be paid to Lessor upon the execution of this Lease. Thereafter,
commencing with the first anniversary of the term hereof, Lessee shall pay to
Lessor as rental yearly in advance the sum of *** dollars ($***) per acre per
year for so much of said land as may then still be under this Lease, until such
time as royalties paid to Lessor are equal to or greater than *** dollars ($***)
per acre per year.

     5. The land covered hereby is described in Exhibit "A" attached hereto and
made a part hereof.

     6. Notwithstanding any other provision of this Lease, it is specifically
understood and agreed that if at the end of five (5) years from date of
expiration of the primary term hereof, Lessee has not commenced production and
sale in commercial quantities of geothermal resources, or any other upon which
royalty is payable to Lessor hereunder, or if after commencing production and
sale of such substances, Lessee shall discontinue same for a period of six
months in any calendar year, then Lessee shall default under this Lease and at
Lessor's Option, this Lease may be terminated if Lessee shall fail to remedy
such default as herein provided or written notice of default from Lessor to
Lessee; provided, however, that no default shall be deemed to exist where such
discontinuance of production or sale is caused by governmental regulations or
restrictions, shutdown for repairs, maintenance, modification or enlargement of
Lessee's electric generating facilities, or because of any of the conditions as
set forth in paragraph 15 below.

*** Confidential material redacted and filed separately with the Commission.

                                       3


     7. Any lands required by Lessee for location of well or wells, easements,
rights of way, egress, ingress, pipelines, or other surface or subsurface
facilities of any kind, hereinafter called "Occupied Land", excepting, however,
those facilities referred to in paragraph 9 below, shall be submitted to Lessor
for his consent and approval before operations on such lands or use thereof are
commenced. Unless Lessor dissents to the location or locations submitted within
five days, and offers a substitute location within 10 days of receiving notice
of Lessee's proposed location, Lessee may consider the request as submitted
approved and may proceed with its planned locations on such lands or use
thereof. Lessor shall not be unreasonable or arbitrary as to the selection or
approval of such sites.

     Should Lessor cause the leased land or any portion thereof to be used for
other than agricultural purposes he shall have the right, at his expense, with
the exception of any well or wells, to cause the aforesaid easements, _______ to
be relocated. Any well site shall consist of not more than two sites and there
shall be a limit of one site per 40 acres of leased land. ____________ Lessee
shall continue to pay all royalties attributable to Occupied site.

     8. Lessee shall pay Lessor yearly rental for Occupied Land adjusted
annually, equal to farming rentals being paid per acre to owners of adjacent or
adjoining farm land, but in no case less than $*** per acre per year. The
parties acknowledge that said farming rental is presently $*** per acre per
year.

*** Confidential material redacted and filed separately with the Commission.

                                       4


     9. Lessor shall also make available to the Lessee one site of not more than
five acres in size for a facility or facilities for the generation of electric
power and/or the processing of geothermal resources or by-products thereof. The
location of said site shall be submitted to Lessor for his consent and approval
as provided for in paragraph 7 above in the same manner as though said site
constituted "Occupied Land". In such event, Lessee shall purchase said site,
paying to the Lessor the fair market value thereof. Said fair market value shall
be based upon the highest and best use of said site notwithstanding the fact
that the same may then be devoted to agricultural purposes. If the parties
cannot agree upon the fair market value of such land within 30 days after
exercise of Lessee's option, such value shall be determined by three qualified
appraisers, one to be selected by each of the parties and the third by any judge
of the Imperial County Superior Court. The rules of the American Arbitration
Association shall apply and be binding upon the parties as to any such
valuation. In the event of such sale Lessor shall retain all geothermal and
mineral rights under said site.

     10. Lessee shall pay to Lessor as royalty *** hereof. Should Lessee process
its *** before sale, Lessor's royalties shall bear its proportionate share of
***. Lessee shall pay to Lessor said royalty on the 25th day of each month for
accrued royalties for the preceding calendar month. Lessee shall have the right
to co-mingle the geothermal resources and other substances produced from the
leased land or lands pooled therewith with such substances produced from other
lands

*** Confidential material redacted and filed separately with the Commission.


                                       5


and to pay Lessor's royalty on the basis of production allocable to the leased
land as determined by metering or gauging same. Lessee shall not be required to
account to the Lessor for, or pay royalty on, any product produced by Lessee
from said land and used by it in its operations hereunder. Except for taxes
chargeable to Lessor no deduction from royalties due Lessor will be made without
written approval of Lessor, except as herein provided.

     11. It is understood and agreed by and between the parties hereto that at
any time during the primary term of this Agreement if Lessee shall acquire by
purchase or assignment an interest in any lease executed after the date of this
Agreement and covering lands located within five miles of the land covered
hereby, which lease shall contain a greater Lessor's royalty or a greater annual
per acre rental than is provided by this Agreement, the Lessee shall immediately
increase the corresponding terms of this Agreement so as to afford the Lessor
herein equal terms. In the event of such increase, the Lessee shall promptly
tender to the Lessor for his execution an instrument in writing which shall
contain such increased terms.

     12. In valuing amounts realized or received by Lessee for any thing or
substance sold, utilized or disposed of by Lessee upon which royalty is payable
to Lessor, such amount in no event shall be less than would be obtained as
between parties dealing at arms length and not under substantial common control.

     13. If the Lessor or any party Lessor owns a less interest in the
geothermal resources or by-products hereunder than the entire and undivided fee
estate therein, then


                                       6


the royalty and rental herein provided shall be paid the Lessor or such party
Lessor only in the proportion which his ownership bears to the whole and
undivided fee.

     14. Lessee may, at any time during the life of this Lease, pool, unitized
or combine all or any part of the leased land into a unit (hereinafter called
"Unit") with any other land or lands or leases adjacent, adjoining or in the
immediate vicinity of the leased land for drilling, development, producing or
operating purposes, provided that the total acreage within any such drilling or
operating unit shall not exceed 5,120 acres, plus or minus 10%. Such a Unit
shall be created upon Lessee's filing with the County Recorder, in the county
where the leased land is located, a notice or declaration of creation of such
unit, describing the lands and acreage to be embraced there, and the names of
the lessors and the dates of the respective leases covering such lands. Notice
of and a copy of the creation of a Unit shall be sent to Lessor.

     15. Production as to which royalty is payable from any wells drilled upon
any such Unit, whether located upon the leased land or other lands, shall be
credited to the leased land in the proportion that the acreage of the leased
land in such Unit bears to the total acreage of such Unit. The royalty paid as
herein provided shall be deemed to be the royalty payable to Lessor with respect
to the leased lands hereunder, and all drilling, developing, producing or other
operation by Lessee on any of the unitized land shall for purposes of this
Lease, be deemed to be performed on the leased land.

     16. The obligations of Lessee hereunder shall be suspended, and the Primary
Term shall be extended until expiration of ninety (90) days after removal of
cause for


                                       7


suspension, while the Lessee is prevented or delayed from complying therewith,
in whole or in part, by strikes, lockouts, actions of the elements, accidents,
inability to obtain services or equipment, rules, regulations or restrictions of
any federal, state, municipal or other governmental entity or agency, procedures
relating to environmental matters, the delay in issuance of permits to Lessee
required with respect to any of Lessee's operations hereunder, provided that
application for any such permits shall have been made not less than 30 days
prior to the time for performing any act required of Lessee hereunder or matters
or conditions beyond the reasonable control of the Lessee (including, but not
limited to, inability to obtain a market for the geothermal resources produced
from the leased land) whether or not similar to the matters or conditions herein
specifically enumerated.

     17. Lessee will keep Occupied Land in a clean and weed-free condition at
all times. If Lessor so desires, he may do the work required and bill Lessee for
his actual costs.

     18. Lessee agrees to put forward its best efforts in overcoming obstacles
that may prevent or delay the expeditious and successful geothermal development
of the leased lands.

     19. The Lessee shall pay all property taxes on its improvements and
property and ninety percent (90%) of the taxes if any, levied against Geothermal
Resources rights and rights as to other products covered by this lease. Lessor
shall pay all taxes levied and assessed against the land as such and Lessor's
property and ten percent (10%) of the taxes


                                       8


levied and assessed against Geothermal Resources rights and rights as to other
products covered by this lease. In the event the State, United States, or any
municipality or other governmental agency levies a license, severance,
production or other tax on the products hereunder, or on Lessee's right to
operate or produce or sell products, then and in that event the Lessee shall pay
ninety percent (90%) of such tax and Lessor shall pay ten percent (10%) thereof.
Lessee is hereby authorized to pay any taxes and assessments on behalf of Lessor
and may, if it so desires, deduct the amount so paid from royalties or monies
due Lessor hereunder. Any taxes (other than taxes on the leased land as such and
Lessor's improvements), a portion of which are chargeable to Lessor under this
Lease, which are levied against the Unit or the pooled lands as a Unit, shall be
chargeable to Lessor only in the proportion thereof that the share of production
from such Unit is allocated to the leased land.

     20. In the event any taxes are levied or assessed against Geothermal
Resources rights or rights as to other products covered by this lease prior to
the production and sale of geothermal resources or by-products thereof, then
Lessee shall pay all said taxes levied and assessed against said rights for
Lessor's account, until such time as geothermal resources or any of the
substances covered by the lease are produced and sold in commercial quantities.

     21. The Lessee or the owner thereof shall have the right at any time to
remove from said land all machinery, equipment, pipes, casing, structures and
other property and improvements belonging to or placed on the land by or under
agreement with the Lessee,


                                       9


providing that such removal shall be completed no later than a reasonable time
after the termination of this lease . Lessee agrees after termination of this
lease to return said land to as near its original condition as is practical.

     22. If Lessee shall violate any provision, condition or covenant hereof,
Lessee shall take corrective action to diligently remedy such violation within
60 days of written notice thereof by Lessor. If Lessee shall fail to do so,
Lessor at his option may cancel this lease by written notice to Lessee, and all
rights of the Lessee in and to said land shall be at an end, save and excepting
each well completed or being drilled and one surrounding each such well, and
saving and excepting rights of way, easements, surface areas and ingress and
egress to surface areas necessary for Lessee's operation for operation and
maintenance of such wells and operation and maintenance of electric generating
and power transmission facilities or other facilities for utilization or
processing of other products covered hereby, and as to which the person or
persons owning or operating such facilities are not in default under the
agreement or agreements pursuant to which such facilities were installed on the
leased land. If, upon termination of this lease, Lessee does not, within 30 days
thereafter, leave the leased land in a clean and farmable condition and remove
from said land all machinery, equipment, pipes, structures and other property or
improvements placed on the land by Lessee and not permitted to remain thereon,
then Lessor shall have the right to remove all such items and Lessee will pay to
Lessor actual cost for such removal and disposal.

                                       10


     23. Lessee may, at any time and upon payment of the sum of $10.00 to Lessor
as and for fixed and liquidated damages, quitclaim to the Lessor all of the
right, title and interest of Lessee in and to the leased lands or any part
thereof, and thereupon all rights and obligations of the parties hereto one to
the other shall cease and terminate as to the premises quitclaimed, except:

     a. No quitclaim shall relieve Lessee of any debt or obligation for the
payment of money due Lessor at time of quitclaim, or any indemnity or old
harmless obligation in Lessor's favor or any obligation of Lessee to restore or
repair the land quitclaimed in accordance with the provisions of this lease.

     b. Quitclaims will not reduce Lessor's percentage in a unit formed prior to
date of quitclaim; and, in the event no Unit has been created, will not reduce
the royalty payments to which he would otherwise be entitled.

     24. In the event of any litigation under this lease, the prevailing party
shall be entitled to reasonable attorney's fees and costs of suit as fixed by
the court.

     25. This Lease and Agreement supersedes that certain lease and agreement
between the parties dated December 10, 1971, a short form of which was recorded
in Book 1321, Page 1194, Official Records of Imperial County, California. It is
understood and agreed that the wells, property, facilities and improvements
heretofore drilled or placed on the leased land by Lessee under said lease and
agreement dated December 10, 1971, are and shall continue to be the property of
Lessee and subject to the provisions of this Lease and Agreement.

                                       11


     26. This lease and all its terms, conditions and provisions shall extend to
and be binding upon the heirs, executors, administrators, grantees, successors
and assigns of the parties hereto.

     27. Any notice from the Lessor to the Lessee must be given by sending the
same by registered or certified mail, postage prepaid, addressed to the office
of Lessee at 631 South Witmer Street, Los Angeles, California 90017; and any
notice from the Lessee to Lessor must be given in the same manner addressed to
the Lessor at 1550 Orange Avenue, El Centro, California 92243. The parties may,
upon notice, change their said respective addresses for notice.

/s/ Walter J. Holtz
---------------------------------
Walter J. Holtz


                                              MAGMA ENERGY, INC.



                                              By: /s/ B.C. McCabe
                                                 -------------------------------
                                              B.C. McCabe              President



                                              By: /s/ Joseph W. Aidlin
                                                 -------------------------------
                                              Joseph W. Aidlin         Secretary


                                       12



                                    EXHIBIT A

     The land which is the subject of the herein Geothermal Lease and Agreement
is that certain land situate in the County of Imperial, State of California,
more particularly described as follows, to wit:

     Tract 40, Township 16 South, Range 14 East, S. B. M. in
     the County of Imperial, State of California, as per Map of
     the re-survey, approved and filed in the United States Land
     Office at Los Angeles, California.

     EXCEPTING THEREFROM that portion thereof described as follows:

     BEGINNING at the Northwest Corner of said Tract 40;
     Thence East along the North line thereof, 208.72 feet;
     Thence South 208.72 feet; thence West 208.72 feet to a
     point in the West line of said Tract 40; Thence North along
     said West line, 208.72 feet to the Point of Beginning.





     Including all rights in and under easements, roadways and canals
appurtenant to the said land.


                                       13



Recording Requested by

NEW ALBION RESOURCES CO.

When Recorded Return To:

NEW ALBION RESOURCES CO.
P.O. Box 168
San Diego, California 92112

Fee
$7.00

                   AMENDMENT TO GEOTHERMAL LEASE AND AGREEMENT

     This Amendment to Geothermal Lease and Agreement ("Amendment") is entered
into this 14th day of April, 1982, by and between WALTER J. HOLTZ ("Holtz") and
NEW ALBION RESOURCES CO., a California corporation ("NARCO"), with reference to
the following facts:

     A. On February 15, 1977, Holtz entered into a "Geothermal Lease and
Agreement" (the "Holtz Lease") with Magma Energy, Inc , a corporation, for the
lands therein described, to explore for, drill for, develop, mine, produce and
utilize geothermal resources and by-products and products associated therewith.
A short form of the Holtz Lease was recorded April 29, 1977, at Book 1400, Page
1487 of Official Records of Imperial County, California. The Holtz Lease was
assigned by Magma Energy, Inc , to NARCO by "Assignment of Interest in Lease,"
dated February 15, 1978, and recorded February 22, 1978, at Book 1412, Page 1083
of Official Records of Imperial County, California.

                                       14


     B. The "primary term" of the Holtz Lease is for a period of five years,
commencing February 15, 1977.

     C. The parties desire to extend the primary term of the Holtz Lease for an
additional one-year period, commencing February 15, 1982, and amend the Holtz
Lease in other respects.

     NOW, THEREFORE, in consideration of the promise of rent to be paid, the
mutual covenants of the parties herein contained, and other good and valuable
consideration, the parties agree as follows:

     1. The "primary term" of the Holtz Lease, set forth in Paragraph 3 of said
lease, is hereby extended for a twelve-month period commencing February 15,
1982, and terminating at Midnight, February 14, 1983.

     2. The following is hereby added to the Holtz Lease as Paragraph 28
thereof:

     "28. Subject to Lessor's right under Paragraph 6 hereof
     and notwithstanding anything else to the contrary
     contained herein, or in the Holtz Lease, if Lessee
     completes a well or wells or a processing plant on the
     leased lands or on the Unit area capable of producing
     or processing Geothermal Resources in quantities and
     quality deemed paying quantities by Lessee, Lessee may
     continue to pay or tender to Lessor, annually in
     advance of each lease anniversary date, rental until
     Lessee has made a sale of Geothermal Resources produced
     from or allocated to the leased lands. So long as such
     annual rental payments are paid or tendered, this Lease
     shall remain in force and effect even though extended
     thereby beyond the primary term, and all payments so
     paid or tendered after the expiration of said primary
     term shall be deemed advance royalties, and so long as
     same are paid, each well or wells shall be deemed to be
     actually producing Geothermal Resources in paying


                             15


     quantities under the terms hereof. The entire amount of
     any such advance royalty(ies) paid to Lessor may be
     retained by Lessor and shall not be subject to
     recapture by Lessee. Lessee agrees to exercise due
     diligence in the development and drilling of wells and
     the production of Geothermal Resources in paying
     quantities; provided, however, that Unit Operations
     conducted under the terms of the Heber Geothermal Unit
     Agreement, recorded in Book 1437, Page 1272, Imperial
     County, California, without a cessation of 180
     consecutive days for reasons other than those stated in
     Article 14 of said Unit Agreement, shall be considered
     as due diligence under this Paragraph 28.

     3. Notwithstanding any provision herein or in the Holtz Lease to the
contrary, and notwithstanding extension hereby of the "primary term" of the
Holtz Lease (i) the five (5) year period described in Paragraph 6 of the Holtz
Lease shall not be hereby extended beyond February 15, 1987, as originally set
forth in the Holtz Lease, and (ii) Paragraph 11 of the Holtz Lease shall remain
in full force and effect throughout the primary term as extended hereby.

     4. The signature original of this Amendment may be filed for recordation by
either party in the Office of the County Recorder for Imperial County,
California.

     5. This Amendment to Geothermal Lease and Agreement shall bind and inure to
the benefit of the respective heirs, executors, administrators, successors and
assigns of the parties hereto.

     6. The Holtz Lease as hereby amended is confirmed.

     The parties have executed this Amendment to Geothermal Lease and Agreement
at San Diego, California, as of the date sat forth at the beginning hereof.


                                       16



                                                    /s/ Walter J. Holtz
                                                 -------------------------------
                                                        WALTER J. HOLTZ


                                                 NEW ALBION RESOURCES CO.,
                                                 a California corporation



                                                 By: /s/ Indecipherable
                                                    ----------------------------
                                                                  Vice President


                                                 Attest:


                                                 /s/ Indecipherable
                                                 -------------------------------
                                                                       Secretary


                                       17



                   AMENDMENT of GEOTHERMAL LEASE AND AGREEMENT

     THIS AGREEMENT, made this 14th day of March, 1986, between the party or
parties whose names are subscribed hereto under the designation of "Lessor",
hereinafter called "Lessor" (whether one or more), and CHEVRON GEOTHERMAL
COMPANY OF CALIFORNIA AND UNION OIL COMPANY OF CALIFORNIA, hereinafter called
"Lessee",

                              W I T N E S S E T H :

     THAT, REFERENCE IS HEREBY HAD to that certain Geothermal Lease and
Agreement dated February 15, 1977 (a short form of such lease being of record in
the Office of the County Recorder of Imperial County, California, in Book 1400,
at Page 1487 et seq., of Official Records), whereby Lessor did grant, let and
lease unto Magma Energy, Inc., a predecessor in interest to Lessee for the
purposes therein described certain lands situate in said County and State
particularly described in such lease and agreement, such lease and agreement
being hereinafter referred to as "said lease";

     AND, WHEREAS, by assignment dated February 15, 1978, recorded in Book 1412,
Page 1083 of said official records, Mamga Energy, Inc. assigned its interest in
said lease to New Albion Resources Co. ("NARCO");

     AND, WHEREAS, by asignment dated April 14, 1982, recorded in Book 1483,
page 678 of said official records, said lease was amended;

                                       18


     AND, WHEREAS, by assignment dated April 14, 1982, a memorandum of which was
recorded in Book 1488, Page 1749 of said official records, Narco assigned its
interest in said lease to Union Oil Company of California, ("UNION");

     AND, WHEREAS, by assignment dated September 1, 1982, a memorandum of which
was recorded in Book 1493, Page 601 of said official records, Union assigned a
67,238 percent undivided interest in said lease to Chevron Geothermal Company of
California;

     AND, WHEREAS, Lessor and Lessee have agreed to further amend said lease in
the particulars hereinafter set forth:

     NOW, THEREFORE, in consideration of the sum of ONE DOLLAR ($1.00) and other
valuable consideration paid to Lessor by Lessee, receipt of which is hereby
acknowledged, Lessor and Lessee agree as follows:

     1. The last sentence of Paragraph 8 of said lease which now reads as
follows: shall be and hereby is amended to read as follows:

     "The parties acknowledge that said farming rental is $*** per acre
     effective February 15, 1985. Commencing with the rental period that begins
     in 1986, the annual rental payment for occupied land for succeeding annual
     periods shall be determined by the increase, if any, in the *** as compared
     to the calendar month in which the 1985 rental payment was made ("Beginning
     Index"). In the event the Ending Index is a number greater than the
     Beginning Index, the amount of said rental payment shall be increased in
     the same ratio that the Ending Index bears to the Beginning Index."

*** Confidential material redacted and filed separately with the Commission.

                                       19


     2. To implement the foregoing, Lessor does hereby grant, demise, lease and
let unto Lessee all those certain lands particularly described in said lease for
the term and purposes and subject to all of the other provisions of said lease
as hereby amended. Lessor agrees that said lease as hereby amended is in good
standing and in full force and effect. Lessor acknowledges receipt of rental in
full under said lease to February 15, 1988.

     3. This agreement shall bind and inure to the benefit of the respective
heirs, executors, administrators, successors, and assigns of the parties hereto.

     IN WITNESS WHEREOF, this agreement has been executed as of the day and year
first herein written.


LESSEE

CHEVRON GEOTHERMAL COMPANY OF CALIFORNIA

By /s/ J.W. Davis
   ------------------------------------
   J.W. Davis, Vice-President


UNION OIL COMPANY OF CALIFORNIA

By /s/ Carol Otte
   ------------------------------------
   ITS ATTORNEY-IN-FACT
   CAREL OTTE


LESSOR

/s/ Walter J. Holtz
---------------------------------------
    WALTER J. HOLTZ

/s/ Toni F. Holtz
---------------------------------------
    TONI F. HOLTZ


                                       20



CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.


                                                                 EXHIBIT 10.4.24

                                GEOTHERMAL LEASE


         THIS LEASE is made this 31st day of August, 1983, by and between MAGMA
ENERGY, INC., ("Lessor") a Nevada corporation, as Lessor, and HOLT GEOTHERMAL
COMPANY, ("Lessee") a California corporation, as Lessee.


                                    Recitals

         Lessor has heretofore drilled certain wells and developed certain
geothermal resources on the land and premises hereinafter described. Lessee
desires to undertake to develop additional geothermal resources on said land and
to construct thereon facilities to utilize geothermal resources for the
generation of electric power, utilizing the Magmamax power process, a
proprietary and patented process owned by Lessor for generating electric power
utilizing geothermal resources, the U.S. patent number thereon being 3,757,516,
Lessee desires, in addition to a non-exclusive license to utilize on and limited
to the leased land the Magmamax power process, to use a portion of said land for
electric power generating facilities and to obtain, on a continuing basis and
subject to License Agreement, the benefit of Lessor's continuing knowledge and
experience with respect to the Magmamax process and to have the non-exclusive
right to utilize any new developments or improvements of the Magmamax process on
and limited to the leased land.

         1. WITNESSETH: that in consideration of the agreements contained
herein, the parties hereby enter into a lease of the hereinafter described land
(the "leased land") by Lessor to Lessee and concurrently herewith, and as part
of one integrated transaction, the parties shall enter into a License Agreement
with respect to the leased land and with respect to the use by Lessee of the
Magmamax power process. In consideration of the agreements contained herein, the
Lessor does grant, lease, let and demise unto the Lessee, its successors and
assigns, the leased land with the sole and exclusive right to the Lessee to
enter upon and to use and occupy the leased land to explore for, drill for,
develop, mine, produce and use the natural heat of the earth, the energy, in
whatever form, below the surface of the earth present in, resulting from, or
created by, or which may be extracted from, such natural heat, and all minerals
in solution or other products obtained from naturally heated fluids, brines,
associated gases, and steam, in whatever form, found below the surface of the
earth ("geothermal resources") and to take, store, remove, dispose of and use
same and for uses and purposes incidental thereto, together with the right to
use the leased land and to construct and maintain any and all facilities thereon
and therein as may be necessary for Lessee's operations on the leased land or
other lands in the vicinity of the leased land, and for use of the geothermal
resources including but not limited to well sites, pipelines, power plants,
power transmission lines, power stations, tanks, ponds, wells for injection or
reinjection of waste water, gases and other residual products, roads, and other
structures and installations. Lessor retains all rights to use and occupy the
surface and subsurface of the leased land for all purposes, provided that such
use or occupancy shall not unreasonably interfere with the rights of Lessee
under this Lease.

         2. Description. The leased land is described in Exhibit "A" attached
hereto and made a part hereof. In addition to the above-described leased land,
this Lease also covers


                                      -2-

accretions and any small strips or parcels of land now or here after owned by
Lessor which are contiguous or adjacent to the above-described leased land.
Lessor agrees to execute at Lessee's request any additional or supplemental
instruments for a more complete or accurate description of the land so covered.

         3. Term. TO HAVE AND TO HOLD the leased land for a period of thirty
(30) years from the date hereof ("primary term") and so long thereafter as any
geothermal resources are produced therefrom, or are capable of being produced
therefrom, or drilling or producing operations are conducted thereon, or excused
under the terms hereof.

         4. Commencement of Operations. Within eighteen (18) months after the
effective date of this Lease, Lessee shall Commence and diligently continue the
drilling of one or more wells for production of geothermal resources from the
leased land until Lessee shall have satisfied itself that sufficient geothermal
resources are obtainable to supply the needs of a Power plant or power plants of
a gross capacity of ten (10) or more megawatts. If, within six (6) months after
commencement of drilling the first well on the leased land, Lessee determines in
its sole judgment that it is not able to develop on the leased land a sufficient
quantity of geothermal resources to warrant installation of one or more power
plants for generating electricity therefrom, Lessee may, upon notice given to
Lessor within thirty (30) days after expiration of such six (6) month period,
terminate and be freed of all obligations under this Lease. If Lessee elects not
to so terminate this Lease, Lessee shall proceed with the drilling of such well
or wells as it deems appropriate to supply the requisite quantity of geothermal
resources for operation of a power plant or power plants and shall proceed
diligently and in good faith with construction of a power plant or power plants
on the leased land for generation of electricity utilizing the geothermal
resources.

         5. Royalty. Lessee shall pay to Lessor as royalty during the full term
of this Lease compensations as follows: (a) As to ***, Lessee shall pay to
Lessor *** received by Lessee. The said payment shall be deemed to embrace a
payment of *** and *** as payment for the said non-exclusive license, for
surface land use and for Lessee's agreement to make available to Lessor subject
to License Agreement its continuing knowledge and experience with respect to the
*** and the right to utilize new developments or improvements thereof on the
leased land; (b) ***, Lessee shall pay to Lessor *** received by Lessee. The
said payment shall be deemed to embrace a payment of *** as payment for the said
non-exclusive license, for surface land use and for Lessor's agreement to make
available to Lessee subject to License Agreement its continuing knowledge and
experience with respect to the *** and the right to utilize new developments or
improvements thereof on the leased land; (c) The payment by Lessee to Lessor of
the total compensations provided for in subparagraphs (a) and (b) hereof, when
due, for the full term of this Lease is a condition to the continuation of
Lessee's rights under this Lease and its right to use or occupy the leased land
or any part thereof. In the event Lessee Shall

*** Confidential material redacted and filed separately with the Commission.


                                      -3-

default under any covenant or condition of this Lease and fail to remedy such
default or to commence in good faith remedy such default, if such default cannot
be remedied within the notice period, Lessor shall have the right, upon
expiration of sixty (60) days written notice of default, to terminate this Lease
and all of Lessee's rights hereunder. The term ***. Lessee shall pay to Lessor
royalty on the last day of each month for accrued royalties for the preceding
calendar month. If the geothermal resources produced from the leased land are
insufficient for operation of Lessee's plant or plants at a ***, at the request
of Lessee, Lessor may supply geothermal resources from other land and the ***%
royalty rate shall apply to ***. If Lessor is unable to provide sufficient
geothermal resources, Lessee may secure geothermal resources from other lands
without paying royalty to Lessor on the geothermal resources so secured. Lessee
shall have the right to *** and to pay Lessor's royalty ***. Lessee shall not be
required to pay royalty on any ***.

         6. License Agreement. Lessor agrees to grant to Lessee, by separate
agreement entered into concurrently herewith, a non-exclusive license to utilize
on and limited to the leased land for the term of this Lease Lessor's patented
Magmamax power process and improvements thereof. Together with said license,
Lessor will agree to make available to Lessee without additional consideration,
Lessor's continuing knowledge and experience with respect to said process. In
the event Lessee shall develop any patentable improvements to the Magmamax power
process, Lessor shall be entitled to a non-exclusive royalty free license with
respect thereto.

         7. Plant Expansion. Lessee shall have the right to increase the
capacity of its plant or build additional plants on the leased land if
operations under this Lease demonstrate the availability of an adequate supply
of geothermal resources on the same terms and conditions as set forth herein.
Lessee shall have the right of first refusal for the development of electricity
available from geothermal resources on adjacent or nearby lands leased or
otherwise controlled by Lessor, in the event Lessee's operation proves the
adequacy of the geothermal resources and the commercial feasibility of producing
electricity therefrom. Lessee shall have four (4) years from the date of firm
operation of the plant to determine if an increase in plant and production
capacity is warranted by the geothermal resources underlying the leased land on
the basis of its operations. Lessee will notify Lessor of its determination on
or before the fourth anniversary of said date. If an increase in the size of the
plant or construction of additional plants is not warranted in Lessee's sole
judgment, Lessee will relinquish its rights to the surface area not actually
used for the original plant or plants, gathering and injection lines, and wells,
Lessor shall assume full responsibility for compliance with any necessary
governmental approvals of such a relinquishment by Lessee. A release of surface
rights to any part of the leased land shall not constitute a release of any part
of the geothermal resources underlying the leased land.

         8. Reinjection. Lessee shall have the right to drill such well or wells
on the leased land as Lessee may deem desirable, including wells for injection
or reinjection purposes, and shall have the right to dispose in any such wells
waste brine, water and other substances, waste

*** Confidential material redacted and filed separately with the Commission.


                                      -4-


products from a well, or wells, power plants or other facilities, located on the
leased land or from wells, power plants or other facilities, located in the
vicinity of the leased land. Lessee shall have the right to freely transfer
geothermal resources from wells located on the leased land, or other lands in
the vicinity of the leased land, to and from the leased land and to inject
geothermal resources into a well or wells located on the leased land.

         9. Inspection by Lessor. Lessor, or its agents, at Lessor's sole risk,
may during hours of operation examine the leased land and the workings,
installations and structures thereto and operations of Lessee thereon, and may
at reasonable times inspect the books and records of Lessee with respect to
production and operations and matters pertaining to the payment of royalties to
Lessor. Lessee shall make available to Lessor all of Lessee's information and
operating experience as to producing and injection wells and the installed
electric generating facilities. Lessee shall also furnish to Lessor all
drilling, engineering and geological reports, tests and logs as to all wells
drilled on said land. Lessor retains the right to utilize the leased land for
any and all purposes provided that such use shall not unreasonably interfere
with Lessee's operations thereon. Lessor, its employees, representatives and
permittees retain the right at all times to enter upon the leased land and to
view all operations and activities of Lessee thereon, provided that Lessee shall
not be liable to Lessor or to any such persons for personal injury or property
damage not resulting from any negligent act or omission of Lessee. Lessor shall
maintain all information gained by such inspection in strict confidence and
shall not disclose any of such information to third parties without advance
written permission of Lessee.

         10. Warranty of Title. Lessor hereby warrants that it has clear title
to the leased land and the geothermal resources contained therein, agrees to
defend title conveyed to Lessee under this Lease, and agrees that Lessee, at
Lessee's option, may pay and discharge any taxes, mortgages or liens existing,
levied or assessed on or against the leased land. If Lessee exercises such
option, Lessee shall be subrogated to the rights of the party to whom payment is
made to the extent of all payments costs and expenses, including attorneys'
fees, and, in addition to its other rights, may reimburse itself out of any
royalties otherwise payable to Lessor. In the event Lessee is made aware of any
claim inconsistent with Lessor's title, Lessee may suspend the payment of
royalties under this Lease, without interest, until Lessee has been furnished
satisfactory evidence that such claim has been resolved.

         11. Lesser Interest. If the Lessor or any party Lessor owns a lesser
interest in the geothermal resources under this Lease than the entire and
undivided fee estate herein, then the royalty herein provided as to geothermal
resources shall be paid to the Lessor or such party Lessor only in the
proportion which his ownership bears to the whole and undivided fee. Lessor
shall bear the entire cost of any underlying royalty interest in the fee estate
or otherwise.

         12. Removal. Lessee shall have the right at any time and from time to
time to remove from the leased land any and all casing, machinery, equipment,
structures, installations and property of every kind and character placed upon
the leased land by or pursuant to permission of Lessee, provided that if such
removal should occur after termination of all rights granted herein, it shall be
completed within a reasonable time thereafter. Lessee agrees after termination
of this Lease to leave the leased land in a clean condition and to level sump
holes or excavations.

                                      -5-


         13. Implied Covenants. This Lease constitutes and expresses the entire
agreement between the parties and no implied covenant of any kind shall be read
into it and in particular there shall not be read into it any implied covenant
requiring Lessee to commence or to continue to conduct more drilling or other
operations on the leased land or to drill more wells thereon or fixing any
greater measure of diligence than Lessee has herein expressly agreed to.

         14. Ancillary Rights. In exploring for, developing, producing, using
and marketing geothermal resources on the leased land, Lessee shall have the
right of ingress and egress along with the right to conduct such operations on
the leased land as may be reasonably necessary for such purposes, including but
not limited to geophysical operations, the drilling of wells, and the
construction and use of roads, canals, pipelines, tanks, water wells, disposal
wells, injection wells, pits, electric and telephone lines, power stations and
plants, and other facilities deemed necessary by Lessee to discover, produces,
store, treat or transport geothermal resources and easements necessary thereto.
Lessee may use in such operations, free of cost, any water or other substances
produced on the leased land. The right of ingress and egress granted hereby
shall apply to the entire leased land described, notwithstanding any partial
release or other termination of this Lease with respect thereto.

         15. Breach or Default. In the event at any time after four (4) years
from the date hereof Lessee shall sell electrical power from said leased land in
any amount less than two (2) megawatts gross generating capacity and if such
condition continues for a period of one (1) year (the generating output would be
computed on an average for said one year), Lessor shall have the right to
consider the aforesaid event a default under this Lease, provided that Lessee
shall not be required to produce and sell electricity in excess of the reservoir
capability of the leased land. If Lessee at any time during the term of this
Lease and Agreement determines in good faith that it is uneconomic or not
feasible to continue its operations on the leased land, Lessee shall have the
right to terminate this Lease and to relinquish its rights under this lease. In
the event of termination Lessee shall execute and deliver appropriate
instruments to clear title to the leased land and shall remove surface
facilities and provide for wells as herein provided in the event of termination
due to Lessee's default. No litigation shall be initiated by Lessor with respect
to any breach or default by Lessee under this Lease, for a period of at least
ninety (90) days after Lessor has given Lessee written notice fully describing
the breach or default, and then only if Lessee fails to begin to remedy the
breach or default within such period. In the event the matter is litigated and
there is a final judicial determination that a breach has occurred, this Lease
shall not be forfeited or cancelled in whole or in part unless Lessee is given a
reasonable time after such judicial determination to remedy the breach or
default and Lessee fails to do so.

         16. Forbearance by Lessor. If any default shall occur which entitles
Lessor to terminate this Lease, Lessor shall have no right to terminate this
Lease unless, following the expiration of the period of time given to Lessee to
cure such default, Lessor shall notify any beneficiary under a deed of trust
covering all or any part of the leased land ("Mortgagee") of Lessor's intent to
so terminate at least thirty (30) days in advance of the proposed effective date
of such termination (the "Termination Notice"). Lessor shall have no right to
terminate this Lease if after delivering the Termination Notice to Mortgagee any
of the following occurs: (a) In the case of a default in the payment of
royalties, Mortgagee shall notify Lessor of Mortgagee's desire to cure such
default, and Mortgagee shall pay or cause to be paid all royalties, and any
other payments then due and in arrears as specified in the Termination Notice,
as well as such


                                      -6-


sums which may become due during such thirty day period, or extended period as
provided in subsection (c) below; (b) In the case of a default which does not
involve the payment of money but is reasonably susceptible of being cured by
Mortgagee, Mortgagee shall notify Lessor of Mortgagee's desire to cure such
default, and Mortgagee shall comply, or in good faith and with reasonable
diligence commence to comply, with all such nonmonetary requirements of this
Lease then in default and diligently pursue such cure to completion, subject to
paragraph 17; (a) In the case of a default not reasonably susceptible of being
cured by Mortgagee, including failure of production, or in the event Mortgagee
is complying with the requirements of subsections (a) or (b) above, this Lease
shall not terminate provided (i) within ninety (90) days after the giving by
Lessor of the Termination Notice, Mortgagee gives written notice to Lessor of
Mortgagee's intention to foreclose its deed of trust, and (ii) Mortgagee, within
ninety (90) days after the giving of the Termination Notice commences
foreclosure or similar proceedings under its deed of trust for the purpose of
acquiring Lessee's interest in this Lease and thereafter diligently prosecutes
the same (provided however, that if Mortgagee is restrained by a court of
competent jurisdiction from so proceeding, the time periods set forth above
shall be tolled), and (iii) either Mortgagee or any other purchaser of Lessee's
interest under this Lease, within a reasonable time after the acquisition of
such interest, commences production, or otherwise cures all defaults hereunder
susceptible of being cured by Mortgagee or such purchaser. No cancellation,
surrender or modification of this Lease shall be effective unless consented to
in writing by any Mortgagee.

         17. Force Majeure. Lessee's obligations under this Lease shall be
suspended until expiration of ninety (90) days after removal of cause for
suspension and the term of this Lease and the period for removal of Lessee's
property in the event of termination shall be extended while Lessee is prevented
from complying therewith by strikes, lockouts, riots, action of the elements,
accidents, delays in transportation, inability to secure labor or materials in
the open market, laws, rules, or regulations of any Federal, State, Municipal or
other governmental agency, authority, or representative having jurisdiction,
inability to secure or absence of a market for commercial sale of geothermal
resources from the leased land; or by other matters or conditions beyond the
reasonable control of Lessee, whether or not similar to the conditions or
matters specifically enumerated in this Paragraph.

         18. Liens, Taxes and Insurance. Lessee shall hold harmless, indemnify
and defend Lessor against all claims, demands, actions and causes of action for
injury or death to persons, damage or destruction of property unless caused by
the negligence or misconduct of Lessor, mechanic's and material man's liens
arising out of or by virtue of Lessee's rights or exercise of any rights under
this Lease, operations on the leased land or any acts or omissions by Lessee,
and Lessee undertakes and agrees to obtain and maintain insurance coverage,
naming Lessor as additional insured, in an amount not less than ten million
dollars ($10,000,000) principal amount to protect Lessor against any such
claims. Lessee shall pay all taxes levied and assessed against all structures,
improvements and personal property placed upon the leased land by Lessee. Lessor
shall pay all taxes levied and assessed against the leased land as such
including the geothermal resources and the right to production thereof and
against any rights therein not covered by this Lease and shall pay all taxes
levied and assessed against all structures and improvements placed on the leased
land by Lessor. Lessee, at its own expense, prior to commencing operations on
the leased land, shall obtain, and thereafter while this Lease is in effect
shall maintain, adequate Workers' Compensation Insurance.

                                      -7-


         19. Assignment. Except as provided in this Paragraph, the interest of
either Lessor or Lessee under this Lease may be assigned, devised or otherwise
transferred in whole or in part, by area and by depth or zone and the rights and
obligations shall extend to their respective heirs, devisees, executors,
administrators, successors and assigns. No change in Lessor's ownership shall
have the effect of reducing the rights or enlarging the obligations of Lessee
under this Lease and no change in ownership shall be binding on Lessee until
sixty (60) days after Lessee has been furnished the original or certified or
duly authenticated copies of the documents establishing such change of ownership
to the satisfaction of Lessee, Lessee shall not transfer, assign or reassign its
interest in whole or in part in this Lease without the consent of Lessor, which
consent shall not be unreasonably withheld, provided that this Lease may be
hypothecated for the benefit of any creditor of Lessee or Lessee's successor in
interest. If Lessee transfers its interest under this Lease in whole or in part,
Lessee shall be relieved of all obligations thereafter arising with respect to
the transferred interest, and failure of the transferee to satisfy such
obligations with respect to the transferred interest shall not affect the rights
of Lessee with respect to any interest not so transferred.

         20. Notice. Any notice from the Lessor to the Lessee must be given by
sending the same by registered or certified mail, postage prepaid, addressed to
its office at 1301 Chelton Way, South Pasadena, California 91030, and any notice
from the Lessee to the Lessor must be given in the same manner addressed to the
Lessor at 631 South Witmer Street, Los Angeles, California 90017. The parties
may, upon notice, change their said respective addresses for notice.

         21. Severability. If any provision of this Lease shall be found or
declared to be null, void or unenforceable for any reason whatsoever by any
Court of competent jurisdiction, then and in such event only such provision
shall be affected thereby, and such finding, ruling or decision shall not in any
way affect the remainder of this instrument or any of the other terms or
conditions hereof, which remaining terms and conditions shall remain binding,
valid and subsisting and in full force and effect between the parties, it being
specifically understood and agreed that the provisions of this Lease are
severable for the purposes of the provisions of this Paragraph. This Lease shall
not in any event extend beyond such term as may be legally permissible under
applicable laws, and should any such applicable law limit the term to less than
that provided in Paragraph 3, then this Lease shall not be void but shall be
deemed to be in existence for such term and no longer.

         22. Integration. This Lease constitutes the entire agreement between
the parties and supersedes all other agreements and understandings, whether oral
or written, the parties may have in connection therewith, including the March 3,
1982, Letter of Intent to enter into this Lease, and say be modified or
terminated only by a writing signed by the parties.

         23.      Binding  Effect.  This Lease shall extend to and be binding
upon the heirs,  executors, administrators, grantees, successors and assigns of
the parties.




     IN WITNESS WHEREOF the parties hereto have executed this Lease effective
as of the date first written above.

HOLT GEOTHERMAL COMPANY                     MAGMA ENERGY, INC.

By: /s/ Indecipherable                      By: /s/ Indecipherable
    ----------------------------                ----------------------------
    President                                   Chairman

Attest: /s/ W.E. Viney                      Attest: /s/ Indecipherable
        ------------------------                    ------------------------
        Secretary                                   Secretary

STATE OF CALIFORNIA     )
                        )  ss.
COUNTY OF LOS ANGELES   )

     On 31 August 1983 before me, the undersigned, a Notary Public in and for
said County and State, personally appeared Ben Holt, known to me to be the
President, and W.E. Viney, known to me to be the Secretary of Holt Geothermal
Company, the corporation that executed the within Instrument, known to me to be
the persons who executed the within Instrument on behalf of the corporation


therein named, and acknowledged to me that such corporation executed the within
instrument pursuant to its by-laws or resolution of its board of directors.


/s/ Betty J. Peterson
---------------------------
Betty J. Peterson


STATE OF CALIFORNIA     )
                        )  ss.
COUNTY OF LOS ANGELES   )

     On August 31, 1983 before me, the undersigned, a Notary Public in and for
said County and State, personally appeared B.C. McCabe, known to me to be the
Chairman, and Joseph W. Aidlin, known to me to be Secretary of Magma Energy,
Inc., the corporation that executed the within Instrument, known to me to be the
persons who executed the within Instrument on behalf of the corporation therein
named, and acknowledged to me that such corporation executed the within
instrument pursuant to its by-laws or resolution of its board of directors.

WITNESSETH my hand and offical seal.

/s/ April L. Wogatzke
---------------------------
April L. Wogatzke





                                 FIRST AMENDMENT
                               TO GEOTHERMAL LEASE

         THIS FIRST AMENDMENT TO GEOTHERMAL LEASE (the "Amendment") is made and
entered into effective as of April 30, 1987 (the "Effective Date") by and
between Magma Energy, Inc., a Nevada corporation (the "Lessor") and
Mammoth-Pacific, a California general partnership (the "Lessee"), collectively
referred to herein as the "Parties".


                                    Recitals

         WHEREAS, the Parties made and entered into that certain Geothermal
Lease dated the 31st day of August, 1983, by and between Lessor and Holt
Geothermal Company, to which Lessee is the successor-in-interest as Lessee (the
"Lease"), a copy of which is attached as Exhibit "A" to this Amendment and
incorporated by reference herein; and

         WHEREAS, the Parties now desire to modify the Lease with respect to the
royalties to be paid by Lessee to Lessor in connection with the operation of one
or more electric power plants fueled by geothermal resources underlying the
leased land, the expansion of the existing electric power plant and the
construction of additional electric power plants, and any other matters referred
to herein.

         NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, and other good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee agree to amend
the Lease as follows:

         1. Paragraph 3 of the Lease is hereby deleted in its entirety and a new
Paragraph 3, reading as follows, is substituted in its place instead:

         3. Term. TO HAVE AND TO HOLD the leased land for a period of thirty
(30) years from the date hereof (the "primary term") and so long thereafter as
electricity is produced on the leased land from the geothermal resources
therein, or excused under the terms of Paragraph 17 of this Lease.

         2. Paragraph 5 of the Lease is hereby deleted in its entirety and a new
Paragraph 5, reading as follows, is substituted in its place instead:

         5. Royalty. Lessee shall pay to Lessor as royalty during the balance of
the full term of this Lease compensation as follows:

         5.1 *** Royalty. As to electricity or other energy generated by ***
Lessee shall pay to Lessor as royalties during the balance of the full term of
the Lease the following percentage of the "***", as such term is defined below,
received by Lessee from ***, together with *** as such term is defined at
Subparagraph 5.3 below:

*** Confidential material redacted and filed separately with the Commission.



         (a) From April 1, 1987, and for a period of twenty-four (24)
consecutive months thereafter, *** as such term is defined at Subparagraph 5.3
below, and applicable "***" as such term is defined at Subparagraph 5.3 below;

         (b) From the date following the conclusion of the period set out in
Subparagraph 5.1(a), above, and for a period of twelve (12) consecutive, months
thereafter, *** as such term is defined at Subparagraph 5.3 below, and
applicable "***" as such term is defined at Subparagraph 5.3 below;

         (c) From the date following the conclusion of the period set out in
Subparagraph 5.1(b), above, and for a period of twelve (12) consecutive months
thereafter, *** and applicable "***" as such term is defined at Subparagraph 5.3
below; and,

         (d) From the date following the conclusion of the period set out in
Subparagraph 5.1(c), above, and for the balance of the term of this Lease, ***
as such term is defined at Subparagraph 5.3 below.

         For all purposes herein, the term "Gross Proceeds" shall mean (i) with
respect to the Existing Plant, all accounts received by Lessee, directly or
indirectly, from the sale to others of electricity, including energy and
capacity payments, or energy in any other form, produced on the leased land from
the geothermal resources therein or, if applicable, the "Adjacent Lease", as
such term is defined at Subparagraph 5.8 below, and (ii) with respect to the
"New Plants", as such term is defined at Subparagraph 5.2 below, all accounts
received by Lessee, directly and indirectly, from the sale to others of
electricity, including energy and capacity payments, or energy in any other form
produced from any lands or geothermal resources without regard to ownership
thereof.

         5.2 *** Royalty. As to electricity or other energy generated by all
additional plants utilizing the *** Lessee shall pay to Lessor for the balance
of the full term of the Lease *** together with applicable "***" as such term is
defined at Subparagraph 5.3 below.

         5.3 *** Royalties. The *** payable by Lessee to Lessor with respect to
the Existing Plant and each new Plant pursuant to Subparagraphs 5.1 and 5.2
above, shall be augmented by additional *** attached to this Amendment and
incorporated by reference herein. Except as otherwise provided at Subparagraph
5.1(a), (b) and (c) above, the *** shall be applied to ***. The term "***" for
each such plant shall mean the forecasts of ***

*** Confidential material redacted and filed separately with the Commission.

                                      -9-


determined as set forth in *** to this Amendment. For all *** from the *** and
each of the ***, respectively in excess of the *** (the "***") for such plants,
the Bonus Royalties shall be applied to calculate the total amount of royalty
payable to Lessor.

         5.4 Inflation Adjustment. The applicable Baseline Revenue for each of
the plants shall not be subject to adjustment during the fixed price period of
any power purchase agreement associated with such plant. The Baseline Revenue
for each of the plants shall be adjusted annually for all years after expiration
of the period of firm prices provided in the power purchase agreement associated
with such plant to account for the difference between an assumed inflation rate
of five percent (5%) per annum and the actual inflation experienced (the
"Inflation Adjustment"). For the purpose of the Inflation Adjustment, the
"Actual Inflation" shall be determined from comparison of the value of the
Producer Price Index for Finished Goods Excluding Food (the "Inflation Index")
on December 31st of the then current year to the value of the Inflation Index on
December 31, 1986. The Actual Inflation shall be equal to the ratio of the value
of the Inflation Index on December 31, of the then current year to the value of
the Inflation Index on December 31, 1986. The "Assumed Inflation" shall be equal
to one and five hundredths ("1.05") raised to a power equal to the number of
years between 1986 and the then current year. The "Inflation Adjustment Factor"
shall be equal to the Actual Inflation divided by the Assumed Inflation. The
"Adjusted Baseline Revenue" for each year shall be determined by multiplying the
Baseline Revenue for each year by the Inflation Adjustment Factor.

         In determining the foregoing Inflation Adjustment, the percentage of
increase or decrease in the Inflation Index shall be calculated to the nearest
one hundredth of one percent (1/100th of 1%). Percentage changes in the
Inflation Index shall be calculated based on the original released United States
Department of Labor, Bureau of Labor Statistics published data with the base
"1967-100" until a new base period is established. Calculations shall be made
based on data on the new base period from that time forward. If, for any reason,
the statistics complied by the United States Department of Labor, Bureau of
Labor Statistics and referred to above, are not available for use for the
foregoing adjustment, an adjustment shall be made by mutual agreement of Lessor
and Lessee. If the United States Department of Labor, Bureau of Labor Statistics
designates an index with a new title and/or code number as being continuous with
the Inflation Index then such new index shall be used for the foregoing
adjustment.

         5.5 Consequences of Default by Lessee. The payment when due by Lessee
to Lessor of the total compensation provided for in this Paragraph 5, for the
balance of the full term of the Lease, is a condition to the continuation of
Lessee's rights under the Lease and its right to use or occupy the leased land
or any part thereof. In the event that Lessee shall default under any covenant
or condition of the Lease and shall fail to remedy such default or to commence
in good faith to remedy such default, if such default cannot be remedied within
the notice period, Lessor shall have the right, upon expiration of sixty (60)
days written notice of default, to terminate the Lease and all of Lessee's
rights hereunder.

         5.6 Payment of Royalties. Lessee shall pay to Lessor the Base
Royalties, and any applicable Bonus Royalties, on the last day of each month for
accrued royalties for the preceding calendar month. Lessee shall calculate the
amount of actual Bonus Royalties due under the Lease at the end of each calendar
year during the term of the Lease, and shall make payment of

*** Confidential material redacted and filed separately with the Commission.

                                      -10-



any underpayment to Lessor or Lessor shall make payment of any overpayment to
Lessee, as the case may be, for any amount due (the "Additional Royalties") and
payable no later than forty-five (45) days after the end of each calendar year
during the term of the Lease. When applicable under Subparagraph 5.4 above,
Inflation Adjustments to the Baseline Revenue resulting from application of the
Inflation Index shall be made on a dollar basis by each January 31st during the
term of the Lease before calculating the actual Bonus Royalties. The Baseline
Revenue for the first year of operation for any New Plant shall be prorated from
the date of first delivery to the end of the calendar year to adjust for
differences in actual and forecasted revenue set forth in the schedules of
Baseline Revenue established for such plant.

         5.7 Insufficiency of Geothermal Resources. (a) With respect to both the
Existing Plant and any New Plants or any "Additional Plants," as such term is
defined at Subparagraph 5.9 below, built on the leased land or the "Adjacent
Lease", as such term is defined at Subparagraph 5.8 below, Lessee shall utilize
geothermal resources produced from the leased land and/or the "Adjacent Lease".
If the geothermal resources obtainable from the leased land and the Adjacent
Lease are insufficient for operation of the Existing Plant, any New Plant, or
any Additional Plant at their respective average capacity during the preceding
three (3) calendar years, Lessor may, but shall not be obligated to, make
available geothermal resources from other lands at the applicable royalty rates
provided in Subparagraphs 5.1, 5.2 and 5.3 above. In such cast, Lessor shall pay
all underlying, overriding, or other form of royalty or production payment, net
revenue interest, or other form of compensation payable to the United States of
America or any other third party on geothermal resources supplied from such
other land. If Lessor is unwilling or unable, as provided above, to make
available sufficient geothermal resources for the Existing Plant or for any such
New Plant or any such Additional Plant, Lessee may secure geothermal resources
from other lands ("Other Lands") for any such plant without paying royalty to
Lessor on the geothermal resources so secured. In such a case, Lessee shall have
the right to commingle the geothermal resources provided with geothermal
resources provided from such Other Lands and to pay Lessor's royalty on the
basis of production allocable to the leased land and the Adjacent Lease, and the
Other Lands made available by Lessee, as determined by metering or gauging same.

         (b) With respect to any New Plant built on land other than the leased
land or the Adjacent Lease, Lessee shall pay Lessor the full royalty due under
Subparagraphs 5.2 and 5.3 above regardless of the source of the geothermal
resources, in accordance with definition of Gross Proceeds in Subparagraph 5.1
above and the last sentence of Subparagraph 7.1 below, and the provisions of
Subparagraph 5.7 (a) above shall have no application.

         5.8 Unitization of Geothermal Resources. Lessor may not voluntarily
commit federal Geothermal Lease Number CA-11667-A (the "Adjacent Lease") to any
unit or cooperative agreement without the prior written consent of Lessee and
shall cooperate fully with Lessee, at no cost to Lessor, in accepting or
opposing, as determined by Lessee any attempt to compel unitization or other
form of joinder, of the Adjacent Lease pursuant to applicable laws and
regulations including, but not limited to, the Geothermal Steam Act of 1970, and
implementing regulations published at Title 43 Code of Federal Regulations, Part
3200, et seq., with all reasonable expenses thereof to be borne by Lessee. In
the event that the Adjacent Lease becomes unitized or otherwise joined with any
other land leased or otherwise controlled by Lessee, Lessor may not propose, or
make any election with respect to, any "Participating Area",

                                      -11-


as such term is defined in applicable laws and regulations without the prior
written consent of Lessee.

         5.9 Additional Plants. As to electricity or other energy generated by
all additional plants built on the leased land or, if applicable, the Adjacent
Lease from geothermal resources therein, other than the Existing Plant or the
New Plants (the "Additional Plants"), Lessee shall pay to Lessor during the
remainder of the full term of the Lease, royalties as provided at Subparagraphs
5.2, 5.3, 5.4, 5.6 and 5.7 above.

         5.10 Minimum Royalty. Notwithstanding Subparagraph 5.7 hereof, Lessee
shall pay to Lessor during the remainder of the full term of the Lease, a
minimum royalty of 3% of gross proceeds from the sale to others of electricity,
including energy and capacity payments, or energy in any other form generated by
plants built on the leased land or when applicable, the Adjacent Lease.

         5.11 No Guaranteed Internal Rate of Return. Lessor shall not be deemed
to have guaranteed Lessee a minimum internal rate of return with respect to the
Existing Plant, any New Plant, or any Additional Plant.

         3. Paragraph 7 of the Lease is hereby deleted in its entirety and a new
Paragraph 7, reading as follows, is substituted in its place instead.

         7. Plant Expansion. Lessee shall have the right to expand its
operations on the leased land, the Adjacent Lease, or any other lands without
regard to ownership thereof beyond the capacity of the Existing Plant as
follows:

         7.1 Plant Expansion. Subject to the provisions of Subparagraph 7.2
below, Lessee shall have the right to increase the capacity of the Existing
Plant or build the New Plants on the leased land, if operations under the Lease
demonstrate the availability of an adequate supply of geothermal resources, on
the terms and conditions set forth herein. Subject to the provisions of
Subparagraph 7.2 below and the first and second provisos to this sentence,
Lessee shall have the right of first refusal for the development of electricity
available from utilization of geothermal resources underlying the Adjacent
Lease; provided that Lessee's operation proves the adequacy of the geothermal
resources and the commercial feasibility of producing electricity therefrom; and
provided further, that Lessee shall have committed to construction of or more of
the New Plants associated with the Standard Offer Number Four Power Purchase
Contracts between Lessee and Southern California Edison Company bearing Document
Numbers 2433H and 2435H (the "Standard Offer Number Four Contracts") or expanded
the Existing Plant in an amount of no less than ten (10) megawatts nameplate
rating prior to the expiration of the Standard Offer Number Four Contracts.

         Lessee hereby agrees to exercise good faith efforts to obtain all
necessary governmental permits, authorizations, and approvals to build and
operate two (2) New Plants on the leased land or on adjacent land leased or
otherwise controlled by Lessor and, if it obtains governmental permits,
authorizations, and approvals which, in its sole discretion, are such that make
construction of the two New Plants economically viable, agrees to seek all
necessary internal corporate and partnership authorizations, and sufficient
financing for the construction of such

                                      -12-


two New Plants. In the event that Lessee is unable, in the exercise of good
faith efforts, to obtain all necessary external and internal permits,
authorizations, approval and financing to build and operate any New Plants or
determine not to build any New Plants for any reason or no reason, Lessee shall
proceed in accordance with the terms of Subparagraph 7.2, below. Regardless of
ownership of the land or geothermal resource dedicated to any New Plant, Lessee
shall pay Lessor royalties on the Gross Proceeds of such New Plants as provided
in Subparagraphs 5.2 and 5.3, above.

         7.2 Consequences of Failure to Expand. If Lessee shall fail to complete
prior to the expiration of the Standard Offer Number Four Contracts an increase
in the capacity of the Existing Plant of no less than ten (10) megawatts
nameplate rating or the construction of at least one (1) New Plant, Lessee shall
relinquish to Lessor its rights under the Lease to the surface and subsurface
area not actually used for the Existing Plant, gathering and injection lines,
and wells and shall further relinquish its right to use the geothermal resource
underlying the leased land or the Adjacent Lease for any purpose other than
operating the Existing Plant as provided herein. If Lessee so relinquishes its
rights to the surface and subsurface area and the geothermal resource, with
respect to the surface and subsurface actually used for the Existing Plant,
gathering and injection lines and wells, Lessee and Lessor shall jointly hold
such rights on a non-interference basis. If Lessee so relinquishes the foregoing
rights, Lessor shall have the right to utilize (i) the surface and subsurface
not actually used for the Existing Plant, gathering and injection lines, and
wells and the geothermal resources underlying the leased land, and (ii) the
Adjacent Lease, for any purpose; provided, however, Lessor may not exercise any
of the foregoing reserved rights which, in the reasonable opinion of Lessee,
might interfere with the operation of the Existing Plant.

         4.  A new Paragraph number 24 is hereby added to the Lease as follows:

         24. Upon request, Lessee shall provide Lessor with full access to
review, and, with respect to Lessor operations on the leased land or Adjacent
Lease, to use without charge all geotechnical data, geotechnical reports, and
documents containing geotechnical information of any kind related to Lessee's
operations on the leased land.

         5. A new Paragraph number 25 is hereby added to the Lease as follows:

         25. Lessee hereby waives, discharges and releases Lessor from any and
all claims of Lessee against Lesser, its directors, officers, employees or
agents which have accrued prior to April 1, 1987 and which arose out of, in
connection with, or relate to the negotiations of Lessees entering into, or
Lessor's performance or nonperformance of the Lease.

         6. As modified or added to by the terms of this Amendment, all terms
and conditions of the Lease shall remain in full force and effect. All
capitalized terms contained herein, unless otherwise defined, shall have the
meaning ascribed to such terms in the Lease.

         IN WITNESS WHEREOF, this Amendment has been executed on the first date
written above by the duly authorized representatives of the parties.


                                      -13-



         MAGMA ENERGY, INC., Lessor MAMMOTH-PACIFIC, Lessee

                                          By: PACIFIC GEOTHERMAL COMPANY,
                                              general partner of MAMMOTH-PACIFIC


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

         Title: President & CEO           Title: President
               -----------------------          -----------------------------



                                      -14-




RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:

RALPH B. KOSTANT, ESQ.
WEISSBURG and ARONSON, INC.
2049 Century Park East, 32nd Floor
Los Angeles, California 90067-3271


                      SECOND AMENDMENT TO GEOTHERMAL LEASE


     THIS AMENDMENT TO GEOTHERMAL LEASE ("Amendment") is made and entered into
effective as of January 1, 1990, by and among MAGMA POWER COMPANY, a Nevada
corporation ("Lessor") and MAMMOTH-PACIFIC, L.P., a California limited
partnership ("Lessee"), with reference to the following facts:

     A. Magma Energy, Inc., a Nevada corporation, and Holt Geothermal Company, a
California corporation, entered into that certain Geothermal Lease dated August
31, 1983, and recorded in memorandum form on September 6, 1983, in Book 389,
Page 37 of Official Records of Mono County, California (the "Lease").

     B. Magma Energy, Inc. has merged with and into Lessor, and Lessor is the
successor-in-interest to Magma Energy, Inc., by operation of law, as fee owner
of the real property covered by the Lease.

     C. By an Assignment of Lease dated August 31, 1983, and recorded in
memorandum form on September 20, 1983, in Book 390, Page 90 of Official Records
of Mono County, California, Holt Geothermal Company assigned all of it right,
title and interest in the Lease to Mammoth-Pacific, a California general
partnership.

     D. The Lease was previously amended by the First Amendment to Geothermal
Lease dated April 30, 1987 between Magma Energy, Inc. and Mammoth-Pacific, a
California general partnership.


                                      -15-


     E. Pacific Geothermal Company, a California corporation and a general
partner of Lessee, subsequently succeeded to all of Mammoth-Pacific, a
California general partnership's right, title and interest in the Lease. By an
assignment dated January 29, 1990 and recorded in memorandum form on January 29,
1990 as Instrument No. 665, Official Records of Mono County, California, Pacific
Geothermal Company assigned an undivided 50% of all of its right, title and
interest in the Lease to Lessee, and the remaining undivided fifty percent (50%)
of all of its right, title and interest in the Lease in equal shares to CD
Mammoth Lakes I, Inc., a Maryland corporation and _______ Mammoth Lakes II,
Inc., a Maryland corporation (collectively, the CD Companies); and the CD
Companies in the same assignment subsequently assigned all of such right, title
and interest in the Lease to Lessee.

     F. Exhibit "A" to the Lease contains the following exception in the
description of Parcel B of the leased premises EXCEPTING THEREFROM the surface
of the Southwesterly three (3) acres, more or less, occupied by a lumberyard as
of the date of this Lease.

     The area covered by this exception is referred to in this Amendment as the
"Excepted Acreage."

     G. Lessor and Lessee desire to amend the Lease to include the Excepted
Acreage in the leased premises, without, however, any warranty of title by
Lessor.

     NOW, THEREFORE, in consideration of the above-referenced facts, the
agreements of Lessor and Lessee contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Lessor and Lessee agree as follows:

     1. The following language is deleted from Exhibit "A" to the Lease:

                                      -16-


     EXCEPTING THEREFROM the surface of the Southwesterly three (3) acres, more
or less, occupied by a lumberyard as of the date of this Lease.

     2. From and after the date of this Amendment, the Excepted Acreage shall be
part of the leased premises covered by the Lease, subject to all of the terms
and conditions of the Lease, as amended, except as provided in paragraph 3
below.

     3. Notwithstanding anything set forth in the Lease, Lessor is leasing the
Excepted Acreage to Lessee without any warranties or representations of title
whatsoever, including, without limitation, any warranty or representation that
the Excepted Acreage is free and clear of leases and tenancies by others.

     EVIDENCING their agreement, Lessor and Lessee have executed this Amendment
as of the date first written above.

     LESSOR:

     MAGMA POWER COMPANY, a Nevada
     corporation

     By: /s/ Jon R. Peele
     Name: (print): Jon R. Peele
     Title: Senior Vice President

     By: /s/ Wallace C. Dieckmann
     Name: (print) Wallace C. Dieckmann
     Title: Assistant Secretary

     LESSEE:

     MAMMOTH-PACIFIC, L.P., a California limited partnership

     By Pacific Geothermal Company, a California corporation, its Managing
     General Partner

     By: /s/ Claude Harvey
     Name: (print) Claude Harvey
     Title: Sr. Vice President


                                      -17-





                       THIRD AMENDMENT TO GEOTHERMAL LEASE


     THIS THIRD AMENDMENT TO GEOTHERMAL LEASE (the "Third Amendment") is made
and entered into as of April 12, 1991, by and between MAGMA POWER COMPANY, a
Nevada corporation ("Lessor") and MAMMOTH-PACIFIC, L.P., a California limited
partnership ("Lessee") with reference to the foregoing facts:

     A. Magma Energy, Inc., a Nevada corporation, and Holt Geothermal Company, a
California corporation, entered into that certain Geothermal Lease dated August
31, 1983, and recorded in memorandum form on September 6, 1983, in Book 389,
Page 37 of Official Records of Mono County, California (the "Original Lease").

     B. Magma Energy, Inc. has merged with and into Lessor, and Lessor is the
successor-in-interest to Magma Energy, Inc., by operation of law, as fee owner
of the real property covered by the Original Lease.

     C. By an Assignment of Lease dated August 31, 1983, and recorded in
memorandum form on September 20, 1983, in Book 390, Page 90 of the Official
Records of Mono County, California, Holt Energy Company assigned all of its
right, title and interest in the Original Lease to Mammoth-Pacific, a California
general partnership ("MPGP").

     D. The Original Lease was previously amended by the First Amendment to
Geothermal Lease dated as of April 30, 1987 between Magma Energy, Inc and MPGP
(the "First Amendment") and by the Second Amendment to Geothermal Lease dated as
of January 1, 1990 between Lessor and MPGP (the "Second Amendment") (the
Original Lease, the First Amendment and the Second Amendment are referred to
collectively herein as the "Lease").

     E. MPGP has dissolved and, as a result of such dissolution, Pacific
Geothermal Company, a California corporation ("PGC"), succeeded to 100% of
MPGP's interest in the Lease.

     F. PGC is a general partner of Lessee, holding not less than 50% interests
in both partnership capital and profits.

     G. By an Assignment and Assumption Agreement dated as of January , 1990
(the "Assignment Agreement"), PGC assigned an undivided 50% interest in the
Lease to Lessee and an undivided 50% in the Lease to the CD Companies (as
defined in the Assignment Agreement) (the "CD Companies"). Said Assignment
Agreement was recorded in memorandum form on January 29, 1990 in Book 548, Page
592 of the Official Records of Mono County, California.

     H. Concurrently with the Assignment to the CD Companies described in
Recital G, the CD Companies assigned their entire interest in the Lease to
Lessee.

     I. Lessor and Lessee now desire to modify the Lease for purpose of, among
other things, modifying and/or clarifying certain rights and obligations of
Lessor and Lessee under the Lease.

                                      -18-


     NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee agree to amend
the Lease as follows:

     1. Definitions. All capitalized terms contained herein, unless otherwise
defined, shall have the meanings ascribed to such terms in the Lease.

     2. Modification of Exhibit "A-1". Lessor and Lessee agree to amend Exhibit
"A-1" to the First Amendment promptly upon the occurrence of "firm operation" of
each New Plant, which amendment(s) shall be prepared on the basis of the same
assumptions used for purposes of initially preparing said Exhibit "A-1", but
which amendment(s) shall accurately reflect the appropriate commencement date
for the effectiveness thereof.

     3. Modification of Exhibit "A-2". Exhibit "A-2" to the First Amendment is
hereby deleted in its entirety and Exhibit "A-2" hereto is substituted in its
place.

     4. Property Taxes. Paragraph 18 of the Lease is hereby amended by adding
the following before the last sentence of Paragraph 18:

     In this regard, all property taxes assessed by the Assessor on the
respective property interests of the parties hereunder in respect of the leased
land shall be shared by Lessee and Lessor in proportion to which the Assessor
allocates the assessment of value among structures, improvements and personal
property made or placed upon the leased land by Lessee, on the one hand, and the
leased land as such (including the geothermal resources and the right to
production thereof), on the other hand; provided, however, that any increase in
tax assessments which arise after the date hereof by reason change in control of
or ownership interests in Lessee shall be paid by "Lessee", and/"Lessee" shall
indemnify and hold Lessor harmless therefor, including, without limitation,
changes in control or of ownership interests in Lessee arising by reason of
redemptions or transfers of interest. In addition, from and after January 1,
1990, Lessor and Lessee shall cooperate in good faith to pursue a joint strategy
of settling on an agreed-upon methodology with the Assessor for valuation and
allocation of property taxes, both historically and prospectively during the
term of this Lease. Lessor and Lessee agree that each party shall represent its
own interests as they shall appear and shall bear its own fees and costs, but
shall seek, in good faith and to the extent reasonably practicable, to present a
common position to the Assessor in a good faith effort to achieve the lowest
overall property tax assessment applicable to both parties.

     5. Indemnification. Paragraph 18 of the Lease is hereby further amended by
adding the following after the first sentence of Paragraph 18:

     Without limiting the generality of the foregoing or any other provision of
this Lease (including, without limitation, Paragraphs 12 and 15 hereof) and in
furtherance thereof, Lessee acknowledges that Lessor has not itself utilized or
monitored Lessee's activities on the leased land and Lessee (i) acknowledges and
agrees that Lessee is relying solely on its own investigation of the leased land
with respect to the effect of (a) the presence, if any, of any underground tanks
on the leased land or of any "hazardous substances", "hazardous materials" or
"hazardous wastes" (as defined under federal or California Law) (collectively,
the "Hazardous Materials"), (ii) assumes the risk of all liabilities, claims,
demands, actions and causes of action arising out of any such storage tanks or
Hazardous Materials on, at, in, under or about the leased


                                      -19-


land whether placed there now or at any point in the future while this Lease is
in affect and, (iii) agrees to hold harmless, indemnify and defend Lessor
against all claims with respect to the foregoing.

     6. Assignment of BLM Lease. Concurrently with the execution and delivery
hereof, Lessor is assigning to Lessee all of Lessor's right, title and interest
in and to that certain Geothermal Resource Lease (Mono-Long Valley Parcel #12)
dated March 1, 1982, between the United States and Magma Energy, as assigned to
Lessor (the "BLM Lease"). In consideration for such Assignment, Lessee shall pay
to Lessor, on the date hereof, the amount of $89,468.06 by wire transfer of
immediately available funds.

     7. BLM Approval. Lessee shall, within 180 days following the date hereof,
obtain from the Department of Interior, Bureau of Land Management ("BLM") such
approvals to the Assignment of the BLM Lease described in Paragraph 6 of this
Third Amendment as may be required in accordance with 43 C.F.R. 3241.2, and
either (a) Lessee shall post a bond satisfactory to BLM if required thereby or
(b) if Lessor has heretofore posted a bond with BLM, then Lessee shall replace
such bond and cause such bond to be released to Lessor. In the event Lessee
fails to perform its obligations under this Paragraph 7, Lessee shall, upon
request of Lessor, assign the BLM Lease to Lessor.

     8. Cross Default. Lessee shall be deemed to be in material breach of the
Lease, as amended hereby, in the event Lessee fails for any reason whatsoever to
pay within five (5) days when due all royalties payable by Lessee for Lessor
under the Lease, as amended hereby, in respect of the BLM Lease, including
without limitation in the event the payment of all or any part of said royalties
are determined to constitute impermissible overriding royalties. If Lessee or
any lender or other party holding a beneficial interest in the BLM Lease fails
to pay any royalty due under the ELM Lease within sixty (60) days after such
royalty comes due, Lessor shall have the right to terminate the Lease upon
written notice to Lessee.

     9. BLM Lease Property Taxes. From and after the date hereof, Lessee shall
pay all property taxes payable in respect of the BLM Lease property and all
rental and royalties payable under the BLM Lease, as though Lessee were the
direct and original lessee thereunder, and lessee shall indemnify and hold
harmless Lessor for all losses, liabilities, costs and expenses (including
without limitation reasonable attorneys' fees) in respect thereof.

     10. Matters Concerning the BLM Leases. To the best of Lessor's knowledge,
without any review of title reports but based solely on Lessor's not having
received any notice, certificate or document to the contrary, Lessor has no
reason to believe there are any defects in Lessor's title to the BLM Lease. In
addition, Lessor represents that all rental Payments and taxes attributable to
the BLM Lease which have become due and payable have been paid in full.

     11. Effectiveness of Third Amendment. This Third Amendment shall be
effective and become of full force and effect only upon receipt by Lessor of
insurance binders or certificates in a form reasonably satisfactory to Lessor
evidencing the maintenance by Lessee of all policies of insurance required to be
maintained pursuant to Paragraph 18 of the Lease.

     12. Continued Effectiveness. Except as specifically provided in this Third
Amendment, the Lease shall remain in full force and effect in accordance with
its original terms


                                      -20-



and conditions, except that the term "Lease" as used in the Lease shall
hereafter mean the Lease as amended hereby.

     13. Counterparts. This Third Amendment may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute a single original instrument.

     14. Entire Agreement-Amendments. This Third Amendment, together with the
Lease and those certain letter agreements date of even date herewith, between
Lessor and Lessee, constitute the entire agreement of the parties with respect
to the matters set forth herein, and the provisions hereof, together with the
other documents enumerated in this Paragraph 14, shall supersede any and all
prior agreements or understandings relating to the same subject matter. The
Lease, as amended hereby, may be further amended only by a writing signed by a
duly authorized representative of both parties.

     IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to
be signed by their duly authorized officers as of the day and year first above
written.

                                           LESSOR:

                                           MAGMA POWER COMPANY, a Nevada
                                           corporation

                                           By: /s/ Jon R. Peele
                                              --------------------------------
                                           Name:  Jon R. Peele
                                           Its:  Senior Vice President

                                           By: /s/ Wallace C. Dieckmann
                                              --------------------------------
                                           Name:  Wallace C. Dieckmann
                                           Its:  Assistant Secretary

                                           LESSEE:

                                           MAMMOTH-PACIFIC, L.P., a California
                                           limited partnership

                                           By:  Pacific Geothermal Company,
                                           a California corporation,
                                           General Partner

                                           By: /s/ Claude Harvey
                                              --------------------------------
                                           Name: Claude Harvey
                                                ------------------------------
                                           Title: Sr. Vice President
                                                 -----------------------------

                                           Recording Requested By and
                                           When Recorded Return To:


                                           WILLILAM E. VINEY, ESQ.
                                           530 West 6th Street, Suite 623
                                           Los Angeles, California 90014


                                           By: CD Mammoth Lakes I Inc.,
                                              --------------------------------
                                               a Maryland Corporation
                                              --------------------------------
                                               General Partner

                                           By: /s/ Terry L. Ogletree
                                              --------------------------------
                                           Name: Terry L. Ogletree
                                                ------------------------------
                                           Its: President
                                               -------------------------------








                                      -21-



                                                                 Exhibit 10.4.25


                           UNPROTECTED LEASE AGREEMENT

             Made in Yavne, Israel as of this 15th day of July, 2004
                                 BY AND BETWEEN:

Ormat Industries Ltd.
Public Company No. 52-003671-6
Of the Industrial Area of Yavne
(hereinafter:  "OIL")
                                                              OF THE FIRST PART;

                                      AND:

Ormat Systems Ltd.
Private Company No. 51-159723-9
Of the Industrial Area of Yavne
(hereinafter: "OSL")
                                                             OF THE SECOND PART;

WHEREAS       OIL leases from the Israeli Land Administration (hereinafter:
              "ILA") a 65,655 sqm of land in the Industrial Area of Yavneh,
              known as Block no. 5403 Plots 8 & 9 (in part), Block 4921 Plots D
              & 10 (in part) and Block no. 5170 Plot 107 (hereinafter: "THE REAL
              ESTATE"), under lease contracts expiring between 2018 through 2047
              (hereinafter: "THE LEASE CONTRACTS") and on which OIL's production
              and manufacturing facilities, headquarters, the technical school
              and other permanent constructions and fixtures used by OIL are
              located as well as the plot on which the Guest House is located at
              7 Brosh St., Yavne (hereinafter, together: "THE PLANT"); and

WHEREAS       OIL and OSL have agreed on the sale of certain assets and
              liabilities of OIL to OSL, including the activities of the Plant
              but excluding the Real Estate and the Plant, and for that purpose
              are entering, simultaneously with their entering into this
              Agreement, into a Purchase Agreement (hereinafter: "THE PURCHASE
              AGREEMENT"); and

WHEREAS       OSL wishes to lease the Real Estate and the Plant for the Term (as
              hereinafter defined), and OIL wishes to lease the Real Estate and
              the Plant to OSL for said period, provided, however that the terms
              of the Law for the Protection of Tenants [Consolidated Version],
              1972 and/or any other law which will replace it or add to it, will


              not apply to this Agreement and that OSL will not be protected by
              such laws;




                                      -2-

       THEREFORE, IN CONSIDERATION OF THE FOREGOING, THE PARTIES, INTENDING
       TO BE LEGALLY BOUND, AGREE AS FOLLOWS:

  1.   DEFINITIONS

       In this Agreement, except where the context otherwise requires, the
       following terms shall have the meaning ascribed to them hereunder:

1.1            "THE LEASED PROPERTY" - the Real Estate and the Plant, depicted
       in blue and red respectively in the drawing attached as EXHIBIT A to this
       Agreement. For the removal of doubt, the Leased Property will include any
       permanent constructions and fixtures located in the Real Property, which
       may not under Israeli law be sold apart from the Real Estate, while it is
       the intention of the Parties that all detachable, removable and/or
       temporary fixtures and constructions will be sold to OSL under the
       Purchase Agreement.

1.2            "QUARTER" - any three-months-period beginning on January 1st,
       April 1st, July 1st or October 1st.

1.3            "BUSINESS DAY" - a day in which most of the five largest banks in
       Israel are open to transact business with the public.

1.4            "THE REPRESENTATIVE RATE OF EXCHANGE" - the representative rate
       of exchange of the USD published by the Bank of Israel, and if such rate
       will not be published, then any rate which will replace it and in the
       absence of such rate - the average of the two largest banks in Israel buy
       and sale rates for transfers of USD.

1.5            "ASSIGNMENT" - whether by way of assignment, conveyance,
       transfer, sale, sublet, lease, pledge, lien, or license, whether with or
       with no consideration.

1.6            "PERMITTED TRANSFEREE" - an entity Controlling, under the Control
       of, or under common Control with, the transferor.

1.7            "CONTROL" - the ability to direct the operations and activities
       of a corporation, except an ability stemming only from the fulfillment of
       a position of a director or another office in the corporation, and it is

       presumed that a person controls a corporation if the person holds half or


       more of the voting rights in the corporation, or half or more of the
       rights to nominate the directors of the corporation.



                                      -3-

  2.   LEASE AND TERM

2.1            Subject to the conditions specified herein, OIL hereby leases to
       OSL and OSL hereby leases from OIL, the Leased Property, for a period of
       4 years and 11 months, commencing on July 1st, 2004 (hereinafter: the
       "TERM"). If necessary, OIL will apply to the ILA for its consent to
       extend the Term to a period of up to a total of 25 years (less one day)
       and, should such approval be granted or if such an approval is not
       required, the Term will be extended accordingly. For the purpose of this
       Agreement, the Term shall include any extension thereof.

2.2            If required, the Parties will exert their best efforts to
       register the Lease with the Land Registry Office and will do so with
       respect to any other registry where such registration is deemed necessary
       or beneficial by the Parties.

2.3            Possession of the Leased Property will be granted to OSL
       effective as of July 1st, 2004 (hereinafter: the "EFFECTIVE DATE").

2.4            Should OIL's Lease Contracts, or part thereof, be terminated
       and/or not be renewed, then the Term with respect to the relevant plot,
       will terminate, and the provisions of section 12.3 hereunder will apply,
       accordingly. The parties agree that other than for gross negligence,
       willful misconduct, or a breach by OIL of its Lease Contracts, OIL shall
       not be liable to OSL for damage and/or loss which results from the
       termination of the Lease by the ILA or the denial of any extension by the
       ILA.

  3.   USE OF THE LEASED PROPERTY

3.1            OIL hereby leases the Leased Property to OSL for the purpose of
       operating the Plant and/or any other type of legal activity.

3.2            OSL declares that it is familiar with, and has seen and
       inspected, the Leased Property, its surroundings and the regulatory
       framework applicable to the Leased Property (including the plans ("taba")
       and the designation of the Leased Property thereunder) and has found the
       Leased Property and its surroundings to be in good and proper condition,
       and the Leased Property and the regulatory framework suitable for its
       purposes and needs. Subject to OIL's complying with its obligations

       hereunder, OSL hereby waives any claim of defect or unsuitability


       regarding the Leased Property, and any other claim of any kind regarding
       the Leased Property or this Agreement.




                                      -4-

3.3            The Plant and/or any other business will be operated by OSL in
       the Leased Property at its sole cost. Beginning on the Effective Date,
       OSL will be solely responsible for obtaining any licenses, permits and
       authorizations necessary for the use and operation of its business in the
       Leased Property. Notwithstanding the above, if required, OIL will assist
       OSL in obtaining any such authorizations, provided OSL will reimburse OIL
       for any expenses incurred by it in connection therewith. For the removal
       of doubt, failure to obtain the necessary authorizations or their
       termination, shall not grant OSL the right to terminate this Agreement or
       the lease hereunder, prior to the termination of the Lease Period.

  4.   OWNERSHIP OF LEASED PROPERTY


       OIL hereby declares and warrants that it is the sole legal lessor and
       holder of the Leased Property and that it is legally entitled to lease
       the Leased Property pursuant to the terms and conditions of this
       Agreement.

  5.   RENT

5.1            In consideration for the lease of the Leased Property, OSL will
       pay OIL a monthly rent of USD52,250 (hereinafter: "THE RENT"), together
       with VAT as stated in clause 5.5 hereunder. The Rent will be paid every
       Quarter in advance, on the first Business Day of such Quarter, with the
       Rent for the period commencing on the Effective Date to be paid on the
       date of signing of this Agreement.

5.2            The Rent will be adjusted every year, beginning on January 1st,
       2005, by the same rate of increase of the Israeli Consumer Price Index
       ("CPI") during the previous calendar year. In any event, the Rent with
       respect to each year during the Term and any extension thereof shall not
       be lower than the Rent paid during the previous year.

5.3            At OSL's choice, Rent will be paid either in USD or in NIS. If
       Rent is paid in NIS, it will be paid according to the Representative Rate
       of Exchange most recently published by the Bank of Israel prior to the
       time of payment.

5.4            Payment of Rent will be effected in cash by wire transfer of



       immediately available funds to an account designated by OIL, in writing,
       or by check, or in any other manner approved by the Parties' CEOs.




                                      -5-

5.5            Value Added Tax, at the appropriate rate, shall be paid by OSL
       with respect to any Rent payment, and in the same manner and on the same
       date such payment is made, against issuance of a VAT invoice by OIL.

  6.   TAXES AND OTHER PAYMENTS IMPOSED ON OSL

6.1            OSL shall pay during the Term any tax, levy, charge or other
       compulsory payments, whether state or municipal and of any kind, imposed
       on the date hereof and/or in the future, on the lessee and/or occupant
       and/or possessor of the Leased Property, and/or applicable on the
       business or operations of OSL in the Leased Property, including municipal
       tax ("arnona"), business tax, licenses fees etc., but excluding payments
       which pursuant to this Agreement are the liability of OIL.

6.2            OSL will pay all the required payments relating to the operation
       of the Leased Property, including electricity, water, gas, telephone
       (including faxes) etc. OIL may demand OSL to register itself during the
       Term as the debtor of such payments with the appropriate entities, and
       OSL will do so. Upon the termination of the Lease Agreement, OIL (or
       whomever it may order) will be re-registered as the debtor.

6.3            OSL will timely and fully remit all taxes and other payments
       imposed on it as aforesaid. Notwithstanding the above, in any event of
       late payment, OSL will bear any interest (including arrears interest),
       linkage differences, fines and other costs imposed in connection with
       such late payment.

6.4            Within reasonable time of OIL's demand, OSL will provide it with
       all the receipts or other certifications proving its full and timely
       compliance with its payment obligations under this clause. OIL will be
       entitled, but not obligated, to pay any such payment which has been due
       for over 60 Business Day and has not been paid by OSL at the time OIL

       remits such payment, and in such event OSL will reimburse OIL for its
       expenses, immediately upon OIL's demand, together with interest (as set
       forth in clause 14.1 hereunder).





                                      -6-


  7.   TAXES AND OTHER PAYMENTS IMPOSED ON OIL

       OSL shall indemnify OIL, immediately upon OIL's demand, for any taxes,
       levies or charges imposed upon OIL, including any payments to the ILA, in


       connection with Leased Property and/or the Rent, but excluding any income
       taxes or other taxes imposed by reference to revenues of OIL or earnings
       of OIL derived from the Rent.

  8.   INAPPLICABILITY OF TENANCY PROTECTION LAWS

       OSL hereby declares, warrants and certifies that:

8.1            The Tenant Protection Law [Consolidated Version], 1972
       (hereinafter: "THE TENANT LAW") does not apply to the lease under this
       Agreement.

8.2            This Agreement, the lease hereunder, OSL, and the Leased Property
       are not and will not be protected under the provisions of the Tenant Law
       nor under any other law that may amend or add to or replace the Tenant
       Law, nor under any other law that now grants or in any time in the future
       will grant tenants or tenancies protection similar to those mentioned in
       the Tenant Law. Any such laws, or any regulation, directive or
       legislation that has been or will be passed or promulgated in the future
       under such laws, shall not apply to OSL, the Leased Property, this
       Agreement or the lease hereunder.

8.3            OSL has not paid, nor has it been required to pay or undertook to
       pay OIL any amount whatsoever, directly or indirectly, whether in money
       or its equivalent, with respect to "key monies" for the lease. OSL hereby
       warrants and declares that any repair and/or change executed in the
       Leased Property, if at all, will be executed in the course of ongoing
       maintenance of the Leased Property and shall not constitute fundamental
       changes in the Leased Property. Hence, upon surrender of the Leased
       Property, OSL shall not be entitled to claim or receive any amount or
       benefit with respect to key monies or goodwill.

  9    OSL'S UNDERTAKINGS

9.1            OSL will fully and timely comply with all laws, regulations,
       directives and other legislation, as well as any licenses, permits and

       authorizations issued by the authorities or required by them, applicable


       to the maintenance and operation of the Leased Property, its use and the
       activities taking place therein.




                                      -7-

  9.2          OSL will look after the intactness of the Leased Property, will
       operate its business only within the boundaries of the Leased Property
       and will not cause or allow its employees, managers, invitees, customers
       or any one on its behalf to cause any hazard, nuisance, trespassing,
       noise, shocks, filth, smoke or other unpleasantness to the users of the
       Leased Property and/or its surroundings, which is unreasonable
       considering the character of the Leased Property and the character of its
       surroundings.

  9.3            OSL will use the Leased Property in a reasonable and careful
       manner. Without derogating from the generality of the above, OSL:

9.3.1          Will keep the Leased Property in a good and proper shape, except
       for reasonable wear and tear.

9.3.2          Will keep the Leased Property clean.

9.3.3          Will use the Leased Property for legal activities.

9.3.4          Will not act in a manner causing harm to the Leased Property.

9.3.5          Will inform OIL of any defect, damage or loss caused to the
       Leased Property, immediately upon their occurring.

9.3.6          Will without delay repair, at its own expense, any loss or damage
       caused to the Leased Property. Should OSL fail to do so within 10
       Business Days of the occurance of such loss or damage, OIL may (but will
       not be obligated to) execute such repair works, at OSL's expense, and OSL
       will reimburse OIL for any out of pocket expenses borne by it with
       respect thereto immediately upon OIL's demand. The expenses will bear

       interest, as set forth in clause 14.1 hereunder.

  9.4          OSL shall obtain and maintain, at its own cost and
       responsibility, with financially and professionally reputable insurers,
       the insurance policies detailed in EXHIBIT B to this Agreement, which
       will cover the Leased Property and its contents at their full value. Both
       OIL and OSL shall be named as beneficiaries of such insurance policies.
       OSL will keep its insurance policies in full force and effect throughout
       the Lease period and will pay the premiums in full and in a timely
       manner. Upon OIL's demand, OSL will present it with proof of its
       compliance with this undertaking. Should OSL fail to obtain or maintain
       insurance policies as aforesaid, OIL may do so




                                      -8-

       at OSL's expense, and OSL shall indemnify OIL, upon its demand, for
       all its expenses in connection therewith. In any event of damage, OSL


       shall take reasonable measures to activate the policies and will use
       any monies received in connection with such policies only to repair,
       with no delay, the damage covered.

  10.  OSL INDEMNIFICATION UNDERTAKINGS

10.1           In addition to any liability imposed on OSL under law, OSL will
       repair, at its expense, any damage or loss which results from defective
       construction of the Plant. Such repair works will be executed by OSL
       within reasonable time of being notified by OIL of the damage or loss.
       Should OSL fail to execute any such repair works within 10 Business Days
       of being notified of the damage or loss, OIL may notify OSL of its intent
       to repair the damage or loss, and in the absence of action on the part of
       OSL within 5 Business Days, OIL may (but will not be obligated to) repair
       any such damage or loss at OSL's expense. OSL will reimburse OIL for any
       out-of-pocket expenses borne by it with respect thereto immediately upon
       OIL's demand. The expenses will bear interest as set forth in clause 14.1
       hereunder.

10.2           Notwithstanding the above, and in addition to any liability
       imposed on OSL under law as possessor and/or occupant and/or lessee of
       the Leased Property, OSL will be solely responsible for any damages of
       any type or kind caused to the Leased Property and/or OIL and/or a third
       party present in the Leased Property (including bodily injury or damages
       to property), as a result of OSL's negligent acts or omissions, including
       the negligent acts or omissions of its employees, invitees or any other
       person or entity acting on behalf of OSL. OSL hereby releases OIL from
       any liabilities under any law to indemnify and/or compensate and/or be
       liable to such damage. OSL will indemnify OIL, immediately upon its
       demand, for any loss or expenses (including legal expenses) it paid as a



       result of OSL's negligence, including loss or expenses incurred by as a
       result of any demand, motion or law suit derived, directly or indirectly,
       from OSL's said negligence.

  11.  MODIFICATIONS AND ALTERATIONS

11.1           Subject to clause 11.4 hereunder, OSL will not build or construct

       on or otherwise develop, modify, alter or effect a change in the Leased


       Property (hereinafter: "A CHANGE") without the advance written consent of
       OIL, which will not be unreasonably withheld.




                                      -9-

11.2           In case of any request or requirement for a Change by OSL, OSL
       will provide OIL in writing all the information regarding the requested
       Change, including all information reasonably required by OIL.

11.3           If OIL authorizes a Change, OSL will be permitted to execute such
       Change, provided it corresponds to the authorization and all other
       reasonable limitations or restrictions imposed by OIL.

11.4           Notwithstanding the provisions of clause 11.1 above, OSL shall be
       entitled to remodel, redecorate, refurbish and make improvements and
       replacements (hereinafter: "IMPROVEMENTS") to the interior structure of
       the Plant as OSL may deem desirable. OIL will have no objection to the
       same, provided that none of the Improvements will have any permanent
       effect whatsoever on the structure or construction of the Plant.

11.5           OSL will bear the responsibility and all costs and expenses
       involved in executing the Change or Improvement, and the maintenance
       thereof, and will not be entitled to any compensation, consideration or
       indemnification for such Change or Improvement, whether upon its
       execution or any time thereafter, including at the termination of this
       Agreement. Neither will OSL be entitled to any reduction in the Rent on
       account of such Change or Improvement. For the removal of doubt, OSL
       alone will be responsible to obtain any necessary approvals or
       authorizations for the execution of the Change or Improvement.

11.6           Any Change or Improvement made will be considered an integral
       part of the Leased Property and deemed owned by OIL for all intents and
       purposes, and will accordingly be surrendered to OIL, together with the
       Leased Property, upon termination of this Agreement (for no
       consideration). Provided however, that subject to clause 13 hereunder,
       said provision will not apply to equipment and furniture belonging to OSL
       (including phones and computer systems) which are not permanently
       attached to the Leased Property and whose detachment will not have a
       permanent effect on the construction or structure of the Plant.


               Notwithstanding the above, OIL shall be entitled at the end of
               the Term or upon the termination of this Agreement, to demand

               that OSL remove any Change or Improvement and return the Leased
               Property to its previous condition, at OSL's expense and OSL
               will do so, within a




                                      -10-

               reasonable time after being so demanded. If OSL fails to do so
               within 30 Business Days of receipt of such a demand, OIL may
               return the Leased Property to its previous condition, at OSL's


               expense, and OSL will reimburse OIL for all its expenses in
               connection therewith, together with interest as set forth in
               clause 14.1 hereunder, immediately upon OIL's demand.

  12.  CEASING OF OPERATION AND TERMINATION

12.1           OSL may cease its activities in the Leased Property at any time
       during the Term, provided however, it continues to fully comply with it
       obligations under this Agreement.

12.2           OIL will have the right to terminate this Agreement upon the
       occurrence of any one of the followings: (i) the dissolution or winding
       up of OSL (ii) an appointment of a special manager, trustee or receiver,
       over OSL or its material assets, if such appointment is not cancelled
       within 90 days (iii) a breach by OSL of any of its payment obligations to
       OIL under this Agreement which is not remedied within 30 days after being
       notified in writing of the breach by OIL, or a breach of OSL of any of
       its other undertakings under this Agreement which is not remedied within
       90 days after being notified in writing of the breach by OIL.

12.3           Upon OIL request and at OIL's sole discretion, the area of the
       Leased Property shall be reduced in order to accommodate the needs of
       OIL; provided, however, that any such reduction does not have an adverse
       affect on the operation of the business of OSL in the Leased Property. If
       OIL exercises its aforesaid right, the Rent and all OSL's liabilities
       with respect to the Leased Property shall be adjusted proportionately to
       such reduction.

13.    SURRENDER OF THE LEASED PROPERTY

13.1           OSL undertakes upon expiration or termination of the Agreement to
       restore possession of the Leased Property to OIL free of any property,
       equipment and fixtures not belonging to OIL (subject to clause 11 above).
       The Leased Property will be in as good, clean, orderly, and proper

       condition as on the date of this Agreement, except for ordinary wear and


       tear resulting from ordinary and reasonable use of the Leased Property in
       accordance with the purpose of the lease.



                                      -11-

               Should OSL fail to comply with its obligation, it will reimburse
               OIL all the expenses incurred by it in the course of restoring
               the Leased Property to such condition.

  13.2         Should OSL fail to vacate as aforesaid the Leased Property at the
         time set forth above,

13.2.1         OSL shall be obligated to pay OIL liquidated damages of USD 3,000
         for each day of delay in vacating the Leased Property. Such penalty
         will not be considered as Rent payment and will not create any
         lessor-lessee relationship between OIL and OSL.

13.2.2         Upon a 7 days prior written notice, OIL may vacate the Leased
         Property at OSL's expense, and transfer and store any equipment and
         furniture belonging to OSL, all at OSL's expense. OIL shall not be
         liable to any damage to OSL or the Leased Property or the equipment or
         furniture vacated, caused in connection with such actions on its part,



         except damage caused willfully or negligently.

               All this, without derogating from any other remedies OIL may be
               entitled to under this Agreement or under law.

  14.  ARREARS INTEREST

14.1           Any payment imposed on a Party under this Agreement for the
         benefit of the other Party, which was not remitted by it on the date
         due for payment, shall bear interest at the rate of Prime plus 5% per
         annum, for the period during which such payment remained unpaid.

14.2           The right to receive or the payment of arrears interest will not
         impair OIL's right to receive, in addition to such payment, any other
         or additional remedy OIL may be entitled to under this Agreement or
         under law for such delay in payment, and will not constitute any waiver
         by OIL of its right to such remedies.

  15.    MISCELLANEOUS


15.1           Each of the Parties hereby declares and confirms, that all


         actions and resolutions necessary in order to give effect to its
         entering into this Agreement, have




                                      -12-

         been taken, and that there is no restriction and/or limitation and/or
         hindrance on its signing this Agreement, and such signature and/or the
         execution of this Agreement by it shall not constitute a breach by it
         of any applicable contract and/or law and/or its documents of
         incorporation.

15.2           Each party will cooperate with the other party, in good faith,
         and exert its best efforts in order to assist the other party in
         achieving the purposes of this Agreement and complying with the other
         party's undertakings hereunder.

15.3           Monetary obligations owed by the Parties hereto to one another,
         which have become due, may be offset by a written notice provided by
         the offsetting Party to the other Party.

15.4           Assignment. Neither this Agreement nor any of the rights or
         obligations hereunder may be assigned by OSL without the prior written
         consent of OIL. Provided however, such assignment may be made to a
         Permitted Transferee, without OIL's consent. OIL may, at any time and
         at its full discretion, assign this Agreement or any of its rights or
         obligations hereunder, as well as sell, transfer, pledge or otherwise
         assign its rights (in whole or in part) in the Leased Property or any
         part thereof, without obtaining OSL's consent, provided however, OSL's
         rights pursuant to this Agreement will not be impaired. OIL will notify
         OSL of such act within reasonable time after its being carried out. OSL
         will then comply with all its obligations pursuant to this Agreement to
         any such transferee of OIL. Any assignment maybe subject to the prior
         consent of the ILA, which the assigning party shall be responsible to
         obtain.

               In any event, the transferee (whether of OSL or of OIL), will
               sign this Agreement with the remaining Party, or will otherwise
               affirm its assumption of the transferor's obligations and
               undertakings under this Agreement in a manner satisfactory to
               the remaining Party.

               Subject to the foregoing, this Agreement shall be binding upon
               and inure to the benefit of the parties hereto and their
               respective successors and assignees with no other person having
               any right, benefit or obligation hereunder.

15.5           Notices. Unless otherwise provided herein, any notice, request,

         instruction or other document to be given hereunder by either party to


         the other shall be in writing and delivered by telecopy or other
         facsimile (with acknowledged




                                      -13-

          receipt), delivered personally or mailed by certified or registered
          mail, postage prepaid (and by airmail if sent internationally), return
          receipt requested or by internationally recognized courier (such as
          Federal Express or DHL) (such mailed or couriered notice to be
          effective on the date such receipt is acknowledged or refused), as
          follows:

               If to OSL, addressed to:
               Ormat Systems Ltd.
               Yavne Industrial Area
               Attn.: President
               Fax: 08-9439901

               If to OIL, addressed to:
               Ormat Industries Ltd.
               Yavne Industrial Area
               Attn: CEO
               Fax: 08-9439901

               or to such other place and with such other copies as either
               party may designate as to itself by written notice to the other.

15.6           Choice of Law; Venue. This Agreement shall be construed,
         interpreted and the rights of the parties determined in accordance with
         the laws of the State of Israel. Each of the parties to this Agreement
         consents to the exclusive jurisdiction and venue of the competent
         courts of Tel-Aviv-Jaffa over all matters arising in connection with
         this Agreement.

15.7           Entire Agreement; Amendments and Waivers. This Agreement,
         together with all exhibits and schedules hereto, constitutes the entire
         agreement between the parties hereto pertaining to the subject matter
         hereof, and supersedes all prior agreements, understandings,
         negotiations and discussions, whether oral or written, between the
         parties hereto with respect to such subject matter. No supplement,
         modification or waiver of this Agreement shall be binding unless
         executed in writing by the party to be bound thereby. No waiver of any
         of the provisions of this Agreement shall be deemed or shall constitute

         a waiver of any other provision hereof (whether or not similar), nor


         shall such waiver constitute a continuing waiver unless otherwise
         expressly provided.



                                      -14-

15.8           Multiple Counterparts. This Agreement may be executed in one or
         more counterparts, each of which shall be deemed an original, but all
         of which together shall constitute one and the same instrument.

15.9           Invalidity. In the event that any one or more of the provisions
         contained in this Agreement or in any other instrument referred to
         herein shall, for any reason, be held to be invalid, illegal or
         unenforceable in any respect, then to the maximum extent permitted by
         law, such provision or provisions shall be judicially reformed
         consistent with the parties' intentions so as to be valid, legal and
         enforceable to the maximum extent possible and such invalidity,
         illegality or unenforceability shall not affect any other provision of
         this Agreement or any other such instrument.

15.10          Titles. The titles, captions or headings of the Sections herein

         are inserted for convenience of reference only and are not intended to
         be a part of or to affect the meaning or interpretation of this
         Agreement.

                            [Signature Page Follows]





                                      -15-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on their respective behalf, by their respective duly authorized
officers, in multiple originals, all as of the day and year first above written.




----------------------------------------  ------------------------------------
Ormat Industries Ltd.                     Ormat System Ltd.

By: /s/ Lucien Y. Bronicki                By: /s/ Etty Rosner
    ------------------------------            ---------------------------
    Lucien Y. Bronicki                        Etty Rosner
    Chairman of the Board                     V.P. Contract Administrator





                                      -16-

                                    EXHIBIT A
                                    ---------
                                    [drawing]










                                      -17-

                                    EXHIBIT B
                                    ---------

-      Employers' Liability Insurance

-      Third Party Liability Insurance

-      Property Insurance

-      Consequential Damage Insurance

-      Business Interruption Insurance

-      Comprehensive General Liability




                                                          Exhibit 10.5.1



                          ENGINEERING, PROCUREMENT AND
                              CONSTRUCTION CONTRACT



                              DATED 23 AUGUST 2002



                                 BY AND BETWEEN



                         TUAROPAKI POWER COMPANY LIMITED

                                     "OWNER"

                                       AND

                               ORMAT PACIFIC INC.

                                  "CONTRACTOR"









ARTICLE 1 - DEFINITIONS                                                      2

ARTICLE 2 - EPC CONTRACT DOCUMENTS                                           8

ARTICLE 3 - CONTRACTOR RESPONSIBILITIES                                      9

ARTICLE 4 - OWNER RESPONSIBILITIES                                          14

ARTICLE 5 - NOTICE TO PROCEED                                               18

ARTICLE 6 - COMPENSATION AND PAYMENT                                        21

ARTICLE 7 - SUBSTANTIAL COMPLETION AND FINAL ACCEPTANCE                     26

ARTICLE 8 - CHANGES IN THE WORK                                             30

ARTICLE 9 - ACCESS AND REVIEW BY OWNER                                      32

ARTICLE 10 - TESTING                                                        35

ARTICLE 11 - WARRANTIES                                                     36

ARTICLE 12 - REMEDIES                                                       41

ARTICLE 13 - SECURITIES                                                     45

ARTICLE 14 - CARE OF THE WORK; TITLE                                        47

ARTICLE 15 - INSURANCE                                                      48

ARTICLE 16 - DISPUTE RESOLUTION                                             52

ARTICLE 17 - INDEMNIFICATION                                                54

ARTICLE 18 - ASSIGNMENT                                                     56

ARTICLE 19 - SUBCONTRACTORS                                                 57


                                       i



ARTICLE 20 - SUSPENSION                                                     58

ARTICLE 21 - TERMINATION                                                    61

ARTICLE 22 - FORCE MAJEURE                                                  64

ARTICLE 23 - CONFIDENTIALITY                                                66



ARTICLE 24 - NOTICES                                                        66

ARTICLE 25 - MISCELLANEOUS                                                  67



                                       ii





                                LIST OF EXHIBITS

         Exhibit A              Scope of Work

         Exhibit B              Milestone Payment Schedule

         Exhibit C              Drawings and Specifications

         Exhibit D              Tests

         Exhibit E              Ormat Industries Ltd. Guarantee

         Exhibit F              Tuaropaki Trust Guarantee

         Exhibit G              Warranty Procedures

         Exhibit H              Project Schedule


         Exhibit I              Approved Major Subcontractors List

         Exhibit J              Form of Performance Bond

         Exhibit K              Form of Continuity Guarantee for Subcontractors



                                      iii




         This ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT is made and
entered into this [ ] th day of August, 2002 by and between Tuaropaki Power
Company Limited, a New Zealand corporation wholly owned by the Tuaropaki Trust
with offices at Taupo, New Zealand ("Owner") and Ormat Pacific Inc., a Delaware
corporation acting through its New Zealand branch with offices at Taupo, New
Zealand ("Contractor").

                                    RECITALS

         1. Owner owns and operates a geothermal power plant at Mokai, New
Zealand (Mokai I) using a part of the total geothermal fluid available
underlaying the land at Mokai.

         2. Owner holds or will hold rights to use land at Mokai, New Zealand,
administered by the Tuaropaki Trust, and to use all of the geothermal resource
underlying the land, resource consents and all other associated rights,
consents, commitments and facilities necessary for the construction, testing,
generation and maintenance of an additional 39 MW net geothermal power plant.

         3. Owner desires Contractor to construct or arrange for the design,
engineering, procurement, construction, fabrication, installation,
commissioning, start-up and testing of a new 39 MW net geothermal power plant at
Owner's site located in Mokai, New Zealand.

         4. Ormat Industries Ltd. has agreed to design, manufacture and supply
certain equipment necessary for the construction of the geothermal power plant
under the terms and conditions of the Supply Contract (as defined below) with
Owner entered into contemporaneously with this agreement .

         5. Contractor is willing to supply certain other equipment and perform
the services set forth herein, upon the terms and conditions hereinafter set
forth.

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants hereinafter contained, the parties hereby agree as follows:

                                       1


ARTICLE 1 - DEFINITIONS

         Unless the context otherwise requires, capitalized terms when used
herein shall have the meanings set forth below:

         "ASSETS"

         The rights to access to and use of land at Mokai, New Zealand
administered by the Tuaropaki Trust, and to use of the geothermal resource
underlying the land and to reinject brine and condensate, resource consents and
all other rights, consents, commitments and facilities necessary for the
engineering, construction, testing, generation and maintenance of the Project
belonging to Owner and/or the Tuaropaki Trust.

         "BBR"

         BBR is defined in Section 6.4.

         "CHANGE IN LAW"

         The enactment, adoption, promulgation, modification or repeal after the
date of this EPC Contract of any Law (except regarding taxation) that
establishes requirements adversely affecting Contractor's costs or schedule for
performing the Work.

         "CHANGE IN THE WORK"

         A variation, requested and agreed in accordance with Article 8, in the
design, quality or quantity of the Work specified or required in Exhibit A and
including without limitation:

         (a)      additions, omissions, substitutions, alterations in design and
                  changes in quality, form, character, kind, position,
                  dimension, level or line; and

         (b)      changes to any part of the Project Site or access thereto.

         "DESIGN CONDITIONS"

         The design operating conditions for the Project as set forth in Article
1.5 of Exhibit A.

                                       2


         "DESIGN INFORMATION"

         The specifications, drawings, performance specifications and
construction field documents for the Project.

         "DISPUTE"

         Any dispute or difference of any kind whatsoever which shall arise
between Owner and Contractor in connection with or arising out of this EPC
Contract (including without limitation any disputes or differences concerning
the terms of the Supply Contract) or the carrying out of the Work, including any
dispute or difference as to any instruction, order, direction, certificate or
valuation by the Owner's Representative, whether during the progress of the Work
or after its completion and whether before or after the termination, abandonment
or breach of this EPC Contract.

         "DRAWINGS AND SPECIFICATIONS"

         Drawings, technical specifications, system descriptions and start-up
and testing procedures prepared and provided by the Contractor, as described in
Exhibits C and D.

         "ELECTRICAL INTERCONNECTION FACILITIES"

         All means required and apparatus installed to interconnect and deliver
power from the Project to the Electric Power Distributor as described in Exhibit
C, including, but not limited to, connection, switching, metering,
communications, and protection equipment required to protect (1) the Electric
Power Distributor's system and its customers from faults occurring at the
Project and (2) the Project from faults occurring on the Electric Power
Distributor's system or on the systems of others to which the Electric Power
Distributor's system is directly or indirectly connected, including any
necessary transmission line(s), and step-up transformer(s).

         "ELECTRIC POWER DISTRIBUTOR"

         The entities selected and designated by Owner to transport and/or
receive the electric power generated by the Project.

                                       3


         "EPC CONTRACT"

         This Engineering, Procurement and Construction Contract together with
the Exhibits attached hereto, which shall, taken as a whole, define the rights
and obligations of the parties hereunder.

         "EPC CONTRACT PRICE"

         The total firm fixed lump sum price, , payable to Contractor by Owner
as set forth in Section 6.1 hereof and as adjusted pursuant to the provisions of
this EPC Contract.

         "EQUIPMENT"

         The equipment which are to be provided by Supplier to Owner pursuant to
the Supply Contract.

         "FINAL ACCEPTANCE"

         Satisfaction by Contractor or waiver by Owner of the conditions set
forth in Section 7.2.

         "FINAL ACCEPTANCE TESTS"

         The Final Acceptance Performance Test and the Reliability Run of the
Project as set forth in Exhibit D hereof.

         "FORCE MAJEURE"

         Force Majeure is defined in Article 22.

         "GEOTHERMAL FLUID"

         The geothermal steam and brine to be supplied at the Geothermal Fluid
Interface Point in accordance with the interface data set forth in Article 1.4
of Exhibit A.

         "GEOTHERMAL FLUID INTERFACE POINT"

         The Geothermal Fluid interface point defined in Article 1.4 of Exhibit
A.

                                       4


         "GEOTHERMAL FLUID SPECIFICATIONS"

         The specifications for the Geothermal Fluid set forth in Article 1.5
and 1.6.1 and 1.6.2 of Exhibit A.

         "GEOTHERMAL WELL CLEANING PERIOD"

         The period after completion of Owner's vertical discharges of the
Geothermal Fluid production wells for the Project that (a) starts upon the date
that the Geothermal Fluid is run through the Project geothermal fluid gathering
system, bypassing the power plant, for the initial cleaning of sand, rocks and
other debris from the Geothermal Fluid and (b) ends upon the earlier of (i) the
declaration of Contractor that the Geothermal Fluid is sufficiently clear of
such sand, rock and debris to permit testing and operation of the Project and
(ii) the declaration of the Owner's Representative that the Geothermal Fluid is
sufficiently clear of such sand, rocks and debris to permit testing and
operation of the Project; provided, that if Contractor disagrees with such
declaration, the accuracy of such declaration is confirmed by the results of the
impact of the steam separated from such Geothermal Fluid on the target plate
installed by Contractor in the steam line of the Project before the inlet to the
steam turbine after allowing two (2) days for flushing the inlet piping for the
steam turbine.

         "GUARANTEED CAPACITY"

         The level of net electrical generating capacity for the Project
guaranteed by Contractor, equal to 39 MW as corrected to the Design Conditions
using the correction curves and formulas set forth in Exhibit D, as measured at
the high voltage interface point defined in Article 1.4, number 5 of Exhibit A.

         "KW"

         Kilowatts.




                                       5



         "LAW"

         Statutes, regulations, codes, consents, ordinances, permits, rules,
orders, judicial and administrative decisions and interpretations to the extent
they have jurisdiction on performance of the Work under this EPC Contract.

         "LENDER"

         Any entity or entities providing construction or permanent debt
financing for the Project that is identified by Owner in a written notice to
Contractor in accordance with this EPC Contract.

         "LIBID"

         LIBID is defined in Section 6.4.

         "MILESTONE PAYMENT SCHEDULE"

         The milestone payment schedule for payment of the EPC Contract Price,
         as set forth in Exhibit B hereto.

         "MOKAI I"

         The existing Mokai geothermal power plant supplied and constructed
         under the Amended and Restated Supply and EPC Contracts dated December
         15 1997.

         "MW"

         Megawatts.

         "NOTICE TO PROCEED"

         Owner's written notice to Contractor directing Contractor to commence
and complete all Work hereunder, as set forth in Article 5.



                                       6


         "OWNER'S REPRESENTATIVE"

         The person designated by Owner to act as its representative in all
respects to this EPC Contract under Section 4.1(k) and having the powers
contained in Section 4.2.

          "PROJECT"

         The power production plant and related equipment to be designed,
engineered, and constructed by Contractor and its Subcontractors for Owner at
Mokai, New Zealand as set forth herein.

         "PROJECT SCHEDULE"

         The completion schedule for the Project as set forth in Exhibit H, as
it may be amended from time to time as set forth in Section 3.1(k).

         "PROJECT SITE"

         The site on which the Project will be located, which is on land held
and administered by the Tuaropaki Trust in Mokai, New Zealand for its beneficial
owners, and as is more specifically described in Article 1.2 of Exhibit A.

         "SCHEDULED FINAL ACCEPTANCE DATE"

         The date by which the Project is required to achieve Final Acceptance,
which shall be the later of (a) ninety seven (97) days from Substantial
Completion or deemed Substantial Completion, according to the case, and (b) such
later date as may be established in accordance with Section 5.3 and 5.4.

         "SCHEDULED SUBSTANTIAL COMPLETION DATE"

         The later of (a) nineteen (19) months from the Notice to Proceed, and
(b) such later date as may be established in accordance with Section 5.4.



                                       7


         "SUBCONTRACTOR"

         Any party (other than Contractor's employees) engaged by Contractor to
perform any of the services or supply any item of goods or material pursuant to
this EPC Contract.

         "SUBSTANTIAL COMPLETION"

         Satisfaction by Contractor or waiver by Owner of all of the conditions
set forth in Section 7.1.

         "SUPPLIER"

         Ormat Industries Ltd., an Israeli corporation.

         "SUPPLY CONTRACT"

         The Supply Contract of even date herewith, together with the Exhibits
attached thereto, by and between Supplier and Owner, as the same may be amended
from time to time, under which, among other things, Supplier is providing the
Equipment and services to Owner for use in connection with the development,


construction, start-up, testing, commissioning and completion of the Project.

         "WORK"

         Material, goods and services which are the responsibility of Contractor
under this EPC Contract.

ARTICLE 2 - EPC CONTRACT DOCUMENTS

         2.1      DOCUMENTS INCLUDED

         This EPC Contract shall include the documents listed below, which are
hereby incorporated herein by reference.

                    Exhibit A             Scope of Work

                    Exhibit B             Milestone Payment Schedule

                    Exhibit C             Drawings and Specifications

                                       8


                    Exhibit D             Tests

                    Exhibit E             Ormat Industries Ltd. Guarantee

                    Exhibit F             Tuaropaki Trust Guarantee

                    Exhibit G             Warranty Procedures

                    Exhibit H             Project Schedule

                    Exhibit I             Approved Major Subcontractor List

                    Exhibit J1 &J2        Form of Performance Bonds


                    Exhibit K             Form of Continuity Guarantee for
                                          Subcontractors

         2.2      CONFLICTS

         In the event of any conflict between the text of this EPC Contract and
any of the Exhibits listed in Section 2.1, the text hereof shall govern.

ARTICLE 3 - CONTRACTOR RESPONSIBILITIES

         3.1      GENERAL RESPONSIBILITIES

         In order for Contractor to complete the Work, except as provided
elsewhere in this EPC Contract, Contractor shall:

                  (a) Perform, or cause to be performed the Work, including
labour, materials, tools, supplies, equipment, transportation, engineering,
insurance, technical services and other services necessary and required to
satisfactorily design (including the specification of the Equipment and all
other goods, materials and plant to be incorporated in the Project), engineer,
procure, construct, install, commission, start up and test the Project, all in
accordance with the requirements of Exhibit A.

                  (b) Provide supervisory personnel necessary for commissioning,
start-up and performance testing of the Project as described herein.

                                       9


                  (c) Prosecute the Work continuously and diligently in
accordance with the Project Schedule, using qualified and competent personnel,
and complete the Work in accordance with good engineering practice and prudent
electrical and mechanical engineering and in accordance with the provisions of
this EPC Contract.

                  (d) Monitor on behalf of Owner as authorized in the Supply
Contract the manufacture and delivery of the Equipment by Supplier, arrange for
complete handling of all goods and material supplied under this EPC Contract and
for the Equipment after delivery under the Supply Contract including, but not
limited to inspection, expediting, shipping, unloading, receiving, customs
clearance and customs claims. In connection herewith, Owner hereby grants to
Contractor the authority to administer the Supply Contract and to enforce
Supplier's obligations there under, and Contractor shall administer the Supply
Contract in the same way as if the Supplier was a Subcontractor.

                  (e) Commission, start-up and performance test the Project in
accordance with the acceptance and performance tests herein and in Exhibit D
hereto. Any after-tax revenue received from the sale of electricity shall be
divided equally between Owner and Contractor (and shall be paid by Owner to
Contractor within 10 (ten) days of Owner's receipt of such revenue) until the
earlier of the Scheduled Final Acceptance Date and Final Acceptance, when all
revenues shall be for the account of Owner.

                  (f) Designate a project manager who will have full
responsibility to oversee prosecution of the Work and to act as a single point
of contact with Owner in all matters on behalf of Contractor. Owner may require
replacement of Contractor's project manager on reasonable grounds which shall be
described to Contractor.

                  (g) Comply in all material respects with the standards
described in Exhibits A or C and with all applicable Laws, relating to the
Project and the performance of the Work.

                  (h) Procure the building consent for the Project and comply in
all material respects with such building consent and such other applicable
consents and



                                       10


permits relating to the Project and the performance of the Work obtained by
Owner in accordance with Section 4.1(c).

                  (i) Provide temporary construction materials, equipment and
supplies necessary for operation and maintenance of the Project until Final
Acceptance and replace any spare parts used during the construction, start-up,
testing and operation and maintenance of the Project until achievement of Final
Acceptance.

                  (j) Pay for construction utilities ( electricity only)
required to achieve Substantial Completion except for initial connection and
disconnection costs.

                  (k) Amend and update the Project Schedule from time to time,
as Contractor deems reasonably necessary or when requested by the Owner's
Representative after the occurrence of a material deviation from the Project
Schedule.

                  (l) Clear the Project Site of temporary structures, surplus
materials and tools upon completion of field work.

                  (m) Train up to 16 (sixteen) operating and maintenance
personnel, of whom up to 3 (three) are senior personnel, designated by Owner at
the Project Site during the commissioning and start-up phase of the Project
construction. Such training shall be in conjunction with the normal
commissioning and start-up activities employed by Contractor. Each person
designated for training by Owner shall be a qualified technician and said
trainees shall not be deemed employees or Subcontractors of Contractor.

                  (n) Use effective quality assurance programs in performing the
Work.

                  (o) Prepare detailed monthly progress reports on progress of
the Work for the period ended on the last day of the previous month to Owner as
reasonably required by Lender or Owner.

                  (p) Provide special tools, and operating and commissioning
supplies which are required for commissioning, start-up, and performance testing
of the Project until Final Acceptance.

                                       11


                  (q) Provide at least 2 (two) copies of job books, operation
and maintenance manuals (which shall incorporate manuals of the Equipment),
operating data and detailed as-built Drawings and Specifications to Owner prior
to Final Acceptance.

                  (r) Exercise, in the design and specification of the Work and
the specification of the Equipment, the skill and care to be expected of a
qualified and competent turnkey contractor experienced in work of similar nature
and scope as the Work.

                  (s) Design, install, construct, commission, test and complete
the Work using proven up to date good practices which are consistent with the
provisions of the Supply Contract and this EPC Contract.

         3.2      EMERGENCIES

         In emergencies affecting the safety or protection of persons or the
Work, Contractor, without special instruction or authorization from Owner, may
take all reasonable actions to prevent such threatened damage, injury, or loss.
This provision is not intended to limit Contractor's rights under any other
provisions hereof, including, without limitation, Article 8 hereof.

         3.3      HEALTH AND SAFETY IN EMPLOYMENT ACT ("HSEA")

                  3.3.1 Contractor warrants to Owner that during Contractor's
activity on the Project Site, up to and including Final Acceptance, Contractor
shall take all practical steps to ensure that no act or omission:

                           (a) in contravention of the HSEA causes a significant
hazard, harm or serious harm to any employee of Contractor or any person at or
in the immediate vicinity of the Project Site; or

                           (b) is a breach of any duty or obligation of
Contractor under the HSEA; or

                                       12


                           (c) does or is likely to give rise to the issue of an
improvement or prohibition notice, enforcement proceedings or a prosecution
under the HSEA against Owner, Contractor, or the Subcontractor.

The words and phrases used in this clause shall have the same meaning as is
ascribed to them in the HSEA.

                  3.3.2 Contractor undertakes that before a Subcontractor
commences work on the Project Site Contractor shall obtain similar warranties as
those stated in Subsection 3.3.1 from that Subcontractor in relation to the
subcontracted Work.

                  3.3.3 Contractor shall indemnify and keep indemnified Owner
from all costs, damages, fines, penalties and expense incurred or suffered by
Owner in respect of any breach of the HSEA and/or conviction or proceedings
instigated against Owner pursuant to the HSEA directly or indirectly related to
a breach by Contractor of any of the warranties set out in Subsection 3.3.1.

                  3.3.4 If Contractor becomes aware that it is or may be in
breach, or is likely to be in breach of any of the warranties in Subsection
3.3.1 or any Subcontractor is or may be in breach of or is likely to breach the
matters set out in the agreement between the Contractor and Subcontractors
pursuant to Subsection 3.3.2, then Contractor shall immediately notify Owner of
such a breach or anticipated breach and, in relation to any breach or
anticipated breach in relation to any of the Work or subcontracted Work,
Contractor shall consult with the Owner's Representative to avoid, remedy or
mitigate such breach or anticipated breach.

                  3.3.5 Contractor, pursuant to the warranties given in
Subsection 3.3.1, shall have regard to the contents of the safety programme
agreed between Owner and Contractor in accordance with Exhibit A, Article
2.3.5.6. A copy of the agreed safety programme shall be kept at the office of
Contractor.

         3.4      PROJECT REPRESENTATION

         Contractor has reviewed the provisions of the Supply Contract and
undertakes to Owner that the combination of the Work and the Equipment are
adequate so that the



                                       13


Project, when completed in accordance with this EPC Contract, will meet the
requirements of Owner set forth in Exhibit A.

ARTICLE 4 - OWNER RESPONSIBILITIES

         4.1      GENERAL RESPONSIBILITIES

         Owner shall, at Owner's cost and expense and not as part of the EPC
Contract Price payable to Contractor:

                  (a) Be responsible for making any and all arrangements for any
sale and purchase of electricity to be generated by the Project, and for
ensuring that the Electric Power Distributor accepts the connection of the
Project and the delivery of electricity generated by the Project at the high
voltage interface point specified in Article 1.4, number 5 of Exhibit A in good
time to permit commissioning, start-up, testing and operation of the Project in
accordance with the Project Schedule.

                  (b) Arrange for and enter into all necessary agreements for
completion of financing for the entire Project with Lender(s) on terms
acceptable in all respects to Owner and, in addition, on terms consistent with
this EPC Contract.

                  (c) Arrange for and obtain all consents and permits required
(including without limitation all environmental, air, water, zoning, use,
construction for any part of the Project, but specifically excluding the
building consent) and provide the other items described in Article 3 of Exhibit
A, each in good time as required by Contractor to permit Contractor to proceed
with the Work in accordance with the Project Schedule, on terms acceptable to
Owner, and in accordance with the terms of this EPC Contract, and to pay for all
fees associated therewith. Without derogating from the aforesaid, Contractor,
upon Owner's specific request, will provide all necessary technical information
to Owner regarding the Project to aid Owner in its efforts to obtain such
consents and permits.

                  (d) Provide the Project Site, including space for all Project
construction facilities, lay-down, storage and disposal areas, roads and other
means of access to Contractor in good time to permit Contractor to proceed with
the Work in accordance with the Project Schedule, after and in accordance with
Contractor notification to Owner



                                       14


of its reasonable requirements regarding amount, weight and dimensions of
equipment to be transported and size and layout of the lay down areas.

                  (e) Obtain all consents, way leaves and approvals in
connection with the regulations and by-laws of any local or other authority
which are applicable to the Work on the Project Site in good time to permit
Contractor to proceed with the Work in accordance with the Project Schedule, on
terms acceptable to Owner, and in accordance with the terms of this EPC
Contract.

                  (f) Obtain and provide all other lands, easements, and rights
of way necessary for the construction of the Project and the Electrical
Interconnection Facilities in good time to permit Contractor to proceed with the
Work in accordance with the Project Schedule, on terms acceptable to Owner, and
in accordance with the terms of this EPC Contract.

                  (g) Obtain and provide the supply of Geothermal Fluid in
accordance with the Geothermal Fluid Specifications to the Geothermal Fluid
Interface Point in good time to permit commissioning, start-up, testing and
operation of the Project in accordance with the Project Schedule.

                  (h) Provide reinjection wells that are sufficient to accept
reinjection of the brine and the condensate at the flow rates defined in Article
1.4 of Exhibit A or provide an alternative solution in accordance with the Law
and the Project consents and permits, all of which will enable performance
testing of the Project in accordance with the Project Schedule and operation and
maintenance of the Project. .

                  (i) Provide the Equipment as provided herein, including
without limitation performing the obligations of Owner under the Supply Contract
and providing the Equipment furnished by Supplier there under to Contractor
immediately upon receipt in accordance with Section 3.1(d). Nothing in this EPC
Contract shall make or imply that Owner is in any way responsible for the
specification, design or performance of the Equipment.

                  (j) Obtain and provide electricity, water and communications
required at the Project Site as specified in Article 3.3 of Exhibit A on terms
acceptable to Owner,



                                       15


and in accordance with the terms of this EPC Contract and in good time to permit
construction, commissioning, start-up, testing and operation of the Project in
accordance with the Project Schedule and to obtain and provide electricity,
water, communications and any other utilities or facilities required at the
Project Site in good time to permit Contractor to perform all of its warranty
obligations.

                  (k) Designate an Owner's Representative who shall act as a
single point of contact with Contractor in all matters on behalf of Owner.
Contractor may require replacement of Owner's Representative on reasonable
grounds which shall be described to Owner.

                  (l) At least 4 (four) months prior to commencement of
Contractor's commissioning activities, provide up to 3 (three) senior operating
and maintenance personnel and at least 2 (two) months prior to commencement of
Contractor's commissioning activities, provide up to 13 (thirteen) regular
operating and maintenance personnel, all for training by Contractor as provided
pursuant to Section 3.1(m), and for commissioning, start-up, performance
testing, and operation through Final Acceptance. Owner and Owner's operation and
maintenance personnel shall cooperate with Contractor in allowing Contractor to
conduct all testing activities, including the Final Acceptance Performance Test,
to complete the Work and to perform all of Contractor's warranty obligations in
a timely and cost efficient manner.

                  (m) Pay the fees in connection with obtaining the building
consent in excess of the sum of $5000 N.Z. (Five Thousand New Zealand Dollars),
and for all New Zealand sales, use, excise, value added, goods and services tax,
customs and similar taxes payable with respect to the Project and payment of the
EPC Contract Price, and pay all real property taxes or other taxes assessed
against the Work or the Project Site, provided that Owner's obligation to pay
such taxes shall not extend to any personal income or withholding tax assessed
against Contractor in respect of income received for performing the Work under
this EPC Contract.

                  (n) Promptly (but not later than 15 days from delivery)
approve, or provide written comments to the extent necessary to, all Design
Information submitted to Owner for approval or comment pursuant to Article 9
hereto.



                                       16


                  (o) Owner shall be the importer of record and consignee for
all goods and materials supplied under this EPC Contract and the Equipment and
shall be responsible for all New Zealand taxes, duties and levies associated
therewith. Owner hereby grants to Contractor the right to act as Owner's agent,
including executing documentation on Owner's behalf, for purposes of
accomplishing the importation of all goods and materials for the Project into
New Zealand under this EPC Contract and the Supply Contract, including the
Equipment, and the processing of such goods and materials through customs.

                  (p) Owner and/or the Tuaropaki Trust shall retain or obtain,
according to the case, all the rights to Assets for the duration of this EPC
Contract.

         Contractor has been chosen by Owner and by the Tuaropaki Trust as their
contractor for the Project and for the development of the second, 40 MW of
geothermal resource on or utilizing the Assets. Any transfer, mortgage,
assignment, sale or other disposition of Assets or rights to Assets to a third
party, any further undertakings on behalf of Owner and/or the Tuaropaki Trust
regarding the Project, and any introduction of an equity participant, joint
venture partner or other participant in any manner in the Project by Owner
and/or the Tuaropaki Trust shall be subject to Contractor's rights to develop
the second, 40 MW of geothermal resource on or utilizing the Assets as aforesaid
and to all of Contractor's rights under this EPC Contract, and Owner and/or the
Tuaropaki Trust shall provide Contractor with said new participant's
acknowledgment and consent to said conditions.

         4.2      RESPONSIBILITIES OF OWNER'S REPRESENTATIVE

         The Owner's Representative shall be authorized to carry out the
specific duties specified in this EPC Contract. In carrying out such duties, and
in exercising any other authority he/she may have under this EPC Contract, the
Owner's Representative shall be entitled to seek the advice and assistance of
Owner, Lender and their respective consultants employed from time to time.

         Wherever under this EPC Contract the Owner's Representative is required
to exercise his/her discretion by:

                                       17


                  (a)      giving a decision, opinion or consent; or

                  (b)      expressing satisfaction or disapproval; or

                  (c)      determining value; or

                  (d)      otherwise taking action which may affect the rights
and obligations of Owner or Contractor;

the Owner's Representative shall consult with Contractor in an endeavour to
reach an agreement before exercising such discretion. If agreement is not
achieved, the Owner's Representative shall exercise such discretion fairly,
reasonably and in accordance with the terms of this EPC Contract having regard
to all the circumstances.

         If Contractor has a Dispute with the determination or discretion made
by the Owner's Representative, such Dispute shall be resolved as provided in
Article 16. Until any contrary determination is made pursuant to Article 16,
Contractor shall proceed with the decisions and instructions given by the
Owner's Representative in accordance with his/her range of authority and with
this EPC Contract.

         Owner shall be entitled to replace the Owner's Representative from time
to time upon giving prior written notice to Contractor.

ARTICLE 5 - NOTICE TO PROCEED

         5.1      PROVISION OF NOTICE TO PROCEED

         Immediately upon fulfilling all its obligations under Sections 4.1(a)
and (b) and the Tuaropaki Trust providing the guarantee pursuant to Section
13.2, Owner shall provide Contractor a Notice to Proceed directing Contractor to
commence and complete the Work under this EPC Contract and Owner shall provide
Supplier a Notice to Proceed directing Supplier to commence and complete the
Work under the Supply Contract.

         5.2      CONTRACTOR COMMENCEMENT OF ACTIVITIES

         Contractor shall commence performance of the Work for the Project upon
Contractor's and Supplier's receipt of the Notices to Proceed issued in
accordance with



                                       18


Section 5.1 above and the Supply Contract. Subject to the terms and conditions
of this EPC Contract, Contractor shall (i) complete the Work necessary to comply
with the requirements of Exhibit A, Scope of Work, and (ii) procure that the
Project satisfactorily meets the requirements for Final Acceptance by the
Scheduled Final Acceptance Date.

         5.3      DELAY IN PROVISION OF NOTICE TO PROCEED

                  (a) If the Notices to Proceed are not issued under Section 5.1
above by December 31, 2002, Contractor shall have the right to extend the
Project Schedule, Scheduled Substantial Completion Date, Scheduled Final
Acceptance Date and related dates by up to 3 (three) months.

                  (b) If the Notices to Proceed are not issued under Section 5.1
above by December 31, 2004, and the conditions in Sections 4.1(a) and (b) have
not been fulfilled despite Owner's best endeavours, either of the parties shall
have the right to terminate, or by mutual agreement the parties may agree to
extend, or amend, this EPC Contract.

         5.4      EXTENSION OF TIME

                  5.4.1 Contractor shall be entitled to an extension to the
Scheduled Substantial Completion Date and the Scheduled Final Acceptance Date to
the extent that Contractor is or will be delayed either before or after such
dates by any of the following causes:

                  (a)      a Change in the Work (other than a change in the Work
                           requested by Contractor under Section 8.6);

                  (b)      a Change in Law;

                  (c)     a Force Majeure event;

                  (d)     physical conditions or circumstances at the Project
                          Site, which are materially adverse and would not be
                          reasonably foreseeable by an experienced contractor;

                                       19


                  (e)     delay to any tests required for Substantial Completion
                          or Final Acceptance as a result of:

                           (i)      the failure of Owner to provide the
                                    Geothermal Fluid that meets the Geothermal
                                    Fluid Specifications or to accept the
                                    Geothermal Fluid after it has been run
                                    through the Project for reinjection or other
                                    disposal; or

                           (ii)     the failure by a Electric Power Distributor
                                    (arising other than as a result of a breach
                                    or failure by Contractor or Supplier to
                                    comply with their respective obligations
                                    under this EPC Contract and Supply Contract,
                                    as appropriate) to transport and/or take the
                                    electrical power generated by the Project as
                                    a result of carrying out such tests or
                                    Project commissioning;

                  (f)     any delay, impediment or prevention by Owner;

                  (g)     the Geothermal Well Cleaning Period (it is agreed that
                          there will be a day-for-day extension for such
                          period);

                  (h)     any other entitlement under a provision of this EPC
                          Contract; or

                  (i)     a delay to Supplier for which Supplier is entitled to
                          an extension of its Delivery Schedule pursuant to
                          Section 5.4 of the Supply Contract.

                  5.4.2 If Contractor believes that it is entitled to an
extension of time under this Section 5.4, Contractor shall give notice to the
Owner's Representative of the same as soon as reasonably practicable and in any
event within 28 (twenty-eight) days of the day when Contractor learns of the
delay. Contractor shall keep such contemporary records as may be reasonably
necessary and feasible to substantiate such delay, either at the Project Site or
at another location reasonably acceptable to the Owner's Representative and
shall provide such information to the Owner's Representative as he or she shall
reasonably require. Contractor shall permit the Owner's Representative to



                                       20


inspect such records during Contractor's normal business hours, and shall (if
requested) provide the Owner's Representative with a copy of such records.

                  5.4.3 Within 28 (twenty-eight) days of such notice (or such
other period as may be agreed by the Owner's Representative), Contractor shall
submit supporting details of the delay. Except that, if Contractor cannot submit
all relevant details within such period because the cause of delay is continuing
or such details are not yet reasonably available, Contractor shall submit
interim details at intervals of not more than 28 (twenty-eight) days (from the
first day of such delay) and final supporting details of its application within
21 (twenty-one) days of the last day of delay. Contractor's failure to meet any
of the time periods specified in this Section 5.4 shall not affect Contractor's
right to the extension of time unless such failure has materially prejudiced the
ability of Owner to rectify the causes of a delay arising from a cause
identified in Section 5.4.1(e) or (f), in which case the extension of time
granted to Contractor shall not include any periods of delay that could
reasonably have been avoided if not for such failure to give notice.

                  5.4.4 The Owner's Representative shall proceed in accordance
with Section 4.2 to agree upon or determine such extension of time as may be
due. The Owner's Representative shall promptly notify Contractor accordingly.
When determining each extension of time, the Owner's Representative shall review
his or her previous determinations and may revise, but shall not decrease, the
total extension of time. If Contractor has a Dispute with the determination or
discretion made by the Owner's Representative, such Dispute shall be resolved as
provided in Article 16.

ARTICLE 6 - COMPENSATION AND PAYMENT

         6.1      EPC CONTRACT PRICE

         For the performance of the Work, Owner shall pay Contractor, in the
manner and at the times hereinafter specified, the EPC Contract Price in the
amount of $ 3,462,000 US (Three Million Four Hundred Sixty two Thousands United
States Dollars) and $ 14,460,000 NZ (Fourteen Million Four Hundred Sixty
Thousands New Zealand Dollars) which amount shall be subject to adjustment only
in accordance with the terms of this EPC Contract. The EPC Contract Price is net
of all New Zealand taxes, duties and levies.

                                       21


         6.2      INDEXING OF EPC CONTRACT PRICE

         If the Notice to Proceed occurs after January 15, 2003 , each milestone
payment amount set forth in the Payment Schedule (will be adjusted in accordance
with changes in the price index for the applicable currency from January 15,
2003 to that for the date of the Notice to Proceed, as per the Price Index of
United States Dollars for the United States Dollars portion of the EPC Contract
Price and New Zealand Dollars for the New Zealand Dollars portion of the EPC
Contract Price from the International Financial Statistics (line 63) as
published by the International Monetary Fund.

         6.3      PAYMENT

                  6.3.1 Exhibit B hereto sets forth the Milestone Payment
Schedule, which is intended to cause payments to approximate the value of Work
performed by Contractor. The Payment Schedule shall be used as the basis for
preparation of invoices, certificates and payments. Each payment shall be
allocated pro rata between the United States Dollar and the New Zealand Dollar
portions of the EPC Contract Price (and paid in such currency.

                  6.3.2 Upon receipt of the Notice to Proceed, Contractor may
issue its first invoice for payment of the first milestone under the Milestone
Payment Schedule. Thereafter on or before the tenth day of each month,
Contractor shall furnish Owner's Representative a detailed progress invoice for
payment based on milestones achieved , during the period ending on the last day
of the previous month accompanied by the documents described under the Payment
Schedule for which payment is demanded (such invoice to include Contractor's New
Zealand registration number for tax purposes).

                   6.3.3 Upon Final Acceptance, Contractor shall submit an
invoice to Owner's Representative, summarizing and reconciling all previous
invoices and payments in the amount of the EPC Contract Price less payments to
date. Owner shall pay the amount of the EPC Contract Price outstanding in full
within 10 (ten) business days of receipt of such invoice or 30 (thirty) days of
Final Acceptance, whichever occurs later, subject to Subsections 6.3.4 and 6.3.5
below.

                                       22


                  6.3.4 Owner's Representative shall verify that the progress
invoice, the final invoice submitted under Section 6.3.3 and the documents
submitted for payment are in accordance with the documentation required under
the Payment Schedule, and shall, within 7 (seven) days of their receipt, either
approve said invoice or give written notice within such period of errors in said
documentation. If Owner's Representative fails to approve the invoice for
release of the progress payment or to provide the notice regarding errors in the
documentation within such period, in the absence of the invoice and the
documents being patently false or inaccurate, the invoice and the accompanying
documentation shall be deemed conclusive evidence sufficient for the release of
such progress payment. In the case Owner's Representative provides written
notice of errors in said documentation within the period described herein, and
the contents of Owner's Representative's notice is not in dispute, Contractor
shall resubmit the corrected progress invoice and/or documentation, and the
above described approval process shall reapply. The invoice as approved by the
Owner's Representative shall comprise a tax invoice for the purposes of New
Zealand goods and services tax.

                  6.3.5 Owner shall pay Contractor the first payment due under
the payment Schedule within 14 (fourteen) of the receipt of Contractor invoice.
With respect to all invoices thereafter, Owner shall pay Contractor on or before
the first business day of the following month the amount owed as set forth in
Contractor's invoice plus the goods and services tax, subject to Subsections
6.3.2 and 6.3.4 above, less any set-off for amounts which are due and owing to
the Owner from the Contractor under this EPC Contract and which are not
legitimately in dispute.

                  6.3.6 If any punch list items remain to be completed upon
Final Acceptance, Owner's Representative may determine to withhold an amount
from the final milestone payment equal to up to one and a half times the
reasonably estimated value of all punch list items remaining on an agreed upon
punch list, with each such withheld amount to be paid to Contractor upon
satisfactory completion of each such punch list item.

                  6.3.7 If there is any Dispute about amounts invoiced and not
paid, and the Dispute is not resolved within 14 (fourteen) days of notice of
Contractor of such Dispute, Contractor shall have the right to suspend the Work
in accordance with Section 20.4 hereunder until payment is received or
resolution of the dispute, whichever occurs earlier.



                                       23


         6.4      INTEREST FOR LATE PAYMENTS

         Amounts not paid by Owner when due in accordance with Section 6.3 shall
bear a late payment charge from the date payment was due to the date of payment
at a rate per annum equal to the following rates for the applicable currency
published on the date due for payment, but not in excess of the maximum amount
permitted by Law provided that no such interest shall be payable by Owner to the
extent the delay in payment is caused as a result of Contractor's default:

                  (a)  for lateness in payments of United States Dollars -- 90
                       (ninety) day LIBID rate + 3% (three percent).

                  LIBID means the London Eurodollar Deposit rate displayed at or
                  about 11:00 A.M. London Standard Time on the Reuter monitor
                  Screen on page RMEY in London.

                  (b)  for lateness in payments of New Zealand Dollars -- 90
                       (ninety) day BBR rate + 4% (four percent).

                  BBR means the New Zealand 90 (ninety) Day Bank Bill Rate
                  displayed at or about 10:45 A.M. New Zealand time on page
                  "BKBM" in Wellington, New Zealand.

         6.5      INTEREST DURING CONSTRUCTION

         In view of the fact that the parties have agreed upon the Payment
Schedule, the EPC Contract Price will be reduced as described below to
compensate Owner in whole or in part for the costs to Owner for interest during
construction. Commencing after 15% (fifteen percent) of the EPC Contract Price
is received by Contractor, there shall be at the time of payment a reduction
from the United States Dollar portion and the New Zealand Dollar portion of each
Payment Schedule payment made thereafter until, but not



                                       24


including, the payment of the milestone payment due upon Substantial Completion,
in the applicable amounts described below:

         For the United States Dollar portion of the payment, the amount
         calculated under the following formula:

                  US$R = US$P x USI x D/365

         Where:

                  US$R = the amount of the reduction in the United States Dollar
                  portion of the applicable Payment Schedule payment

                  US$P = the United States Dollar portion of the applicable
                  Payment Schedule payment

                  USI = the interest rate factor for the United States Dollar
                  portion of the applicable Payment Schedule payment which shall
                  be the 90 (ninety) day LIBID Rate (for the business day
                  immediately preceding the payment date) + 1 1/5% (one and
                  one-fifth percent) per annum

                  D = the number of days between the payment date and the then
                  current Scheduled Substantial Completion Date

         For the New Zealand Dollar portion of the payment, the amount
         calculated under the following formula:

                  NZ$R = NZ$P x NZI x D/365

         Where:

                  NZ$R = the amount of the reduction in the New Zealand Dollar
                  portion of the applicable Payment Schedule payment NZ$P = the
                  New Zealand Dollar portion of the applicable Payment Schedule
                  payment instalment)

                  NZI = the interest rate factor for the New Zealand Dollar
                  portion of the applicable Payment Schedule payment which shall
                  be the 90 (ninety) day



                                       25


                  BBR Rate (for the business day immediately preceding the


                  payment date) + 2% (two percent) per annum

                  D = the number of days between the payment date and the then
                  current Scheduled Substantial Completion Date

ARTICLE 7 - SUBSTANTIAL COMPLETION AND FINAL ACCEPTANCE

         7.1      SUBSTANTIAL COMPLETION

                  7.1.1    When:

                  (a)      the Project is substantially complete and Contractor
                           has complied with all provisions of this EPC Contract
                           relating to the installation of all components and
                           systems of the Project (except for completion of
                           insulation, painting, final grading and any other
                           portion of the Work not affecting the operability,
                           safety, mechanical and/or electrical integrity of the
                           Project);

                  (b)      the Project is mechanically and electrically sound;

                  (c)      the Project has completed initial operation,
                           adjustment and testing for Substantial Completion, as
                           defined in Exhibit D hereto; and

                  (d)      Contractor has submitted draft as-built drawings and
                           operation and maintenance manuals to the Owner's

                           Representative, such drafts to be in sufficient
                           detail for Owner to operate and maintain the Project;

                  Contractor shall serve notice on the Owner's Representative to
that effect.

                  7.1.2 The Owner's Representative shall inspect the Work within
14 (fourteen) days of receipt of Contractor's notice under Subsection 7.1.1, and
shall either:

                  (a)      countersign Contractor's notice as described in
                           Exhibit B hereto, at which stage, Substantial
                           Completion shall have occurred as of the date of
                           Contractor's notice; or

                                       26


                  (b)      issue a notice to Contractor specifying the Work
                           which is required to be done to comply with the
                           requirements of Subsection 7.1.1 before Substantial
                           Completion is achieved, in which case Contractor
                           shall be entitled to receive the Owner's
                           Representative's countersignature within 14
                           (fourteen) days of completion of the Work specified
                           in such notice, and Substantial Completion shall
                           occur on the date of completion of such Work.

                  7.1.3 Notwithstanding any other provision of this EPC
Contract, if the Project has met the requirements set forth in Sections
7.1.1(a), (b) and (d), but due to the occurrence of any of the events described
in Section 5.4.1(e) or (f) Contractor is unable to carry out the testing for
Substantial Completion as defined in Exhibit D hereto within 60 (sixty) days
after the Scheduled Substantial Completion Date (not taking into account any
extensions of the Scheduled Substantial Completion Date by virtue of the
occurrence of the events described in Section 5.4.1(e) or (f)), then Substantial
Completion shall be deemed to have occurred, and Contractor shall be entitled to
payments corresponding to Substantial Completion under the Milestone Payment
Schedule.

         7.2      FINAL ACCEPTANCE

         When construction of the Project is completed as specified in this EPC
Contract (including completion of the uncompleted Work described in Section
7.1.1(a), but excluding punch list items which shall be handled as provided in
Section 6.3.6 and, in the case of clause (b) below, not including any
construction that cannot reasonably be completed due to the occurrence of any of
the events described in Section 5.4.1(e) or (f)), Final Acceptance of the
Project shall occur upon the earlier of:

         (a)      the date upon which:

                           (i)      There is satisfactory completion of the
                                    Final Acceptance Tests under Exhibit D, or
                                    compliance with the associated remedy set
                                    forth in Section 12.2, according to the
                                    case; and

                                       27


                           (ii)     Contractor has submitted final as-built
                                    drawings and operation and maintenance
                                    manuals to the Owner's Representative; and

                           (iii)    Contractor has paid all liquidated damages
                                    due pursuant to Sections 12.1 and 12.2; or

         (b)      a date which is 97 (ninety-seven) days after Substantial
                  Completion or 37 (thirty-seven) days after deemed Substantial
                  Completion under Section 7.1.3, as appropriate, if the Final
                  Acceptance Tests have not been satisfactorily completed under
                  this EPC Contract due to the occurrence of any of the events
                  described in Section 5.4.1(e) or (f).

         7.3      DELAYED TESTS

                  7.3.1 If the Final Acceptance Tests have not been performed
and Final Acceptance has been deemed to have occurred pursuant to Section
7.2(b):

                  (a)      the Project shall be properly maintained by Owner at
                           Owner's expense in accordance with:

                           (i)      good industry practices; and

                           (ii)     operation and maintenance manuals,
                           instructions and specific recommendations provided by
                           Contractor to Owner; and

                  (b)      once every 6 (six) weeks until the Final Acceptance
                           Tests can be performed Contractor may conduct an
                           inspection of the Project to ensure proper
                           maintenance of the Project, at Owner's expense, is
                           being carried out.

                  7.3.2 If geothermal fluid has been run through any part of the
Project or the Project has otherwise been operated by Owner, for a cumulative
period of more than 6 (six) weeks, Contractor may require that the parties
jointly open and inspect the Project prior to the Final Acceptance Tests being
carried out.

                                       28


                  7.3.3 Subject to Subsection 7.3.5, if the events that
prevented the commencement of the testing cease, the parties shall inspect the
Project and:

                  (a)      if the Project is in good, clean and as-installed
                           condition, Contractor will proceed within a
                           reasonable period of time to conduct the Final
                           Acceptance Tests not previously completed; or

                  (b)      if the Project is not in good, clean and as-installed
                           condition, prior to the conduct of the Final
                           Acceptance Tests, Contractor will within a reasonable
                           period of time clean and repair the Project (as
                           Contractor reasonably deems appropriate) at Owner's
                           expense and then conduct such tests; and

                  (c)      if the Project can not be cleaned and/or repaired to
                           a standard to enable the Final Acceptance Tests to be
                           carried out, the testing protocols and requirements
                           shall be revised accordingly to adjust for the
                           constraints which prevent such tests from being
                           performed as originally defined and within a
                           reasonable period of time Contractor shall conduct
                           such revised tests.

                  7.3.4 Contractor shall be paid all costs and expenses arising
directly from such prevention and delay, including without limitation those
costs and expenses reasonably incurred for demobilization and remobilization and
increased costs and expenses incurred for rescheduling of the testing.

                  7.3.5 Contractor's obligations under this Section 7.3 shall
cease upon the end of the earlier of (a) 8 (eight) months after the date of the
deemed Substantial Completion under Subsection 7.1.3 or (b) 7 (seven) months
after the date of deemed Final Acceptance under Section 7.2(b), if Contractor
has not been able to commence the testing for Final Acceptance before the end of
the applicable period.

                                       29


ARTICLE 8 - CHANGES IN THE WORK

         8.1      CHANGE IN THE WORK

         All Changes in the Work shall be recorded in a written instrument
signed by the Owner's Representative and Contractor and shall not be implemented
by Contractor without such written instrument.

         8.2      EFFECT OF CHANGE IN THE WORK

         No Change in the Work shall in any way vitiate or invalidate this EPC
Contract.

         8.3      REQUEST

         In addition to the mandatory Changes in the Work as provided in Article
22, either party may request a Change in the Work by written request to the
other party, provided however, that neither party may request or require changes
or deletions which, in the aggregate, reduce the EPC Contract Price by more than
15% (fifteen percent).

         8.4      ADJUSTMENTS

         Should any Change in the Work cause an increase or decrease in the cost
of or time required for performance of this EPC Contract or otherwise affect any
provision of this EPC Contract (save as provided in Section 8.6), an adjustment
will be made to the EPC Contract Price, including for added expenses for
interest during construction, Project Schedule, Scheduled Substantial Completion
Date, Scheduled Final Acceptance Date, performance warranties and any other
provision of this EPC Contract which is thereby affected. Any increased cost in
the EPC Contract Price due to such Change in the Work shall be payable subject
to a progress payment schedule to be submitted by Contractor as part of the
proposed written Change in the Work order.

         8.5      CHANGE IN THE WORK ORDER

         When Contractor is notified of or proposes a Change in the Work,
Contractor shall promptly prepare and submit to Owner an estimate of the
increase or decrease, if any, in the cost and time required to complete the
Project, together with an explanation of the



                                       30


basis therefore, and shall inform Owner whether, in Contractor's opinion, such
Change in the Work should result in an adjustment to the Scheduled Substantial
Completion Date, Scheduled Final Acceptance Date or any other provision of this
EPC Contract. A written Change in the Work order signed by Owner and Contractor
and describing the Change in the Work, its effect, if any, on the EPC Contract
Price, Payment Schedule, Scheduled Substantial Completion Date, Scheduled Final
Acceptance Date, Project Schedule, and any other provision of this EPC Contract
which is affected must be entered into by the parties in order for the Change to
be effective. If Contractor refuses to sign a written Change in the Work order
which has been signed by Owner's Representative and Owner's Representative
considers such refusal to be arbitrary or unreasonable, then the matter shall be
referred for resolution according to the Dispute Resolution mechanism under
Article 16 hereto.

         8.6      CONTRACTOR CHANGES

         Notwithstanding the foregoing, or anything expressed or implied in this
EPC Contract, if Contractor requests a Change in the Work so as to make the
Project meet the Design Conditions, or to otherwise comply with its obligations
under this EPC Contract and such request does not involve any other cause or
event that would otherwise entitle Contractor to such Change in the Work under
this EPC Contract, such Change in the Work shall be at Contractor's own cost and
expense and shall be subject to the consent of the Owner's Representative (which
consent shall not be unreasonably withheld). If the Owner's Representative
withholds its consent to such Change in the Work, and Contractor remains of the
view that it is necessary for the completion of the Work in accordance with this
EPC Contract, then the matter shall be referred for resolution under Article 16.

         8.7      SOURCES OF PAYMENT

         Notwithstanding the foregoing, Contractor shall not be required to
implement any Change in the Work in excess of an aggregate value of NZ$25,000
(Twenty Five Thousand New Zealand Dollars) for all Changes in the Work until
adequate assurances have been provided to Contractor by Owner of sources of
payment by means acceptable to Contractor to pay for any increased costs and any
extensions in time.



                                       31


         8.8      EFFECT OF CHANGES ON WARRANTIES AND SAFETY

         If Contractor reasonably believes that a proposed Change in the Work
may negatively affect any express or implied warranty of the Work, Contractor
shall serve Owner notice within 14 (fourteen) days of the receipt of such
proposal of its belief and the believed effect. If Owner insists, despite
Contractor's notice, to require the execution of such proposal, Contractor shall
comply with Owner's requirement to execute the proposal, but Contractor may void
negatively affected warranties or performance guarantees, but only to the extent
related to or derived from Owner's proposal.

         If Contractor believes that a proposed Change in the Work may
negatively affect safety of the Work or persons in its vicinity, Contractor
shall serve Owner notice within 14 (fourteen) days of such proposal of its
belief and the believed effect, and Contractor shall not be required by Owner to
execute such proposal.

         8.9      OTHER PROVISIONS UNAFFECTED

         Except to the extent a Change in the Work specifically amends one or
more provisions hereof, all provisions hereof shall apply to all Changes in the
Work, and no Change in the Work shall be implied as a result of any other Change
in the Work.

ARTICLE 9 - ACCESS AND REVIEW BY OWNER

         9.1      RESPONSIBILITY FOR DESIGN

         Contractor shall be responsible for the development of all technical
data, design and other documentation required for the performance of the Work
(including the specification of the Equipment).

         9.2      INSPECTION OF WORK

         Owner and Owner's Representative shall have the right to timely inspect
any item of the Work to be provided hereunder.



                                       32


         9.3      ACCESS TO PROJECT SITE

         Owner and Owner's Representative shall have access to the Project Site,
at reasonable times and upon reasonable notice, shall have the right to be
present during all on-site and off-site test procedures and shall have the right
to receive, upon request, a single copy of test procedures, quality control
reports, and test reports and data. Contractor shall notify Owner at least 21
(twenty-one) days prior to the testing of major equipment items and systems at
the Project Site. While at the Project Site, Owner and its representatives shall
comply with all of Contractor's safety rules and other job site rules and
regulations.

         9.4      DESIGN REVIEW

                  9.4.1 Design Information reasonably requested by the Owner's
Representative shall be submitted to him in accordance with this Section 9.4.

                  9.4.2 Contractor shall submit to Owner's Representative 1
(one) hard and 1 (one) electronic copy of such material Design Information in
sufficient time to enable Owner's Representative to review such Design
Information in accordance with this Section 9.4. In the event that a
re-submission of Design Information is required as provided in this Section 9.4,
such re-submission shall be made as soon as reasonably practicable after
Contractor's receipt of the relevant statement of objections.

                  9.4.3 Following receipt of a submission of Design Information
in accordance with Subsection 9.4.2, the Owner's Representative shall within 15
(fifteen) days from receipt return one copy of the Design Information to
Contractor together with either:

         (a)      a notice stating that he/she has no objections to the Design
                  Information as submitted (for the purposes of this Article 9,
                  a "notice of no objection"); or

         (b)      a statement of objections which shall identify with due
                  particularity the aspects of the Design Information which do
                  not materially comply with the



                                       33


                  provisions of Exhibit A or C and/or accord in any material
                  respect with any Design Information previously submitted by
                  Contractor.

If the Owner's Representative fails to respond within the 15 (fifteen) day
period, then he/she will be deemed to have issued a notice of no objection.

                  9.4.4 If the Owner's Representative returns any Design
Information under Subsection 9.4.3(a) or is deemed to have issued a notice of no
objection under Section 9.4.3, Contractor may, subject to Subsection 9.4.5,
proceed with the Work in accordance with this EPC Contract.

                  9.4.5 If the Owner's Representative considers that revisions
to a submission of Design Information are appropriate, but that such revisions
are of minor design significance, the Owner's Representative may issue a notice
of no objection subject to an appended schedule of comments identifying the
relevant revisions. Subject to the restrictions set forth in Subsection 9.4.6,
Contractor shall cause such Design Information to be revised in accordance with
such comments, but shall not be obliged to re-submit such Design Information
solely on account of such revisions.

                  9.4.6 If the Owner's Representative returns any Design
Information under Subsection 9.4.3(b), Contractor shall cause the Design
Information to be revised so as to take account of the properly stated
objections and as soon as reasonably practicable shall re-submit such Design
Information to Owner's Representative, provided, however, that Contractor shall
not be required to make any modifications or changes which are not in accordance
with Exhibit A and/or C or prudent engineering practice.

                  9.4.7 Neither a proper objection raised under Section 9.4.3(b)
nor a comment made under Section 9.4.5 shall constitute a Change in the Work.

                  9.4.8 Except in the case of a Change in the Work, approved
Design Information shall not be departed from.

                  9.4.9 Owner and/or Owner's Representative shall have the right
to inspect all of Contractor's Drawings and Specifications and the Design
Information at Contractor's premises, for any part of the Work.

                                       34


         9.5      DRAWINGS NOT TO BE PROVIDED

         Notwithstanding any other provisions of this EPC Contract, Contractor
shall not be required to provide shop drawings nor any of Contractor's or
Supplier's confidential manufacturing drawings, designs or know-how nor the
confidential details of manufacturing practices, processes or operations.

         9.6      USE OF DRAWINGS

         Documents, drawings and information supplied by Contractor may be used
by Owner, its representatives, assignees and transferees, only for the purposes
of completing, operating, maintaining, adjusting and repairing the Work. No
license is granted to copy or use documents, drawings or information so supplied
in order to make or have made spare parts except as expressly provided in the
Supply Contract with respect to the Equipment. Documents, drawings or
information so supplied by Contractor shall be subject to the confidentiality
clause contained herein in Article 23 and shall not be used, copied or
communicated to a third party otherwise than as strictly necessary and permitted
under this EPC Contract.

ARTICLE 10 - TESTING

         10.1     TEST PROCEDURES

         The tests described in Exhibit D hereto shall be performed as described
therein, and test results shall be adjusted in accordance with the correction
curves as set forth in Exhibit D.

         10.2     NOTICE OF TESTING

         Contractor shall give Owner's Representative at least 14 (fourteen)
days' notice prior to the date(s) on which Contractor will be ready to perform
the initial Substantial Completion and Final Acceptance tests under Exhibit D;
provided that for any repeated test the notice period shall be at least
twenty-four (24) hours before the time established by Contractor for such test.
Owner's Representative shall be entitled to have, at its own cost, a suitably
qualified independent party present during all such tests. If Owner's



                                       35


Representative and/or such independent party fails to attend at the time and
place appointed for the tests, Contractor shall be entitled to proceed with the
tests in the Owner's Representative's and/or such party's absence. The tests
shall then be deemed to have been made in the presence of the Owner's
Representative and such party and the results of the tests shall be accepted as
accurate. Contractor shall make copies of the test results available to the
Owner's Representative as soon as reasonably practicable after completion of
such tests.

         If major equipment items fail to pass any test, the Owner's
Representative may request such test to be repeated on the same terms and
conditions and Contractor shall determine whether or not repeated testing shall
be executed.

         10.3     CONDUCT AND REPETITION OF TESTS

         Contractor may at any time prior to Final Acceptance repeat, one or
more times, any of the tests described in Exhibit D where Contractor, in its
sole discretion, believes that the results of the prior tests are
unsatisfactory. Further, Contractor may undertake remedial actions in connection
with such repeated tests, provided that such remedial action does not depart
from previously approved Design Information without the Owner's Representative's
prior consent, which shall not be unreasonably withheld and the response shall
be given promptly but not later than (48) forty-eight hours after Contractor's
request.

ARTICLE 11 - WARRANTIES

         11.1     WARRANTY

         Contractor warrants that:

                  (a) the Work and the Equipment shall conform in all material
respects to Laws, permits obtained by Owner pursuant to Section 4.1(c), and the
other applicable description, specifications and criteria set forth in this EPC
Contract and the Supply Contract;

                  (b) the Work shall be performed in a workmanlike and skilful
manner;

                                       36


                  (c) the Work and the Equipment shall be of good quality and
will, on Final Acceptance, be free from defects in workmanship, material, design
and title; and

                  (d) All materials and other items when incorporated in the
Work and the Equipment shall be new (except for the diesel generator, which may
be reconditioned or second-hand) and of a suitable grade of its respective kind
for its intended use.

         Contractor makes no warranty regarding the performance of the wells
and/or of the performance of the Geothermal Fluid (e.g., chemical composition,
temperature, pressure and flow rates) or 110 kV line losses.

         11.2     WARRANTY PERIOD

         The warranties set forth in Section 11.1 shall inure for the benefit of
Owner and its successors and assigns (including the Lender) and, except as
expressly provided below in this Section 11.2, shall be in effect from Final
Acceptance for the duration of:

                  (a) 12 (twelve) months (without limiting the longer warranty
periods specifically described below in this Section 11.2);

                  (b) 18 (eighteen) months for the steam turbine/generator and
the Ormat turbine/generators included in the Equipment;

                  (c) 36 (thirty six) months for any defect in the steam turbine
blades, nozzles and rotor that results in corrosion or erosion thereof that is
materially in excess of the corrosion and erosion that would normally be
expected to occur under the circumstances (this extended warranty is conditional
upon Owner (i) operating and maintaining the Project in accordance with the
operation and shutdown procedures set forth in the operation and maintenance
manuals provided by Contractor under this EPC Contract and (ii) maintaining
records of the steam quality data (e.g., pH, purity and wetness) collected on a
daily basis for the steam entering into the steam turbine and providing copies
of such records to Contractor upon its request); and

                  (d) 36 (thirty six) months for any defect in the Work of the
kind described in Section 11.1 that was caused by the gross misconduct of
Contractor and



                                       37


which would not have been disclosed by a reasonable examination prior to the
expiry of the above described applicable warranty period (for purposes of this
paragraph, "gross misconduct" does not comprise each and every lack of care or
skill but means an act or omission on the part of Contractor which implies
either a failure to pay due regard to the serious consequences which a
conscientious and responsible contractor would normally foresee as likely to
ensue or a wilful disregard of any consequences of such act or omission).

         The warranty period set forth in paragraphs (a) or (b) above with
respect to any item of the Work that is repaired, replaced, modified, or
otherwise altered after Final Acceptance by Contractor shall extend until the
date of expiration of the original warranty, or a period of 6 (six) months from
the date of completion of such alteration, whichever is later, provided,
however, that in no case shall the warranty extended hereunder exceed the
maximum period of 6 (six) months beyond the end of the original warranty period.

         11.3     CORRECTION OF IMPROPER WORK

         Owner shall notify Contractor immediately upon discovery of any failure
which, at the time of discovery, appears to give rise to a Contractor warranty
claim. A written "failure report", which includes available technical and
logistic information to assist Contractor to assess the damage to the Work or
Equipment and to evaluate appropriate corrective action, shall be provided to
Contractor within 5 (five) days of the occurrence. Owner shall supply, upon
request by Contractor, all relevant information relating to past maintenance,
repair and operational data relating to the failed Work or Equipment.
Contractor's responsibility for any such warranty claim shall be limited to the
obligation to, as soon as reasonably possible following Contractor's receipt of
notice from Owner during the applicable warranty period at its own cost and
expense to correct non-compliance with the warranty. All costs incidental to any
warranty correction and remedying shall be borne by Contractor, provided,
however, that Contractor shall have the obligation in connection with the
performance of any warranty work to provide any special rigging, cranes or heavy
equipment or any labour required in connection with operating such Work or
Equipment, except where such items or labour are readily available at the
Project Site, in which case such items or labour shall be provided by



                                       38


Owner or Owner's operator, and Contractor shall pay reasonable compensation
therefore, and provided that Contractor shall have no obligation in connection
with the performance of non-warranty repair and maintenance work, including the
cost incidental to the replacement of parts which are not defective but which
are replaced in conjunction with a warranty repair at the request of Owner and
Owner's operator. Owner or Owner's operator shall provide Contractor with access
to Project equipment and workshop space in connection with Contractor's
performance of any warranty work. If (a) Contractor requests Owner to perform
corrective action under this warranty, or (b) Contractor does not promptly
correct and remedy such non-compliance and damage, Owner has the discretion to
do so and Contractor shall reimburse Owner the reasonable costs Owner has
incurred as a result of such corrective action by Owner.

         The liabilities and obligations of Contractor under this Section 11.3
shall not extend to replenishment of normal consumables or any repairs,
adjustments, or replacements to the extent required as a result of corrosion and
erosion (save as provided in Section 11.2), or wear and tear in the operation of
the Project or as a result of failure, other than Contractor's failure to
properly store, install, operate and/or maintain the Work, Equipment or parts in
accordance with good industry practices, operation and maintenance manuals,
instructions, and specific recommendations made by Contractor and/or any changes
or modifications made to such equipment or parts without Contractor's express
written consent prior to such changes or modifications, or by neglect, abuse,
malicious mischief, vandalism, Force Majeure (other than a warranty failure) or
by the repair and maintenance of the equipment having been performed or
supervised by personnel other than Contractor's personnel or Owner's certified
personnel trained or approved by Contractor.

         11.4     IMPLEMENTATION OF WARRANTY

         The warranty shall be implemented in accordance with the Warranty
Procedures in Exhibit G.



                                       39


         11.5     DISCLAIMER AND RELEASE

                  11.5.1 EXCEPT FOR GROSS NEGLIGENCE OR FRAUD ON THE PART OF
CONTRACTOR:

                  (A) THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF CONTRACTOR,
AND

                  (B) AND RIGHTS AND REMEDIES OF OWNER,

SET FORTH IN THIS EPC CONTRACT WITH RESPECT TO ANY NON-CONFORMANCE OR DEFECT IN
ANY WORK OR EQUIPMENT ARE EXCLUSIVE.

                  11.5.2 OWNER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER
WARRANTIES, OBLIGATIONS, REPRESENTATIONS AND LIABILITIES ON THE PART OF
CONTRACTOR, TOGETHER WITH ALL OTHER RIGHTS, CLAIMS AND REMEDIES OF OWNER AGAINST
CONTRACTOR, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, INCLUDING BUT NOT
LIMITED TO ANY:

                  (A) WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE;

                  (B) WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE OF TRADE;

                  (C) OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT,
WHETHER OR NOT ARISING FROM THE NEGLIGENCE OF CONTRACTOR, ACTUAL, PASSIVE OR
IMPUTED;

                  (D) OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF
OR DAMAGE TO ANY PRODUCT OR PART OF THE PROJECT;

                  (E) LIABILITY OF OWNER TO ANY THIRD PARTY; AND

                  (F) INCIDENTAL OR CONSEQUENTIAL DAMAGES.



                                       40


                  11.5.3 CONTRACTOR'S WARRANTY UNDER THIS EPC CONTRACT DOES NOT
APPLY TO ANY NON-CONFORMANCE OR DEFECT IN ANY PRODUCT, EQUIPMENT OR PART OF THE
PROJECT, TO THE EXTENT SUCH NON-CONFORMANCE OR DEFECT HAS BEEN DIRECTLY OR
INDIRECTLY CAUSED BY:

                  (A) FAILURE BY OWNER OR ITS EMPLOYEES OR CONTRACTORS TO COMPLY
WITH ALL OPERATING PROCEDURES;

                  (B) ALTERATION OF ANY PRODUCT OR PART OF THE PROJECT WITHOUT
THE PRIOR WRITTEN CONSENT OF CONTRACTOR, SUPPLIER OR AN AUTHORIZED SERVICE
REPRESENTATIVE OF CONTRACTOR OR SUPPLIER;

                  (C) OPERATION OF ANY PRODUCT, EQUIPMENT OR PART OF THE PROJECT
OTHERWISE THAN IN ACCORDANCE WITH THE OPERATION AND MAINTENANCE MANUALS SUPPLIED
BY CONTRACTOR OR SUPPLIER;

                  (D) ABUSE, MISUSE OR NEGLIGENT OPERATION OF ANY PRODUCT,
EQUIPMENT OR PART OF THE PROJECT; OR

                  (E) ANY OTHER INTENTIONAL OR NEGLIGENT ACT OR OMISSION OF
OWNER.

ARTICLE 12 - REMEDIES

         12.1     LIQUIDATED DAMAGES FOR DELAY IN FINAL ACCEPTANCE

                  12.1.1 After the Scheduled Final Acceptance Date, Contractor
shall pay to Owner as liquidated damages, and not as a penalty, for each day or
part of a day which shall elapse between the Scheduled Final Acceptance Date and
the date of Final Acceptance a sum equal to 0.137% (one hundred thirty-seven
thousandths of one percent) of both the United States Dollar portion and the New
Zealand Dollar portion of the EPC Contract Price per day (plus goods and
services tax on such amounts if any) up to a total aggregate sum of 30.54%
(thirty and fifty-four hundredths percent) of the EPC Contract



                                       41


Price; provided, however, that if the Project does not accomplish Final
Acceptance by the Scheduled Final Acceptance Date, but nevertheless is
generating electricity, then the liquidated damages payable by Contractor under
this Section 12.1.1 shall be reduced (but not to less than zero) by the amount
of the revenue (including payments under any hedge agreement) realized by Owner
in excess of $18,000 N.Z. (Eighteen Thousand New Zealand Dollars) per day, if
any, during the period starting on the date Owner is entitled to receive such
revenue as a result of the partial completion of the Project until the date
Final Acceptance occurs.

                  12.1.2 Owner may, without prejudice to any other method of
recovery, deduct the amount of such liquidated damages from any monies due, or
to become due, to Contractor under this EPC Contract. In the event of an
extension of time being granted under this EPC Contract, the amount due under
this Section shall be recalculated accordingly, and any over-payment refunded.
The payment or deduction of such damages shall not relieve Contractor from its
obligation to complete the Work, or from any other of its duties, obligations or
responsibilities under this EPC Contract.

                  12.1.3 If at any time after the Scheduled Final Acceptance
Date, Contractor is delayed in carrying out the Work as a result of any event
identified in Section 5.4.1 which would have entitled Contractor to an extension
of time had it occurred prior to the Scheduled Final Acceptance Date,
Contractor's obligation to pay liquidated damages under Section 12.1.1 shall be
suspended for such period as represents the extension of time to which
Contractor would have been entitled had Section 5.4 applied.

         12.2     LIQUIDATED DAMAGES FOR PERFORMANCE DEFICIENCY

         If the Project has failed to satisfy the Guaranteed Capacity upon
completion of the Final Acceptance Performance Test used to establish Final
Acceptance, Contractor shall pay to Owner as liquidated damages, and not as a
penalty, the following sum:

                  $3,600 N.Z. (Three Thousand Six Hundred New Zealand Dollars)
                  per kilowatt (plus goods and services tax on such amounts, if
                  any), up to a total aggregate sum of 45% (forty-five percent)
                  of the EPC


                                       42


                  Contract Price, for each kW of capacity deficiency, as
                  determined in the Final Acceptance Performance Test set forth
                  in Exhibit D hereto, below the Guaranteed Capacity.

         12.3     PERFORMANCE BONUS

         If the Project has exceeded the requirements of the Final Acceptance
Performance Test set forth in Exhibit D as is shown in the final test results,
the Tuaropaki Trust shall negotiate in good faith with Contractor and/or its
assigns for the supply and erection of the third development of the Mokai
geothermal resource undertaken by the Tuaropaki Trust, its successors or assigns
after seeking approval from the beneficial owners to so negotiate and subject to
receipt of their approval. In the event that the parties cannot conclude a
contract as a result of the aforementioned negotiations within 90 (ninety)
working days of the commencement of such negotiations, Contractor shall have the
right to participate in any tender process undertaken by the Tuaropaki Trust,
its successors or assigns regarding such development.

         12.4     MAKE RIGHT OBLIGATION

         Notwithstanding that Contractor may have paid liquidated damages for
the performance deficiency pursuant to Section 12.2:

                  (a)      Contractor may carry out such remedial Work and
repeat the Final Acceptance Performance Test, in accordance with Article 10, for
a period of 120 (one hundred and twenty) days following Final Acceptance, which
period shall be extended to take into account any event described in Section
5.4.1;

                  (b)      if the results of the last such repeated Final
Acceptance Performance Test show that:

                           (i) such performance deficiency has been reduced or
                           rectified, Owner shall refund such performance
                           related liquidated damages, or a proportionate amount
                           up to the amount calculated and paid or owing
                           pursuant to Section 12.2; or

                                       43


                           (ii) such performance deficiency has been increased,
                           Contractor shall pay to Owner a further amount, in
                           respect of the increased deficiency, calculated under
                           Section 12.2 as liquidated damages.

All such remedial Work and repeat tests shall be conducted in such a way and at
such times as to minimize so far as reasonably possible interference or
disruption to the normal operation of the Project.

         12.5     EXCLUSIVITY

         Notwithstanding the warranties set forth in Section 11.1, but subject
to Sections 12.1 and 12.6 and Owner's right to terminate under Section 21.1.1(d)
for gross delays or deficiencies, the remedies described in this Article 12
shall constitute Owner's sole and exclusive remedies for liabilities arising
from schedule delays (up to 223 days) and performance shortfalls up to 5 MW
hereunder. If the performance shortfall is greater than 5 MW, then Owner must
within thirty (30) days of completion of the relevant tests elect to either
receive the liquidated damages described in Section 12.2 as its sole and
exclusive remedy for liabilities arising there from or alternatively exercise
its termination rights under Section 21.1.1(d) and, subject to the limitations
set forth in Article 11 and Section 12.7 of this EPC Contract, seek to recover
damages from Contractor. If the schedule delays exceed 223 days, then Owner must
within thirty (30) days of such 224th day elect to either receive the liquidated
damages described in Section 12.1 as its sole and exclusive remedy for
liabilities arising there from or alternatively exercise its termination rights
under Section 21.1.1(d) and, subject to the limitations set forth in Article 11
and Section 12.6 of this EPC Contract, seek to recover damages from Contractor
in which case any liquidated damages previously received or setoff by Owner
shall be taken into consideration and/or refunded as appropriate based upon the
final determination of damages caused by such delay and payable by Contractor to
Owner.

         12.6     GENERAL LIMITATION OF LIABILITY

                  (a) Notwithstanding any other provision to the contrary in
this EPC Contract, Contractor shall in no event be liable to Owner, by way of
indemnity or by reason of any breach of this EPC Contract or in tort, including
negligence and strict


                                       44


liability, or otherwise, for loss of use of any part (or all) of the Project or
for the cost of substitute equipment or materials or for loss of production,
loss of profit or loss of contract or for any indirect, consequential loss or
damage which may be suffered by Owner, except that this Section 12.6(a) shall
not limit the liability of Contractor under Section 12.1 or 12.2 (liquidated
damages for delay and performance deficiency).

                  (b) The total liability of Contractor to Owner on all claims
of any kind (other than under Section 17.1(b)) shall in no case exceed the
aggregate of the EPC Contract Price and the Supply Contract Price provided
however that if Owner shall receive any amount from Supplier directly for any
claims under the Supply Contract, the maximum liability of Contractor shall be
reduced accordingly.

                  (c) Owner is not permitted to sell, assign or otherwise
transfer all or any part of the Work without obtaining an acknowledgment and
undertaking in writing from the third party that it will afford Contractor and
its Subcontractors with the protection of this Section 12.6.

                  (d) Contractor agrees that Supplier's and Supplier's
Subcontractors' liability on all claims of any kind regarding the Equipment
shall be subject to the terms of limitation of liability described in this
Section 12.6.

ARTICLE 13 - SECURITIES

         13.1     SECURITY PROVIDED ON BEHALF OF CONTRACTOR

                  (a) Contractor's obligations under this EPC Contract shall be
secured by a performance bond in the form of a standby letter of credit provided
by a reputable surety company or financial institution (reasonably acceptable in
all respects to Owner) in the form attached hereto as Exhibit J-1 in the maximum
amount equal to 30% (Thirty Percent) of the New Zealand dollar portion of the
EPC Contract Price (the "NZ$ Denominated L/C"). The NZ$ Denominated L/C shall be
provided prior to receipt of the first NZ$ payment under the Milestone Payment
Schedule, shall become effective upon Contractor's receipt of the first NZ$
payment under the Milestone Payment Schedule and shall be increased from time to
time by the New Zealand dollar amounts received by



                                       45


Contractor from Owner under the Milestone Payment Schedule up to the 30% (Thirty
Percent) maximum NZ dollar amount specified above.

                  (b) Further, Contractor's obligations under this EPC Contract
and Supplier's obligations to deliver Equipment under the Supply Contract shall
be secured by a performance bond in the form of a standby letter of credit
provided by a reputable surety company or financial institution (reasonably
acceptable in all respects to Owner) in the form attached hereto as Exhibit J-2
(the "US$ Denominated L/C"). The US$ Denominated L/C shall be provided prior to
receipt of the first US$ payment under the Milestone Payment Schedule of the
Supply Contract, shall become effective upon Supplier's receipt of the first US$
payment under the Milestone Payment Schedule of the Supply Contract and shall be
increased from time to time by (i) the United States dollar amounts received by
Contractor from Owner under the EPC Contract Milestone Payment Schedule for
Payment Milestones nos. 1-20 up to a maximum sum of $1,038,600 US (One million
thirty eight thousand six hundred United States Dollars) and (ii) the amounts
received by Supplier from Owner under the Supply Contract Milestone Payment
Schedule for Payment Milestones nos. 1-19 up to a maximum sum of $20,129,540 US
(Twenty million one hundred twenty nine thousand five hundred and forty United
States Dollars). The US$ Denominated L/C shall be reduced from time to time upon
Supplier's delivery of Equipment or parts thereof under the Supply Contract by
the amounts computed as described in Exhibit J-2, so that the US$ Denominated
L/C will be reduced to 30% (Thirty Percent) of the sum of the US dollar
denominated portion of the EPC Contract Price and the Supply Contract Price upon
the completion of delivery of the Equipment.

                  (c) Both the NZ$ Denominated L/C and the US$ Denominated L/C
shall remain valid until Final Acceptance. If the NZ$ Denominated L/C or the US$
Denominated L/C by its terms will expire before Final Acceptance, then
Contractor shall provide to Owner evidence of the renewal or replacement of said
performance bond at least ten (10) business days before such expiration date.

                  (d) Upon Final Acceptance, the NZ$ Denominated L/C and the US$
Denominated L/C shall be reduced to nil and replaced by a performance bond in
the form



                                       46


of a standby letter of credit provided by a reputable surety company or
financial institution (reasonably acceptable in all respects to Owner) in the
amount of 5% (five percent) of the combined EPC Contract Price and the Supply
Contract Price to secure the performance of Contractor's warranty obligations,
which shall remain valid for the Warranty Period defined in Section 11.2.

                  (e) Ormat Industries Ltd. shall provide a guarantee in the
form described in Exhibit E hereto, upon execution of this EPC Contract, to
guarantee Contractor's obligations to perform hereunder.

         13.2     SECURITY PROVIDED ON BEHALF OF OWNER

         The Tuaropaki Trust shall provide a guarantee in the form described in
Exhibit F hereto, upon execution of this EPC Contract, to guarantee its and
Owner's obligations under Sections 4.1(p) and 12.3 hereunder.

ARTICLE 14 - CARE OF THE WORK; TITLE

         14.1     RISK OF LOSS

         Except to the extent caused by the negligence or wilful misconduct of
Owner and not covered by the insurance required to be maintained pursuant to
this EPC Contract, Contractor shall bear the risk of physical loss or
destruction of or damage to the Equipment from the point in time such items are
delivered FOB (Incoterms 2000) until Final Acceptance, and to the Work and shall
retain care of the Work prior to Final Acceptance, provided, however, that (a)
in the case Owner assumes said responsibility prior to the completion of any or
all testing under Exhibit D, Owner makes best efforts to permit Contractor to
proceed with all commissioning, testing, and related activities, provided that,
all Work so conducted by Contractor shall be conducted in a fashion to minimize
interference with the normal operation of the Work, and (b) any actual proceeds
of insurance payable with respect to such loss, damage, or destruction are
handled as provided in Section 15.5



                                       47


         14.2     DELIVERY

         Contractor shall be responsible to assure safe delivery of all
materials, equipment, tools, supplies and other items to the Project Site
related to the Work including all of the Equipment.

         14.3     TITLE

         Title to the Work shall pass from Contractor to Owner upon the earlier
of delivery to the Project Site or payment to Contractor under this EPC Contract
for the applicable Work.

ARTICLE 15 - INSURANCE

         15.1     CONTRACTOR PROVIDED INSURANCE

         Contractor shall provide the following insurance with the indicated
limits, with its insurance carriers, naming all Subcontractors, Owner and
Lender(s) as additional insured and shall maintain such insurance in full force
and effect until Final Acceptance. In the event this insurance or any portion of
it becomes commercially unavailable on commercially reasonable rates and terms
Owner and Contractor shall cooperate in their efforts to obtain such replacement
insurance as may be available and this EPC Contract shall be modified
accordingly:

                  (a) Comprehensive General Liability - $10,000,000 N.Z. (Ten
Million New Zealand Dollars) combined single limit;

                  (b) Equipment and Contractor's plant, goods and materials loss
in transit, including ocean marine shipment (replacement value);

                  (c) Accident Rehabilitation Compensation and Insurance Act
(where required by law, statutory limits); and

                  (d) Contract Works Insurance for the full value of the Project
including earthquake, provided however, that the aggregate cost for acquiring
and maintaining such cover does not exceed $ 250,000 US (two hundred fifty
thousand United States Dollars), and as available August 14 2002. Cover for
fire, collapse, flood and any other catastrophic perils shall be in such sub
limits that



                                       48


are commercially available at reasonable rates in the commercial insurance
market.

         15.2     OWNER PROVIDED INSURANCE

         Owner shall provide the following insurance with the indicated limits,
with its insurance carriers, naming Contractor and Lender(s) as additional
insured and shall maintain such insurance in full force and effect through the
end of the warranty period or such later period as Lender(s) may reasonably
require. In the event this insurance or any portion of it becomes commercially
unavailable on commercially reasonable terms Owner and Contractor shall
cooperate in their efforts to obtain such replacement insurance as may be
available and this EPC Contract shall be modified accordingly:

                  (a) Control of wells insurance - (repair and replacement
value); and

                  (b) All other insurances reasonably required by Lender(s).

         15.3     POLICIES

         All policies of insurance maintained pursuant to this Article 15 shall:

                  (a) require 45 (forty-five) days' prior notice (15 (fifteen)
days' prior notice in the event of non-payment of premium) to the additional
insured parties of cancellation, non-renewal or material change in coverage;

                  (b) provide that such insurance is primary without right of
contribution from any other insurance which might otherwise be available to the
insured party;

                  (c) provide that any such policy referred to in Section
15.1(d) shall not be cancelled or payment refused in the event of any
unintentional failure to make full disclosure (material or otherwise) of any
matter or change in circumstance on the part of Lender(s);

                  (d) provide that, in the event of any loss payment under a
policy, the insurer shall waive any rights of subrogation against the insured
party and shall waive any setoff or counterclaim or any other deduction whether
by attachment or otherwise; and

                                       49


                  (e) include a cross-liability endorsement providing that
inasmuch as the policies are written to cover more than one insured, all terms
and conditions, insuring agreements and endorsements, with the exception of
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured.

         15.4     EVIDENCE OF INSURANCE

         Upon request by Owner, Contractor shall furnish Owner with the policy
wording and a Certificate of Insurance as evidence that Contractor provided
insurance is being maintained. Upon request by Contractor, Owner shall similarly
furnish Contractor with the policy wording and a Certificate of Insurance as
evidence that Owner provided insurance is being maintained.

         15.5     APPLICATION OF INSURANCE PROCEEDS

         In the event of any loss, damage, or destruction to the Project or any
part thereof which may give rise to a claim under the insurance maintained by
Contractor under Section 15.1:

                  (a) where the insurance proceeds for the Work and/or the
Equipment are equal or less than $200,000 N.Z. (Two Hundred Thousand New Zealand
Dollars), such proceeds shall be paid directly to Contractor.

                  (b) where the insurance proceeds for the Work and/or Equipment
are in an amount exceeding an aggregate amount of NZ$200,000 (Two Hundred
Thousand New Zealand Dollars), Contractor shall:

                  (i)      give notice of such event to Owner;

                  (ii)     pursue all such insurance claims with due diligence;
                           and

                  (iii)    procure that any such insurance proceeds for events
                           occurring under Subsections 15.1(b) and (d) shall be
                           paid into an interest bearing escrow account
                           nominated by Owner and agreed upon by Contractor,
                           which agreement shall not be unreasonably withheld,
                           at



                                       50


                           the expense of Owner, in the joint names of Owner,
                           Supplier and Contractor for the purposes of the
                           Project.

         Directions will be placed with the escrow agent that the monies will be
released from the account within 48 (forty-eight) hours against presentation by
Contractor or Supplier of an invoice and/or shipping documents verified by
Owner's Representative as provided below, representing the supply of replacement
goods and/or completion of the rectification of the relevant parts of the Work
which had been lost, damaged or destroyed. The documents shall first be
submitted to Owner's Representative who shall verify and countersign in
accordance with the procedures contained in Subsection 6.3.4. Upon completion of
the Project all monies remaining in the escrow account relating to the Work
shall be immediately released to Contractor.

         If this EPC Contract is terminated prior to completion of the Project,
the parties shall direct the escrow agent to apply any monies standing to the
credit of the escrow account as follows:

                  (i)      to Owner to the value of the relevant parts of the
                           Work which are lost, damaged or destroyed, which have
                           not been replaced or rectified as of the date of
                           termination and to the extent Contractor or Supplier
                           had been previously paid by Owner for such Work;

                  (ii)     to Owner any such insurance proceeds paid for other
                           loss or damages of Owner arising out of events giving
                           rise to the claim; and

                  (iii)    the balance to Contractor;

provided that, in the event of any shortfall in the proceeds of the insurance to
cover the payments due under paragraph (i) above, such shortfall shall represent
a debit due to Owner from Contractor.

                                       51


ARTICLE 16 - DISPUTE RESOLUTION

         16.1     CLAIMS

                  (a) If Contractor intends to claim any additional payment
under this EPC Contract, Contractor shall give notice to the Owner's
Representative as soon as reasonably practicable and in any event within 28
(twenty-eight) days of the date that Contractor learns of the event giving rise
to the claim and its payment implications.

                  (b) Contractor shall keep such contemporary records as may be
reasonably necessary and feasible to substantiate any such claim, either on the
Project Site or at another location reasonably acceptable to the Owner's
Representative. Without admitting Owner's liability, the Owner's Representative
shall, on receipt of such notice, inspect such records and may instruct
Contractor to continue keeping such records. Contractor shall permit the Owner's
Representative to inspect such records during Contractor's normal business hours
and shall (if requested) submit a copy of such records to the Owner's
Representative.

                  (c) Within 28 (twenty-eight) days of such notice, or such
later time as may be agreed by the Owner's Representative, Contractor shall send
to the Owner's Representative an account, giving then known detailed particulars
of the amount and basis of the claim. Where the event giving rise to the claim
has a continuing effect, such account shall be considered as interim. Contractor
shall then, at such intervals, as the Owner's Representative may reasonably
require, but in no event more frequently than bi-weekly, send further interim
accounts giving the accumulated amount of the claim and any further particulars.
Where interim accounts are sent to the Owner's Representative, Contractor shall
send a final account within 28 (twenty-eight) days of the end of the effects
resulting from the event.

                  (d) The Owner's Representative shall proceed in accordance
with Section 4.2 to agree upon or determine such additional payment as may be
due. The Owner's Representative shall promptly notify Contractor accordingly. If
Contractor has a Dispute with the determination or discretion made by the
Owner's Representative, such Dispute shall be resolved as provided in Sections
16.3 and 16.4.

                                       52


         16.2     PAYMENT OF CLAIMS

         Contractor shall be entitled to have included in any progress payment
such amount for any claim as the Owner's Representative considers due. If the
particulars supplied are insufficient to substantiate the whole of the claim,
Contractor shall be entitled to payment for such part of the claim as has been
substantiated.

         16.3     RESOLUTION BY PARTIES

         Owner and Contractor desire that this EPC Contract operate between them
fairly and reasonably. If during the term of this EPC Contract, a Dispute arises
between Owner and Contractor, or one party perceives the other as acting
unfairly or unreasonably, or a question of interpretation arises hereunder, then
Owner's Representative and Contractor's project manager shall promptly confer
and exert their best efforts in good faith to reach a reasonable and equitable
resolution of the Dispute. If the Owner's Representative and the project manager
are unable to resolve the Dispute within 20 (twenty) business days, the matter
shall be referred within 2 (two) business days of the lapse of the
aforementioned 20 (twenty) business days to the parties' responsible corporate
officers for resolution. Neither party shall seek resolution by arbitration of
any Dispute arising in connection with this EPC Contract until both parties'
responsible corporate officers, who shall be identified by each party from time
to time, have had at least 20 (twenty) business days to resolve the Dispute
following referral of the Dispute to such responsible corporate officers.

         16.4     RESOLUTION BY ARBITRATION

         If the responsible corporate officers are unable to resolve the Dispute
within the above described period, then Owner and Contractor shall enter into
binding arbitration as set forth herein. Notice of the demand for arbitration
shall be delivered to the other party and the Dispute shall be referred to such
arbitrator, if the parties agree upon one, within 20 (twenty) business days of
receipt of demand, and if not to 3 (three) arbitrators, one appointed by each
party, within 20 (twenty) business days of receipt of demand, each of whom shall
be an expert in the construction and power generation field and a third
independent arbitrator appointed by the (2) two arbitrators. If a party fails to
appoint an arbitrator, then the other party's appointee shall become the sole
arbitrator.

                                       53


         The parties shall proceed with the arbitration expeditiously and shall
conclude all proceedings there under in order that a decision may be rendered
within 120 (one hundred and twenty) days or, in the case of a payment Dispute,
45 (forty-five) days from service of the demand for arbitration.

         Each party shall bear its own expenses in connection with any
arbitration, including but not limited to counsel fees, and all joint expenses
shall be apportioned in the award of the arbitrators.

         Any arbitration shall be conducted in Auckland, New Zealand in
accordance with the provisions of the Arbitration Act 1996 (as amended or
substituted from time to time).

ARTICLE 17 - INDEMNIFICATION

         17.1     CONTRACTOR'S INDEMNITY

                  (a) Contractor shall defend, indemnify and hold harmless Owner
from any and all claims, demands and liabilities arising from the death,
sickness or accident of employees of Contractor or of Subcontractors or from
damage to their property or from damage to Contractor's property as a result of
performance of this EPC Contract, except only to the extent that such deaths,
injuries, sickness or accidents are shown to have been caused by the intentional
or grossly negligent conduct of Owner.

                  (b) Contractor shall defend, indemnify and hold harmless Owner
from any claims, demands, penalties or liabilities for injury or death to third
parties or damage to third party property and/or in respect of any Contractor
breach of the Resource Management Act 1991, to the extent directly caused by the
negligence of Contractor and/or Subcontractors in activities connected with the
Project and/or performance of this EPC Contract.

         17.2     OWNER'S INDEMNITY

                  (a) Owner shall defend, indemnify and hold harmless Contractor
from any and all claims, demands and liabilities arising from the death,
sickness or accident of employees of Owner or of Owner's subcontractors or from
damage to their property or


                                       54



from damage to Owner's property as a result of performance of this EPC Contract,
except only to the extent that such deaths, injuries, sickness or accidents are
shown to have been caused by the intentional or grossly negligent conduct of
Contractor.

                  (b) Owner shall defend, indemnify and hold harmless Contractor
from any claims, demands, penalties or liabilities for injury or death to third
parties or damage to third party property and/or in respect of any Owner breach
of the Resource Management Act 1991, to the extent directly caused by the
negligence of Owner and/or Owner's subcontractors in activities connected with
the performance of this EPC Contract.

         17.3     PATENT INDEMNITY

         Contractor shall indemnify Owner from and against all third party
claims and proceedings for or on account of infringement of any patent rights,
registered design, copyright, design, trademark, trade secret, name, know-how or
other intellectual property rights in respect of the Work and the Equipment and
from and against all claims, demands, proceedings, damages, costs, charges and
expenses whatsoever in respect of or in relating to such rights, except for any
use of the Work other than for the original purpose for which it is intended or
any infringement which is due to the use of the Work in association or
combination with any other plant or item not supplied by Contractor or Supplier.

         17.4     NOTICE AND SETTLEMENT OF CLAIMS

         A party seeking the benefit of an indemnity shall give the other party
prompt notice of any claim giving rise to the indemnity. The other party may at
its own cost conduct negotiations for the settlement of such claim and any
litigation that may arise there from. The party claiming the benefit of the
indemnity shall not make any admission which might be prejudicial to the other
party unless the other party fails to take over the conduct of the negotiations
or litigation within a reasonable time after having been so requested.

         The other party may not, however, conduct such negotiations or
litigation before it has given the party claiming the benefit of the indemnity a
reasonable security in circumstances where the party claiming the benefit of the
indemnity does not possess such



                                       55


reasonable security. The security shall be for an amount which is an assessment
of the compensation, damages, expenses and costs for which the party claiming
the benefit of the indemnity may become liable and which are the subjects of the
indemnity under this Article 17.

         The party claiming the benefit of the indemnity shall, at the request
of the other party, provide all available assistance for the purpose of
contesting any such claim or action, and shall be paid all reasonable costs
incurred in doing so.

ARTICLE 18 - ASSIGNMENT

         18.1     ASSIGNMENT BY OWNER

                  (a) Any assignment by Owner shall be subject to Contractor's
status as chosen contractor as described in Section 4.1(p) and to all of
Contractor's rights under this EPC Contract.

                  (b) Owner hereby unconditionally and irrevocably assigns all
of its rights and obligations for the receipt of liquidated damages from
Supplier, as described in Article 11 of the Supply Contract, warranties and
remedies from Supplier, as described in Article 10 of the Supply Contract,
indemnification, as described in Section 16.3 of the Supply Contract, and
remedies for delay under the Supply Contract, to Contractor. Owner further
agrees that all its rights and obligations with respect therewith shall inure to
the benefit of Contractor as if Contractor were a party to the Supply Contract,
and that this assignment shall inure to the benefit of and shall be binding upon
the parties' respective successors and assigns. Notwithstanding the foregoing,
Owner retains its indemnification rights against Supplier as provided in Section
16.1 of the Supply Contract.

                  (c) Subject to Sections 18.1(a) and (b), Owner may assign all
of its rights, title and interest in and to or arising out of or in connection
with this EPC Contract as security for financing of the Project for benefit of
Lender(s), provided, however, that any such assignment shall not relieve Owner
of any obligation hereunder.

                  (d) Unless specifically permitted in this Section 18.1, Owner
may not assign any or all of its obligations, right, title and/or interest in
and to or arising out of or



                                       56


in connection with this EPC Contract without the prior written approval of
Contractor which approval will not be arbitrarily or unreasonably withheld. Any
such assignment shall not relieve Owner of any obligation hereunder.

         18.2     ASSIGNMENT BY CONTRACTOR

                  (a) Contractor may assign all of its right, title and interest
in and to or arising out of or in connection with this EPC Contract as security
for the Project for benefit of Lender(s) or, for financing of the Work,
provided, however, that any such assignment shall not relieve Contractor of any
obligation hereunder.

                  (b) Except to a related company (as defined in Section 2(3) of
the Companies Act 1993) or as specifically permitted under Section 18.2(a),
Contractor may not assign any or all of its obligations, right, title and/or
interest in and to or arising out of or in connection with this EPC Contract
without the prior written approval of Owner which approval will not be
arbitrarily or unreasonably withheld. No assignment shall relieve Contractor of
any obligation hereunder.

         18.3     SUCCESSION

         This EPC Contract shall inure to the benefit of and be binding upon the
successor and permitted assigns (as provided for by Sections 18.1 and 18.2) of
the parties hereto. Owner agrees to cause any assignees or transferees of its
interest or any portion thereof in this EPC Contract or in the Project,
including any lien holder or party holding a security interest with respect
thereto, to be bound by Contractor's right to recourse regarding such interest
or portion thereof and by the releases and limitations of liability set forth
herein.

ARTICLE 19 - SUBCONTRACTORS

         19.1     SUBCONTRACTS

         Contractor may enter into subcontracts for the performance of parts of
the Work and shall be solely responsible for the management and satisfactory
performance of all its Subcontractors in their performance of the Work.
Contractor shall request that its Subcontractors under subcontracts requiring
payment of more than One Hundred Fifty



                                       57


Thousand United States Dollars (US$150,000) execute a Continuity Guarantee in
the form attached hereto as Exhibit K. Contractor shall not subcontract any
major components of Work (other than for the purchase of proprietary goods and
materials or for the provision of labour on a piecework basis) except to
Subcontractors appearing on the Approved Major Subcontractors List (as described
below). Contractor shall be responsible for the acts, defaults and neglects of
any Subcontractor, its agents or employees in their performance of the Work as
if they were the acts, defaults or neglects of Contractor, its agents or
employees. The issuance of any subcontract shall not relieve Contractor of any
of its obligations under this EPC Contract.

         19.2     APPROVED MAJOR SUBCONTRACTOR LIST

         The Approved Major Subcontractors List attached hereto as Exhibit I is
preliminary, and may be amended in the following manner. In the case the need
arises to add a Subcontractor to the Approved Major Subcontractors List, in
Contractor's opinion, Contractor shall propose such addition to Owner's
Representative in writing identifying the type of Work that could be
subcontracted to such Subcontractor. Within 15 (fifteen) days after receipt of
Contractor's proposal, Owner's Representative shall have the right to advise
Contractor of any such potential Subcontractors to which it reasonably objects,
together with the reasons for objection and may propose additional
Subcontractors based on his or her experience concerning such potential
Subcontractor. Contractor shall not add any potential Subcontractor to the list
to which Owner's Representative so reasonably objects and shall give due
consideration to adding to the list any Subcontractors proposed by the Owner's
Representative. If Owner's Representative fails to respond within such 15
(fifteen) day period, Contractor shall have the right to add said potential
Subcontractor to the list.

ARTICLE 20 - SUSPENSION

         20.1     RIGHT OF OWNER TO SUSPEND WORK

         Owner's Representative may suspend performance of the Work by
Contractor hereunder, in whole or in part, upon 10 (ten) days' prior written
notice of such suspension to Contractor.



                                       58


         Such suspension shall continue for the period specified in the
suspension notice.

         20.2     INITIAL PAYMENTS TO CONTRACTOR

         Provided that suspension does not arise as a result of a default on the
part of Contractor under this EPC Contract or on the part of Supplier under the
Supply Contract, which has not been corrected, Contractor shall be entitled to
be paid within 10 (ten) business days of its issuance of an invoice to Owner for
all Work carried out up to the date of such suspension (excluding any work of
correction) and for payments owing by Contractor to its Subcontractors for
commitments made before such suspension which cannot be reasonably avoided.

         20.3     EXTENDED SUSPENSION

         In the event suspensions by Owner exceed 90 (ninety) days in the
aggregate and provided that such suspensions do not arise as a result of default
on the part of Contractor under this EPC Contract or on the part of Supplier
under the Supply Contract, which has not been corrected, then Contractor may
give notice to the Owner's Representative of permission to proceed within 28
(twenty-eight) days. If permission is not granted within that time, Contractor
may terminate its obligations under this EPC Contract by so notifying Owner in
writing and Contractor shall be entitled to be paid:

         (a)      the proportion of the EPC Contract Price consistent with the
                  progress of the Work up to the date of suspension; and

         (b)      any costs reasonably incurred by Contractor which are
                  attributable to the suspension and termination of the Work,
                  including cancellation charges owed to third parties; and

         (c)      loss of profit calculated at the rate of 9.5% (nine and
                  one-half percent) of the proportion of the EPC Contract Price
                  which will remain unpaid following such termination.

                                       59


         20.4     RIGHT OF CONTRACTOR TO SUSPEND

         Subject to Section 6.3.7, Contractor may suspend performance of the
Work hereunder, in whole or in part, upon 10 (ten) days' prior written notice of
such suspension where Owner has not paid any amount invoiced by Contractor
unless Owner places any unpaid or disputed amount in an interest bearing escrow
account for the sole benefit of and immediate payment to Contractor pending
resolution of the Dispute in Contractor's favour. Any interest carried on any
monies held in escrow shall be paid to the party in whose favour the Dispute is
resolved.

         Such suspension shall continue for the period specified in the
suspension notice.

         20.5     ADDITIONAL CHANGES RESULTING FROM SUSPENSIONS

         Provided that suspension does not arise as a result of default by
Contractor under this EPC Contract or by Supplier under the Supply Contract, the
EPC Contract Price shall be adjusted for costs reasonably incurred and profits
on such costs at a fixed rate of 12% (twelve percent) as a result of the
suspension (including without limitation costs for the purpose of safeguarding
and/or storage, personnel, Subcontractors or rented equipment costs,
demobilization and re-mobilization costs and increased costs or charges incurred
for rescheduling) and the Scheduled Final Acceptance Date and all other dates
and milestones herein by which Contractor's responsibilities are measured shall
be adjusted to reflect any delays resulting from such suspension (including
without limitation a period equal to the suspension period, a period for
demobilization and re-mobilization plus any additional period required).

         If Contractor shall, solely in consequence of such suspension, be
required to perform any obligations under the warranty at a time which exceeds
the original schedule for warranty obligations which would have been applied if
there had been no suspension, the additional cost of complying with the warranty
obligations shall be added to the EPC Contract Price.

                                       60


         20.6     RESUMPTION OF WORK

         Upon receipt of notice to resume the Work in accordance with this EPC
Contract, Contractor shall examine the Project and the Work affected by the
suspension.

         Contractor shall make good any deterioration or defect in or loss of
such Project or Work that may have occurred during suspension, and costs
incurred in making such examinations and making good and resuming Work shall be
added to this EPC Contract Price, if suspension was not necessary by reason of a
default on the part of Contractor which has not been corrected.

ARTICLE 21 - TERMINATION

         21.1     TERMINATION BY OWNER

                  21.1.1 Owner may, in its sole discretion, terminate the Work
after the occurrence of one or more of the following events of default and if,
following a written notice from Owner to cure such event of default, said event
of default continues to exist for 10 (ten) days in the circumstances described
in (a) and (b) below, and 30 (thirty) days in the circumstances described in (c)
and (d) below:

                           (a)      Contractor becomes insolvent or admits in
writing its  inability to pay its debts or makes an assignment for the benefit
of creditors; or

                           (b)      Insolvency, receivership or bankruptcy
proceedings are commenced by or against Contractor; or

                           (c)      Contractor defaults in its performance under
a material  provision of this EPC Contract, provided, however, that Owner may
not terminate this EPC Contract if, after notice of the event of default and
prior to expiration of the thirty (30) day period set forth above, Contractor
has commenced and is diligently pursuing efforts to cure such breach in
accordance with a cure plan agreed upon between the parties.

                           (d)      Contractor defaults in its performance of
the Performance  Obligations as described below.

                                       61


For the purpose of this paragraph "Performance Obligations" shall mean: (i) the
Final Acceptance Performance Test (as repeated under Section 12.4) has
established that the level of net electrical generating capacity of the Project
equals or exceeds 34 (thirty four) MW, as corrected to the Design Conditions
using the correction curves and formulas set forth in Exhibit D, as measured at
the high voltage interface point defined in Article 1.4, number 5 of Exhibit A
or (ii) Final Acceptance shall occur within 223 days of the Scheduled Final
Acceptance Date.

                  21.1.2 Notwithstanding anything expressed or to be implied to
the contrary in this EPC Contract, in the event that the Supply Contract, or the
Supplier's employment under it, is terminated for any reason other than the
breach of Owner there under, Owner shall be entitled to terminate this EPC
Contract forthwith upon notice to Contractor in writing.

                  21.1.3 Upon termination, Contractor shall deliver to Owner
possession of the Work in its then condition, including Drawings and
Specifications and contracts with Subcontractors, and construction supplies and
aids dedicated solely to construction of the Project. In the event of
termination neither party shall be liable to the other hereunder except to the
extent that obligations by their terms expressly survive termination.

                  21.1.4 In the event of termination as provided in Section
21.1.1, Owner shall have the right, at its sole option, to assume and become
liable for any reasonable written obligations and commitments that Contractor
may have in good faith undertaken with third parties in connection with the
Work, which obligations and commitments are by law or by their terms assumable
by Owner. If Owner elects to assume any obligation of Contractor as described in
this Section 21.1.4, then as a condition precedent to Owner's compliance with
any subsection of this Article 21, Contractor shall execute all papers and take
all other reasonable steps requested by Owner which may be required to vest in
Owner all rights, set-offs, benefits and titles necessary to such assumption by
Owner of such obligations. Owner agrees to indemnify and hold Contractor
harmless against any liability under any obligations assumed by Owner pursuant
hereto.

                                       62


         21.2     TERMINATION BY CONTRACTOR

                  21.2.1 Contractor may, in its sole discretion, terminate the
Work after the occurrence of one or more of the following events of default and
if, following a written notice from Contractor to Owner to cure such event of
default (copied to the Lender at the address specified in Section 24 below),
said event of default continues to exist for 10 (ten) days in the circumstances
described in (a) and (b) below, and 30 (thirty) days in the circumstances
described in (c) below, and subject to Section 21.2.3:

                           (a)      Owner becomes insolvent or admits in writing
its inability to pay its debts or makes an assignment for the benefit of
creditors; or

                           (b)      Insolvency, receivership or bankruptcy
proceedings are commenced by or against Owner; or

                           (c)      Owner defaults in its performance under a
material provision of this EPC Contract, including the obligation to make any
payment hereunder; provided, however, that Contractor may not terminate this EPC
Contract if, for all cases except for the obligation to make or complete any
payment, after notice of the event of default and prior to expiration of the 30
(thirty) day period set forth above, Owner has commenced and is diligently
pursuing efforts to cure such breach in accordance with a cure plan agreed upon
between the parties.

                  21.2.2 In the event of termination as provided in Section
21.2.1, Owner shall pay to Contractor a pro rata portion of the EPC Contract
Price consistent with Contractor's progress on the Project up to the date of
Owner's receipt of notice of termination plus any costs attributable to and
incurred in terminating the Work, including cancellation charges owed to third
parties, and compensation for loss of profit in the amount of 9.5% (nine point
five percent) for the uncompleted portion of this EPC Contract Price.

                  21.2.3 In the event of the occurrence of one or more of the
events of default, if, following Contractor's written notice to Owner and the
Lender to cure such default and before the close of the cure period in Section
21.2.1 above, Lender(s) provide written notice to Contractor of its/their intent
to take over the Project and cure such event



                                       63


of default, the 30 (thirty) day cure period determined in Section 21.2.1 shall
be extended by an additional 30 (thirty) days.

ARTICLE 22 - FORCE MAJEURE

         22.1     FORCE MAJEURE

                  (a) Force Majeure as used in this EPC Contract shall be an
event beyond the control of Owner, Contractor or Supplier which either Owner or
Contractor (for purposes of this Section 22.1, the "affected party") is unable
to prevent or provide against by the exercise of reasonable diligence and which
materially affects the affected party's performance of its obligations under
this EPC Contract, and shall include, but not be limited to, the following
events:

         war, declared or not, or hostilities, or belligerence, blockade,
         revolution, insurrection, riot, expropriation, requisition,
         confiscation, or nationalization, export or import restrictions by any
         authorities, closing of harbours, docks, canals, or other assistances
         to or adjuncts of the shipping or navigation of or within any place,
         rationing or allocation, whether imposed by law, decree or regulation
         by, or by compliance of industry at the insistence of any governmental
         authority, or fire, unusual flood, earthquake, hydrothermal eruption,
         volcanic eruption, storm, lightning, tide (other than normal tides),
         tidal wave, perils of the sea, accidents of navigation or breakdown or
         injury of vessels, accidents to harbours, docks, canals or other
         assistance to or adjuncts of the shipping or navigation, epidemic,
         quarantine, strikes or combination of workmen, lockouts or other labour
         disturbances (except for strike or other labour disturbances by
         Contractor's employees), or governmental acts and decrees that in fact
         delay the Work or increase the cost of the Project.

                  (b) To the extent that the affected party is prevented from or
delayed in complying with any of its obligations under this EPC Contract by
reason of an event of Force Majeure, such obligation shall be suspended for the
duration of the impact of such event upon the affected party.


                                       64


         22.2     ADJUSTMENTS TO DATES AND COST

         In the event Contractor is delayed by Force Majeure, or the cost of the
Work shall be increased, Contractor shall be entitled to an extension of time
under Section 5.4 and the EPC Contract Price shall be increased to reflect the
increase in the cost of the Work (including warranty) and added expenses
incurred by Contractor including those described in Section 6.5.

         22.3     OWNER FAILURES

         Although not a Force Majeure event, Owner shall be responsible for any
increased cost of Contractor, and Contractor shall be entitled to an extension
of time under Section 5.4 and to adjustments to the EPC Contract Price under the
terms of Section 22.2, due to the failure or delay of Owner (or its
representatives, agents, subcontractors or suppliers other than Contractor and
Supplier and Contractor's and Supplier's Subcontractors, agents, and employees)
to meet its obligations under this EPC Contract, to the extent such failure or
delay in fact delays the Work or increases Contractor's cost and/or due to a
Change in Law to the extent such change in fact delays the Work or increases
Contractor's cost.

         22.4     EXTENDED FORCE MAJEURE

         If circumstances of Force Majeure have occurred and shall continue for
a period of 180 (one hundred and eighty) days then, notwithstanding that
Contractor may by reason thereof have been granted an extension of time for
completion of the Work, either party shall be entitled to serve upon the other
party 28 (twenty-eight) days written notice to terminate this EPC Contract. If
at the expiry of the period of 28 (twenty-eight) days the Force Majeure event
shall still continue then this EPC Contract shall terminate and Contractor shall
be entitled to the payments contained in Subsection 21.2.2 except for
compensation for loss of profit.



                                       65


         22.5     FRUSTRATION

         In the event of this EPC Contract being frustrated whether by Force
Majeure or by any other supervening event which may occur independently of the
will of the parties, Owner shall pay to Contractor in so far as such items have
not already been covered by interim payments made to Contractor, for all Work
executed prior to the date of termination at the prices and rates provided in
this EPC Contract and in addition:

                  (a) the sums payable in respect of preliminary items in so far
as the Work or service comprised therein has been carried out or performed and a
proper proportion as certified by the Owner's Representative of all such items;
and

                  (b) the cost of plant, goods and materials reasonably ordered
for the Work which shall have been delivered to Contractor or of which
Contractor is legally liable to accept delivery, such plant, goods and materials
becoming the property of Owner upon such payment being made by Owner.

ARTICLE 23 - CONFIDENTIALITY

         Any information disclosed by one party to the other ("the transferee")
incident to the performance of the Work which is designated in writing as
proprietary is disclosed in confidence and the transferee shall restrict its use
of such information solely to uses related to the Project or performance of this
EPC Contract. Contractor and Owner shall treat such information as private and
confidential and neither of them shall transfer, copy, list or disclose the same
or any particulars thereof without the previous written consent of the other,
provided that nothing in this Article shall prevent the publication or
disclosure of any such information that has come within the public domain
otherwise than by breach of this Article.

ARTICLE 24 - NOTICES

         All notices and other communications required or permitted by this
Contract shall be in writing and shall become effective when delivered by hand
(including by messenger or courier) or received by telex, telecopier, facsimile,
telegram or such other method of telecommunication capable of creating a
writing, at the addresses set forth below or at



                                       66


such other addresses as the party receiving notice shall subsequently designate
by written notice to the other party. Without obviating the obligation to timely
provide such notice to both Contractor addressees set forth below, a notice or


communication to Contractor hereunder shall become effective upon the first date
of delivery to or receipt of such notice by either Contractor addressee set
forth below.

         If to Owner:         Tuaropaki Power Company Limited
                              c/o Stretton & Co.
                              P. O. Box 214
                              Taupo
                              New Zealand
                              Attention:  Mr. Pat Brown
                              Fax: 64-7-378-2711

         If to Contractor:    Ormat Pacific Inc.,
                              New Zealand Branch
                              P. O. Box 1717
                              Taupo
                              New Zealand
                              Fax: 64-7-377-6235

         with copies to:      Robert E.Giles
                              Perkins Coie
                              1201 Third Avenue,
                              40th Floor,
                              Seattle, WA 98101-3099
                              Fax: 1-206-583-8524

         If to Lender:        Head of Project Finance
                              Westpac Corporate Finance

                              120 Albert St., Level 24
                              P.O. Box 934
                              Auckland, New Zealand
                              Fax: 64-9-367-3733



                                       67


ARTICLE 25 - MISCELLANEOUS

         25.1     APPLICABLE LAW

         Throughout the course of performance of this EPC Contract, the parties
shall comply with all applicable Laws relating to this EPC Contract and its
performance. This EPC Contract shall be interpreted under and governed by the
laws of New Zealand.

         25.2     SEVERABILITY

         In the event that any of the provisions or portions, or applications
thereof, of this EPC Contract are held to be unenforceable or invalid by any
court of competent jurisdiction, Owner and Contractor shall negotiate an
equitable adjustment in the provisions of this EPC Contract with a view toward
effecting the purpose of this EPC Contract, and the validity and enforceability
of the remaining provisions or portions, or applications thereof, shall not be
affected thereby.

         25.3     AMENDMENTS AND WAIVERS

         This EPC Contract may not be changed or amended orally, and no waiver
hereunder may be oral, but any change or amendment hereto or any waiver
hereunder must be in writing and signed by the party or parties against whom
such change, amendment, or waiver is sought to be enforced.

         25.4     COUNTERPARTS

         This EPC Contract may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

         25.5     ENTIRE CONTRACT

         This EPC Contract constitutes the entire agreement between the parties
hereto relating to the subject matter hereof, and supersedes any previous
agreements or understandings between the parties..



                                       68


         25.6     EFFECT OF WAIVERS

         Either party's waiver of any breach or failure to enforce any of the
terms, covenants, conditions or other provisions of this EPC Contract at any
time shall not in any way affect, limit, modify or waive that party's right
thereafter to enforce or compel strict compliance with every term, covenant,
condition or other provision hereof, any course of dealing or custom of the
trade notwithstanding. The waiver by Supplier or Owner of any breach or failure
to enforce any of the terms, covenants, conditions or other provisions of the
Supply Contract at any time shall not in any way affect, limit, modify or waive
Owner's or Contractor's right thereafter to enforce or compel strict compliance
with every term, covenant, condition or other provision of this EPC Contract,
any course of dealing or custom of the trade notwithstanding.

         25.7     REPRESENTATIONS

         By their execution hereof, the parties warrant that they are authorized
to enter into this EPC Contract, that it does not conflict with any agreement,
lease, instrument or other obligation to which either is a party or by which
either is bound, and that it represents their valid and binding obligation,
enforceable in accordance with its terms.

         25.8     HEADINGS

         The headings contained herein are not part of this Contract and are
included solely for the convenience of the parties.

         25.9     PUBLICITY

         When reasonably practical, Owner shall acknowledge the role of
Contractor as the contractor of the Project and the use of the Ormat equipment
in the Project in the press releases and other publications issued by Owner
about the Project.




                                       69




         IN WITNESS WHEREOF, the parties have caused this EPC Contract to be
executed as of the date first above written.

Contractor:                           Ormat Pacific Inc., New Zealand branch

                                      By: /s/ Connie Stechman
                                         -----------------------------------
                                      Name: Connie Stechman
                                           ---------------------------------
                                      Title: Assistant Secretary
                                            --------------------------------


Owner:                                Tuaropaki Power Company Limited

                                      By: /s/ S.J. Andrews  /s/ M.R. Kedian
                                         -----------------------------------
                                      Name: S.J. Andrews    M.R. Kedian
                                           ---------------------------------
                                      Title: Directors
                                            --------------------------------












                                       70



                                                           Exhibit 10.5.2


                                 AMENDMENT NO. 1

                                       TO

                                   ENGINEERING

                      PROCUREMENT AND CONSTRUCTION CONTRACT


This AMENDMENT NO.1 TO THE ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT
(the "Amendment") is made and entered into as of            2003 by and between
Tuaropaki Power Company Limited, a New Zealand corporation with offices at
Taupo, New Zealand ("Owner"), and Ormat Pacific Inc., a Delaware corporation
acting through its New Zealand branch with offices at Taupo, New Zealand
("Contractor").


                                    RECITALS

A.       Owner and Contractor are parties to the Engineering, Procurement and
         Construction Contract dated as of August 23, 2002, (the "EPC Contract")
         pursuant to which Contractor agreed to arrange for the design,
         engineering, procurement, construction, fabrication, installation,
         commissioning, start-up and testing of a geothermal power plant at
         Owner's site located in Mokai, New Zealand.

B.       Owner and Contractor wish to amend certain provisions of the EPC
         Contract to clarify certain matters.

                                    AGREEMENT

1.       DEFINED TERMS

Terms defined in the EPC Contract shall have the same meaning when used in this
Amendment, unless specifically defined otherwise herein.

2.       AMENDMENT TO EPC CONTRACT

With effect from the date of this Amendment:

         (a)      The definition of "Guaranteed Capacity" in Article 1 is
                  amended to read as follows:

                  "The level of net electrical generating capacity for the
                  Project guaranteed by Contractor, equal to 39 MW as corrected
                  to the Design Conditions using the Correction Curves and
                  formulas set forth in Exhibit D, as measured at the Power
                  Measuring Point of the switch yard as per Drawing
                  0.002.95.641.0 and adjusted to include the 110/220kV
                  transformer (T9) losses at Whakamaru but excluding line
                  losses."

         (b)      Article 9.1 will be amended by adding at the end of that
                  Article the following:

                  "Contractor acknowledges that construction and operational
                  experience from Mokai I may be relevant to the development of
                  technical data, design and other




                  documentation required for the performance of the Work
                  (including specification of the Equipment). Contractor agrees
                  to provide to Owner prior to the Owner giving a Notice to
                  Proceed under Article 5.1 a detailed listing of lessons
                  learned during the construction and operation of Mokai I,
                  together with details of the various design changes that have
                  been or are proposed to be implemented in respect of the
                  Project and/or the Equipment. Contractor further agrees that,
                  to the extent not already incorporated in the design of the
                  Project and/or the Equipment, it shall address those issues
                  raised as part of the design review process."

         (c)      The last sentence of subclause 13.1(b) appearing under Article
                  13.1 (Security Provided on Behalf of Contractor) will be
                  amended by replacing it as follows:

                  "The US$ Denominated L/C shall be reduced from time to time
                  upon arrival at the port of destination in New Zealand of
                  Equipment or parts thereof (as may be evidenced by a notice of
                  arrival issued by the shipping line agent) by the amounts
                  computed as described in Exhibit J-2, so that the US$
                  Denominated L/C will be reduced to 30% (Thirty Percent) of the
                  sum of the US dollar denominated portion of the EPC Contract
                  Price and the Supply Contract Price upon the completion of
                  arrival of the Equipment at the New Zealand port. The US$
                  Denominated L/C shall also be reduced from time to time by the
                  amount of insurance proceeds received for any goods lost,
                  destroyed or irrevocably damaged in marine transit and which
                  were paid into escrow pursuant to Article 15.5".


         (d)      Article 15.1 shall be amended by adding at the end of the
                  clause the following paragraph:

                  "The insurance to be maintained pursuant to sub-paragraph (b)
                  above shall include terrorism and war risk".

         (e)      Article 15.5 (Application of Insurance Proceeds) will be
                  amended as follows:

                    (i)    after sub-clause (a), by adding a new sub-clause (b):

                           "where the insurance proceeds arise as a result of a
                           claim under the ocean marine shipment insurance
                           maintained pursuant to Article 15.1(b) and the
                           milestone payment for shipment of goods affected by
                           the event of loss was not received by Contractor or
                           Supplier, according to the case, (irrespective of
                           whether the obligation to pay has arisen) an amount
                           equal to the difference between the total insurance
                           proceeds paid in respect of the event of loss or
                           damage and the value of milestone payments under the
                           Milestone Payment Schedule or the Supply Contract
                           Milestone Payment Schedule paid by the Owner to the
                           Contractor or the Supplier as the case may be in
                           respect of that Equipment or other goods lost or
                           damaged shall be paid directly to Contractor."

                    (ii)   by relettering sub-clause (b) as sub-clause (c), and
                           amending its sub-clause (iii) by replacing "under
                           Subsections 15.1(b) and (d)" with:

                           "under insurance referred to in Subsection 15.1(d),
                           and all insurance proceeds for events occurring and
                           covered by the insurance maintained under Subsection
                           15.1(b) in excess of amounts payable directly to
                           Contractor under




                           Section 15.5 (b) above".

                    (iii)  by replacing the first sentence of the full paragraph
                           following renumbered sub-clause (c)(iii) as follows:

                           "Directions will be placed with the escrow agent that
                           the monies will be released from the account for each
                           milestone payment within 48 (forty-eight) hours
                           against presentation by Contractor or Supplier of
                           documents in accordance with the Milestone Payment
                           Schedule or the Supply Contract Milestone Payment
                           Schedule, as applicable (as such shall be adapted for
                           goods or works not specifically mentioned there)
                           verified by Owner's Representative as provided below,
                           and so that payment in full is due no later than the
                           supply (delivered to the New Zealand port as
                           evidenced by a notice of arrival issued by the
                           shipping line agent) of replacement goods and/or
                           completion of the rectification of the relevant parts
                           of the Work which had been lost, damaged or
                           destroyed."

                    (iv)   at the end of Article 15.5 add the following:

                           "and provided further that the amount of the
                           insurance proceeds payable to the Owner under
                           sub-clauses (i) and (ii) above (in respect of any
                           Equipment lost, damaged or destroyed that has not
                           been replaced or rectified as of the date of
                           termination or in respect of other loss or damages
                           arising out of events giving rise to the claim) shall
                           be reduced by the amount received by the Owner as a
                           result of any claim on the US$ Denominated L/C
                           provided by Contractor pursuant to Article 13.2."

         (f)      Exhibit A shall be amended by adding to the end of the sixth
                  paragraph of clause 1.1 the words:

                  "Contractor acknowledges that construction and operational
                  experience from Mokai I may be relevant to the development of
                  technical data and design of the Project (including
                  specification of the Equipment) and has included in the design
                  of the Project those design revisions and modifications that
                  were implemented for Mokai I or an appropriate equivalent or,
                  to the extent not already implemented, will address those
                  issues in the design review process in accordance with Article
                  9.1."

         (g)      Exhibit A shall be amended by adding a new bullet point to
                  clause 3.3 as follows:

                  "Description of operational experience from Mokai I to be
                  addressed during the design review for the Project."

         (h)      Exhibit A shall be amended by adding a new section 4.11 as
                  follows:

                  "4.11  Interface with Mokai I

                  The Contractor acknowledges that Mokai I is an operational
                  plant and that in performing the Work the Contractor will
                  schedule all activities that involve direct interface with
                  Mokai I plant or systems in a manner to be mutually agreed
                  upon to accommodate the operational requirements of Mokai I
                  and shall at all times conduct the Work with a view to
                  minimising disruption to the operation of Mokai I"


         (i)      Schedule B to Exhibit D is amended by deleting the Correction
                  Curves contained therein and substituting the Correction
                  Curves attached as the Schedule to this Amendment.

         (j)      Exhibit J-2 (Form of Performance Bond) shall be amended as
                  follows:

                    (i)  At the end of paragraph 2 (under the heading "Special
                         Conditions") add the words "and/or as payments from
                         insurance monies which were escrowed as a result of a
                         claim of loss under the ocean marine shipment policy
                         and which were received in connection with milestone
                         payments prior to shipment payments for replacement
                         goods."

                    (ii) In Paragraph 3 (under the heading "Special
                         Conditions"):

                           (aa) renumbering paragraph (a) as paragraph (a1);

                           (bb) adding a new subparagraph (a1)(3) after
                                subparagraph (a1)(2) as follows:

                                "(3) Copy of Notice of arrival of the shipment
                                of the equipment referred to in the Bill of
                                Lading issued by the shipping line agent"

                           (cc) Adding the following after " IA = the total
                                amount of the Invoices supporting such reduction
                                request."

                                "And/or

                                (a2) By an amount equal to a sum not to exceed
                                the amount stated in the escrow account agent's
                                statement under (2) below in a reduction request
                                to be presented to us by ORMAT in writing,
                                together with of the following documents:

                                (1)  Copy of ORMAT's certificate certifying that
                                     amounts have been claimed from the marine
                                     cargo insurer for an event of loss of goods
                                     in transit under the insurance maintained
                                     by ORMAT or OPI.

                                (2)  Copy of the escrow agent's statement
                                     confirming the amount of the insurance
                                     proceeds deposited into the escrow
                                     account."

3.       MISCELLANEOUS

3.1      This Amendment shall be effective on the date of execution.

3.2      This Amendment may be executed in two or more counterparts, each of
         which shall be deemed an original, but all of which together shall
         constitute one and the same instrument.

3.3      Except as amended by this Amendment the EPC Contract remains in full
         force and effect.








IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as of
the date first above written.



Contractor                                   Ormat Pacific Inc.

                                             By: /s/ Connie Stechman
                                                -------------------------------

                                             Name: Connie Stechman
                                                  -----------------------------

                                             Title: Assistant Secretary
                                                   ----------------------------



Owner:                                       Tuaropaki Power Company Limited

                                             By: /s/ Martin Douglas Heffernan
                                                -------------------------------

                                             Name: Martin Douglas Heffernan
                                                  -----------------------------

                                             Title: Director
                                                   ----------------------------




                                                                Exhibit 10.5.3

                          ENGINEERING, PROCUREMENT AND
                              CONSTRUCTION CONTRACT



                              DATED OCTOBER 3, 2003



                                 BY AND BETWEEN

                             CONTACT ENERGY LIMITED

                                     "OWNER"

                                       AND

                               ORMAT PACIFIC INC.

                                  "CONTRACTOR"




                                     PAGE 1







        ARTICLE 1 - DEFINITIONS...........................................................................1

         ARTICLE 2 - EPC CONTRACT DOCUMENTS..............................................................13

         ARTICLE 3 - CONTRACTOR RESPONSIBILITIES.........................................................13

         ARTICLE 4 - OWNER RESPONSIBILITIES..............................................................33

         ARTICLE 5 - EXTENSION OF TIME...................................................................36

         ARTICLE 6 - COMPENSATION AND PAYMENT............................................................39

         ARTICLE 7 - COMMISSIONING AND TAKE OVER.........................................................44

         ARTICLE 8 - CHANGES.............................................................................53

         ARTICLE 9 - ACCESS AND REVIEW BY OWNER..........................................................58

         ARTICLE 10 - TESTING............................................................................63

         ARTICLE 11 - WARRANTIES.........................................................................67

         ARTICLE 12 - REMEDIES...........................................................................76

         ARTICLE 13 - SECURITIES.........................................................................80

         ARTICLE 14 - CARE OF THE WORK; TITLE............................................................83

         ARTICLE 15 - INSURANCE..........................................................................85

         ARTICLE 16 - DISPUTE RESOLUTION.................................................................86

         ARTICLE 17 - INDEMNIFICATION....................................................................88

         ARTICLE 18 - ASSIGNMENT.........................................................................90

         ARTICLE 19 - SUBCONTRACTORS.....................................................................91


                                       i



         ARTICLE 19A - PERSONNEL.........................................................................95

         ARTICLE 20 - SUSPENSION.........................................................................96

         ARTICLE 21 - TERMINATION........................................................................98

         ARTICLE 22 - FORCE MAJEURE.....................................................................104

         ARTICLE 23 - CONFIDENTIALITY...................................................................106

         ARTICLE 24 - NOTICES...........................................................................107



         ARTICLE 25 - MISCELLANEOUS.....................................................................108




                                       ii





                                LIST OF SCHEDULES

         Schedule A                         Owner's Technical Requirements

         Schedule B                         Contractor's Technical Proposal

         Schedule C                         Milestone Payment Schedule

         Schedule D                         Performance Tests

         Schedule E                         Project Schedule

         Schedule F                         Warranty Procedures

         Schedule G                         ORMAT Industries Ltd. Guaranty


         Schedule H                         Form of Performance Bond

         Schedule I                         Cancellation Fee

         Schedule J                         Drawings



                                      iii




         This ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT is made and
entered into this _____ the day of ____________, 2003 by and between Contact
Energy Limited, a New Zealand limited liability company with offices at
Wellington, New Zealand ("Owner") and ORMAT Pacific Inc., a Delaware corporation
acting through its New Zealand branch with offices at Taupo, New Zealand
("Contractor").

                                    RECITALS

         A. Owner holds or will hold rights to use land at Wairakei, New
Zealand, and to use certain of the geothermal resource underlying the land,
resource consents and certain other associated rights, consents, commitments and
facilities necessary for the construction, testing, generation and maintenance
of an 14.38 MW (net) geothermal power plant.

         B. Owner desires Contractor to design, engineer, procure, construct,
fabricate, install, commission, start-up and test a new 14.38 MW (net)
geothermal power plant at Owner's site located in Wairakei, New Zealand.

         C. ORMAT Industries Ltd. has agreed to design, manufacture and supply
certain equipment necessary for the construction of the geothermal power plant
under the terms and conditions of the Supply Contract (as defined below) with
Owner entered into contemporaneously with this agreement.

         D. Contractor is willing to supply certain other equipment and perform
the services set forth herein, upon the terms and conditions hereinafter set
forth.

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants hereinafter contained, the parties hereby agree as follows:

ARTICLE 1 - DEFINITIONS

         Unless the context otherwise requires, the following terms when used
herein or in any Schedule hereof shall have the meanings set forth below:

                                       1


         "APPLICATION SOFTWARE" means all application programs, whether in
electronic read only devices or otherwise, including data and utilities
designed, developed or created by or on behalf of Contractor to be installed
and/or supplied as part of the Works and its associated documentation.

         "BANK BILL BID RATE" means the average New Zealand dollar 90 day bank
bill bid rate (rounded upwards to the nearest second decimal place) as appearing
at 11.00 am or as soon as practicable thereafter on the relevant day in
Wellington on page BKBM of the Reuters screen.

         "BASE DATE" means June 23, 2003.

         "BEST ENDEAVOURS" means that the party shall promptly and diligently
use all the resources and take all steps available to it which a prudent,
determined and reasonable person, acting in its own interests and with a genuine
desire to achieve the intended outcome, would take.

         "BRINE RETURN TEMPERATURE" means the half-hourly arithmetic average of
the temperature of the Geothermal Fluid measured every minute over a half hour
period downstream of the Binary Plant at the Terminal Point where it is returned
to the reinjection system.

         "BINARY PLANT" means the binary power plant and all related and
ancillary work to be provided by Contractor and the Supplier, and taken over by
Owner under this EPC Contract as part of the Permanent Works.

         "CHANGE" means any change to the requirements or obligations of this
EPC Contract.

         "CHANGE IN LAW" means the enactment, adoption, promulgation,
modification or repeal after the Base Date of any Law (except regarding
taxation) or to the Designation or any Standard that establishes requirements
adversely affecting Contractor's costs or schedule for performing the Work.

         "COMMENCEMENT DATE" means the date of this EPC Contract.

                                       2


         "CONSENT" means any consent, permit, licence, approval or the like,
including the Owner's Consents.

         "CONTRACTOR'S CHANGE" means a Change requested by the Contractor and
agreed by Owner in terms of ARTICLE 8 (Changes).

         "CONTRACTOR'S EQUIPMENT" means all equipment, apparatus, machinery,
vehicles and other things required for the execution and completion of the Works
and the remedying of any defects, but excludes Temporary Works, Plant and
Permanent Works.

         "CONTRACTOR'S REPRESENTATIVE" means the person designated by Contractor
pursuant to SECTION 19A.2 (Contractor's Representative) to act as its
representative.

         "CONTRACTOR'S TECHNICAL PROPOSAL" means Contractor's proposal for
meeting the Owner's Technical Requirements, and comprises the Contractor's
preliminary design and specification for the Binary Plant and Contractor's
proposals generally for carrying out the Works as set forth in SCHEDULE B.

         "CORRECTED NET POWER OUTPUT" means the lowest of the Measured Net Power
Output results, as corrected for deviations from the Guarantee Conditions using
the Correction Curves, of the six tests comprising a single Net Power Output
Performance Test as described in section 1.5.9 of EXHIBIT D (Performance Tests).

         "CORRECTED PRESSURE DROP" means the highest of the Measured Pressure
Drop results, as corrected for deviations from the Guarantee Conditions using
the Correction Curves, of the six tests comprising a single Net Power Output
Performance Test as described in section 1.5.9 of EXHIBIT D (Performance Tests).

         "CORRECTION CURVES" means the curves and mathematical formulae set
forth in SCHEDULE D (Tests) and used for the purposes of calculating the
Corrected Net Power Output and the Corrected Pressure Drop.

         "COST" means all expenditure necessarily, reasonably, properly and
actually incurred (or to be incurred) by Contractor, whether on or off the Site,
excluding any allowance for overhead, margin, profit and similar charges.
Overhead for these purposes


                                       3


means expenses required for the general overall running of Contractor's
business, including administrative, financial and office expenses and
supervision.

         "DAY" means a calendar day.

         "DEFAULT RATE" means, in any month, the Bank Bill Bid Rate appearing on
the first business day of the month (namely the first day of the month in which
banks in Wellington are ordinarily open for business) plus three percent per
annum, calculated daily and capitalised monthly.

         "DEFECTS CORRECTION PERIOD" means the period referred to in SUBSECTION
11.2.1.

         "DESIGN RANGE" means the design range of operating conditions for the
Binary Plant as set forth in section 1.3.1 of SCHEDULE A (Owner's Technical
Requirements).

         "DESIGN AND OTHER INFORMATION" means the documents specified in
SUBSECTION 9.4.1.

         "DESIGNATION" means the Taupo District Council's designation for road
under the Resource Management Act 1991 and relevant accompanying conditions
relating to the ETA, as described section 1.3.2(v) and Exhibit B9 of SCHEDULE A
(Owner's Technical Requirements).

         "DISPUTE" means any dispute or difference of any kind whatsoever which
shall arise between Owner and Contractor in connection with or arising out of
this EPC Contract (including without limitation any disputes or differences
concerning the terms of the Supply Contract) or the carrying out of the Works,
including any dispute or difference as to any instruction, order, direction,
certificate or valuation by the Owner's Representative, whether during the
progress of the Works or after its completion and whether before or after the
termination, abandonment or breach of this EPC Contract.

         "DOCUMENT" means:(a) any writing on any material; (b) any information
recorded or stored by whatever means including electronically or on tape; and
(c) sound recordings and visual recordings (including photographs and films).

                                       4


         "DRAFT AS-BUILT DRAWINGS" means markups (through hand interlineations
or other similar means) of Contractor's major construction drawings for the
Binary Plant marked to show as-built details of control and electrical systems
and approximate locations of other material components of the Binary Plant that
are reasonably relevant to the operation and maintenance of the Binary Plant.

         "DRAWINGS" means the drawings in SCHEDULE A (Owner's Technical
Requirements), SCHEDULE B (Contractor's Technical Proposal), SCHEDULE J
(Drawings) and such other major drawings related to the Works provided by
Contractor to Owner under this EPC Contract.

         "FAIL SAFE" means a feature which ensures that the absence of any
critical control or safety component, system, signal or function will not result
in any unsafe condition.

         "EPC CONTRACT" means this Engineering, Procurement and Construction
Contract together with the Schedules attached hereto, which shall, taken as a
whole, define the rights and obligations of the parties hereunder.

         "EPC CONTRACT PRICE" means the total firm fixed lump sum price, payable
to Contractor by Owner as set forth in SECTION 6.1 hereof and as adjusted
pursuant to the provisions of this EPC Contract.

         "EQUIPMENT" means the equipment that is to be provided by Supplier to
Owner pursuant to the Supply Contract.

         "ETA" means the Eastern Taupo Arterial Highway to be constructed by the
Taupo District Council and Transit New Zealand, part of which is to run through
the Wairakei Station and close to and/or through parts of Site 3 and Site 4.

         "FINAL ACCEPTANCE" means satisfaction by Contractor or waiver by Owner
of the conditions set forth in SUBSECTION 11.2.6, which will occur on the date
specified in the Final Acceptance Certificate.

         "FINAL ACCEPTANCE CERTIFICATE" means the certificate issued under
SUBSECTION 11.2.6.



                                       5


         "FORCE MAJEURE" shall have the meaning assigned to that term in ARTICLE
22.

         "GEOTHERMAL FLUID" means the geothermal brine to be supplied at the
Geothermal Fluid Terminal Point in accordance with the interface data set forth
in section 1.3.1 of SCHEDULE A (Owner's Technical Requirements).

         "GEOTHERMAL FLUID TERMINAL POINT" means the Geothermal Fluid interface
point defined in section 1.2.3 and Exhibit A2 of SCHEDULE A (Owner's Technical
Requirements).

         "GEOTHERMAL GROUP CONTROL ROOM" or "GGC" means Owner's existing control
room which forms part of the Wairakei Station and which contains control
facilities and personnel for operation and management of Owner's geothermal
power stations and associated facilities.

         "GRID" means the transmission network including related substations
currently owned and operated by Transpower.


         "GST" means Zealand Goods and Services Tax pursuant to the Goods and
Services Tax Act 1985.

         "GUARANTEE CONDITIONS" means the conditions and parameters in section
1.3.4 of SCHEDULE A (Owner's Technical Requirements).

         "GUARANTEED NET POWER OUTPUT" means 14,380 kW being the minimum net
amount of power measured in kW produced by the Binary Plant at Guarantee
Conditions measured at the plant's revenue meters when all the Binary Plant's
auxiliaries are operating as normal with no supplementary power supply.

         "GUARANTEED PRESSURE DROP" means 2.2 barg being the maximum brine
system pressure drop across the Binary Plant as measured at the applicable
Terminal Points for Geothermal Fluid supply and return at Guarantee Conditions.

         "HAZOP REVIEW" (otherwise known as a hazard and operating review) means
a formal, systematic examination of the design for the Binary Plant and
interconnected



                                       6


systems to identify matters which could lead to hazards, operability problems,
nuisances or environmental harm in respect of the Binary Plant, Wairakei Station
or their surroundings.

         "INDUSTRY ARRANGEMENTS" means the applicable electricity industry
arrangements and includes:

         (a)  the New Zealand Electricity Market rules, the Metering and
              Reconciliation Information Agreement, and the Multilateral
              Agreement on Common Quality Standards; or

         (b)  the electricity rulebook governed by an electricity governance
              board established by electricity industry participants (to the
              extent such rulebook supersedes the arrangements in paragraph
              (a)); or

         (c)  industry rules made by an Electricity Governance Board
              established under the Electricity Act 1992 (to the extent such
              rules supersede the arrangements in paragraph (a)).

         "INTELLECTUAL PROPERTY RIGHTS" means any right to, and any interest in,
any patent, design, trade mark, copyright, trade secret and any other
proprietary right or form of intellectual property (protectable by registration
or not) in respect of any know-how, technology, concept, idea, data, program or
other software (including in source and object codes), specification, formula,
drawing, programme, design, system, process, logo, mark, style or other thing,
conceived, used, developed or produced by any person.

         "KW" means kilowatts.

         "LAW" means statutes, regulations, codes, consents, ordinances,
district and regional plan requirements, grid operator standards and codes,
permits, rules, orders, judicial and administrative decisions and
interpretations to the extent they have jurisdiction on performance of the Works
under this EPC Contract, including Transpower's "Connection Policy" or
substitute or equivalent document from time to time, the "Asset Owner
Performance Obligations" (AOPO), Transpower's requirements as owner and operator
of the Grid and the Industry Arrangements.

                                       7


         "LOCAL CONTROL ROOM" means the HMI control room for the operation of
the Binary Plant which is to be designed and constructed by Contractor and to be
located adjacent to the Binary Plant.

         "MEASURED NET POWER OUTPUT" means net amount of power in kW produced by
the Binary Plant measured at the Binary Plant's revenue meters when all the
Binary Plant's auxiliaries are operating as normal with no supplementary power
supply.

         "MEASURED PRESSURE DROP" means the brine system pressure drop across
the Binary Plant measured at the Terminal Points for supply and return of
Geothermal Fluid.

         "MILESTONE" means the completion of a discrete part of the Works or the
occurrence of an event identified as such in the Milestone Payment Schedule.

         "MILESTONE PAYMENT SCHEDULE" means the milestone payment schedule for
payment of the EPC Contract Price, as set forth in SCHEDULE C.

         "MW" means megawatts.

         "OPERATING CONSUMABLES" means electric power, working fluid, water,
chemicals, lubricants, filters, lamps, light bulbs and other consumable
materials used to construct, commission, test and operate the Binary Plant.

         "OPERATING PERSONNEL" means the Owner's Personnel hired by Owner to
operate the Binary Plant and to be trained by Contractor under SECTION 3.1(O).

         "OWNER'S CHANGE" means a Change requested by Owner and agreed by
Contractor in terms of ARTICLE 8 (Changes) or other Change or event designated
as an Owner's Change in this EPC Contract.

         "OWNER'S CONSENTS" means the Consents obtained or to be obtained by
Owner for the Works identified in SCHEDULE A (Owner's Technical Requirements).

         "OWNER'S PERSONNEL" means the staff, labour and other employees of
Owner, including the Owner's Representative, and any other personnel notified to
Contractor by Owner from time to time.

                                       8


         "OWNER'S PLANNED OUTAGE SCHEDULE" means Owner's schedule of planned
outages of the Wairakei Station, as updated and provided by the Owner to the
Contractor from time to time.

         "OWNER'S REPRESENTATIVE" means the person designated by Owner to act as
its representative in all respects to this EPC Contract under SECTION 4.1(H) and
having the powers contained in SECTION 4.2.

         "OWNER'S TECHNICAL REQUIREMENTS" means the purpose, scope, design,
performance expectations and other technical criteria for the Works specified in
SCHEDULE A.

         "PERFORMANCE GUARANTEES" means Guaranteed Net Power Output, Guaranteed
Pressure Drop and the performance guarantees for reliability for the Binary
Plant set forth in SCHEDULE D (Performance Tests).

         "PERFORMANCE TESTS" means the handling trials, Net Power Output and
Pressure Drop tests, and Reliability Run set out in SCHEDULE D (Performance
Tests) to demonstrate that the Binary Plant meets the Performance Guarantees.

         "PLANT" means all materials, supplies, apparatus, machinery, parts,
tools, components, spares, appliances, vehicles and appurtenances intended to
form or forming part of the Permanent Works.

         "PERMANENT WORKS" means the permanent works to be designed, specified,
procured, manufactured, assembled, installed, tested, completed, commissioned
and repaired by Contractor in accordance with this EPC Contract, and includes
the Binary Plant and all related and ancillary work identified in or to be
reasonably inferred as being within the work required of the Contractor under
this EPC Contract.

         "POST-TAKE OVER WORKS" means the Works described in SECTION 7.9
(Post-Take Over Works).

                                       9


         "PROJECT SCHEDULE" means the completion schedule for the Plant set
forth in SCHEDULE F and as it may be amended from time to time as set forth in
SECTION 3.8 (Project Schedule).

         "PROPRIETARY SOFTWARE" means all computer programs, whether in
electronic read only devices or otherwise, including operating systems, data and
utilities, supplied without modification by a third party software publishing
house (not employed in any capacity to develop application software for the
Works) as standard proprietary software available on standard licence terms and
conditions, to be installed and/or supplied as part of the Works and its
associated documentation.

         "PUNCHLIST" means a list of minor incomplete or defective items which
remain to be completed, prepared in accordance with SECTION 7.1 (Readiness for
commissioning) and SECTION 7.2(A)(C) (Take Over).

         "RELIABILITY RUN" means the reliability run test described in paragraph
1.5.12 of SCHEDULE D (Performance Tests) to establish that the Binary Plant can
run reliability for a minimum period of 21 consecutive days.

         "SCHEDULED TAKE OVER DATE" means the date by which the Binary Plant is
required to achieve Take Over, which shall be the later of (a) June 20, 2005 and
(b) such later date as may be established in accordance with SECTION 5.1.

         "SITE" means the site on which the Permanent Works will be located,
which is on land more specifically described in section 1.1.3 and 1.1.5 of
SCHEDULE A (Owner's Technical Requirements).

         "SITE 3" means:

         (a)  the cross hatched area labelled "Site 3" as shown on Site Drawing
              WRK0262 in exhibit A3 of SCHEDULE A (Owner's Technical
              Requirements) and

         (b)  the hatched areas labelled "Construction/Laydown Area" shown on
              Site Drawing WRK0262 in exhibit A3 of SCHEDULE A (Owner's
              Technical



                                       10


              Requirements) together with such additional areas as may, from
              time to time, be designated by Owner by notice to Contractor for
              Contractor's use.

         "SITE 4" means the hatched area labelled "Site 4" shown on Site Drawing
WRK 0262 in exhibit A3 of SCHEDULE A (Owner's Technical Requirements)) together
with such additional areas as may, from time to time, be designated by Owner by
notice to Contractor for Contractor's use. The hatched area labelled "Site 4"
includes the construction/laydown area allocation for Site 4.

         "SOFTWARE" means all computer programs, whether in electronic read only
devices or otherwise, including Application Software, Proprietary Software,
operating systems, data and utilities and any other software which is not
included in Application Software or Proprietary Software installed and/or
supplied as part of the Works, and its associated documentation (including user
manuals).

         "STANDARD" means any technical standard, code of practice,
specification, rule, industry certification requirement, the Industry
Arrangements or the like relevant to the Works, including those specified in the
Schedules.

         "STATION CONTROLLER" means the individual whom is controller of the
Wairakei Station from time to time or his or her authorised representative
notified by Owner to Contractor from time to time.

         "SUBCONTRACTOR" means any party (other than Contractor's employees)
engaged by Contractor to perform any of the services or supply any item of goods
or material pursuant to this EPC Contract.

         "SUPPLIER" means ORMAT Industries Ltd., an Israeli corporation.

         "SUPPLY CONTRACT" means the Supply Contract of even date herewith,
together with the Schedules attached thereto, by and between Supplier and Owner,
as the same may be amended from time to time, under which, among other things,
Supplier is providing the Equipment and services to Owner for use in connection
with the development, construction, start-up, testing, commissioning and
completion of the Permanent Works.

                                       11


         "TAKE OVER" means satisfaction by Contractor or waiver by Owner of the
conditions set forth in SECTION 7.2 (Take Over) and the taking over by Owner of
the Binary Plant, which will occur on the date specified in the Take Over
Certificate or the deemed Take Over pursuant to SECTION 7.5 (Delayed Tests).

         "TAKE OVER CERTIFICATE" means the certificate issued under SECTION 7.3
(Request for Take Over Certificate).

         "TEMPORARY WORKS" means all temporary works of every kind required for
the carrying out of the Works but not forming part of the Permanent Works.

         "TERMINAL POINT" means a location where Contractor connects certain
elements of the Permanent Works provided under this EPC Contract to Owner's
existing plant and equipment forming part of Wairakei Station. All Terminal
Points are defined in paragraph 1.2.3 and Exhibit A2 of SCHEDULE A (Owner's
Technical Requirements).

         "THIRD PARTY" means any neighbour, statutory or regulatory authority,
or other individual, and/or body which is either provided with goods or services
by Owner or is affected or influenced by Owner's activities. Third Parties
include but are not limited to Taupo District Council, Transit New Zealand, Her
Majesty the Queen acting by and through the Commissioner of Crown Lands,
Transpower, Hawke's Bay Network Limited, the Prawn Farm, Huka Jet, NETCOR and
the Wairakei Tourist Hotel.

         "TRANSPOWER" means Transpower New Zealand Limited, or such other
owner/s and/or body/bodies appointed to operate or control the Grid.

         "WAIRAKEI STATION" means Owner's land and improvements in the vicinity
of the Site, including the existing geothermal power station, the GGC, the
steamfield and all associated facilities (including services provided to Third
Parties).

         "WORKS" means all work which Contractor is required to carry out under
this EPC Contract including the provision of all material, goods, things and
services which are the responsibility of Contractor under this EPC Contract,
including all things of a permanent or temporary nature necessary for the works
and whether stated or reasonably implied as being within the work required of
the Contractor under this EPC Contract including,


                                       12


without limitation, the design, engineering, and procurement construction of a
14.38 MW (net) binary power plant on the Site in accordance with this EPC
Contract and the administration of the Supply Contract and dealing with the
Equipment to be supplied under the Supply Contract as provided herein.

         "YEAR" means 365 days.

ARTICLE 2 - EPC CONTRACT DOCUMENTS

         2.1      DOCUMENTS INCLUDED

         This EPC Contract shall include the documents listed below, which are
hereby incorporated herein by reference and which, in the event of conflict, are
to be interpreted in accordance with the priority listed below.

         o   These Terms and Conditions

         o   the Owner's Technical Requirements

         o   the other Schedules

         o   any other documents forming part of this EPC Contract.

ARTICLE 3 - CONTRACTOR RESPONSIBILITIES

         3.1      GENERAL RESPONSIBILITIES

         Except as provided elsewhere in this EPC Contract, Contractor shall:

                  (a) Perform, or cause to be performed the Works, including
providing all labour, materials, tools, supplies, Temporary Works, Contractor's
Equipment, documents, Operating Consumables, equipment, transportation,
engineering, insurance, technical services and all other things and services
necessary and required to satisfactorily design, engineer, procure, construct,
install, commission, start up and test the Binary Plant, including verification
of the adequacy of the specification of the Equipment, and rectify any defects
in the Binary Plant all in accordance with the requirements of this EPC
Contract.

                                       13


                  (b) Provide personnel necessary for commissioning, start-up
and performance testing of the Permanent Works as described herein.

                  (c) Prosecute the Works continuously and diligently in
accordance with the Project Schedule (including achievement of Take Over as
provided in SECTION 7.2 (Take Over) by the Scheduled Take Over Date), using
qualified and competent personnel, and complete the Works in accordance with
good design and engineering practice and prudent electrical and mechanical
engineering and in accordance with the provisions of this EPC Contract.

                  (d) Ensure that when completed, the Works (and the Equipment)
are fit for the purposes for which the Works (and the Equipment) are intended
namely the provision to Owner of a 14.38 MW (net, at Guarantee Conditions)
binary plant capable to operate safely and lawfully on the Site using
Owner-supplied Geothermal Fluid meeting the Design Range and capable of
dispatching electricity to the Grid interface with the Wairakei Station all in
accordance with the requirements set out in SCHEDULE A (Owner's Technical
Requirements).

                  (e) Rectify defects in the Works as soon as practicable during
the Defects  Correction  Period in accordance with SUBSECTION 11.12.3 (Defects
Warranty); and

                  (f) Monitor on behalf of Owner as authorized in the Supply
Contract the manufacture and delivery of the Equipment by Supplier, arrange for
complete handling of all goods and material supplied under this EPC Contract and
for the Equipment after delivery under the Supply Contract including, but not
limited to inspection, expediting, shipping, unloading, receiving, customs
clearance and customs claims. In connection herewith, Owner hereby grants to
Contractor the authority to administer the Supply Contract and Contractor agrees
to administer the Supply Contract and to enforce on behalf of Owner the
Supplier's obligations there under, and Contractor shall administer the Supply
Contract in the same way as if the Supplier was a Subcontractor under this EPC
Contract. As between Owner and Contractor, Contractor shall be responsible for
its acts or omissions in relation to its administration of the Supply



                                       14


Contract, and shall be responsible for enforcing and obtaining performance by
the Supplier of Supplier's obligations under the Supply Contract.

                  (g) Commission, start-up and performance test the Permanent
Works in  accordance  with the Performance Tests.

                  (h) Comply in all material respects with all applicable
Standards (including those described in SCHEDULE A (Owner's Technical
Requirements) and SCHEDULE B (Contractor's Technical Proposal) and with all
applicable Laws and Consents, relating to the Plant and the performance of the
Works and be responsible for the adequacy and safety of all Site operations and
of all methods of construction.

                  (i) Procure all Consents required for the Works, other than
the Owner's Consents, and comply in all material respects with all Consents.
Contractor shall not, without Owner's approval, seek to vary or modify any of
the Owner's Consents or any of the conditions attaching to them, or to obtain
any Consent which is inconsistent in any respect with any of the Owner's
Consents or communicate with consent authorities in relation to the Owner's
Consents. If it appears that any Consent that Contractor is in the process of
obtaining may be issued subject to conditions that will affect the ability of
Contractor to comply with any of its obligations under this EPC Contract
including on Owner's ability to lawfully and conveniently use the Binary Plant
and/or the Wairakei Station, Contractor must notify Owner as soon as reasonably
practicable to enable Owner, if Owner elects, to confer with the authorities
regarding such possible conditions. Such action by Owner shall not relieve
Contractor of any of its obligations under this EPC Contract.

                  (j) complete the Works so the Binary Plant:

                           (i)      is capable of being  operated in all modes
within the Design  Range in  compliance with the Consents; and

                           (ii)     will not hinder or interfere  with the
ability of the Wairakei  Station to operate in accordance with the resource
Consents or other statutory or regulatory Consents applicable to the Wairakei
Station and in force at the Base Date.

                                       15


                  (k) If Contractor becomes aware that an act or omission of
Contractor related to the Works is, or is likely to breach any applicable Law,
or result in any fine, sanction or enforcement action (whether under the
Resource Management Act 1991 or any other law), then Contractor shall
immediately notify Owner and Owner may, in its reasonable discretion and without
relieving the Contractor of any responsibility in respect of that event issue
instructions to Contractor as it reasonably considers appropriate to mitigate
the risk identified and Contractor shall comply with such instructions issued by
Owner at the expense in all respects of Contractor.

                  (l) Provide all temporary and permanent construction
materials, equipment and supplies necessary for commissioning and testing of the
Permanent Works until Take Over.

                  (m) Pay for construction utilities (electricity only) required
to achieve Take Over except for any initial connection and disconnection costs.

                  (n) Train up to 25 operating and maintenance personnel, of
whom up to 5 are senior personnel, designated by Owner at the Site over the time
periods identified in SECTION 4.1(I) and during the commissioning and start-up
phase of the Binary Plant construction. Such training shall be in conjunction
with the normal commissioning and start-up activities employed by Contractor.
Each person designated for training by Owner shall be a qualified for their role
at the site and shall not be deemed employees or Subcontractors of Contractor.
Training shall be conducted as described in section 1.12 of SCHEDULE A (Owner's
Technical Requirements).

                  (o) Have a quality system/s that meets the requirements of the
ISO9000 series of standards or equivalent in relation to the Works, provide
copies and details of that system/s to Owner upon request from time to time and
for review and acceptability prior to Take Over, ensure compliance by all
Subcontractors with the quality system/s, and implement a system/s that ensures
traceability of all critical parts and components of the supplied Plant and
equipment and the associated quality records.



                                       16


                  (p) Prepare detailed monthly progress reports on progress of
the Works for the period ended on the last day of the previous month to Owner as
reasonably required by Owner. Such reports shall include without limitation:

                           (i) all work achieved during the preceding month
including Milestones achieved;

                           (ii) any significant events or achievements in the
Works including the results of any tests;

                           (iii) significant events planned for the following
month;

                           (iv) progress of the Works against programme,
identifying any actual or potential slips in progress against programme and the
likelihood that Take Over will be achieved by the Scheduled Take Over Date;

                           (v) means of rectifying any delay;

                           (vi) any notices of non-conformance and the extent to
which there is any outstanding non-conformance.

                  (q) Provide special tools, and operating and commissioning
supplies which are required for commissioning, start-up, and performance testing
of the Permanent Works until Take Over.

                  (r) Not less than six (6) months prior to the Scheduled Take
Over Date, provide to Owner draft operation and maintenance manuals (which shall
incorporate the manuals of the Equipment) and prior to Take Over, provide at
least two (2) copies of job books, operation and maintenance manuals (which
shall incorporate manuals of the Equipment), operating data and Draft As-Built
Drawings to Owner in a sufficient state of completion and containing sufficient
detail to enable Owner to operate and maintain the Binary Plant properly,
safely, lawfully and without hindrance and without reliance in any way on
Contractor and not later than six (6) months after Take Over, provide to Owner
four copies of the final operation and maintenance manuals (which shall
incorporate



                                       17


manuals of the Equipment), operating data and detailed as-built Drawings and
specifications.

                  (s) Exercise, in the design and specification of the Works and
the verification of the adequacy of the specifications of the Equipment, and
generally in connection with Contractor's responsibilities under this EPC
Contract the skill and care to be expected of a qualified and competent
designer, engineer and contractor experienced in work of similar nature and
scope as the Binary Plant.

                  (t) Design, install, construct, commission, test and complete
the Binary Plant using proven up to date good practices and which are consistent
with the provisions of the Supply Contract and this EPC Contract.

                  (v) At Owner's request, at any reasonable time up to Take
Over, Contractor shall participate in the conceptual design review and in the
subsequent Site located dedicated design review with Owner's Personnel regarding
the design of the means of integrating the Binary Plant with Owner's existing
Wairakei Station HMI system, and provide at the Site one control engineer for a
period of up to one week in the 12 months following Take Over to assist and
advise Owner regarding Owner's coordination and integration of the Binary Plant
with the existing Wairakei Station HMI system.

         3.2      EMERGENCIES

         In emergencies affecting the safety or protection of persons or the
Work, Contractor, without special instruction or authorization from Owner, may
take all reasonable actions to prevent such threatened damage, injury, or loss.
This provision is not intended to limit Contractor's rights under any other
provisions hereof, including, without limitation, ARTICLE 8 (Changes).

         3.3      HEALTH AND SAFETY IN EMPLOYMENT ACT ("HSEA")

                  3.3.1 Contractor warrants to Owner that during Contractor's
activity on the Site, up to and including Take Over of the Binary Plant,
Contractor shall ensure that no act or omission by Contractor:

                                       18


                           (a) in contravention of the HSEA causes a significant
hazard, harm or serious harm to any employee of Contractor or any person at or
in the immediate vicinity of the Site; or

                           (b) is a breach of any duty or obligation of
Contractor under the HSEA; or

                           (c) does or is likely to give rise to the issue of an
improvement or prohibition notice, enforcement proceedings or a prosecution
under the HSEA against Owner, Contractor, or the Subcontractor.

The words and phrases used in this clause shall have the same meaning as is
ascribed to them in the HSEA.

                  3.3.2 Contractor undertakes that before a Subcontractor
commences work on the Site Contractor shall obtain similar warranties as those
stated in SUBSECTION 3.3.1 from that Subcontractor in relation to the
subcontracted Work.

                  3.3.3 Contractor shall indemnify and keep indemnified Owner
from all costs, damages, fines, penalties and expense incurred or suffered by
Owner in respect of any breach of the HSEA and/or conviction or proceedings
instigated against Owner pursuant to the HSEA directly or indirectly related to
a breach by Contractor of any of the warranties set out in SUBSECTION 3.3.1.

                  3.3.4 If Contractor becomes aware that it is or may be in
breach, or is likely to be in breach of any of the warranties in SUBSECTION
3.3.1 or any Subcontractor is or may be in breach of or is likely to breach the
matters set out in the agreement between Contractor and Subcontractors pursuant
to SUBSECTION 3.3.2, then Contractor shall immediately notify Owner of such a
breach or anticipated breach and, in relation to any breach or anticipated
breach in relation to any of the Work or subcontracted Work, Contractor shall
consult with the Owner's Representative to avoid, remedy or mitigate such breach
or anticipated breach.

                  3.3.5 Contractor, pursuant to the warranties given in
SUBSECTION 3.3.1, shall have regard to the contents of the safety programme
agreed



                                       19


between Owner and Contractor in accordance with SCHEDULE A (Owner's Technical
Requirements). The safety plan submitted shall meet the requirements of HSEA and
any other applicable Laws, be suitable for the conditions of the Site, the
Works, the Wairakei Station and be consistent with Owner's site and safety
rules. A copy of the agreed safety programme shall be kept at the office of
Contractor.

                  3.3.6 Contractor shall nominate a safety officer who shall be
approved by Owner, which approval shall not be unreasonably withheld, to be
responsible for the safety at the Site and in respect of Contractor's operations
in the Wairakei Station, and such officer shall be available or be represented
by a designee on the Site during business hours after the commencement of the
Works at the Site and on call after hours.

                  3.3.7 If Contractor fails to comply with the obligations set
out in this clause, Owner may require Contractor to suspend the Works until the
failure is rectified. In the event of such suspension Contractor shall comply
with its obligations under ARTICLE 20 (Suspension) but Contractor shall not be
entitled to any extension of time under SECTION 5.1 (Extension of Time) or
otherwise, payment of any costs (including Cost) or any adjustment of the EPC
Contract Price as a result of such suspension.

                  3.3.8 Contractor shall ensure that all its employees and
Subcontractors that will be working in the Wairakei Station:

                  (i)  attend the local induction course and receive training
                       on Owner's safety procedures;

                  (ii) are advised of any revision to Owner's safety
                       procedures that are provided to Contractor;

                 (iii) comply at all times with Owner's safety procedures;
                       and

                  (iv) request clarification of any of Owner's safety
                       procedures, including all access authorisations, that
                       they do not understand.

                                       20


If Owner reasonably considers any person employed by Contractor or any
Subcontractor is not complying with Owner's site safety procedures, Owner may,
or may require Contractor to, remove that person from the Wairakei Station.

         3.4      PROJECT REPRESENTATION

         Contractor has reviewed the provisions of the Supply Contract and
warrants that the combination of the Works and the Equipment are adequate so
that the Permanent Works, when completed in accordance with this EPC Contract,
will meet the Owner's Technical Requirements.

         3.5      ACCESS CONDITIONS

         (a) Contractor shall have investigated and satisfied itself as to the
suitability and availability of access routes to the Site and the Wairakei
Station.

         (b) Where Contractor wishes to have other access or intrusion onto or
over land adjoining either the Site or the Wairakei Station, then arrangements
must be made by Contractor and such access or intrusion will be entirely at
Contractor's risk and cost. Contractor shall keep Owner informed in respect of
negotiations for any such arrangements and Owner's consent shall be required for
any such arrangements (which consent shall not be unreasonably withheld).

         3.6      CONDITIONS AFFECTING THE CARRYING OUT OF THE WORKS

         (a)      Contractor shall be deemed to have:

                  (i)      inspected the Site and surrounding locations,
                           including surface conditions to the extent a
                           qualified and competent designer, engineer, and
                           contractor experienced in works in similar nature and
                           scope as the Binary Plant would have; and

                  (ii)     familiarised and satisfied itself with respect to:

                           (1)      the nature of the Works and the areas where
                                    the Works is to be carried out;

                                       21


                           (2)      the Designation and the effect that it will
                                    have on the Wairakei Station, the Site and
                                    the Works;

                           (3)      the general and local conditions with
                                    respect to weather, environment,
                                    transportation, access, waste disposal, lay
                                    down areas, handling and storage of
                                    materials and residue, availability and
                                    conditions of roads, climatic conditions and
                                    seasons, surface physical conditions at the
                                    Site, the Wairakei Station and the
                                    surrounding area;

                           (4)      the location of all pipes, cables, utilities
                                    works and similar  hazards on or about the
                                    Site, the Wairakei Station and the
                                    surrounding area; and

                           (5)      hydrological and geotechnical matters as
                                    identified in Site hydrological and
                                    geotechnical  studies which may affect the
                                    carrying out of the Works,

                  in existence at or before the Commencement Date and to have
                  taken all such matters into account in the EPC Contract Price
                  such as qualified and competent designer, engineer, and
                  contractor experienced in works in similar nature and scope as
                  the Binary Plant would have.

         (b) Except as otherwise expressly provided for in clause (c) below and
elsewhere in this EPC Contract, Contractor shall not be entitled to an extension
of time under SECTION 5.1 (Extension of Time) or otherwise, payment of any costs
(including Cost) or to any adjustment of the EPC Contract Price as a result of
any unforeseen difficulties or costs.

         (c) Notwithstanding clauses (a) and (b), Contractor shall have no
responsibility for, and shall be entitled to an Owner's Change under ARTICLE 8
(Changes) for, any material delays or costs resulting from the discovery of
subsurface conditions being materially different from that ordinarily and
reasonably expected at the Site, including load bearing of the subsoil being
materially less than one would ordinarily and reasonably expect in the locality
of the Site, or for unforeseen obstructions, or for the



                                       22


presence of any hazardous materials, or from any material inaccuracy in any
material designs, drawings or other information provided by Owner; provided,
however, that if such event would also constitutes an event of Force Majeure
then Owner may elect to not proceed with the Owner's Change in having Contractor
remedy the consequences of such event and instead deal with impact of such event
in accordance with the provisions of ARTICLE 22 (Force Majeure). For the
avoidance of doubt, based upon the September 26, 2003 geotech study of the Site
provided by Owner, Supplier and Owner acknowledge that Site ground stabilization
work (e.g., pilings) is required to remedy the soil and subsurface conditions
identified in that report and that such Works will be performed by Contractor as
an Owner's Change to be implemented pursuant to ARTICLE 8 (Changes) (except that
Contractor notes that there will be no change to the Scheduled Take Over Date)
on an open book basis (both as to Costs and scope of work) with Owner paying
Contractor its Costs for such Works plus 10% plus GST in accordance with SECTION
8.5 (Adjustments), which amounts shall be in addition to the EPC Contract Price
specified in SECTION 6.1 (EPC Contract Price).

         3.7      [INTENTIONALLY OMITTED]

         3.8      PROJECT SCHEDULE

         (a) Contractor shall maintain the relationship between progress and
payment established by Contractor's draft Project Schedule contained in SCHEDULE
E (Project Schedule) and the Milestone Payment Schedule contained in SCHEDULE C
(Milestone Payment Schedule).

         (b) At the end of the first month after the date of this EPC Contract
and monthly after that, Contractor shall submit to Owner in terms of SECTION 9.4
(Design and other Information Review) a three month rolling Project Schedule
detailing the work to be carried out during the following three months. The
initial updated Project Schedule shall reflect the Scheduled Take Over Date and
other dates specified in this EPC Contract. In addition, all Project Schedule
updates shall, without limitation, show significant events for the following
three months, reflect the timing of Contractor's planned interfaces with the
various interface points identified in SCHEDULE A (Owner's Technical
Requirements), demonstrate how any delay is to be recovered and show activities
for rectifying any


                                       23


defects and addressing any relevant matters raised in Contractor's monthly
progress report under SECTION 3.1(P).

         (c)      In the event that:

                  (i)   the Scheduled Take Over Date is extended in terms of
                  SECTION 5.1 (Extension of Time) or

                  (ii)  Owner instructs an Owner's Change in terms of ARTICLE 8
                  (Changes); or

                  (iii) Contractor or Owner considers for any reason that there
                  is or will be a significant deviation between the actual or
                  anticipated progress of the Works and the Project Schedule,

Contractor shall submit a further Project Schedule to Owner (subject, with
respect to schedule issues arising out of clause (iii) above, to review by Owner
pursuant to SECTION 9.4 (Design and Other Information)) revised to take account
of such circumstance. Such revised Project Schedule shall identify the likely
dates upon which the Project Works will be completed, Milestones achieved and
how Contractor proposes to achieve Take Over in terms of Section 7.2 (Take Over)
by the Scheduled Take Over Date.

         3.9      HAZOP REVIEW

         (a)      Contractor shall:

                  (i)      conduct a Hazop Review after the conceptual design
                           and layout stage, and before the issue of process and
                           instrumentation diagrams and single line drawings for
                           construction;

                  (ii)     engage appropriately qualified third parties to:

                           (1)      train  personnel  participating  in the
                                    Hazop Review in the methodology of a Hazop
                                    Review; and

                           (2)      facilitate the Hazop Review;

                                       24


         (b) Owner will make available, at its cost and in good time as required
to permit Contractor to proceed with the Hazop Review in accordance with the
Project Schedule, appropriate Owner's Personnel to participate in the training
in the Hazop Review methodology and in the Hazop Review. Contractor shall bear
all other costs of the Hazop Review and shall make any changes in design
identified by the Hazop Review as being required.

         (c) The participation of the Owner's Personnel in terms of this SECTION
3.9 shall under no circumstances give rise to an entitlement to Cost, an
adjustment to the EPC Contract Price or the extension of time under ARTICLE 5
(Extension of Time) or otherwise, nor shall it give rise to any entitlement to a
Change.

         3.10     INFORMATION TO BE SUPPLIED BY CONTRACTOR

         (a) Contractor shall keep Owner informed, as reasonably required by
Owner, on matters relating to the Works.

         (b) Until issue of the Take Over Certificate, Contractor shall promptly
answer all enquiries reasonably made by and received from Owner, and thereafter
through Final Acceptance use reasonable endeavors to assist Owner in any matter
which may affect the operation and maintenance of the Binary Plant, if requested
to do so by Owner, and at the reasonable cost of Owner unless such matter is
part of the Works.

         3.11     RETENTION OF DOCUMENTS AND INSPECTION

         (a) Contractor shall ensure that adequate records are kept to verify
that the Works are being carried out in accordance with this EPC Contract,
including in accordance with all applicable Laws, Consents and Standards.

         (b) Contractor shall maintain on the Site until Take Over all material
documents in relation to the carrying out of the Works. In addition, Contractor
shall retain all such documents for a period of 10 years following Take Over.

         (c) Contractor acknowledges Owner's right, at Owner's expense and upon
reasonable coordination with Contractor, to inspect and take copies of any of
the



                                       25


documents referred to in paragraph (b) for any reason in connection with this
EPC Contract, and shall assist Owner, its representatives and any authorised
public officers to inspect such documents and shall answer queries or supply
information that is reasonably requested by such persons.

         (d) To the extent that any documents referred to in this SECTION 3.11
are maintained on computer or other electronic storage device, then Contractor
shall agree with Owner and adhere to a procedure for backup and off the Site
storage of copies of such documents, in an electronic format accessible by
Owner.

         3.12     INSTRUCTIONS

         Contractor shall comply with Owner's instructions, directions and
notices reasonably in relation to the Works. If Contractor forms the view that
any such instruction, direction or notice comprises an Owner's Change under this
EPC Contract or a change under the Supply Contract then Contractor shall notify
Owner promptly in terms of ARTICLE 8 (Changes) and in any event before giving
effect to such instructions. To avoid doubt, no instruction, direction or notice
by Owner that is not an Owner's Change shall give rise to an entitlement to any
costs (including Cost), an adjustment to the EPC Contract Price or an extension
of time under ARTICLE 5 (Extension of Time) or otherwise.

         3.13     ATTENDANCE AT MEETINGS

         Contractor shall attend or be represented (by such on-Site personnel
reasonably requested by Owner) at all meetings described in the Schedules (if
any) and at all other meetings prior to Take Over reasonably convened by Owner
to which Contractor may be summoned. Such meetings will be held as reasonably
requested by Owner and coordinated with Contractor to avoid unreasonably
interference in the performance of the Works, but not less frequently than once
a month. At such meetings Contractor shall advise Owner on all material matters
relating to the Works.

         3.14     CONSENT OF TAUPO DISTRICT COUNCIL & TRANSIT NEW ZEALAND

         (a) Contractor acknowledges that one of the Owner's Consents required
is the approval of the Taupo District Council to Contractor's proposal setting
out the exact



                                       26


location, design and construction methods expected to be required for Geothermal
Fluid pipelines to cross the area of the ETA in order to connect the Binary
Plant to the existing reinjection system. This approval will also be required
for any other Works that may be proposed upon the ETA.

         (b) Provided that Contractor has fulfilled in all material respects its
obligations in the Schedules to assist Owner in gaining the required approval
for Contractor's proposal and Owner has failed to secure that approval from the
Taupo District Council by the deadline specified for such item in the Project
Schedule, such matter shall be treated as an Owner's Change pursuant to SECTION
8.4 (Owner's Change).

         3.15     COMMUNICATION

         Contractor shall direct all of the following communications (whether
written or oral) through Owner:

         (a)  communications with Waikato Regional Council and Taupo District
              Council or other Third Parties relating to the Owner's Consents
              and where the Works may affect or be affected by the proposed
              ETA;

         (b)  communications with Transpower relating to the Works, the Site
              and/or the Binary Plant (including in relation to dispatch of
              electricity from the Binary Plant);

         (c)  communications with Transit New Zealand relating to the Works,
              (except for matters or permits associated with the transportation
              of equipment to the Site).

         (d)  communications relating to the Works, the Site and/or the Binary
              Plant with any other person or entity reasonably designated by
              the Owner from time to time where the Owner (acting reasonably)
              considers that such communications may affect the Owner's
              interests.

         Owner shall use its Best Endeavors to promptly and diligently conduct
         such communications with such Third Parties in good time as required to
         permit Contractor to proceed with the Works in accordance with the
         Project Schedule.

                                       27


         3.16     EMERGENCY ACTION

         (a) If any emergency arises in relation to the Works and Contractor
cannot be contacted or is unable or unwilling to take appropriate and timely
remedial action, Owner may take any emergency action it considers necessary.

         (b) Where Contractor was obliged, under this EPC Contract or otherwise,
to take emergency action and Owner takes such action on Contractor's behalf as a
result of Contractor's failure to take such action as described in paragraph
(a), such action by Owner shall not relieve Contractor of any such obligations
and the cost of taking such action shall be recoverable by Owner as a debt due
from Contractor.

         3.17     CO-EXISTING USE OF THE WAIRAKEI STATION

         (a)      Contractor acknowledges that:

                  (i)    Contractor is required to carry out part of the Works
                         in the vicinity of the Site and in the Wairakei
                         Station; and

                  (ii)   the Wairakei Station and Owner's power stations at
                         Wairakei, Ohaaki and Poihipi, which are controlled from
                         the GGC, are in use by Owner for the generation and
                         dispatch of electricity onto the Grid, disruption to
                         which has the potential to cause loss to Owner and
                         impose material financial and social costs on others;
                         and

                  (iii)  Third Parties rely on Wairakei Station and its environs
                         to provide goods and services including prawn farming
                         and tourism, disruption to which has the potential to
                         have adverse implications for Owner and/or those Third
                         Parties.

         (b) Contractor shall not interfere with or disrupt Owner's, or the
Third Parties' (referred to above), use of the Wairakei Station, which includes
an obligation not to interfere with or disrupt the Owner's use of its power
stations at Wairakei, Ohaaki and Poihipi, given that the GGC is used to operate
those power stations remotely. Without limitation, where any work under this EPC
Contract may reasonably interfere with or



                                       28


disrupt Owner's use of the Wairakei Station, Contractor shall only carry out
such work during a planned outage in terms of the Owner's Planned Outage
Schedule; provided, however, that Owner shall develop the Owner's Planned Outage
Schedule in a manner so as to reasonably permit Contractor to proceed with such
Works in accordance with the Project Schedule. If Owner makes any changes to
Owner's Planned Outage Schedule and Contractor suffers delay or incurs Cost as a
result, Contractor shall be entitled to an Owner's Change therefor pursuant to
ARTICLE 8 (Changes):

         (c)      Contractor shall give Owner 7 days notice of Contractor's
intention to undertake any activities in the Wairakei Station or to undertake
any activities which may reasonably impact on the use or operation of the
Wairakei Station, including details of such intended activities.

         (d)      Contractor shall keep Owner updated on a daily basis as to:

                  (i)    any changes to Contractor's intentions notified under
                         paragraph (c) (any material changes shall require a
                         further 5 days notice under paragraph (c)); and

                  (ii)   once Contractor commences such activities, the progress
                         of such activities.

         (e)      Owner shall be entitled to have an observer present during the
carrying out of activities  required to be notified by Contractor under
paragraph (c);

         (f)      if Owner reasonably considers that there is a real risk that
an act or omission by Contractor may disrupt or interfere with Owner's use of
the Wairakei Station, and/or Owner's use of its power stations at Wairakei,
Ohaaki or Poihipi, given that the GGC is used to operate those power stations
remotely, or the dispatch of electricity into the Grid:

                  (i)    Owner may instruct Contractor to do or omit anything
                         that Owner, acting reasonably, considers is required in
                         order to overcome such potential disruption or
                         interference. Such instruction may include an


                                       29


                         instruction to cease all work, to remove any part of
                         the Works and/or to undertake any work;

                  (ii)   Contractor shall immediately comply with any such
                         instruction; and

                  (iii)  such instruction shall, if appropriate in the
                         circumstances, be treated as an Owner's Change for the
                         purposes of ARTICLE 8 (Changes).

         3.18     CO-EXISTING USE OF THE GGC

         Without limiting SECTION 3.17 (Co-existing use of the Wairakei
Station), Contractor:

         (a) acknowledges that the Owner will be integrating and connecting the
Binary Plant to the GGC, and that eventually the Binary Plant will be controlled
from the GGC;

         (b) acknowledges that the GGC is also used to control Owner's power
stations at Wairakei, Ohaaki, and Poihipi so that disruption of the GGC has the
potential to cause material financial loss to, and have other adverse
implications on, Owner;

         (c) will avoid any interference with or disruption to Owner's remote
control of the Wairakei, Ohaaki and Poihipi power stations from the GGC;

         (d) will co-operate with Owner and comply with the Schedules in
relation to any activities it carries out at or in relation to, the GGC;

         (e) use competent employees, contractors and Subcontractors who are
experienced in work of a similar nature and scope in carrying out all activities
at, or in relation to, the GGC. Without limitation to ARTICLE 19
(Subcontractors), Owner will have the right to reasonably approve all such
employees, contractors and subcontractors at any time.

         3.19     CO-OPERATION

         (a) Contractor acknowledges that during the carrying out of the Works
Owner or a Third Party may wish to carry out work on or adjacent to the Site
and/or the Wairakei Station. Contractor shall co-operate and co-ordinate with
Owner and any such Third



                                       30


Party to allow them the reasonable opportunity to carry out any such work with
the approval of Owner, provided, however, that Contractor shall not be obligated
under this clause to undertake any activity that will unreasonably interfere
with Contractor's performance and completion of the Works in accordance with the
Project Schedule.

         (b)      Contractor acknowledges that:

                  (i)    Taupo District Council and/or Transit New Zealand may
                         wish to construct the ETA in future adjacent to the
                         Site as shown on Site Drawing number WRK 0262 in
                         exhibit A3 of SCHEDULE A (Owner's Technical
                         Requirements) and as described in the Designation. The
                         designating authority or its contractors or agents may
                         therefore wish to undertake investigations, design or
                         construction works for the proposed road at the same
                         time as Contractor is carrying out the Works;

                  (ii)   concessionaires and others may from time to time
                         undertake improvements to their facilities on
                         neighbouring lands including neighbouring Wairakei
                         Tourist Park land at the same time as Contractor is
                         carrying out the Works;

                  (iii)  and in all cases Contractor shall co-operate with and
                         co-ordinate its activities with Owner and with Third
                         Parties as appropriate and take such actions as are set
                         out in the Schedules or as are reasonable to
                         accommodate these requirements with the approval of
                         Owner.

         (c)      Any Change required by Contractor as a result of complying
with its obligations under paragraphs (a) or (b) shall be treated as an Owner's
Change pursuant to ARTICLE 8 (Changes).

         (d)      If the Binary Plant is capable of producing electricity prior
to Take Over then:

                  (i)    Contractor shall either (at Owner's option) allow Owner
                         to generate and dispatch electricity from the Binary
                         Plant onto the Grid, or shall



                                       31


                         comply with Owner's instructions in relation to
                         generation and dispatch of electricity from the Binary
                         Plant; and

                  (ii)   if Contractor suffers delay or incurs Cost as a result,
                         Contractor shall be entitled to an Owner's Change
                         therefor pursuant ARTICLE 8 (Changes).

         3.20     SECURITY

         Contractor shall be responsible for security of the Site prior to Take
Over. This obligation includes keeping unauthorised persons off the Site.

         3.21     CONTRACTOR'S OPERATIONS ON THE SITE AND WAIRAKEI STATION

         (a)      Contractor shall confine all of its operations (including
Contractor's Equipment and all its personnel) to the Site and, only to the
extent necessary for carrying out the Works, the Wairakei Station.

         (b)      Contractor shall comply with all reasonable security
requirements of Owner in relation to the Wairakei Station.

         (c)      During the carrying out of the Works Contractor shall keep the
Site and the Wairakei Station free from all wreckage, rubbish, unnecessary
obstruction, and shall store or remove from the Site and the Wairakei Station
any Contractor's Equipment, surplus materials and Temporary Works which are no
longer required.

         (d)      Upon the issue of the Take Over Certificate and as part of the
Post-Take Over Works, Contractor shall:

                  (i)    clear away and remove all Contractor's Equipment,
                         surplus materials, wreckage, rubbish and Temporary
                         Works relating to the Works;

                  (ii)   leave the Site and the Binary Plant, and with respect
                         to the Works, the Wairakei Station, in a clean and safe
                         condition; and

                  (iii)  reinstate all construction/laydown areas relating to
                         the Works.

                                       32


However, Contractor may retain on the Site, in a tidy and orderly manner in a
place designated by Owner for the duration of the Defects Correction Period,
such Contractor's Equipment as is required for Contractor to fulfill its
obligations under this EPC Contract.

ARTICLE 4 - OWNER RESPONSIBILITIES

         4.1      GENERAL RESPONSIBILITIES

         Owner shall, at Owner's cost and expense and not as part of the EPC
Contract Price payable to Contractor:

                  (a) Be responsible for making any and all arrangements for any
sale and purchase of electricity to be generated by the Binary Plant, and for
ensuring that Transpower enters into agreements allowing for the connection of
the Binary Plant and the delivery of electricity generated by the Binary Plant
at the high voltage interface point specified in SCHEDULE A (Owner's Technical
Requirements) in good time to permit commissioning, start-up, testing and
operation of the Binary Plant in accordance with the Project Schedule.

                  (b) Arrange for and obtain all Owner's Consents in good time
as required by Contractor to permit Contractor to proceed with the Work in
accordance with the Project Schedule, on terms acceptable to Owner, and in
accordance with the terms of this EPC Contract, and to pay for all fees
associated therewith. Without derogating from the aforesaid, Contractor, upon
Owner's specific request, will provide all necessary technical information to
Owner regarding the Works to aid Owner in its efforts to obtain such consents
and permits.

                  (c) Provide the Site, including space for all construction
facilities, lay-down, storage and disposal areas, roads and other means of
access to Contractor in good time to permit Contractor to proceed with the Work
in accordance with the Project Schedule, subject to ARTICLE 3 (Contractor
Responsibilities) and in particular SECTION 3.5 (Access Conditions) and SECTION
3.6 (Condition affecting the carrying out of the Works).

                  (d) Obtain and provide the supply of Geothermal Fluid in
accordance with the Design Range to the Geothermal Fluid Terminal Point after
being given the



                                       33


requisite 3 day prior notice of testing under SECTION 10.2 (Notice of Testing)
and in good time to permit commissioning, start-up, testing and operation of the
Binary Plant in accordance with the Project Schedule. If Contractor notified
Owner in its Commissioning and Performance Testing PLAN provided pursuant to
paragraph 1.2.1 of SCHEDULE D (Performance Tests) that it requires Geothermal
Fluid in addition to the volume per hour specified in the Design Range and Owner
has confirmed to Contractor the technical feasibility and cost of making the
additional supply if any, Owner shall on demand of Contractor supply up to the
agreed additional volume of Geothermal Fluid and Contractor shall pay Owner the
agreed cost of providing it. Owner shall be entitled to interrupt the supply of
Geothermal Fluid but such interruption shall be treated as an Owner's Change
pursuant to ARTICLE 8 (Changes).

                  (e) Accept the Geothermal Fluid for return to the reinjection
system or other disposition following its use by Contractor at the Terminal
Point, provided the temperature exceeds the minimum Brine Return Temperature of
85(Degree) C.

                  (f) Perform the obligations of Owner under the Supply Contract
so that Supplier can make available the Equipment furnished by Supplier in
accordance with the Supply Agreement to Contractor (on behalf of Owner), for
incorporation in the Works.

                  (g) Provide access to electricity, water and communications at
the Terminal Points specified in SCHEDULE A (Owner's Technical Requirements) in
good time to permit construction, commissioning, start-up, testing and operation
of the Binary Plant in accordance with the Project Schedule.

                  (h) Designate an Owner's Representative who shall act as a
single point of contact with Contractor in all matters on behalf of Owner.
Contractor may require replacement of Owner's Representative on reasonable
grounds, which shall be described to Owner. Owner may from time to time appoint
alternative or additional persons to act in place of the Owner's Representative
and shall give Contractor written notice of such appointment. Contractor shall
act on the instructions of the following people, and no others:



                                       34


                           (i)   the Owner's Representative (or any alternate or
                                 additional  persons  notified by Owner to
                                 Contractor under this clause); and

                           (ii)  in relation to any matter which may affect the
                                 Wairakei Station, the Station Controller or the
                                 Owner's Representative (or any alternate or
                                 additional persons notified by Owner to
                                 Contractor under this clause).

       (i) At least four (4) months prior to commencement of Contractor's
commissioning activities, provide up to 5 senior operating and maintenance
personnel and at least two (2) months prior to commencement of Contractor's
commissioning activities, provide up to 25 regular operating and maintenance
personnel, all for training by Contractor as provided pursuant to SECTION
3.1(N), and for commissioning, start-up, performance testing, and operation
through Take Over. Owner and Owner's operation and maintenance personnel shall
provide reasonable cooperation with Contractor in allowing Contractor to conduct
all testing activities, including the Performance Tests, to complete the Work
and to perform all of Contractor's warranty obligations in a timely and cost
efficient manner.

         (j) Promptly (but not later than ten (10) days from delivery) approve,
or provide written comments to the extent necessary to, all Design and Other
Information submitted to Owner for approval or comment pursuant to ARTICLE 9
(Access and Review by Owner).

         (k) Owner shall be the importer of record and consignee for all goods
and materials supplied under this EPC Contract and the Equipment and shall be
responsible for all New Zealand taxes, duties and levies associated therewith.
Owner hereby grants to Contractor the right to act as Owner's agent, including
executing documentation on Owner's behalf, for purposes of accomplishing the
importation of all goods and materials for the Binary Plant into New Zealand
under this EPC Contract and the Supply Contract, including the Equipment, and
the processing of such goods and materials through customs.

                                       35


         4.2      RESPONSIBILITIES OF OWNER'S REPRESENTATIVE

         The Owner's Representative is authorized to:

                  (a)      give a decision, opinion or consent; or

                  (b)      express satisfaction or disapproval; or

                  (c)      determine value; or

                  (d)      otherwise take action which may affect the rights and
obligations of Owner or Contractor.

The Owner's Representative shall consult with Contractor in an endeavour to
reach an agreement before exercising such authority. If agreement is not
achieved, the Owner's Representative shall exercise such authority reasonably.

         If Contractor has a Dispute with the determination made by the Owner's
Representative, such Dispute shall be resolved as provided in ARTICLE 16
(Dispute Resolution). Until any contrary determination is made pursuant to
ARTICLE 16 (Dispute Resolution), Contractor shall proceed with the decisions and
instructions given by the Owner's Representative.

         Owner shall be entitled to replace the Owner's Representative from time
to time upon giving prior written notice to Contractor.

ARTICLE 5 - EXTENSION OF TIME

         5.1      EXTENSION OF TIME

                  5.1.1 In addition to any of its rights to recover additional
Costs it incurs upon the occurrence of the following events as provided in other
provisions of this EPC Contract, Contractor shall be entitled to an extension to
the Scheduled Take Over Date and other dates in this EPC Contract to the extent
that Contractor is or will be delayed either before or after such dates by any
of the following causes:

                  (a)     an Owner's Change;

                                       36


                  (b)     a Change in Law;

                  (c)     a Force Majeure event;

                  (d)     subject to ARTICLE 3 (Contractor Responsibilities),
                          physical conditions or circumstances at the Site,
                          which are materially adverse and would not be
                          reasonably foreseeable by an experienced contractor;

                  (e)     delay to any tests required for Take Over as a result
                          of:

                           (i)      the failure of Owner to provide the
                                    Geothermal Fluid that meets the Design Range
                                    or to accept Geothermal Fluid not less than
                                    85(Degree) C after it has been run through
                                    the Binary Plant for reinjection or other
                                    disposal; or

                           (ii)     the failure by Transpower (arising other
                                    than as a result of a breach or failure by
                                    Contractor or Supplier to comply with their
                                    respective obligations under this EPC
                                    Contract and Supply Contract, as
                                    appropriate) to transport and/or take the
                                    electrical power generated by the Binary
                                    Plant as a result of carrying out such tests
                                    or Binary Plant commissioning;

                  (f)     any unreasonable delay, impediment or prevention by
                          Owner other than the exercise of Owner's rights under
                          this EPC Contract or the Supply Contract;

                  (h)     a delay to Supplier for which Supplier is entitled to
                          an extension of its Delivery  Schedule pursuant to
                          Section 5.1 of the Supply Contract,

                  provided that:

                  (i)     the delay does not arise as a result of a default or
                          failure by Contractor or Supplier;

                                       37


                  (ii)    the ability of Contractor to achieve Take Over by the
                          Scheduled Take Over Date is actually affected by the
                          delay. Contractor will only be entitled to an
                          extension of the Scheduled Take Over Date to the
                          extent of such effect;

                  (iii)   the delay could not have been prevented or overcome by
                          the exercise of foresight, care and diligence of a
                          professionally qualified and competent contractor
                          experienced in work of a similar nature and scope as
                          the Works;

                  (iv)    Contractor and/or Supplier as the case may be has used
                          its Best Endeavours to mitigate the delay, including
                          making such reasonable changes to the timing, method,
                          and sequence of the Project as Owner may propose and
                          finding alternative suppliers, and offering them
                          assistance; and

                  (v)     Contractor and/or Supplier as the case may be has
                          advised Owner of the potential for delay as soon as
                          the potential became apparent, or would have become
                          apparent to a qualified and competent contractor
                          experienced in work of a similar nature and scope to
                          the particular work in question.

                  Notwithstanding that Contractor has not claimed an extension
                  of time, Owner may at any time and from time to time by notice
                  to Contractor as an Owner's Change pursuant to ARTICLE 8
                  (Changes) extend the Scheduled Take Over Date.

                  5.1.2 If Contractor believes that it is entitled to an
extension of time under this SECTION 5.1, Contractor shall give notice to the
Owner's Representative of the same as soon as reasonably practicable and in any
event within 5 days of the day when Contractor learns of the delay. Contractor
shall keep such contemporary records as may be reasonably necessary and feasible
to substantiate such delay, either at the Site or at another location reasonably
acceptable to the Owner's Representative and shall provide such information to
the Owner's Representative as he or she shall reasonably require.



                                       38


Contractor shall permit the Owner's Representative to inspect such records
during Contractor's normal business hours, and shall (if requested) provide the
Owner's Representative with a copy of such records

                  5.1.3 Within 14 days of such notice (or such other period as
may be agreed by the Owner's Representative), Contractor shall submit supporting
details of the delay. Except that, if Contractor cannot submit all relevant
details within such period because the cause of delay is continuing or such
details are not yet reasonably available, Contractor shall submit interim
details at intervals of not more than 14 days (from the first day of such delay)
and final supporting details of its application within 14 days of the last day
of delay. If Contractor fails to meet any such time periods, Contractor shall
notify Owner as soon as reasonably practicable. Contractor's failure to meet the
time periods specified in this SECTION 5.1 shall not affect Contractor's right
to the extension of time unless such failure has materially prejudiced the
ability of Owner to rectify or mitigate the causes or consequences of the delay
in which case the extension of time granted to Contractor shall not include any
periods of delay that could reasonably have been avoided if not for such failure
to give notice.

                  5.1.4 The Owner's Representative shall proceed to agree upon
or determine such extension of time as may be due. The Owner's Representative
shall promptly notify Contractor accordingly.

ARTICLE 6 - COMPENSATION AND PAYMENT

         6.1      EPC CONTRACT PRICE

                  6.1.1 For the performance of the Work, Owner shall pay
Contractor, in the manner and at the times hereinafter specified, the EPC
Contract Price in the amount of Eight Hundred Thirty Thousand United States
Dollars (U.S. $830,000) and Seven Million Five Hundred Twenty-Two Thousand Four
Hundred Forty-Seven New Zealand Dollars (NZ$7,522,447). The EPC Contract Price
is net of all applicable New Zealand taxes (other than the New Zealand income
taxes of Contractor, and New Zealand employee-related taxes of Contractor, all
of which the Contractor shall be responsible to pay), duties and levies
including without limitation any New Zealand property taxes such as rates




                                       39


assessed against the Works or the Plant and the payment of any such taxes,
duties and levies (other than the New Zealand income taxes, and New Zealand
employee-related taxes, of Contractor) shall be the responsibility of Owner.
Contractor shall provide reasonable cooperation to Owner to reduce Owner's
exposure to any tax, duty or levy.

                  6.1.2 The EPC Contract Price (plus any GST, and less any
withholding required by law) shall be full payment for performance of all of
Contractor's obligations under and in connection with this EPC Contract, and
Contractor shall be deemed to have satisfied himself as to the correctness and
sufficiency of the EPC Contract Price. The EPC Contract Price includes
Contractor's income taxes and employee-related taxes of the Contractor and
withholding taxes that Owner may be required by law to withhold from any payment
due to Contractor.

                  6.1.3 The EPC Contract Price shall be adjusted only as
expressly provided for in this EPC Contract and shall not be adjusted for other
changes in the cost of equipment, materials, labour or other inputs or currency
exchange rates.

                  6.1.4    The parties agree:

                  (a) That they are independent parties dealing at arm's length
with each other in relation to the matters contemplated by this Contract.

                  (b) For the purposes of Division 2 of Subpart EH of the Income
Tax Act 1994, the parties confirm that the EPC Contract Price does not include
any capitalised interest and it is the consideration the parties would have
agreed, on the Commencement Date, if payment was required in full at the time
the first right in the contracted property was transferred or the services were
provided.

                  6.1.5 For the avoidance of doubt, the parties acknowledge and
agree that:

                  (a) any interest on overdue payments is separate from and does
not form part of the EPC Contract Price; and

                                       40


                  (b) the gross EPC Contract Price includes any early completion
payment under SECTION 6.5 (Early Completion Payment), taxes, levies or duties
paid by the Owner under this Contract.

         6.2      PAYMENT

                  6.2.1 Schedule C hereto sets forth the Milestone Payment
Schedule, which is intended to cause payments to approximate the value of Works
performed by Contractor. Contractor shall invoice Owner on achievement of
Milestones in accordance with the Milestone Payment Schedule. Each payment shall
be allocated pro rata between the United States Dollar and the New Zealand
Dollar portions of the EPC Contract Price (and paid in such currency).

                  6.2.2 Upon the execution of this EPC Contract by the parties,
Contractor may issue its first invoice for payment of the first milestone under
the Milestone Payment Schedule. Thereafter on or before the tenth (10th) day of
each month, Contractor shall furnish Owner's Representative a detailed progress
invoice for payment based on Milestones achieved or due under SECTION 6.5 (Early
Completion Payment), during the period ending on the last day of the previous
month accompanied by the documents described under the Milestone Payment
Schedule for which payment is demanded and any other documents as required under
SECTION 6.4 (Preconditions to Milestone payments) (such invoice, and each
invoice under this contract, is to include Contractor's New Zealand registration
number for GST purposes, and other information to comply with the requirements
for a "tax invoice" in section 24 of the Goods and Services Tax Act 1985).

                  6.2.3 Upon accomplishment of the Milestone entitled "Delivery
of Final Documentation" in the Milestone Payment Schedule, Contractor shall
submit an invoice to Owner's Representative, summarizing and reconciling all
previous invoices and payments in the amount of the EPC Contract Price less
payments to date. Owner shall pay the amount of the EPC Contract Price
outstanding in full within ten (10) days of receipt of such invoice, subject to
SUBSECTIONS 6.2.4 and 6.2.5 below.

                  6.2.4 Owner's Representative shall verify that the invoices
submitted under SUBSECTION 6.2.2 OR 6.2.3 and the documents submitted pursuant
to



                                       41


SUBSECTION 6.2.2 in support of the claim for payment, and shall, within ten (10)
days of their receipt, either approve said invoice or give written notice within
such period of errors or disputes with said documentation. Contractor shall be
entitled to payment of an instalment only when it has met the applicable
pre-conditions, if any, in SECTION 6.4 (Preconditions to Milestone Payments) and
achieved all of the requirements of the relevant Milestone in conformity with
the requirements of this EPC Contract. If Owner's Representative fails to
approve the invoice for release of the Milestone payment or to provide the
notice regarding errors or Disputes in the documentation within such period, in
the absence of the invoice and the documents being patently false or inaccurate,
the invoice and the accompanying documentation shall be deemed conclusive
evidence sufficient for the release of such Milestone payment. In the case
Owner's Representative provides written notice of errors or Disputes in said
documentation within the period described herein Contractor shall resubmit the
corrected progress invoice and/or documentation, and the above described
approval process shall reapply.

                  6.2.5 Subject to meeting the requirements of SECTION 6.4(A)
and (B), Owner shall pay Contractor the first payment due under the Milestone
Payment Schedule within ten (10) days of the receipt of Contractor's invoice.
With respect to all invoices thereafter, Owner shall pay Contractor on or before
the 5th business day following Owner's approval or deemed approval of the
invoice or any undisputed portion thereof pursuant to SUBSECTION 6.2.4 plus the
GST, less any set-off for amounts which are due and owing to Owner from
Contractor under this EPC Contract. When a set-off sum is in Dispute the parties
shall promptly refer the matter for determination under the Disputes resolution
procedure set forth in ARTICLE 16 (Dispute Resolution) and any moneys set-off
and subsequently determined to be payable shall thereupon be paid together with
interest for late payment.

                  6.2.6 If any Punchlist items remain to be completed upon Take
Over, Owner's Representative may determine to withhold an amount from the
remaining Milestone payments equal to up to one and a half times the reasonably
estimated value of all Punchlist items remaining on an agreed upon punch list,
with each such withheld amount to be paid to Contractor upon satisfactory
completion of each such Punchlist item,




                                       42


Contractor to accumulate claims and send invoices to Owner therefor no more
frequently than on a monthly basis.

                  6.2.7 If there is any Dispute about amounts invoiced and not
paid, and the Dispute is not resolved within ten (10) days of notice by
Contractor of such Dispute, the parties shall promptly refer the matter for
determination under the disputes procedure in this EPC Contract and any moneys
set-off and subsequently determined to be payable shall thereupon be paid
together with interest for late payment from the date payment was originally due
to the date of payment at the Default Rate.

         6.3      INTEREST

         All monies not paid under this EPC Contract (including liquidated
damages) by the due date for payment shall bear a late payment charge from the
date payment was due to the date of payment at the Default Rate, unless such
payment has been disputed and the Dispute has been resolved in favour of the
paying party.

         6.4      PRECONDITIONS TO MILESTONE PAYMENTS

         The preconditions referred to in SUBSECTION 6.2.4 are:

         (a)      Contractor must have provided to Owner prior to the first
                  Milestone payment the NZ$ Denominated L/C and the US$
                  Denominated L/C and the parent company guaranty to Owner as
                  provided in ARTICLE 13 (Securities);

         (b)      Contractor must have produced to Owner evidence confirming
                  that Contractor has in place the insurances required in
                  SECTION 15.1(A) (Contractor's Insurances) prior to the
                  payment of the first Milestone payment, evidence that
                  Contractor has in place the insurance required in SECTION
                  15.1(B) prior to the payment of Milestone payments occurring
                  immediately prior to the date that Supplier is scheduled to
                  first deliver Equipment to Owner FOB (Incoterms 2000)
                  pursuant to the Supply Contract and evidence that Contractor
                  has in place the insurance required in SECTION 15.1(C) and
                  (D) prior to the payment of Milestone payments



                                       43


                  occurring after Contractor has commenced performance of the
                  Works at the Site; and

         (c)      Contractor is current in providing the monthly progress
                  reports pursuant to SECTION 3.1(Q), provided, however, that
                  any issues regarding the adequacy of the contents of such
                  reports shall be resolved pursuant to ARTICLE 16 (Dispute
                  Resolution) or other provisions of this EPC Contract and shall
                  not be a basis for withholding or delaying payment of any
                  Milestone.

         6.5      EARLY COMPLETION PAYMENT

         In addition to the EPC Contract Price, Owner shall pay to Contractor
upon the successful completion of the Reliability Run the sum of One Hundred
Eighty Nine Thousand New Zealand Dollars (NZ$189,000) (plus GST if any and less
any withholding required by law)if Contractor commences a Reliability Run prior
to May 1, 2005 (as that date may be extended pursuant to ARTICLE 5 (Extension of
Time) or ARTICLE 8 (Changes)) and successfully completes that Reliability Run.
For purposes of this SECTION 6.5, Contractor may commence the Reliability Run
when it has successfully accomplished the handling trials, satisfied the
Performance Guarantees for the net power output and brine pressure drop output
performance tests described in SUBSECTION 1.5.9 of SCHEDULE D (Performance
Tests), and the Binary Plant can be operated lawfully, provided, however, that
the noise test set forth in SECTION 1.5.13 of SCHEDULE D (Performance Tests)
does not need to be completed prior to the commencement of the Reliability Run.

ARTICLE 7 - COMMISSIONING AND TAKE OVER

         7.1      COMMISSIONING

                  7.1.1       READINESS FOR COMMISSIONING

                  Not earlier than 7 days (but not later than 4 days) before
Contractor considers the Binary Plant will be ready for commissioning,
Contractor shall give notice to Owner indicating the date on which Contractor
believes the Binary Plant will be ready for commissioning. The Binary Plant is
ready for commissioning when:



                                       44


                  (a) Contractor has completed the Works up to commissioning in
accordance with this EPC Contract, apart from completion of insulation,
painting, final grading and gravel, drainage or any other incomplete or
defective items which do not affect the mechanical, electrical or structural
integrity, or the safe and lawful operation, of the Binary Plant. Contractor
shall participate in an inspection of the Works with Owner in order to jointly
identify such incomplete or defective items;

                  (b) Contractor has included the incomplete or defective items
referred to in paragraph (a) in an initial Punchlist and Owner has approved (in
its reasonable discretion) the initial Punchlist (the same time period and
procedure set forth in SECTION 9.4 shall apply to Owner's review, approval or
objections to the initial Punchlist proposed by Contractor);

                  (c) the Binary Plant may be operated in accordance with all
applicable Laws, Consents and Standards, and without damage to the Works
generally (including the Binary Plant itself), the Grid, the Wairakei Station,
or anything else on or off the Site, and without injury to any person;

                  (d) Contractor has complied with its obligations under
SCHEDULE A (Owner's Technical Requirements) in relation to commissioning;

                  (e) the Binary Plant is ready for initial operation,
adjustment and testing;

                  (f) Contractor has submitted, in accordance with SECTION 9.4
(Design and Other Information Review), a detailed Commissioning and Performance
Testing Plan pursuant to paragraph 1.2.1 of SCHEDULE D (Performance Tests),
including Contractor's requirements regarding the volume of Geothermal Fluid to
be supplied by Owner at specified times, and Owner has issued or pursuant to
SECTION 9.4.3 is deemed to have issued a notice of no objection in respect of
it; and

                  (g) Contractor has provided to Owner all test certificates,
approvals and the like required from statutory or regulatory authorities before
the Binary Plant may be commissioned.



                                       45


                  7.1.2       NOTICE BY OWNER

                  Within 7 days after receipt of notice pursuant to SUBSECTION
7.1.1 (Readiness for commissioning), Owner shall give notice to Contractor
advising either that Owner:

                  (a) has no objection to Contractor commissioning the Binary
Plant (with or without conditions); or

                  (b) objects to Contractor commissioning the Binary Plant
because any of the conditions in SUBSECTION 7.1.1 (Readiness for commissioning)
have not been satisfied and specifying the conditions objected to and the basis
for such objection.

If Owner fails to provide such notice within such 7 day period, Owner shall be
deemed to have no objection to Contractor commissioning the Binary Plant (with
or without conditions).

                  7.1.3       COMMISSIONING/CORRECTIVE MEASURES

                  (a) If Owner gives or is deemed pursuant to SUBSECTION 7.1.2
(Notice by Owner) to have given notice that it has no objection to Contractor
commissioning the Binary Plant, Contractor shall proceed to commission the
Binary Plant in accordance with any conditions attaching to the notice and the
Commissioning and Performance Testing Plan.

                  (b) If Owner gives notice that it objects to Contractor
commissioning the Binary Plant, Contractor shall undertake corrective measures
and/or perform any work required to comply with the conditions of SUBSECTION
7.1.1 (Readiness for commissioning), then give notice to Owner again under
SUBSECTION 7.1.1 (Readiness for commissioning).

         7.2      TAKE OVER

         The Binary Plant shall be ready for Take Over when:

                                       46


         (a)      Contractor has completed all Performance Tests and the results
                  are within or better than the thresholds for performance
                  identified in SECTION 10.5 (Failure to pass the Performance
                  Tests);

         (b)      Contractor has completed the Binary Plant, except for (i) the
                  Post-Take Over Works, (ii) completion of the final as-built
                  drawings and operation and maintenance manuals; and (iii) any
                  construction that cannot reasonably be completed due to the
                  occurrence of any of the events described in SUBSECTION
                  5.1.1(E) OR (F) (Extension of Time);

         (c)      the Binary Plant can be used for its intended purposes and
                  operated properly and conveniently by Owner, without further
                  reliance on Contractor and in accordance with all applicable
                  Laws, Consents and Standards;

         (d)      Contractor has furnished Owner with or has obtained such
                  Consents or waivers from governmental authorities having
                  jurisdiction that permit Owner under applicable Law, Consents,
                  and Standards to operate the Binary Plant

         (e)      Contractor has paid all delay and performance related
                  liquidated damages to Owner due in terms of ARTICLE 12
                  (Remedies) save only those subject to a Dispute then submitted
                  for resolution pursuant to ARTICLE 16 (Dispute Resolution)
                  and, if the Binary Plant has been accepted under SECTION
                  10.5(A)(3) (Failure to pass the Performance Tests), Contractor
                  has paid to Owner any amount due to Owner to reflect the
                  adjustment to the EPC Contract Price under SECTION 10.5(B)
                  (Failure to pass the Performance Tests);

         (f)      Contractor has trained all operation and maintenance personnel
                  as required under SECTION 3.1(N);

         (g)      Contractor has given Owner the following documents and
                  information:

                  (i)      draft operating and maintenance manuals;

                                       47


                  (ii)     training manuals;

                  (iii)    software end user licences, passwords, codes and
                           other similar items necessary for the operation and
                           maintenance of the Binary Plant;

                  (iv)     Draft As-Built Drawings; and

                  (v)      documents required to satisfy all applicable
                           regulatory approvals necessary for Owner's operation
                           of the Binary Plant;

         (h)      The Hazop Review has been carried out and any issues
                  identified have been rectified.

         7.3      REQUEST FOR TAKE OVER CERTIFICATE

                  7.3.1 Not earlier than 7 days before Contractor considers the
provisions of SECTION 7.2 (Take Over) will be met, Contractor shall give notice
to Owner requesting a Take Over Certificate. Such request shall contain all such
documentary evidence and other information in sufficient detail to enable Owner
to determine whether the provisions of SECTION 7.2 (Take Over) have or will be
(as applicable) met.

                  7.3.2 Owner shall within 7 days after receiving Contractor's
request:

                  (a)      if Contractor has met all of the requirements of
                           SECTION 7.2 (Take Over), issue a Take Over
                           Certificate to Contractor stating the date on which
                           Contractor met the requirements of SECTION 7.2 (Take
                           Over);

                  (b)      if Contractor has not met one or more of the
                           requirements of SECTION 7.2 (Take Over), reject the
                           request, giving reasons and identifying the work
                           required to be done by Contractor to enable the Take
                           Over Certificate to be issued. Contractor shall then
                           complete this work before issuing a further notice
                           under SECTION 7.3 (Request for Take Over
                           Certificate); or

                                       48


                  (c)      if Contractor has not met all of the requirements of
                           SECTION 7.2 (Take Over) but Owner wishes to take over
                           the Permanent Works notwithstanding such failure,
                           Owner may issue a Take Over Certificate stating the
                           date on which the Owner took over the Permanent Works
                           identifying those requirements of SECTION 7.2 (Take
                           Over) which remain outstanding. In the event of Take
                           Over in these circumstances, Contractor shall not be
                           relieved of the obligation to meet all of the
                           requirements of SECTION 7.2 (Take Over) and shall
                           meet such requirements as soon as practicable
                           following Take Over.

         7.4      RESPONSIBILITY FOR THE PERMANENT WORKS

         Owner shall take complete possession and control of the Permanent Works
and assume responsibility for the daily operation of the Binary Plant upon Take
Over. Owner and Contractor shall reasonably coordinate and cooperate with each
other to provide Contractor access to the Site at reasonable times to avoid
unreasonable interference with Owner's operation and maintenance of the Binary
Plant for the purpose of completing Punchlist items, remedying any defects,
fulfilling any other outstanding obligations of Contractor under this EPC
Contract or performing the corrective work described in SECTION 12.8 (Make Right
Obligation).

         7.5      DELAYED TESTS

         (a) If the Performance Tests are not satisfactorily completed by the
Scheduled Take Over Date due to the occurrence of any of the events described in
SUBSECTION 5.1.1(D) OR (E) (Extension of Time) (solely for purposes of this
Section, the term "Scheduled Take Over Date" shall not be extended due to the
occurrence of such SUBSECTION 5.1.1(D) OR (E) events, but shall reflect any
other extensions thereof made pursuant to the other provisions of this EPC
Contract) then Contractor shall be entitled to issue a notice to Owner under
SECTION 8.5 as if the failure to complete the tests was an Owner's Change.

                                       49


         (b) In the event that SUBSECTION 5.1.1(E) or (F) applies and the Owner
fails or refuses to remedy the relevant SUBSECTION 5.1.1(E) or (F) event within
30 days of such Scheduled Take Over Date then Contractor shall be entitled to
payment of the relevant Milestone(s) as if the Performance Tests had been
successfully completed and Take Over had occurred. If Owner is able to remedy
the relevant event within 90 days of such Scheduled Take Over Date, Contractor
shall, subject to SECTION 7.6 (Binary Plant Degradation) and upon Owner's
request, conduct the delayed Performance Tests and otherwise comply with the
provisions of SECTION 7.2 (Take Over) and ARTICLE 10 (Testing). If Contractor is
required to incur additional Costs as a result of maintaining personnel and
equipment on standby to do so it shall be entitled to claim for reasonable
reimbursement of those Costs as an Owner's Change pursuant to ARTICLE 8
(Changes). In the event that Owner is unable to remedy the relevant event within
90 days of the Scheduled Take Over Date then Take Over and the successful full
completion of all of the Performance Tests shall be deemed to have occurred and
Contractor shall be entitled to payment of the relevant Milestone(s) for Take
Over, the accomplishment of such Performance Tests and related matters.

         7.6      BINARY PLANT DEGRADATION

         (a) If geothermal fluid has been run through any part of the Binary
Plant due to a request by Owner to operate the Binary Plant under SECTION
3.19(D) resulting in a cumulative operating period of more than six (6) weeks,
Contractor may require that the parties jointly open and inspect the Binary
Plant prior to the Performance Tests being carried out.

       Subsequent to the inspection:

                  (i)      if the Binary Plant is in good, clean and reasonably
                           as-installed condition, Contractor will proceed
                           within a reasonable period of time to conduct the
                           Performance Tests not previously completed; or

                  (ii)     if the Binary Plant is not in good, clean and
                           reasonably as-installed condition, prior to the
                           conduct of the Performance Tests,



                                       50


                           Contractor will notify Owner accordingly and with the
                           agreement of Owner (not to be unreasonably withheld)
                           within a reasonable period of time clean and repair
                           the Binary Plant (as Contractor reasonably deems
                           appropriate) at Owner's expense and then conduct such
                           tests; and

                  (iii)    if the Parties agree that the Binary Plant can not be
                           cleaned and/or repaired to a standard to enable the
                           Performance Tests to be carried out, the testing
                           protocols and requirements shall be revised
                           accordingly to adjust for the constraints which
                           prevent such tests from being performed as originally
                           defined and within a reasonable period of time
                           Contractor shall conduct such revised tests.

         7.7      REPLACEMENT PERFORMANCE BOND

                  Upon Take Over Contractor may submit to Owner a replacement
performance bond issued by the same bank, provided that it has the same or
better credit rating, or other financial institution meeting the criteria
specified in SECTION 13.1 (Security Provided on Behalf of Contractor) and in the
same form as the performance bonds issued under SECTIONS 13.1(A) and 13.1(B) but
for an amount representing 5% of the sum of the EPC Contract Price and the
Supply Contract Price at Take Over. Upon receipt of such bond, Owner shall
release the NZ$ Denominated L/C and the US$ Denominated L/C issued under
SECTIONS 13.1(A) and 13.1(B).

         7.8      INDUSTRY AND GRID REQUIREMENTS

                  If the Binary Plant upon Take Over does not satisfy the
technical requirements of all Industry Arrangements Contractor shall, if
requested by Owner, provide all information necessary for Owner to seek an
equivalence arrangement or dispensation. Contractor shall also reimburse all
Owner's reasonable out-of-pocket costs associated with both any application for
an equivalence arrangement or dispensation and any charges imposed thereafter.
Owner shall not be obliged to apply for an equivalence arrangement or
dispensation and any application, or decision not to apply for an equivalence
arrangement or dispensation shall not limit Owner's rights or remedies.

                                       51


         7.9      POST-TAKE OVER WORKS

         After Take Over, Contractor shall promptly and diligently perform the
following Works to completion:

         (a)      Upon Take Over, Contractor shall prepare a final Punchlist
                  that identifies all incomplete or defective items of the
                  Works and present the same for approval by Owner (acting
                  reasonably) applying the same time period and approval
                  procedure set forth in SUBSECTION 7.1.2 to the final
                  Punchlist proposed by Contractor and the parties referring
                  any Dispute over the composition of the final Punchlist for
                  resolution pursuant to ARTICLE 16 (Dispute Resolution)
                  without delaying Take Over. Approval by Owner of the
                  Punchlist shall not relieve Contractor of any of its
                  obligations under this EPC Contract and Contractor shall
                  promptly and diligently complete all items of the Works
                  included in the final Punchlist approved by Owner as
                  provided above.

         (b)      Contractor shall transfer all applicable Consents related to
                  the Works and Binary Plant to Owner in a form which enables
                  the benefit of them to be used by Owner, including:

                  (i)      Building Act 1991 code compliance certificate(s);

                  (ii)     all certification under the Electricity Act 1992 and
                           Hazardous Substances and New Organisms Act 1996;

                  (iii)    all certification of pressure equipment and cranes;
                           and

                  (iv)     all other certificates required for operation or
                           maintenance of the Works which are within
                           Contractor's obligations;

         (h)      Contractor shall give Owner all documents and information
                  required to be provided under this EPC Contract, including:

                  (i)      all documents required by the Schedules; and

                                       52


                  (ii)     Plant specifications and descriptions.

         (i)      Contractor shall provide to Owner all special tools identified
                  in the Contractor's Technical Proposal;

         (j)      Contractor shall remove all Contractor's and Subcontractor's
                  personnel, supplies, equipment, waste materials, rubbish and
                  temporary facilities, except those reasonably required for
                  performance of correction work during the Defects Correction
                  Period, from the Site and the Wairakei Station;

         (k)      Contractor shall give Owner all information required as
                  specified in SCHEDULE A (Owner's Technical Requirements) for
                  Owner's final fixed asset register with respect to the Binary
                  Plant;

         7.10     FINAL DOCUMENTATION

         Not later than six (6) months after Take Over, Contractor shall provide
to Owner four copies of the final operation and maintenance manuals (which shall
incorporate manuals of the Equipment) and detailed as-built Drawings and
specifications for the Binary Plant.

ARTICLE 8 - CHANGES

         8.1      CHANGE

         All Changes shall be recorded in a written instrument signed by the
Owner's Representative and Contractor and shall not be implemented by Contractor
without such written instrument.

         8.2      EFFECT OF CHANGE

         No Change shall in any way vitiate or invalidate this EPC Contract.

                                       53


         8.3      REQUEST

         Either party may request a Change under this ARTICLE 8 (Changes) by
written request to the other party, provided however, that neither party may
request or require changes or deletions which, in the aggregate, reduce the
combined EPC and Supply Contract Prices by more than fifteen percent (15%).

         8.4      OWNER'S CHANGES

         (a)      At any time prior to issuing the Take Over Certificate, Owner
may instruct Owner's Changes. Contractor shall promptly implement any such
Owner's Change.

         (b)      If Owner requests a proposal in respect of a contemplated
Owner's Change, or if Contractor is of the view that an instruction given by
Owner comprises an Owner's Change, the following provisions shall apply:

                  (i)      within 14 days after Owner's request, or such longer
                           period as Owner allows, Contractor shall prepare and
                           submit to Owner a detailed proposal relating to the
                           contemplated Owner's Change, including:

                           (1)      a description of how the Change would be
                                    implemented, including (where relevant)
                                    the proposed design and/or work to be
                                    performed;

                           (2)      any additional Cost or Cost saving and
                                    Contractor's proposal for any adjustment to
                                    the EPC Contract Price for such Cost (and if
                                    relevant Supplier's proposal for any
                                    adjustment in the Supply Contact Price under
                                    the Supply Contract) as a result;

                           (3)      any additional time that would be involved
                                    or any time saving and Contractor's proposal
                                    for any adjustment to the Scheduled Take
                                    Over Date as a result;

                                       54


                           (4)      Contractor's proposal for any consequential
                                    adjustment to the programme, construction
                                    method statement and the Milestone Payment
                                    Schedule; and

                           (5)      advice as to the effect of the Owner's
                                    Change on the ability of Contractor to
                                    perform its obligations under this EPC
                                    Contract;

                           (6)      advice as to the effect of the Owner's
                                    Change on the Supply Contract and/or the
                                    Equipment;

                  (ii)     Contractor and Owner shall then take reasonable steps
                           to reach agreement on the Owner's Change. Upon
                           agreement being reached Owner may then issue an
                           instruction to Contractor to implement the Owner's
                           Change. Any such agreement shall be conditional upon
                           Owner being able to reach an agreement with the
                           Supplier for any related change under the Supply
                           Agreement and upon terms acceptable to Owner (acting
                           reasonably);

                  (iii)    no agreement between Owner and Contractor as to the
                           terms upon which an Owner's Change may be implemented
                           shall have any contractual or other legal effect
                           unless it is in writing and a written instruction to
                           implement the Owner's Change has been issued pursuant
                           to this clause;

                  (iv)     any such written agreement shall be binding upon
                           Contractor and Owner according to its terms and
                           Contractor will have no further or other entitlement
                           under this EPC Contract in respect of such Owner's
                           Change;

                  (v)      if the parties fail to reach agreement within 7 days
                           Owner may either:

                           (1)      instruct Contractor under paragraph (a) to
                                    implement the Owner's Change in which case
                                    the parties shall resolve any



                                       55


                                    Dispute regarding the extension of time,
                                    compensation or other issues regarding such
                                    Change in accordance with ARTICLE 16
                                    (Dispute Resolution); or

                           (2)      choose not to proceed with the Owner's
                                    Change, in which event Contractor shall have
                                    no claim of any kind whatsoever arising out
                                    of or in connection with the request for the
                                    proposal. If Owner elects to not proceed
                                    with the Owner's Change, Owner reserves the
                                    right, subject to the terms of this EPC
                                    Contract, to proceed with the work behind
                                    the proposed Change directly or through a
                                    third party.

         8.5      ADJUSTMENTS

         Should any Owner's Change or the occurrence of an event described in
SUBSECTION 5.1.1 (other than where the occurrence of such event is due to an
event of Force Majeure and Owner elects to address such failure pursuant to the
terms of ARTICLE 22 (Force Majeure)) cause a material increase or decrease in
the Cost of or time required for Contractor's performance of this EPC Contract
or otherwise affect any provision of this EPC Contract, then after Contractor
has given to Owner the required information under SECTION 8.4 of the likely
effect of the Change and corresponding proposed adjustments, and Owner elects to
continue with the proposed Change then the Scheduled Take Over Date and other
dates in this EPC Contract shall be adjusted as provided in ARTICLE 5 (Extension
of Time) and an adjustment that is reasonable in the circumstances will be made
to the EPC Contract Price for the Costs of such Change plus a ten percent
allowance thereon for overhead and profit (with regard to SUBSECTION 5.1.1
events, Contractor's rights under this SECTION 8.5 with regard to recovery of
Costs shall be subject to the conditions set forth in SUBSECTION 5.1.1(I),
(III), (IV) and (V) which provisions shall be read as if references to "delay"
refer to "Costs"), and to performance warranties (where performance of the Works
is attested and subject to SECTION 8.7 (Effect of Changes on Warranties and
Safety) and any other provision of this EPC Contract which is thereby affected.
Any increase in the EPC Contract Price due to such Change



                                       56


shall be payable subject to a progress payment schedule to be submitted by
Contractor as part of the proposed written Change order. Any Dispute relating to
any such Change shall be determined in terms of ARTICLE 16 (Dispute Resolution),
but Contractor shall continue to implement any Owner's Change notwithstanding
the Dispute.

         8.6      CONTRACTOR CHANGES

                  8.6.1 Notwithstanding the foregoing, or anything expressed or
implied in this EPC Contract, if Contractor requests a Change so as to make the
Binary Plant meet the Performance Guarantees, or to otherwise comply with its
obligations under this EPC Contract and such request does not involve any other
cause or event that would otherwise entitle Contractor to such Change under this
EPC Contract, such Change shall be at Contractor's own cost and expense and
shall be subject to the consent of the Owner's Representative (which consent
shall not be unreasonably withheld). If the Owner's Representative withholds its
consent to such Change, and Contractor remains of the view that it is necessary
for the completion of the Work in accordance with this EPC Contract, then the
matter shall be referred for resolution under ARTICLE 16 (Dispute Resolution).
Provided always in no event shall Owner be obliged to accept a Contractor's
Change that Owner considers to be detrimental to Owner's overall interests in
relation to the Plant.

                  8.6.2 The requirements of SECTION 8.4(B) shall apply to every
request made by Contractor for a Change under this SECTION 8.6, and the
provisions of SECTION 8.4(B) shall be read as if references to "Owner's Change"
are to "Contractor's Change" and SECTION 8.4(B)(V) shall be read so that if the
parties fail to reach agreement within 7 days the Dispute shall be determined in
terms of ARTICLE 16 (Dispute Resolution).

         8.7      EFFECT OF CHANGES ON WARRANTIES AND SAFETY

                  8.7.1 If Contractor reasonably believes that a proposed
Owner's Change will result in Contractor not being able to comply with any
express or implied warranty of the Works, Contractor shall serve Owner notice
within fourteen (14) days of the receipt of such proposal of its belief and the
believed effect together with such supporting technical data and other
information as is reasonably required to confirm to Owner (acting reasonably)
the predicted effect of the proposed change in the Works. If the parties are



                                       57


unable to agree upon the Owner's Change and its predictive effect and Owner
wishes to proceed with the Owner's Change then the matter shall be referred for
immediate resolution by a suitably qualified expert either agreed by the parties
or appointed by the President or nominee of the Institute of Professional
Engineers of New Zealand within 7 days of being requested to do so under this
EPC Contract. The expert shall be required to make the determination within 7
days of appointment. If Owner insists, despite the expert determination to
require the execution of such proposal in circumstances where the expert
determines the change will result in Contractor not being able to comply with
any express or implied warranty of the Works, Contractor shall comply with
Owner's requirement to execute the proposal, but Contractor shall not be
responsible for the resulting non compliance with affected warranties or
performance guarantees, but only to the extent related to or derived from
Owner's proposal.

                  8.7.2 If a proposed Owner's Change will cause or result in an
unlawful activity or may negatively affect safety of the Binary Plant or persons
in its vicinity, Contractor shall serve Owner notice within fourteen (14) days
of such proposal of its belief and the believed effect, and Contractor shall not
be required by Owner to unlawfully execute such proposal.

         8.8      OTHER PROVISIONS UNAFFECTED

         Except to the extent a Change specifically amends one or more
provisions hereof, all provisions hereof shall apply to all Changes, and no
Change shall be implied as a result of any other Change.

ARTICLE 9 - ACCESS AND REVIEW BY OWNER

         9.1      RESPONSIBILITY FOR DESIGN

         Contractor shall be responsible for the development of all technical
data, design and other documentation required for the performance of the Works
(including the verification of the design specification of the Equipment) and
its suitability or otherwise to achieve Contractor's obligations in SECTION 3.1
(General Responsibilities), particularly relating to fitness for purpose as
described in SECTION 3.1(D).

                                       58


         9.2      INSPECTION OF WORK

         (a) In addition to inspection and testing required elsewhere under this
EPC Contract (including those noted in section 1.7 of SCHEDULE A (Owner's
Technical Requirements)), Owner shall have the right at all reasonable times to
inspect and test, on the Site, any item of equipment, material, engineering,
service or workmanship to be provided as part of the Works and to inspect and
test any such major items that are being specially fabricated for Contractor in
New Zealand. Alternatively, Owner shall have the right to require Contractor to
demonstrate to Owner, by testing or otherwise, that any such work complies with
this EPC Contract or the Supply Contract as the case may be. Contractor shall,
at the request of Owner, arrange for any such inspection, testing or
demonstration at the relevant location. Owner shall coordinate such requested
inspections and tests with Contractor to avoid unnecessary duplication of
inspections and testing and interference with the performance of the Works.
Where any such matter inspected, tested or the subject of a demonstration under
this clause:

                  (i)      does not conform with this EPC Contract or the Supply
                           Contract, Contractor shall be responsible for all
                           costs in respect of such inspection, testing or
                           demonstration and the Contractor shall not be
                           relieved of its obligations to carry out the Works in
                           accordance with the requirements of this EPC
                           Contract;

                  (ii)     conforms with this EPC Contract or the Supply
                           Contract, such inspection, testing or demonstration
                           shall be treated as an Owner's Change pursuant to
                           ARTICLE 8 (Changes).

         (b) Contractor shall be responsible for all costs in respect of any
inspection, testing or demonstration required by any authority, other statutory
or regulatory body or other authorised third party in relation to the Works
and/or the Site.

         (c) Contractor shall give notice to Owner whenever any work is ready
for inspection or testing and before it is materially covered up, put out of
sight, or packaged for storage or transport. If Contractor fails to give notice
then notwithstanding



                                       59


SECTION 9.2(A) (Inspection of Work) Contractor shall, if and when required by
Owner, uncover the work and thereafter reinstate and make good, all at
Contractor's cost.

         9.3      ACCESS TO THE SITE

         Owner shall have the right to access the Site at all times, shall have
the right, at Owner's expense, to be present during all on-site and off-site
test procedures and shall have the right to receive, upon request, a single hard
copy and electronic copy of inspection and test procedures, quality control
reports, and test reports and data. Contractor shall notify Owner at least ten
(10) days prior to the testing of major equipment items and systems at the Site.
While at the Site, Owner and its representatives shall comply with all of
Contractor's safety rules and other job site rules and regulations.

         9.4      DESIGN AND OTHER INFORMATION REVIEW

                  9.4.1 Contractor shall submit to Owner for review 4 hard
copies or 1 electronic copy of the documents listed in Exhibit A01 of SCHEDULE A
(Owner's Technical Requirements) and any other information reasonably requested
by the Owner's Representative for the purposes of enabling commissioning and
Take Over of the Permanent Works.

                  9.4.2 Contractor shall submit to Owner's Representative one
(4) hard or one (1) electronic copy of the Design and Other Information in
sufficient time to enable Owner's Representative to review such Design and Other
Information in accordance with this SECTION 9.4. In the event that a
re-submission of Design and Other Information is required as provided in this
SECTION 9.4, such re-submission shall be made as soon as reasonably practicable
after Contractor's receipt of the relevant statement of objections.

                  9.4.3 Following receipt of a submission of Design and Other
Information in accordance with SUBSECTION 9.4.2, the Owner's Representative
shall within ten (10) days from receipt return to the Contractor either:

         (a)      a notice stating that he/she has no objections to the Design
                  and Other Information as submitted (for the purposes of this
                  ARTICLE 9, a "notice of no objection"); or

                                       60


         (b)      a statement of objections which shall identify with due
                  particularity the aspects of the Design and Other Information
                  which do not materially comply with the provisions of this EPC
                  Contract and/or accord in any material respect with any Design
                  and Other Information previously submitted by Contractor.

If the Owner's Representative fails to respond within the ten (10) day period,
then he/she will be deemed to have issued a notice of no objection.

                  9.4.4 If the Owner's Representative returns any Design and
Other Information under SUBSECTION 9.4.3(A) or is deemed to have issued a notice
of no objection under SUBSECTION 9.4.3, Contractor may, subject to SUBSECTION
9.4.5, proceed with the Works in accordance with this EPC Contract.

                  9.4.5 If the Owner's Representative considers that revisions
to a submission of Design and Other Information are appropriate, but that such
revisions are of minor design significance, the Owner's Representative may issue
a notice of no objection subject to an appended schedule of comments identifying
the relevant revisions. Subject to the restrictions set forth in SUBSECTION
9.4.6, Contractor shall cause such Design and Other Information to be revised in
accordance with such comments, but shall not be obliged to re-submit such Design
and Other Information solely on account of such revisions.

                  9.4.6 If the Owner's Representative returns any statement
under SUBSECTION 9.4.3(B), Contractor shall cause the Design and Other
Information to be revised so as to take account of the properly stated
objections and as soon as reasonably practicable shall re-submit such Design and
Other Information to Owner's Representative, provided, however, that Contractor
shall not be required to make any modifications or changes which are not in
accordance with this EPC Contract.

                  9.4.7 Submission of a document under SUBSECTION 9.4.1, and the
issue of notice of objection or the issue of a notice of no objection by Owner:

                  (a)      does not in any way place responsibility for the
                           document or the matters to which the document relates
                           upon Owner or restrict any


                                       61


                           remedy Owner would have otherwise have had with
                           respect to the relevant Works, or any other related
                           submission of a document by Contractor; and

                  (b)      shall not relieve Contractor from any of its
                           obligations under this EPC Contract or any liability
                           arising from the document.

         In particular, without limitation, Owner shall not be obliged to review
         a document submitted under SUBSECTION 9.4.1 and a notice of objection
         does not imply that Owner has undertaken such a review.


                  9.4.8 Neither a proper objection raised under SUBSECTION
9.4.3(B) nor a comment made under SUBSECTION 9.4.5 shall constitute a Change.

                  9.4.9 Except in the case of an Owner's Change or agreed
Contractor's Change, approved Design and Other Information shall not be departed
from.

                  9.4.10 Owner and/or Owner's Representative shall have the
right to inspect all of the Design and Other Information at Contractor's
premises, for any part of the Works, includes as contemplated in section 1.5.1
of SCHEDULE A (Owner's Technical Requirements). Owner shall coordinate such
requested inspections with Contractor to avoid unnecessary duplication of
inspections and interference with the performance of the Works.

         9.5      DRAWINGS NOT TO BE PROVIDED

         Notwithstanding any other provisions of this EPC Contract, Contractor
shall not be required to provide shop drawings nor any of Contractor's or
Supplier's confidential manufacturing drawings, designs or know-how nor the
confidential details of manufacturing practices, processes or operations.

         9.6      USE OF DRAWINGS

         Documents, drawings and information supplied by Contractor may be used
by Owner, its representatives, assignees and transferees, only for the purposes
of completing, operating, maintaining, adjusting and repairing the Binary Plant.
No license is granted to



                                       62


copy or use documents, drawings or information so supplied in order to make or
have made spare parts. Documents, drawings or information so supplied by
Contractor shall be subject to the confidentiality clause contained herein in
ARTICLE 23 (Confidentiality) and shall not be used, copied or communicated by
Owner to a third party otherwise than as strictly necessary and permitted under
this EPC Contract.

ARTICLE 10 - TESTING

         10.1     TEST PROCEDURES

         Once Contractor has achieved commissioning of the Plant as provided in
SECTION 7.1 (Commissioning), Contractor shall conduct the Performance Tests
described in SCHEDULE D (Performance Tests) hereto as described therein, and
test results shall be adjusted in accordance with the Correction Curves as
applied in accordance with SCHEDULE D (Performance Tests). Contractor shall
provide everything necessary to conduct the Performance Tests apart from the
obligations of Owner under this EPC Contract (e.g., supplying the Geothermal
Fluid).

         10.2     NOTICE OF TESTING

         Contractor shall give Owner's Representative at least three (3) days'
notice prior to the date(s) on which Contractor will be ready to perform the
initial Performance Tests under SCHEDULE D (Performance Tests); provided that
for any repeated test the notice period shall be at least twenty-four (24) hours
before the time established by Contractor for such test. Owner's Representative
shall be entitled to have, at its own cost, a suitably qualified independent
party present during all such tests. If Owner's Representative and/or such
independent party fails to attend at the time and place appointed for the tests,
Contractor shall be entitled to proceed with the tests in the Owner's
Representative's and/or such party's absence. The tests shall then be deemed to
have been made in the presence of the Owner's Representative and such party and
the results of the tests shall except for manifest error be accepted as
accurate. Reporting the results of the tests shall be in accordance with the
requirements of SCHEDULE D (Performance Tests).

                                       63


         If any aspect of the Works fails to pass any test, the Owner's
Representative may require such test to be repeated on the same terms and
conditions and such testing shall be executed by Contractor.

         10.3     CONDUCT AND REPETITION OF TESTS

         Contractor may at any time prior to Take Over repeat at its cost, one
or more times, any of the tests described in SCHEDULE D (Performance Tests)
where Contractor, in its sole discretion, believes that the results of the prior
tests are unsatisfactory. Further, Contractor may undertake remedial actions at
its cost in connection with such repeated tests, provided that such remedial
action does not depart from previously approved Design and Other Information
without the Owner's Representative's prior consent, which shall not be
unreasonably withheld and the response shall be given promptly but not later
than forty-eight (48) hours after Contractor's request.

         10.4     POST PERFORMANCE TESTS ALTERATIONS

         (a) If Contractor alters the setting, configuration or the like of the
Binary Plant during or after the successful completion of a Performance Test in
a manner that would materially affect the integrity of such Performance Test,
save where such alteration is part of the normal operating practice of the
Binary Plant or is approved/waived by Owner in its reasonable discretion, then
the results of such affected successful Performance Test shall, at the option of
Owner, be invalidated.

         (b) Contractor shall notify Owner of any defects in the Binary Plant
discovered during the conduct of any Performance Test.

         10.5     FAILURE TO PASS THE PERFORMANCE TESTS

         (a)      If:

                  (i)      the Corrected Net Power Output in respect of the
                           final Performance Test for net power output set forth
                           in section 1.5.9 of SCHEDULE D (Performance Tests) is
                           less than 90% of the Guaranteed Net Power Output; or

                                       64


                  (ii)     the Corrected Pressure Drop in respect of the final
                           Performance Test for pressure drop set forth in
                           SCHEDULE D (Performance Tests) is greater than the
                           2.7 barg; or

                  (iii)    the Binary Plant fails to pass the Reliability Run
                           (following any rescheduled run/s of the Reliability
                           Run permitted by SCHEDULE D (Performance Tests) or
                           this EPC Contract),

                  Owner shall be entitled to:

                  (1)      order Contractor to carry out corrective work and a
                           repetition of the relevant Performance Test(s);

                  (2)      reject the Binary Plant, in which event Owner shall,
                           without prejudice to any other rights or remedies
                           under this EPC Contract or otherwise have the same
                           remedies as are provided in SECTION 21.1 (Termination
                           for Cause), SUBSECTION 21.1.3 (Consequences of
                           Termination), and SUBSECTION 21.1.4 (Payment After
                           Termination); or

                  (3)      accept the Binary Plant at the reduced performance
                           level, subject to reduction of the EPC Contract Price
                           in terms of paragraph (b) below.

         (b) In the event Owner accepts the Binary Plant in terms of SECTION
10.5(A)(3) then the EPC Contract Price shall be reduced by the amount
appropriate to cover the reduced value of the Binary Plant to Owner (and SECTION
8.3 (Request) shall not apply) having regard to:

                  (i)      an acceptable return to Owner on the revised EPC
                           Contract Price, having regard to the electricity that
                           can be generated from the Binary Plant and the cost
                           of its operation; and

                  (ii)     any other matter which would be reasonably relevant
                           to Owner's consideration of the price it would be
                           prepared to pay for the



                                       65


                           Binary Plant given its performance, economic life and
                           its whole of life cost,

                           provided always that if Owner accepts the Binary
                           Plant in terms of SECTION 10.5(A)(3) without having
                           agreed upon a revised EPC Contract Price with
                           Contractor, the EPC Contract Price shall be
                           determined in accordance with ARTICLE 16 (Dispute
                           Resolution). Upon the determination of the reduction
                           in the EPC Contract Price in accordance with ARTICLE
                           16 (Dispute Resolution), Owner shall be entitled to a
                           further opportunity to exercise either of the options
                           in SECTION 10.5(A)(1) or 10.5(A)(2) and not take over
                           the Binary Plant for the reduced price so determined.

         (c) In the event Owner has already paid Contractor more than the
reduced EPC Contract Price, Owner may recover the amount of the overpayment as a
debt due from Contractor. The acceptance of the Binary Plant by Owner, and the
reduction of the EPC Contract Price shall not otherwise relieve Contractor of
its obligations under this EPC Contract, save in relation to those consequences
which necessarily arise as a result of the failure which gave rise to the
reduction in the EPC Contract Price; provided, however, that if Owner receives
any amount from Supplier for a similar claim under the Supply Contract, the
liability of Contractor under this clause shall be reduced accordingly .

         (d) If the final applicable Performance Tests (which to avoid doubt
must be carried out prior to the Reliability Run that is the basis for Take
Over) establish that:

                  (i)      the Corrected Net Power Output is less than 100% (but
                           not less than 90%) of the Guaranteed Net Power
                           Output; or

                  (ii)     the Corrected Pressure Drop is more than the
                           Guaranteed Pressure Drop (but not more than the 2.7
                           barg),

         Contractor shall pay liquidated damages in accordance with SECTION 12.2
         (Liquidated Damages for Performance Deficiency).

                                       66


ARTICLE 11 - WARRANTIES

         11.1     GENERAL WARRANTY

         Contractor warrants that:

                  (a)      the Works and the Equipment shall conform in all
                           material respects to Laws, Owner's Consents, and the
                           other applicable descriptions, specifications and
                           criteria set forth in this EPC Contract and the
                           Supply Contract;

                  (b)      the Works shall be performed in a workmanlike and
                           skilful manner;

                  (c)      the Works and the Equipment shall be of good quality
                           and will, on Take Over, be free from defects in
                           workmanship, material, design and title and, as
                           specified in SECTION 3.1(D) (General
                           Responsibilities), fit for the purposes for which the
                           Works are intended, each in accordance with this EPC
                           Contract.

                  (d)      All materials and other items when incorporated in
                           the Works and the Equipment shall be new and of a
                           suitable grade of its respective kind for its
                           intended use;

                  (e)      it is a corporation duly organised, validly existing
                           and in good standing under the laws of its home
                           country, and has full power to engage in the business
                           it presently conducts and contemplates conducting,
                           and is and will be duly licensed or qualified and in
                           good standing under the laws of each jurisdiction in
                           which it transacts business;

                  (f)      there are no actions, suits, proceedings or
                           investigations pending or, to Contractor's knowledge,
                           threatened against it, which individually or in the
                           aggregate could result in any materially adverse
                           effect on



                                       67


                           Contractor or in any impairment of its ability to
                           perform its obligations under this EPC Contract;

                  (g)      it has no knowledge of any violation or default with
                           respect to any order, writ, injunction or any decree
                           of any court or any governmental department
                           commission, board, agency or instrumentality which
                           may result in any such materially adverse effect or
                           such impairment;

                  (h)      it owns or has the right to use all Intellectual
                           Property Rights necessary to perform this EPC
                           Contract and to carry on its business as presently
                           conducted and presently planned to be conducted
                           without conflict with the rights of others;

                  (i)      it has knowledge of all of the legal requirements,
                           business practices and other matters specific to New
                           Zealand that must be followed or complied with in
                           performing this EPC Contract and this EPC Contract
                           will be performed in conformity with such
                           requirements and practices.

                  (j)      it will employ, or contract with, suitably expert and
                           experienced employees and Subcontractors to strictly
                           discharge Contractor's obligations under this EPC
                           Contract;

                  (k)      it has audited the Owner's Technical Requirements and
                           any design provided by Owner and is unaware of any
                           inaccuracy or defect in the same that should have
                           been apparent to a qualified and competent contractor
                           experienced in work of similar nature and scope as
                           the Works;

                  (l)      it has exercised and will continue to exercise in the
                           design of the Works all the skill and care to be
                           expected of a professionally qualified and competent
                           designer experienced in work of similar nature and
                           scope as the Works;

                                       68


                  (m)      it understands the Owner's Technical Requirements and
                           the Works will, when completed, comply in all
                           respects with the Owner's Technical Requirements;

                  (n)      the Binary Plant has been or will be designed and
                           constructed using proven up-to-date good practice and
                           to standards appropriate to the development which are
                           consistent with the Owner's Technical Requirements
                           and with the intended use of the Binary Plant;

                  (o)      no goods or materials generally known to be
                           deleterious or otherwise not in accordance with good
                           engineering practice have been or will be specified
                           or selected by Contractor or any one acting on its
                           behalf and no goods or materials which, after their
                           specification or selection by or on behalf of
                           Contractor but before being incorporated into the
                           Binary Plant, become generally known to be
                           deleterious or otherwise not in accordance with good
                           engineering practice, will be incorporated into the
                           Works; and

                  (p)      the design of the Permanent Works has taken or will
                           take full account of the effects of the intended
                           construction methods, Temporary Works and
                           Contractor's Equipment.

         11.2     DEFECTS CORRECTION WARRANTY PERIOD

                  11.2.1      DURATION

                  The warranties set forth in SECTION 11.1 (General Warranty)
shall inure for the benefit of Owner and its successors and assigns and, except
as expressly provided below in this SECTION 11.2, the warranties set forth in
SECTION 11.1 (other than the warranties set forth in SECTION 11.1(D)-(I) and (K)
and (N) which are made and in effect as of the Commencement Date) shall be in
effect from Take Over for the duration of:

                  (a)      twenty four (24) months; and


                                       69


                  (b)      thirty six (36) months for any defect in the Binary
                           Plant of the kind described in SECTION 11.1 (General
                           Warranty) that was caused by the gross misconduct of
                           Contractor and which would not have been disclosed by
                           a reasonable examination prior to the expiry of the
                           above described applicable warranty period (for
                           purposes of this paragraph, "gross misconduct" does
                           not comprise each and every lack of care or skill but
                           means an act or omission on the part of Contractor
                           which implies either a failure to pay due regard to
                           the serious consequences which a conscientious and
                           responsible contractor would normally foresee as
                           likely to ensue or a willful disregard of any
                           consequences of such act or omission);

the time periods specified in paragraphs (a) and (b) being the Defects
Correction Period.

The Defects Correction Period set forth in paragraph (a) above with respect to
any item of the Works that is repaired, replaced, modified, or otherwise altered
after Take Over by Contractor shall extend for a period of twenty four (24)
months from the date of completion of such alteration, provided, however, that
in no case shall the warranty extended hereunder exceed the maximum period of
thirty-six (36) months from Take Over.

                  11.2.2      PUNCHLIST AND DEFECTS

                  In order that the Permanent Works, including the Binary Plant,
and the documents to be provided by Contractor under this EPC Contract are in
the condition required by this EPC Contract by the expiry date of the Defects
Correction Period Contractor shall, as soon as practicable after the issue of
the Take Over Certificate and at its own risk and cost:

                  (a)      complete all items on the Punchlist and any other
                           Works that is  outstanding  at Take Over; and

                  (b)      execute all work required to remedy defects or damage
                           or other non-conformance in the Permanent Works,
                           provided that where such defect, damage or
                           non-conformance arises as a result of a



                                       70


                           failure by Owner to comply with the operation and
                           maintenance manuals issued by Contractor under this
                           EPC Contract, in which event Owner shall reimburse
                           Contractor the Cost of such work plus a ten percent
                           allowance for overhead and profit.

                  11.2.3      DEFECTS WARRANTY

                  (a) If within the Defects Correction Period a defect in the
Works occurs and Owner notifies Contractor of the defect, Contractor will
promptly reperform, repair or replace, as Contractor (acting reasonably)
determines is appropriate under the circumstances, the portion of the Works that
has been determined to be defective. This warranty will not cover repairs or
alterations (not being normal maintenance work required to be carried out by
Owner under the operating and/or maintenance manuals provided by Contractor
under this EPC Contract) made by Owner or a third party without Contractor's
written consent. Owner shall cooperate to provide reasonable access thereto and
working and workshop spaces in order to enable the Contractor to perform the
repair. Further, if special rigging, cranes or heavy equipment or any labour
required in connection with operating such equipment is available at the Site
and necessary for the performance of such repairs, Owner shall provide
Contractor with access to such equipment and labour and Contractor shall pay
reasonable compensation therefor.

                  (b) The warranties in this EPC Contract do not extend or apply
to damage, deterioration or failure resulting after Take Over from:

                              (i)  normal wear and tear but excluding any wear
                              and tear  attributable  to a defect in the Works;

                              (ii) abnormal environment over and above that
                              which would ordinarily be expected for the site in
                              which the Binary Plant is operated;

                              (iii) failure of Owner to store, operate and
                              maintain the Works in accordance with the Design
                              Range or the operation and maintenance manuals
                              furnished by Contractor in accordance



                                       71


                              with SCHEDULE A (Owner's Technical Requirements)
                              including, but not limited to, the fuel, lube oil
                              and water specifications; or

                              (iv)  an event of Force Majeure.

                  11.2.4      FAILURE TO REMEDY DEFECTS

                  (a) If Contractor fails to remedy any defect and directly
resulting damage as soon as reasonably practicable, Owner may give written
notice to Contractor requiring Contractor to remedy the defect or damage within
a specified reasonable time.

                  (b) If Contractor fails to remedy the defect and directly
resulting damage by this notified date, the failure shall constitute a
fundamental breach of Contractor's obligations under this EPC Contract and Owner
may:

                           (i)      carry out the work  itself or by others and
                                    the Contractor  shall pay to the Owner the
                                    costs reasonably incurred by the Owner in
                                    remedying the defect or damage, or

                           (ii)     if the defect and directly resulting damage
                                    deprives the Owner of substantially the
                                    whole benefit of the Works or any major part
                                    of the Works, exercise the Owner's rights
                                    under ARTICLE 21 (Termination).

                  (c) In connection with the warranty provisions set forth in
this ARTICLE 11 (Warranties), the parties shall comply with the provisions of
SCHEDULE F (Warranty Procedures).

                  11.2.5      REMOVAL OF DEFECTIVE WORK

                  If the defect or damage cannot be remedied expeditiously on
the Site and Owner gives consent, Contractor may remove from the Site for the
purposes of repair such items of the Works as are defective or damaged. As a
condition of such consent Owner may require Contractor to provide a performance
bond or other appropriate security.

                                       72


                  11.2.6      FURTHER TESTS

                  As part of the work of remedying of any defect or damage after
Take Over, Owner (acting reasonably) may require Contractor to test the replaced
component or, where reasonably appropriate, related system or subsystem to
substantiate that such defect or damage has been properly remedied. The
requirement shall be made by notice within 28 days after the defect or damage is
remedied. The parties shall use reasonable endeavours to agree upon the nature
and extent of the testing reasonably required in the circumstances and in the
event that they are unable to agree either party may request the nature and
extent of the testing reasonably required in the circumstances be fixed by an
expert appointed by the President or nominee of the Institute of Professional
Engineers New Zealand and the determination of that expert shall be final and
binding upon the parties

                  The agreed or expert determined repeat tests shall be carried
out in accordance with the terms applicable to the previous tests at the risk
and cost of Contractor with due allowance for degradation as is appropriate. For
the avoidance of doubt ARTICLE 12 (Liquidated Damages) shall not apply.

                  11.2.7      FINAL ACCEPTANCE CERTIFICATE

                  (a) Owner shall issue the Final Acceptance Certificate within
10 days after the end of the Defects Correction Period (not taking into account
the period specified in SUBSECTION 11.2.1(B) but including any extension of the
period specified in SUBSECTION 11.2.1(A) as provided in SUBSECTION 11.2.1), or
within 10 days of Contractor completing all items on the Punchlist, remedying
any defects or damage and otherwise completing all of the Works required by this
EPC Contract, whichever is the later.

                  (b) On the issuance of the Final Acceptance Certificate Owner
shall release the replacement performance bond provided under SECTION 7.4
(Replacement Performance Bond) and the parent company guaranty provided under
SECTION 13.1(D) (Security Provided by Contractor). Further, upon the end of the
twenty-four month period after Take Over, the replacement performance bond shall
be reduced to the amount mutually agreed upon by the parties that reasonably
reflects the value of the Works that



                                       73


were replaced or corrected by Contractor during the Defects Correction Period
prior to such date. If the parties are unable to agree upon such values, then
the parties shall promptly refer the matter for determination under the Disputes
resolution procedure set forth in ARTICLE 16 (Dispute Resolution).

                  11.2.8      REMEDIES

                  The guarantees and warranties provided in this EPC Contract
are exclusive and are given and accepted in lieu of:

                  (a)  any and all other warranties and/or guarantees,
                       statutory, or implied (including, without limitation,
                       the implied warranties of merchantability and fitness
                       for a particular purpose, and all warranties arising
                       from course of dealing or usage of trade);

                  (b)  any warranties or conditions implied by the Sale of
                       Goods Act 1908 relating to quality and suitability.

The remedies of Owner for any breach of guarantees and warranties shall be
limited to those permitted in this EPC Contract, to the exclusion of any and all
other remedies. No agreement varying or extending the foregoing guarantees,
warranties, remedies or limitations will be binding upon Contractor unless in
writing and signed by a duly authorized representative of Contractor.

                  11.2.9      CLEARANCE OF SITE

                  Within two weeks of receiving the Final Acceptance
Certificate, Contractor shall have removed any remaining Contractor's Equipment,
surplus material, wreckage, rubbish and Temporary Works from the Site.

         11.3     DISCLAIMER AND RELEASE

                  11.3.1   EXCEPT FOR GROSS NEGLIGENCE OR FRAUD ON THE PART OF
CONTRACTOR:

                                       74


                  (A) THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF CONTRACTOR,

                  (B) AND RIGHTS AND REMEDIES OF OWNER,

SET FORTH OR PERMITTED IN THIS EPC CONTRACT WITH RESPECT TO ANY NON-CONFORMANCE
OR DEFECT IN ANY WORKS OR EQUIPMENT ARE EXCLUSIVE.

                  11.3.2 OWNER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER
WARRANTIES, OBLIGATIONS, AND LIABILITIES ON THE PART OF CONTRACTOR, TOGETHER
WITH ALL OTHER RIGHTS, AND REMEDIES OF OWNER AGAINST CONTRACTOR, EXPRESS OR
IMPLIED, ARISING BY LAW OR OTHERWISE, INCLUDING BUT NOT LIMITED TO ANY:

                  (A) WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE;

                  (B) WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE OF TRADE;

                  (C) OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT,
WHETHER OR NOT ARISING FROM THE NEGLIGENCE OF CONTRACTOR, ACTUAL, PASSIVE OR
IMPUTED;

                  (D) OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF
OR DAMAGE TO ANY PRODUCT OR PART OF THE WORKS;

                  (E) LIABILITY OF OWNER TO ANY THIRD PARTY; AND

                  (F) INCIDENTAL OR CONSEQUENTIAL DAMAGES.

                  11.3.3 CONTRACTOR'S WARRANTY UNDER THIS EPC CONTRACT DOES NOT
APPLY TO ANY NON-CONFORMANCE OR DEFECT IN ANY PRODUCT, EQUIPMENT OR PART OF THE
PLANT, TO THE EXTENT SUCH



                                       75


NON-CONFORMANCE OR DEFECT HAS BEEN DIRECTLY OR INDIRECTLY CAUSED BY ANY OTHER
NEGLIGENT ACT OR OMISSION OF OWNER.

ARTICLE 12 - REMEDIES

         12.1     LIQUIDATED DAMAGES FOR DELAY IN TAKE OVER

                  12.1.1 After the Scheduled Take Over Date, Contractor shall
pay to Owner as liquidated damages, and not as a penalty, for each day or part
of a day which shall elapse between the Scheduled Take Over Date and the date of
the Take Over a sum equal to NZ$18,000 (plus GST if any) per day; provided,
however, that if Take Over does not occur by the Scheduled Take Over Date, but
nevertheless the Binary Plant is generating electricity, then the liquidated
damages payable by Contractor under this SUBSECTION 12.1.1 shall be reduced (but
not to less than zero) by the amount of the net revenue (including payments
under any hedge agreement, to the extent such hedge agreement is applicable to
the Binary Plant) received by Owner until the date Take Over occurs.

                  12.1.2 Owner may, without prejudice to any other method of
recovery, deduct the amount of such liquidated damages from any monies due, or
to become due, to Contractor under this EPC Contract. The payment or deduction
of such damages shall not relieve Contractor from its obligation to complete the
Works, or from any other of its duties, obligations or responsibilities under
this EPC Contract.

                  12.1.3 If at any time after the Scheduled Take Over Date,
Contractor is delayed in carrying out the Works as a result of any event
identified in SUBSECTION 5.1.1 (Extension of Time) which would have entitled
Contractor to an extension of time had it occurred prior to the Scheduled Take
Over Date, Contractor's obligation to pay liquidated damages under SUBSECTION
12.1.1 shall be suspended for such period as represents the extension of time to
which Contractor would have been entitled had SUBSECTION 5.1.1 (Extension of
Time) applied.



                                       76


         12.2     LIQUIDATED DAMAGES FOR PERFORMANCE DEFICIENCY

                  If:

                  (a) the Corrected Net Power Output in respect of the Net Power
Output Performance Test described in SCHEDULE D (Performance Tests) upon which
Take Over is based is less than 100% (but not less than 90%) of the Guaranteed
Net Power Output then Contractor shall pay Owner liquidated damages of NZ$4,575
(plus GST if any) per kilowatt for each kilowatt that the Corrected Net Power
Output is below 100% of the Guaranteed Net Power Output; and

                  (b) the Corrected Pressure Drop in respect of the Pressure
Drop Performance Tests described in SCHEDULE D (Performance Tests) upon which
Take Over is based is more than the Guaranteed Pressure Drop (but not more than
the 2.7 barg), then Contractor shall pay Owner liquidated damages of NZ$145,200
(plus GST if any) for each 0.1 barg that the Corrected Pressure Drop exceeds the
Guaranteed Pressure Drop.

         12.3     MAXIMUM LIQUIDATED DAMAGES

         In no event shall the aggregate amount of liquidated damages payable by
Contractor pursuant to SECTION 12.1 (Liquidated Damages for Delay in Take Over)
and SECTION 12.2 (Liquidated Damages for Performance Deficiency) exceed
twenty-five percent of the sum of the EPC Contract Price and the Supply Contract
Price (as that term is defined in the Supply Contract) provided however that if
Owner shall receive any liquidated damages from Supplier under the Supply
Contract, the aggregate amount of liquidated damages payable by Contractor as
specified above shall be reduced accordingly.

         12.4     EVENT CHARGES

         If at any time before Take Over, Owner incurs an instantaneous reserve
event charge (or like charge) under its Grid operator services arrangement with
Transpower (or equivalent arrangement from time to time) due to any act or
omission of Contractor or defect in the Works or the Equipment, Contractor shall
pay liquidated damages calculated in accordance with the calculation for such
instantaneous reserve event charge (net of any



                                       77


rebates) in Transpower's posted terms for Grid operator services (or equivalent
document) from time to time.

         12.5     PAYMENT

         Owner shall be entitled to demand payment of any liquidated damages
which accrue under this ARTICLE 12 (Remedies) at any time after they have
accrued. Contractor shall pay the amount so demanded (plus GST if any) within 21
days after receipt of such notice.

         12.6     GENUINE ESTIMATE

         Contractor acknowledges that the liquidated damages under this ARTICLE
12 reflect genuine estimates of the losses Owner is likely to suffer in the
event of a default by Contractor of a type referred to in this ARTICLE 12.

         12.7     EXCLUSIVE REMEDY

         (a) Subject to paragraph (b) and to Owner's right to reject under
SECTION 10.5 (Failure to Pass the Performance Tests) and to recover losses
during retesting under SECTION 12.8 (Make Right Obligation]

                  (i)      liquidated damages net of any net generation revenue
                           received from Owner under Section 12.1 (Liquidated
                           Damages for Delay in Take Over) shall be the only
                           damages payable by Contractor for failing to achieve
                           Take Over in terms of SECTION 7.2 (Take Over) by the
                           Scheduled Take Over Date, but shall not otherwise
                           limit the Owner's rights and remedies under this EPC
                           Contract for claims other than for delays, and

                  (ii)     liquidated damages under SECTION 12.2 (Liquidated
                           Damages for Performance Deficiency) shall be Owner's
                           sole and exclusive remedy for failure by Contractor
                           to achieve the Guaranteed Net Power Output and the
                           Guaranteed Pressure Drop or other Binary Plant output
                           or operating performance.

                                       78


         (b) In the event the EPC Contract is terminated by Owner pursuant to
ARTICLE 21 (Termination), liquidated damages shall apply up to the date of such
termination and general damages shall apply from the date of such termination.

         12.8     MAKE RIGHT OBLIGATION

         Notwithstanding that Contractor may have paid liquidated damages for
the performance deficiency pursuant to SECTION 12.2 (Liquidated Damages for
Performance Deficiency):

                  (a) Contractor may carry out such remedial Work and repeat the
Net Power Output and/or Pressure Drop Performance Test, in accordance with
ARTICLE 10 (Testing), within 120 days following Take Over;

                  (b) if the results of the last such repeated Performance Test
show that such performance deficiency has been reduced or rectified or that the
liquidated damages payable thereon have been reduced, Owner shall refund ninety
percent of the difference between the amount of liquidated damages previously
paid by Contractor for such performance deficiency and the amount of liquidated
damages, if any, payable by Contractor under SECTION 12.2 (Liquidated Damages
for Performance Deficiency) based upon the results of such last repeated
Performance Test; and

                  (c) All such remedial Work and repeat tests shall be
coordinated with Owner and conducted by Contractor in such a way and at such
times as to minimize so far as reasonably possible interference or disruption to
the normal operation of the Binary Plant. To the extent that such remedial work
requires power generation from the Binary Plant to be reduced to effect the
remedial work, Contractor shall reimburse Owner for this lost generation on a
pro rata basis of NZ$18,000 per day /14.38 MW (plus GST if any) for each MW
lost.

         12.9     GENERAL LIMITATION OF LIABILITY

                  (a) Without prejudice to the Contractor's liquidated damages
obligations in this Contract or its obligations in SECTION 12.9(C), Contractor
shall in no event be liable to Owner, by way of indemnity or by reason of any
breach of this EPC


                                       79


Contract or in tort, including negligence and strict liability, or otherwise,
for loss of profit or revenues or similar, claims of the Owner's customers or
other damages or losses not being direct damages for losses.

                  (b) The total liability of Contractor to Owner on all claims
of any kind (other than under SECTION 17.3) shall in no case exceed the
aggregate of the EPC Contract Price and the Supply Contract Price (as that term
is defined in the Supply Contract) provided however that if Owner shall receive
any amount from Supplier directly for any claims under the Supply Contract, the
maximum liability of Contractor shall be reduced accordingly.

                  (c) Nothing in this SECTION 12.9 shall limit the liability of
Contractor for general damages in any case of fraud or gross misconduct.

ARTICLE 13 - SECURITIES

         13.1     SECURITY PROVIDED ON BEHALF OF CONTRACTOR

                  (a) Contractor's obligations under this EPC Contract shall as
an essential term of this EPC Contract be secured by a performance bond in the
form of a standby letter of credit provided or confirmed by a reputable
investment grade surety company or financial institution as assessed by Moody's
Investors Service from time to time (reasonably acceptable in all respects to
Owner) substantially in the form attached hereto as SCHEDULE H-1 (any material
changes in such form shall be subject to the approval of Owner (acting
reasonably)) in the maximum amount equal to ten percent of the New Zealand
dollar portion of the EPC Contract Price (initially, Seven Hundred Fifty-Two
Thousand Two Hundred Forty-Five New Zealand Dollars (NZ$752,245)) (the "NZ$
Denominated L/C). The NZ$ Denominated L/C shall be provided prior to receipt of
the first NZ$ payment under the Milestone Payment Schedule, shall become
effective upon Contractor's receipt of the first NZ$ payment under the Milestone
Payment Schedule and shall be increased from time to time by the New Zealand
dollar amounts received by Contractor from Owner under the Milestone Payment
Schedule up to the foregoing maximum amount.



                                       80


                  (b) Contractor's obligations under this EPC Contract and
Supplier's obligations to deliver Equipment under the Supply Contract shall as
an essential term of this EPC Contract be secured by a performance bond in the
form of a standby letter of credit provided or confirmed by a reputable
investment grade surety company or financial institution as assessed by Moody's
Investors Services from time to time (reasonably acceptable in all respects to
Owner) substantially in the form attached hereto as SCHEDULE H-2 (the "US$
Denominated L/C") (any material changes in such form shall be subject to the
approval of Owner (acting reasonably)) . The US$ Denominated L/C shall be
provided prior to receipt of the first US$ payment under either the Milestone
Payment Schedule of this EPC Contract or the Supply Contract, shall become
effective upon the earlier of Contractor's receipt of the first US$ payment
under this EPC Contract or Supplier's receipt of the first payment under the
Milestone Payment Schedule of the Supply Contract and shall be increased from
time to time by (i) the United States dollar amounts received by Contractor from
Owner under this EPC Contract up to a maximum of Eighty-Three Thousand United
States Dollars (US$83,000) plus (ii) the amounts received by Supplier from Owner
under the Supply Contract Milestone Payment Schedule for payment Milestones nos.
1-18. The US$ Denominated L/C shall be reduced from time to time upon Supplier's
delivery to the Site of Equipment or parts thereof under the Supply Contract as
evidenced by a delivery acknowledgment document (either a packing slip or other
delivery document from the carrier delivering such item to the Site) that is
countersigned by Owner's Representative or his designee (or if such individual
fails to countersign within 24 hours of Contractor's request, countersigned by
SGS New Zealand Limited or such other independent third party mutually agreed
upon by Owner and Supplier, with Contractor paying the expenses of such third
party) after such third party's confirmation of delivery by the applicable
Supply Contract Milestone Payment Schedule amounts for such delivered items;
provided, however, that the US$ Denominated L/C shall not be reduced below the
sum equal to ten percent of the sum of the U.S. Dollar portion of the EPC
Contract Price and the Supply Contract Price (initially, One Million Seven
Hundred Twenty-Nine Thousand Four Hundred Ninety United States Dollars
(US$1,729,490)). Contractor shall provide contemporaneous written notice to
Owner of each request that Contractor submits to the financial institution
issuing the US$ Denominated L/C for a reduction in the amount of the same as
provided above.



                                       81


                  (c) Both the NZ$ Denominated L/C and the US$ Denominated L/C
shall remain valid until the earlier of (i) issue of the Take Over Certificate
or (ii) the termination of this EPC Contract; provided, however, that if at such
termination Owner has a Dispute with Contractor that is in the process of being
resolved in accordance with ARTICLE 16 (Dispute Resolution), then the release of
the NZ$ Denominated L/C and the US$ Denominated L/C shall be subject to
Contractor posting a replacement bond, letter of credit or other security
acceptable to Owner (acting reasonably) in an amount mutually agreed upon by the
parties that reasonably reflects the value of claim(s) of Owner that are the
subject of such Dispute. If the parties are unable to agree upon such amount,
then the parties shall promptly refer the matter for determination under the
Disputes resolution procedure set forth in ARTICLE 16 (Dispute Resolution) with
such replacement security being released upon resolution or satisfaction of such
Dispute. If the NZ$ Denominated L/C or the US$ Denominated L/C by its terms will
expire before the issue of the Take Over Certificate, then Contractor shall
provide to Owner evidence of the renewal or replacement of said performance bond
at least ten (10) business days before such expiration date.

                  (d) Contractor shall as an essential term of this EPC
Contract, procure that ORMAT Industries Ltd. shall provide a parent company
guaranty in the form in SCHEDULE G (ORMAT Industries Ltd. Guaranty) hereto upon
execution of this EPC Contract, to guarantee Contractor's obligations to perform
hereunder.

         13.2     EPC CONTRACT AND SUPPLY CONTRACT

         The Supply Contract shall be collateral to this EPC Contract to the
intent that:

                  (a) any default by Supplier under the Supply Contract shall be
a default by Contractor under this EPC Contract and the Owner may exercise its
rights on such default in respect of either or both of the Supply Contract and
this EPC Contract as Owner (acting reasonably) deems appropriate,

                  (b) any default by Owner under the Supply Contract shall be a
default by Owner under this EPC Contract and on such default Contractor may
exercise its rights under this EPC Contract, as Contractor (acting reasonably)
deems appropriate;



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                  (c) any termination of the Supply Contract, whether for cause,
convenience, extended suspension or force majeure, shall unless otherwise agreed
upon by the parties be a similar termination of this EPC Contract; and

                  (d) Contractor shall cooperate and coordinate with Supplier so
that pursuant to the terms of this EPC Contract and the Supply Contract Owner is
provided at Take Over 14.38 MW (net, at Guarantee Conditions) binary plant
capable to operate safely and lawfully on the Site using Owner-supplied
Geothermal Fluid meeting the Design Range and capable of dispatching electricity
to the Grid interface with the Wairakei Station all in accordance with the
requirements set out in SCHEDULE A (Owner's Technical Requirements).

ARTICLE 14 - CARE OF THE WORK; TITLE

         14.1     RISK OF LOSS

         Contractor shall bear the risk of physical loss or destruction of or
damage to the Equipment from the point in time such items are delivered FOB
(Incoterms 2000) until Take Over Certificate is issued. Contractor shall bear
the risk of physical loss or destruction of or damage to the Works (excluding
Equipment) and shall retain care of the Works until the issue of the Take Over
Certificate.

         14.2     CONTRACTOR'S CARE OF THE BINARY PLANT

         (a) Contractor shall take full responsibility for the care of the
Binary Plant until the Take Over Certificate is issued when, subject to
paragraph (b), responsibility for the care of the Binary Plant shall pass to
Owner.

         (b) Notwithstanding that responsibility may have passed to Owner under
paragraph (a), Contractor shall remain responsible for the repair of any aspect
of the Binary Plant which is defective or outstanding on the date stated in the
Take Over Certificate, until this defective or outstanding work has been
completed in accordance with this EPC Contract.



                                       83


         (c) If any loss or damage happens to the Binary Plant prior to the
issue of the Take Over Certificate, or if loss or damage happens to any aspect
of the Binary Plant for which Contractor remains responsible for the repair of
under paragraph (b), Contractor shall rectify the loss or damage at Contractor's
risk and cost, so that the Binary Plant is provided to Owner in accordance with
this EPC Contract.

         (d) Contractor shall be liable for any loss or damage to the Works
caused by any act or omission of Contractor after the Take Over Certificate has
been issued until the later of Final Acceptance or the completion of
Contractor's performance of Works at the Site, except to the extent that the
same was caused by Owner. Contractor shall also be liable for any loss or damage
to the Works which occurs after the Take Over Certificate has been issued and
which arose from a previous event for which Contractor was liable, except to the
extent that such loss or damage was caused by Owner.

         14.3     DELIVERY

         Contractor shall be responsible to assure safe delivery of all
materials, equipment, tools, supplies and other items to the Site related to the
Works including all of the Equipment.

         14.4     TITLE

         Contractor warrants that it has good title to the Works and shall
procure that title to the Works shall pass to Owner free of all liens, claims,
charges, security interests (including security interests under the Personal
Property Securities Act 1999) and encumbrances upon the earlier of delivery to
the Site or payment to Contractor or Supplier as the case may be under this EPC
Contract or the Supply Contract for the applicable Works or Equipment.

         14.5     TITLE TO ELECTRICITY

         Owner has title to and is entitled to the commercial benefit of all
electricity produced from the Binary Plant, including electricity produced
during commissioning and testing.



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ARTICLE 15 - INSURANCE

         15.1     CONTRACTOR PROVIDED INSURANCE

         Contractor shall provide the following insurance no later than the
times specified in SECTION 6.4(B) (Preconditions to Milestone payments) with the
indicated limits, with its insurance carriers, naming Owner as an additional
insured and shall maintain such insurance in full force and effect until Take
Over. In the event this insurance or any portion of it becomes commercially
unavailable on commercially reasonable rates and terms Owner and Contractor
shall cooperate in their efforts to obtain such replacement insurance as may be
available and this EPC Contract shall be modified accordingly:

                  (a) Comprehensive General Liability - with combined single
limits of NZ$10,000,000 per occurrence and in the aggregate;

                  (b) Equipment and Contractor's plant, goods and materials loss
in transit to the Site, including ocean marine shipment (replacement value);

                  (c) New Zealand Statutory Liability Insurance - NZ$1,000,000,
and

                  (d) Contract Works Insurance for the full value of the Works
including earthquake. Cover for earthquake, fire, collapse, flood and any other
catastrophic perils shall be in such sub-limits that are commercially available
at reasonable rates in the commercial insurance market.

         15.2     POLICIES

         All policies of insurance maintained pursuant to this ARTICLE 15 shall:

                  (a) require forty-five (45) days' prior notice to the
additional insured parties of cancellation, non-renewal or material change in
coverage;

                  (b) provide that such insurance is primary without right of
contribution from any other insurance which might otherwise be available to the
insured party;

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                  (c) provide that, in the event of any loss payment under a
policy, the insurer shall waive any rights of subrogation against the insured
party and shall waive any setoff or counterclaim or any other deduction whether
by attachment or otherwise; and

                  (d) include a cross-liability endorsement providing that
inasmuch as the policies are written to cover more than one insured, all terms
and conditions, insuring agreements and endorsements, with the exception of
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured.

         15.3     EVIDENCE OF INSURANCE

         Upon request by Owner, Contractor shall furnish Owner with the policy
wording and a Certificate of Insurance, issued by the Insurer, as evidence that
Contractor provided insurance is being maintained..

ARTICLE 16 - DISPUTE RESOLUTION

         16.1     RESOLUTION BY PARTIES

         Owner and Contractor desire that this EPC Contract operate between them
fairly and reasonably. If during the term of this EPC Contract, a Dispute arises
between Owner and Contractor, or one party perceives the other as acting
unfairly or unreasonably, or a question of interpretation arises hereunder, then
either party identifying the Dispute shall serve notice on the other (a "Notice
of Dispute") stating the nature of the Dispute, together with brief particulars
of the facts and circumstances relied on by the party serving the Notice of
Dispute and the Owner's Representative and Contractor's Representative shall
then promptly confer and exert their best efforts in good faith to reach a
reasonable and equitable resolution of the Dispute. If the Owner's
Representative and the Contractor's Representative are unable to resolve the
Dispute (whether because of a disagreement between them or because they did not
communicate or respond) within five (5) business days after the Notice of
Dispute, the matter shall be referred after notice by either party to the other
within two (2) business days of the lapse of the aforementioned five (5)
business days to the parties' responsible corporate officers for resolution.
Neither party shall seek resolution by arbitration of any Dispute arising in
connection with this EPC Contract until at least ten (10) business days after
the above-referenced referral to the



                                       86


parties' responsible corporate officers, who shall be identified by each party
from time to time, to provide them an opportunity during such period to resolve
the Dispute.

         16.2     RESOLUTION BY ARBITRATION

         If the Dispute is not resolved within the above described period for
resolution by the responsible corporate officers, then at the request of either
party Owner and Contractor shall enter into binding arbitration as set forth
herein. Notice of the demand for arbitration shall be delivered to the other
party and the Dispute shall be referred to three arbitrators, one each appointed
the parties and the third appointed by the parties' appointees by agreement
between the parties' appointees or if they are not able to agree within ten (10)
business days of service of notice referring the dispute to arbitration, then by
the President of the New Zealand District Law Society on request of either
party.

         The parties shall proceed with the arbitration expeditiously and shall
conclude all proceedings there under in order that a decision may be rendered
within forty (40) days from service of the demand for arbitration.

         Each party shall bear its own expenses in connection with any
arbitration, including but not limited to counsel fees, and all joint expenses
shall be apportioned in the award of the arbitrators.

         Any arbitration shall be conducted in Wellington, New Zealand in
accordance with the provisions of the Arbitration Act 1996 (as amended or
substituted from time to time).

         16.3     URGENT RELIEF

         Nothing in this ARTICLE 16 shall preclude either party from bringing
court proceedings seeking urgent interlocutory relief.

         16.4     CONDITIONS PRECEDENT

         Each step in the Dispute resolution process in this ARTICLE 16 shall be
a condition precedent to proceeding to the next step. In particular, a party may
not commence arbitration in respect of a Dispute unless that Dispute has first
been negotiated, mediated



                                       87


and discussed by the parties' responsible corporate officer in accordance with
SECTION 16.1 (Resolution by Parties). The parties may, however, agree otherwise
in relation to any particular Dispute.

         16.5     CONTINUED PERFORMANCE

         The parties shall continue to perform their obligations under this EPC
Contract pending the final settlement or determination of any dispute.

ARTICLE 17 - INDEMNIFICATION

         17.1     CONTRACTOR'S INDEMNITY

         Contractor shall defend, indemnify and hold harmless Owner and its
directors, officers, agents, employees, shareholders and affiliates from any and
all third party claims, suits, actions and proceedings and all costs, expenses
and other liabilities (including reasonable attorney fees) related thereto
arising out of any actual or alleged injury or death of persons or damage to
property arising out of (i) the negligence, willful misconduct or default of
Contractor, its Subcontractors or their employees (except only to the extent
that the same have been caused by the negligence or default of Owner or its
employees) or (ii) the violation of any Law, Consents or Standards by
Contractor, its Subcontractors or their employees.

         17.2     OWNER'S INDEMNITY

         Owner shall defend, indemnify and hold harmless Contractor and its
Subcontractors and their respective joint venture partners, directors, officers,
agents, employees, shareholders and affiliates from any and all third party
claims, suits, actions and proceedings and all costs, expenses and other
liabilities (including reasonable attorney fees) related thereto arising out of
(i) any actual or alleged injury or death of persons or damage to property
arising out of the negligence, willful misconduct or default of Owner (except
only to the extent that the same have been caused by the negligence or default
of Contractor, its Subcontractors or their employees); (ii) the violation of any
Law, Consents or Standards by Owner or its employees; or (iii) the use of the
Site or the use or disposal of the Geothermal Fluid as contemplated in this EPC
Contract (except only to the extent



                                       88


that the same has been caused by the failure of Contractor, its Subcontractors
or their employees to comply with the applicable Consents with regard to such
disposal).

         17.3     PATENT INDEMNITY

         Contractor shall indemnify Owner from and against all third party
claims and proceedings for or on account of infringement of any Intellectual
Property Rights in respect of the Works and from and against all claims,
demands, proceedings, damages, costs, charges and expenses whatsoever in respect
of or in relating to such rights, except for any use of the Works other than for
the original purpose for which it is intended or any infringement which is due
to the use of the Works in association or combination with any other plant or
item not supplied by Contractor or Supplier.

         17.4     NOTICE AND SETTLEMENT OF CLAIMS

                  17.4.1 A party seeking the benefit of an indemnity shall give
the other party prompt notice of any claim giving rise to the indemnity. The
indemnifying party may at its own cost conduct negotiations for the settlement
of such claim and any litigation that may arise there from. The party claiming
the benefit of the indemnity shall not make any admission (other than
appropriate admissions in strict liability actions) which might be prejudicial
to the indemnifying party unless the indemnifying party fails to take over the
conduct of the negotiations or litigation within a reasonable time after having
been so requested. The party claiming the benefit of the indemnity shall have
the right to have its own counsel, at its expense, participate in the defense
and negotiation of the claim or action.

                  17.4.2 The party claiming the benefit of the indemnity shall,
at the request of the indemnifying party, provide reasonable assistance for the
purpose of contesting any such claim or action, and shall be paid all reasonable
costs incurred in doing so.

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ARTICLE 18 - ASSIGNMENT

         18.1     ASSIGNMENT BY OWNER

                  (a) Owner may assign any or all of Owners rights, obligations
or interests under this EPC Contract. Owner will nevertheless be responsible to
discharge Owner's obligations under this EPC Contract in the event that the
assignee fails to do so.

                  (b) Where default of the Supply Contract has occurred or a
remedy or obligation been triggered so as to entitle Owner to claim under the
Supply Contract, and Contractor has at Owner's request remedied the default or
provided the remedies or performed the obligation in question under this EPC
Contract such that further remedies or performance of such obligation under the
Supply Contract would comprise an unreasonable duplication, Owner
unconditionally and irrevocably assign all of its rights and obligations to the
additional Supply Contract obligation or remedies in relation to the claim in
question to Contractor. Owner further agrees that all its rights and obligations
with respect therewith shall inure to the benefit of Contractor as if Contractor
were a party to the Supply Contract, and that this assignment shall inure to the
benefit of and shall be binding upon the parties' respective successors and
assigns.

         18.2     NO ASSIGNMENT BY CONTRACTOR

                  (a) Contractor may assign all of its right, title and interest
in and to or arising out of or in connection with this EPC Contract as security
for the benefit of its lender(s) or to a related company (as defined in clause
(b) below) for which ORMAT Industries Ltd. is the ultimate parent provided that
such related company signs a document assuming and agreeing to perform all of
Contractor's obligations under this EPC Contract. No such assignment shall
relieve Contractor of any obligation hereunder.

                  (b) Contractor shall not assign any of Contractor's rights,
interests or obligations under this EPC Contract. For the purposes of this
SECTION 18.2, assignment shall include the transfer of shares in any related
company (within the meaning of section 2(3) of the Companies Act 1993) of the
Contractor that directly or indirectly results in a change of control of the
Contractor such that ORMAT Industries Ltd. is no longer its ultimate parent.



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         18.3     SUCCESSION

         This EPC Contract shall inure to the benefit of and be binding upon the
successor and permitted assigns (as provided for by SECTION 18.1 (Assignment by
Owner) or SECTION 18.2 (Assignment by Contractor)) of the parties hereto. Owner
shall cause any assignees or transferees of its interest or any portion thereof
in this EPC Contract or in the Works, including any lien holder or party holding
a security interest with respect thereto, to be bound by the releases and
limitations of liability set forth herein.

ARTICLE 19 - SUBCONTRACTORS

         19.1     SUBCONTRACTS

         Contractor may enter into subcontracts for the performance of parts of
the Work and shall be solely responsible for the management and satisfactory
performance of all its Subcontractors in their performance of the Work.
Contractor shall not subcontract any major components of Work (other than for
the purchase of proprietary goods and materials or for the provision of labour
on a piecework basis) except to Subcontractors appearing on the Approved Major
Subcontractors List (as described below). Contractor shall be responsible for
the acts, defaults and neglects of any Subcontractor, its agents or employees in
their performance of the Work as if they were the acts, defaults or neglects of
Contractor, its agents or employees. The issuance of any subcontract shall not
relieve Contractor of any of its obligations under this EPC Contract.

         19.2     SUBCONTRACTING

         (a) Contractor shall provide all such information (other than price and
other proprietary information) relating to its Subcontractors as Owner may
reasonably require.

         (b) No subcontract or purchase order shall bind or purport to bind
Owner.

         19.3     CONTRACTOR'S RESPONSIBILITY

         Contractor shall be responsible for performance by all Subcontractors
under their respective subcontracts and for the acts or defaults of its
Subcontractors and its



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Subcontractors' personnel, agents and employees, and any other entity employed
by any of them in connection with the Works, as if they were the acts or
defaults of Contractor.

         19.4     APPROVED MAJOR SUBCONTRACTOR LIST

         The Approved Major Subcontractors List in SCHEDULE B (Contractor's
Technical Proposal) is preliminary, and may be amended in the following manner.
In the case the need arises to add a Subcontractor to the Approved Major
Subcontractors List, in Contractor's opinion, Contractor shall propose such
addition to Owner's Representative in writing identifying the type of Work that
could be subcontracted to such Subcontractor and details of the Subcontractor,
including relevant experience. Within ten (10) days after receipt of
Contractor's proposal, Owner's Representative shall have the right to advise
Contractor of any such potential Subcontractors to which it reasonably objects,
together with the reasons for objection and may propose additional
Subcontractors based on his or her experience concerning such potential
Subcontractor. Contractor shall not add any potential Subcontractor to the list
to which Owner's Representative so reasonably objects and shall give due
consideration to adding to the list any Subcontractors proposed by the Owner's
Representative. If Owner's Representative fails to respond within such ten (10)
day period, Contractor shall have the right to add said potential Subcontractor
to the list.

       19.5       SUBCONTRACT TERMS

         (a) Contractor shall cause each subcontract entered into by Contractor
with a value of NZ$500,000 or more to contain terms that entitle Contractor to
disclose the subcontract (excluding price and other proprietary information) to
Owner, that acknowledge that the subcontract works are being carried out by the
Subcontractor for the benefit of Owner in terms of the Contracts (Privity) Act
1982 and to agree that upon termination of this EPC Contract for due to
Contractor's default:

                  (i)      Owner may upon the default of Contractor and
                           termination of this EPC Contract pursuant to SECTION
                           21.1.2 (Termination for Cause) take an assignment or
                           novation of the benefit of the subcontract (together
                           with a term that the Subcontractor acknowledges that
                           it by signing the subcontract it has agreed to such
                           novation); and

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                  (ii)     upon assignment or novation under paragraph (i):

                           (1)      Owner shall not become responsible for any
                                    outstanding obligations or liabilities of
                                    Contractor to the Subcontractor under the
                                    subcontract relating to the period prior to
                                    the such assignment or novation, including
                                    payments due to the Subcontractor for work
                                    carried out; and

                           (2)      Owner will be responsible to pay the
                                    Subcontractor only for all action taken by
                                    the Subcontractor at the written instruction
                                    of Owner at the prices in the subcontract.

         (b)      Contractor acknowledges that:

                  (i)      it will, if requested by Owner, disclose the
                           existence of any subcontract with a value of
                           NZ$500,000 to Owner;

                  (ii)     it consents to an assignment or novation to Owner
                           under SECTION 19.5(A)(I);

                  (iii)    upon such assignment or novation Owner may exercise
                           all of the rights of Contractor under or in relation
                           to the subcontract as if it were Contractor;

                  (iv)     upon such assignment or novation Contractor shall not
                           be relieved of, and subject to the agreement of such
                           Subcontractor, Owner shall not become liable for, the
                           obligations or liabilities of Contractor relating to
                           the period prior to such assignment or novation. If
                           Subcontractor's agreement as referred to in this
                           SECTION 19.5(B)(IV) is not forthcoming, Contractor
                           agrees and acknowledges that it shall promptly
                           reimburse Owner for any amounts Owner is required to
                           pay to Subcontractor for any obligations or
                           liabilities of Contractor relating to the period
                           prior to such assignment or novation.

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         19.6     PAYMENT OF SUBCONTRACTORS

         (a) Contractor shall pay all sums due to Subcontractors by the due date
for payment and nothing in this EPC Contract shall require Contractor to pay any
sums to a Subcontractor that are being disputed in good faith by Contractor in
accordance with applicable Law.

         (b) Contractor shall, at its option, either provide confirmation from
Subcontractors that such Subcontractors have been paid or other reasonable
evidence of payment of Subcontractors if requested by Owner.

         19.7     ASSIGNMENT OF SUBCONTRACTOR WARRANTIES

         Upon Final Acceptance, Contractor shall assign to Owner all warranties
or guarantees which Contractor has received from Subcontractors in respect of
the Works.

         19.8     COMPLIANCE WITH CONSTRUCTION CONTRACTS ACT 2002 (CCA)

         (a) Contractor shall ensure that compliance with the requirements of
CCA are not breached but if any notice of suspension of any part of the Works is
received by Contractor from any Subcontractor Contractor shall immediately
notify the Owner's Representative including the amount that Contractor allegedly
owes to any Subcontractor who exercises any lawful right to suspend work in
accordance with section 72 of the CCA (the subcontractor's debt).

         (b) Owner shall be entitled but not obliged to pay the subcontractor
debt when due directly to the Subcontractor in order to avert any lawful
suspension of work by that Subcontractor under the CCA. If payments are made by
Owner direct to any Subcontractor under this clause such payment shall be deemed
to be in satisfaction of the Owner's obligation to pay Contractor such amounts
due under this EPC Contract. The value of payments made direct to any
Subcontractor under this clause shall be deducted from future progress payments
made to Contractor.

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         (c) Contractor shall indemnify Owner against any cost, losses,
liabilities or damages suffered by Owner which may arise out of or in
consequence of any lawful suspension of all or any part of the Works by any
Subcontractor under the CCA.

ARTICLE 19A - PERSONNEL

         19A.1    CONTRACTOR'S RESPONSIBILITY

         Contractor shall be responsible for the acts and defaults of its
employees and agents as if they were the acts or defaults of Contractor.

         19A.2    CONTRACTOR'S REPRESENTATIVE

         (a) Contractor shall designate a Contractor's Representative who shall
act as a single point of contact with Owner in all matters (including
administration of the Supply Agreement) on behalf of Contractor. The
Contractor's Representative shall be available or be represented on the Site
during business hours after the commencement of the Works at the Site, and on
call after hours, to receive all instructions from Owner and shall be authorised
by Contractor to act on its behalf in relation to all matters arising under this
EPC Contract. Owner shall not be obliged to issue instructions to any other
person.

         (b) Contractor shall not remove the Contractor's Representative without
first consulting with Owner about such removal unless such persons (or any
replacements as aforesaid) become incapacitated or no longer in the employment
of Contractor. Contractor shall give the Owner notice forthwith on becoming
aware of any such event.

         (c) Any replacement Contractor's Representative shall have appropriate
qualifications, experience and expertise and shall be subject to Owner's
approval (which shall not be unreasonably withheld).

         19A.3    REMOVAL OF PERSONNEL

         (a) Owner shall be entitled, after consultation with Contractor, to
require the removal from the carrying out of the Works of any person employed by
Contractor or any Subcontractor whose performance or conduct, in the reasonable
opinion of Owner, is unsatisfactory.

                                       95


         (b) In the event that any personnel is removed under SECTION 19A.3(A),
Contractor shall at no cost to Owner replace such person with a person with
appropriate qualifications, experience and expertise.

       19A.4      LABOUR ISSUES

         Contractor shall immediately notify Owner of any and all events and
circumstances giving rise to claims, disputes, grievances, bans, disruptions,
work stoppages and other labour issues which affect or have the potential to
affect Contractor's workforce, the workforce of any Subcontractor, or the
workforce of any other contractors, or which constitutes a project wide concern.

ARTICLE 20 - SUSPENSION

         20.1     RIGHT OF OWNER TO SUSPEND THE WORKS

         Owner's Representative may suspend performance of the Works by
Contractor hereunder, in whole or in part, by written notice of such suspension
to Contractor. If Owner elects to suspend Supplier's performance of the Supply
Contract, Owner shall notify Contractor and, unless Contractor otherwise agrees,
Owner shall be deemed to suspend performance of the Works by Contractor
hereunder. During such suspension, Contractor shall protect, store and secure
the Works or such part of the Works, including any affected Equipment, against
any deterioration, loss or damage. Upon receipt of permission, instruction or
notice to resume the Works in accordance with this EPC Contract, the parties
shall jointly examine the Equipment and the Works affected by the suspension and
determine an orderly, reasonable and safe plan for implementing such suspension.
Such suspension shall continue for the period specified in the suspension
notice.

         20.2     CONSEQUENCES OF SUSPENSION

         (a) If Contractor suffers delay as a result of complying with Owner's
instructions under SECTION 20.1 (Right of Owner to Suspend Work), Contractor
shall be entitled, subject to ARTICLE 5 (Extension of Time), to an extension of
time for any such delay.

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         (b) If as a result of complying with Owner's instructions under SECTION
20.1 (Right of Owner to Suspend the Works) Contractor incurs or will incur Cost:

                  (i)      in protecting, storing and securing the Works, or any
                           part of the Works, against any deterioration, loss or
                           damage;

                  (ii)     for personnel, Subcontractors or rented Contractor's
                           Equipment, the payments of which, with Owner's prior
                           written agreement, is continued during the suspension
                           period; and/or

                  (iii)    for demobilisation and re-mobilisation,

Contractor shall be entitled to payment of such Cost plus an allowance of ten
percent thereon for overhead and profit.

         (c) Contractor shall not be entitled to an extension of time, payment
of any costs (including Cost) or an adjustment of the EPC Contract Price for
making good the consequences of Contractor's faulty design, workmanship or
materials, or of Contractor's failure to protect, store or secure in accordance
with SECTION 19.1 (Right of Owner to Suspend the Works).

         20.3     EXTENDED SUSPENSION

         In the event suspensions by Owner exceed one hundred and twenty (120)
days in the aggregate and provided that such suspensions do not arise as a
result of default on the part of Contractor under this EPC Contract or on the
part of Supplier under the Supply Contract or an event of Force Majeure (in
which case SECTION 22.5 (Extended Force Majeure) shall apply), then Contractor
may give notice to the Owner's Representative requesting permission to proceed
within twenty-eight (28) days. If permission is not granted within that time,
Contractor may by giving notice to Owner and treat the suspension as an Owner's
Change omitting the affected part of the Works. The provisions of SECTION 8.3
(Requests) relating to reduction of the EPC Contract Price shall not apply to
the suspension. If the suspension affects the whole of the Works, Contractor may
terminate its obligations under this EPC Contract by so notifying Owner in
writing



                                       97


and Contractor shall be entitled to be paid as provided in SUBSECTION 21.1.5
(Termination for convenience) or, if applicable, SECTION 22.5 (Extended Force
Majeure).

         20.4     RIGHT OF CONTRACTOR TO SUSPEND

         Contractor may suspend performance of the Work hereunder, in whole or
in part, upon 10 days' prior written notice of such suspension where Owner has
not paid by the due date any amount invoiced by Contractor unless Owner places
any unpaid or disputed amount in an interest bearing escrow account for the
benefit of and immediate payment to the party in whose favour the Dispute is
ultimately resolved. Any interest carried on any monies held in escrow shall be
paid to the party in whose favour the Dispute is resolved. Such suspension shall
continue until the money is put into escrow.

ARTICLE 21 - TERMINATION

         21.1     TERMINATION BY OWNER

                  21.1.1            NOTICE TO CORRECT

                  Within 10 days from the issue of a notice of any breach of
this EPC Contract from the Owner's Representative, Contractor shall either
remedy such breach or provide to Owner a plan acceptable to Owner (acting
reasonably) for the remedy of the breach complained of. Such plan shall address
both the actions that Contractor is proposing to undertake and the timeframe for
such actions, which timeframe shall be that period reasonably necessary and
practicable for remedying such breach. Contractor must promptly and diligently
commence and continue to effect the remediation measures specified in the agreed
upon plan in accordance with the timeframe or particular programme agreed. To
avoid doubt, Owner shall be under no obligation under this SUBSECTION 21.1.1 to
agree to an extension of the Scheduled Take Over Date.

                  21.1.2            TERMINATION FOR CAUSE

                  Owner shall be entitled to terminate this EPC Contract
immediately by notice to Contractor, if the Supply Contract is terminated other
than as a result of default by Owner, or if Contractor:



                                       98


                   (a)     fails, within the 10 day period specified in
                           SUBSECTION 21.1.1, to either (i) remedy the breach or
                           (ii) provide the plan for remediation that is
                           acceptable to Owner (acting reasonably) as required
                           under SUBSECTION 21.1.1;

                  (b)      fails to diligently commence and continue to effect
                           the cure of a breach of this EPC Contract in
                           accordance with the agreed upon plan of remediation
                           as described in SUBSECTION 21.1.1 or Owner does not
                           accept the remediation plan provided by Contractor
                           pursuant to SUBSECTION 21.1.1 and in each case does
                           not rectify such failure within 2 days of receipt of
                           notice of such failure from Owner; or

                  (c)      becomes bankrupt or insolvent, goes into liquidation,
                           has a receivership or administration order made
                           against it, compounds with its creditors, or carries
                           on business under a receiver, trustee or manager for
                           the benefit of its creditors, or if any act is done
                           or event occurs which under any Law has a similar
                           effect to any of these acts or events.

                  Each of (a) to (c) of this SUBSECTION 21.1.2 is a "Default".
                  The Owner's election to terminate this EPC Contract under this
                  SUBSECTION 21.1.2 shall not prejudice any other rights or
                  remedies of the Owner, under this EPC Contract or otherwise.

                  21.1.3            CONSEQUENCES OF TERMINATION

                  Upon termination under SECTION 21.1.2 (Termination for cause):

                  (a)      Contractor shall immediately comply with any
                           instructions included in the notice of termination
                           for the protection of life or property or for the
                           safety of the Plant;

                  (b)      Contractor shall then leave the Site and:

                                       99


                           (i)      deliver to Owner all Contractor's Equipment
                                    then at the Site (only if Owner elects to
                                    complete the Binary Plant as provided in
                                    clause (c) below, Equipment (including
                                    Equipment off site) and Temporary Works;

                           (ii)     deliver to Owner all documents (in whatever
                                    state of completion) and information created
                                    by or on behalf of Contractor that
                                    Contractor would have been required to
                                    submit or provide to Owner under this EPC
                                    Contract but for the termination and for
                                    avoidance of doubt excluding all documents
                                    which Contractor was not otherwise obligated
                                    to provide under this EPC Contract; and

                           (iii)    comply with any instructions included in the
                                    notice of termination for the novation of
                                    any subcontract with any Subcontractor;

                  (c)      Owner may (but shall not be obliged to) complete the
                           Binary Plant and/or arrange for any other entities to
                           do so. Owner and these entities may use for this
                           purpose any Contractor's Equipment, Plant, Temporary
                           Works, documents and information made by or on behalf
                           of Contractor; and

                  (d)      on completion of the Binary Plant Owner shall give
                           notice that the Contractor's Equipment and Temporary
                           Works will be released to Contractor at or near the
                           Site. Contractor shall promptly arrange their
                           removal, at the risk and cost of Contractor.

                  21.1.4            PAYMENT AFTER TERMINATION

                  After termination under SECTION 21.1.2 (Termination for
cause):

                  (a)      Owner may withhold any further payments to Contractor
                           until any costs of design, execution, completion of


                           the Works and remedying of any defects, losses and
                           general damages arising from



                                      100


                           Contractor's breach (including for delay in
                           completion), and all other costs incurred by Owner,
                           have been established; and

                  (b)      Owner shall be entitled to recover from Contractor
                           Owner's costs and general damages arising from
                           Contractor's breach (including for delay in
                           completion and costs of completing the Works (subject
                           to the limitations of this EPC Contract).

                  21.1.5            TERMINATION FOR CONVENIENCE

                  (a)      In addition to Owner's rights to terminate under
                           SUBSECTION 21.1.2 (Termination for cause), Owner
                           shall be entitled to terminate this EPC Contract at
                           any time, by giving notice of such termination to
                           Contractor. The termination shall take effect on the
                           date on which Contractor receives notice.

                  (b)      Upon termination under SUBSECTION 21.1.5(A):

                           (i)      the provisions of SUBSECTION 21.1.3(A) TO
                                    (D) (Consequences of termination) shall
                                    apply except that Contractor shall be
                                    entitled to remove the Contractor's
                                    Equipment upon leaving the Site;

                           (ii)     the parties shall co-operate to achieve an
                                    equitable wash-up of debits and credits
                                    between them in relation to this EPC
                                    Contract and Contractor shall be entitled to
                                    payment of the following:

                                    (1)     such proportion of the EPC Contract
                                            Price that is equivalent to the
                                            proportion of the Works completed in
                                            accordance with this EPC Contract by
                                            Contractor (including on account of
                                            Milestones achieved by reference to
                                            the Milestone Payment Schedule or if
                                            equitable in the circumstances a

                                            fair and just pro rata payment on
                                            account of Milestones partly
                                            achieved),



                                      101


                                            less any amounts previously paid to
                                            Contractor for such work, any
                                            liquidated damages due under ARTICLE
                                            12 (Remedies) and any other
                                            undisputed amount then due to Owner
                                            from Contractor in connection with
                                            any breaches of this EPC Contract by
                                            Contractor;

                                    (2)     actual cancellation charges due to
                                            Subcontractors as a result of the
                                            termination;

                                    (3)     reasonable costs incurred by
                                            Contractor for its own efforts to
                                            implement termination and
                                            demobilisation (subject to
                                            Contractor using reasonable
                                            endeavours to minimise such costs),
                                            and

                                    (4)     a cancellation fee calculated in
                                            accordance with SCHEDULE I,

                           but shall not be entitled to payment for any other
                           consequential costs of any kind or to payment on
                           account of its overhead or anticipated profit in
                           respect of the unfinished work.

                  (c)      Prior to exercising the right of termination under
                           SUBSECTION 21.1.5(a), Owner shall be entitled to
                           require Contractor to advise of the Subcontractor
                           cancellation charges Contractor would incur in the
                           event of such termination. Contractor shall use its
                           Best Endeavors to provide such information within 7
                           days or as soon thereafter as reasonably practicable.
                           Provided Owner exercises the right of cancellation
                           within 14 days after receipt of such information, the
                           amount due under SUBSECTION 21.1.5(b)(ii)(2) shall
                           not exceed the figure advised by Contractor under
                           this SUBSECTION 21.1.5(c).

                                      102


                  (d)      Owner's election to terminate this EPC Contract under
                           SUBSECTION 21.1.5(A) shall not prejudice any other
                           rights of Owner or Contractor under this EPC Contract
                           or otherwise.

         21.2     TERMINATION BY CONTRACTOR

         In addition to its other rights and remedies under law or otherwise,
Contractor shall be entitled to terminate this EPC Contract on 5 days notice
only if one of the following defaults occur and continue for 30 days (20 days in
the event of payment default) following a notice by Contractor to cure such
default or (except in the case of a default in any payment obligation) if cure
cannot be effected within such period, without promptly commencing and
diligently pursuing a cure thereof:

                  (a)      Contractor does not receive a payment when such
                           payment was due (except for any amount disputed in
                           good faith by Owner);

                  (b)      an extended suspension affects the whole of the Works
                           as described in SECTION 20.3 (Extended suspension);

                  (c)      Owner becomes bankrupt or insolvent, goes into
                           liquidation, has a receivership or administration
                           order made against it, compounds with its creditors,
                           or carries on business under a receiver, trustee or
                           manager for the benefit of its creditors, or if any
                           act is done or event occurs which under any Law has a
                           similar effect to any of these acts or events.

Each of (a) to (c) of this SUBSECTION 21.2 is a "Default". Contractor's election
to terminate this EPC Contract under this SUBSECTION 21.2 shall not prejudice
any other rights or remedies of the Contractor, under this EPC Contract or
otherwise.

         21.3     PAYMENT ON TERMINATION

         After termination under SECTION 21.2 (Termination by Contractor)
Contractor's remedy shall be an entitlement to payment in accordance with
SECTION 21.1.5



                                      103


(Termination for convenience) and to termination, without draw, of the
performance bonds and parent company guaranty furnished by Contractor under this
EPC Contract.

ARTICLE 22 - FORCE MAJEURE

         22.1     FORCE MAJEURE

                  (a) Force Majeure as used in this EPC Contract shall be an
exceptional event or circumstance which is beyond the control of Owner,
Contractor or Supplier, such party could not reasonably have provided against
before entering into this EPC Contract or the Supply Contract as appropriate,
and which having arisen, either Owner or Contractor (for purposes of this
SECTION 22.1, the "affected party") could not reasonably have avoided or
overcome and which materially affects the affected party's performance of its
obligations under this EPC Contract, and shall include, but not be limited to,
the following events:

         war, declared or not, or hostilities, or belligerence, blockade,
         revolution, insurrection, riot, expropriation, requisition,
         confiscation, or nationalization, export or import restrictions by any
         authorities, closing of harbours, docks, canals, or other assistances
         to or adjuncts of the shipping or navigation of or within any place,
         rationing or allocation, whether imposed by law, decree or regulation
         by, or by compliance of industry at the insistence of any governmental
         authority, or fire, unusual flood, earthquake, hydrothermal eruption,
         volcanic eruption, storm, lightning, tidal wave, perils of the sea,
         accidents of navigation or breakdown or injury of vessels, accidents to
         harbours, docks, canals or other assistance to or adjuncts of the
         shipping or navigation, epidemic, quarantine, strikes or combination of
         workmen, lockouts or other labour disturbances (except for strike or
         other labour disturbances by Contractor's employees), or governmental
         acts and decrees that in fact delay the Work or increase the cost of
         the Works but excluding failures of plant and equipment,
         non-availability of labour, goods, materials, equipment or other
         resources, strikes or other employee disputes, adverse weather not
         identified above, or lack of financial resources.



                                      104


                  (b) To the extent that the affected party is prevented from or
delayed in complying with any of its obligations under this EPC Contract by
reason of an event of Force Majeure, such obligation shall be suspended for the
duration of the impact of such event upon the affected party. The burden of
proving the Force Majeure event shall be on the party claiming Force Majeure.

                  (c) Non-performance of a Subcontractor is a Force Majeure
event, provided the Subcontractor's non-performance is due to an exceptional
event or circumstance in terms of paragraph (a) and the Subcontractor uses its
best endeavours to continue to perform its obligations under the subcontract, to
minimise any delay, to correct or cure the circumstances preventing performance
and otherwise to remedy its inability to perform.

         22.2         NOTICE

         If either party's ability to perform its obligations under this EPC
Contract is or is likely to be affected by Force Majeure, such party shall
promptly give notice to the other party stating the nature of the circumstances
or anticipated circumstances, their effect or anticipated effect upon the
performance of such party's obligations, the anticipated duration of the
circumstances and any action being taken to avoid or minimise the effect of the
circumstances.

         22.3         CONTINUED PERFORMANCE

         The suspension or delay of performance due to Force Majeure shall be of
no greater scope and no longer duration than is required. The excused party
shall use its Best Endeavours to continue to perform its obligations under this
EPC Contract, to minimise any delay, to correct or cure the circumstance
preventing performance and otherwise to remedy its inability to perform.

         22.4         ACCRUED OBLIGATIONS

         No obligations of either party which arose before the occurrence of
Force Majeure shall be excused as a result of such occurrence.



                                      105


         22.5         EXTENDED FORCE MAJEURE

         If circumstances of Force Majeure have occurred and shall continue for
a period of 180 days then, notwithstanding that Contractor may by reason thereof
have been granted an extension of time for completion of the Work, either party
shall be entitled to serve upon the other party 28 days written notice to
terminate this EPC Contract. If at the expiry of the period of 28 days the Force
Majeure event shall still continue then this EPC Contract shall terminate and
Contractor shall be entitled to the payments contained in SUBSECTION 21.1.5
except for the cancellation fee.

ARTICLE 23 - CONFIDENTIALITY

         The contents of this EPC Contract and the Supply Contract and any other
information that is in or comes into the possession of either party ("the
Transferee"), its employees, Subcontractors or other third parties for which it
is responsible relating to the other party is disclosed in confidence and the
Transferee shall restrict its use of such information solely to uses:

                  (a)      required for the purpose of giving effect to
                           performance of this EPC Contract;

                  (b)      required for the purpose of giving effect to or the
                           conditions of any Consent;

                  (c)      required by law or any stock exchange listing rules
                           (provided that prior to disclosure the Transferee
                           must advise the other party and must only disclose
                           such information as the Transferee's legal advisors
                           reasonably believe is necessary to disclose by law);
                           or

                  (d)      in relation to information that is in the public
                           domain (other than as a result of a breach of this
                           ARTICLE 23).

Contractor and Owner shall treat all such information as private and
confidential and neither of them shall transfer, copy, list or disclose the same
or any particulars thereof without the previous written consent of the other,
provided that nothing in this Article



                                      106


shall prevent the publication or disclosure of any such information that has
come within the public domain otherwise than by breach of this Article.

ARTICLE 24 - NOTICES

         All notices and other communications required or permitted by this EPC
Contract shall be in writing and shall become effective (a) if by hand delivery,
upon receipt thereof, (b) if by official government mail, three (3) days after
deposit in the mail, postage prepaid, certified or registered mail, return
receipt requested or (c) if by next day delivery service, upon such delivery, at
the addresses set forth below or at such other addresses as the party receiving
notice shall subsequently designate by written notice to the other party.
Notwithstanding the foregoing, the parties may communicate via email at such
email addresses designated by each party in the manner provided above with
regard to communications other than notices of breach, default, termination or
other similar material matters. Without obviating the obligation to timely
provide such notice to both Owner or Contractor addressees set forth below, a


notice or communication to Owner or Contractor hereunder shall become effective
upon the first date of delivery to or receipt of such notice by either Owner or
Contractor addressee set forth below.

         If to Owner:

                              Contact Energy Limited
                              PO Box 10742
                              Wellington, New Zealand

                              Attention:  Tom Zink

         with a copy to:


         :                    Contact Energy Limited
                              PO Box 2001
                              Taupo, New Zealand

                              Attention: Wayne Christie




                                      107


         If to Contractor:

                              ORMAT Pacific Inc.
                              New Zealand Branch
                              P. O. Box 1717
                              Taupo
                              New Zealand

         with a copy of notices of
         breach or termination to:

                              Robert E. Giles
                              Perkins Coie LLP
                              1201 Third Avenue
                              48th Floor
                              Seattle, WA 98101-3099


ARTICLE 25 - MISCELLANEOUS

         25.1     APPLICABLE LAW

         Throughout the course of performance of this EPC Contract, the parties
shall comply with all applicable Laws relating to this EPC Contract and its
performance. This EPC Contract shall be interpreted under and governed by the
laws of New Zealand.

         25.2     SEVERABILITY

         In the event that any of the provisions or portions, or applications
thereof, of this EPC Contract are held to be unenforceable or invalid by any
court of competent jurisdiction, Owner and Contractor shall negotiate an
equitable adjustment in the provisions of this EPC Contract with a view toward
effecting the purpose of this EPC Contract, and the validity and enforceability
of the remaining provisions or portions, or applications thereof, shall not be
affected thereby.

         25.3     AMENDMENTS AND WAIVERS

         This EPC Contract may not be changed or amended orally, and no waiver
hereunder may be oral, but any change or amendment hereto or any waiver
hereunder must be in writing and signed by the party or parties against whom
such change, amendment, or waiver is sought to be enforced.



                                      108


         25.4     COUNTERPARTS

         This EPC Contract may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

         25.5     ENTIRE CONTRACT

         This EPC Contract constitutes the entire agreement between the parties
hereto relating to the subject matter hereof, and supersedes any previous
agreements or understandings between the parties.

         25.6     EFFECT OF WAIVERS

         Either party's waiver of any breach or failure to enforce any of the
terms, covenants, conditions or other provisions of this EPC Contract at any
time shall not in any way affect, limit, modify or waive that party's right
thereafter to enforce or compel strict compliance with every term, covenant,
condition or other provision hereof, any course of dealing or custom of the
trade notwithstanding. The waiver by Supplier or Owner of any breach or failure
to enforce any of the terms, covenants, conditions or other provisions of the
Supply Contract at any time shall not in any way affect, limit, modify or waive
Owner's or Contractor's right thereafter to enforce or compel strict compliance
with every term, covenant, condition or other provision of this EPC Contract,
any course of dealing or custom of the trade notwithstanding.

         25.7     REPRESENTATIONS

         By their execution hereof, the parties warrant that they are authorized
to enter into this EPC Contract, that it does not conflict with any agreement,
lease, instrument or other obligation to which either is a party or by which
either is bound, and that it represents their valid and binding obligation,
enforceable in accordance with its terms.

         25.8     HEADINGS

         The headings contained herein are not part of this Contract and are
included solely for the convenience of the parties.

                                      109


         25.9     PUBLICITY

         Without limiting ARTICLE 23 (Confidentiality), Contractor shall not
release public or media statements or publish material related to this EPC
Contract, the Works or Owner's business activities or interests without Owner's
approval, which approval will not be unreasonably withheld or delayed. Owner
shall as and when it considers it appropriate to do so give consideration to
acknowledging the role of Contractor as the contractor of the Binary Plant and
the use of the ORMAT equipment in the Binary Plant in the press releases and
other publications issued by Owner about the Binary Plant.

         25.10    COUNTERPARTS; TRANSMITTED COPIES

         This EPC Contract may be executed in any number of counterparts, each
of which will be deemed an original, but all of which taken together will
constitute one and the same instrument. To expedite the process of entering into
this EPC Contract, the parties acknowledge that Transmitted Copies of this EPC
Contract will be equivalent to original documents until such time (if any) as
original documents are completely executed and delivered. "TRANSMITTED COPIES"
mean copies that are reproduced or transmitted via facsimile or another process
of complete and accurate reproduction and transmission.

         25.11    FURTHER ASSURANCES

         Owner and Contractor will use reasonable endeavours to implement the
provisions of this EPC Contract, and for such purpose each, at the request and
expense of the other, will, without further consideration, promptly execute and
deliver or cause to be executed and delivered to the other such, consents,
documents or other instruments in addition to those required by this EPC
Contract as the other may reasonably require to implement any provision of this
EPC Contract.



[The rest of this page is intentionally left blank. The next page is the
signature page.]






                                      110




         IN WITNESS WHEREOF, the parties have caused this EPC Contract to be
executed as of the date first above written.


Contractor:                     ORMAT Pacific Inc., New Zealand branch

                                By: /s/ Connie Stechman
                                   -----------------------------------------

                                Name: Connie Stechman
                                     ---------------------------------------

                                Title: Assistant Secretary
                                      --------------------------------------


Owner:                          Contact Energy Limited

                                By: /s/ Stephen P. Barrett
                                   -----------------------------------------

                                Name: Stephen P. Barrett
                                     ---------------------------------------

                                Title: Managing Director and Chief Executive
                                      --------------------------------------














                                      111



                                                                  Exhibit 10.5.4

                                LICENSE AGREEMENT
                     ENTERED INTO THIS 15TH DAY OF JULY 2004

THIS LICENSE AGREEMENT (this "AGREEMENt") is made and entered into as of the 1st
day of July, 2004 (the "EFFECTIVE DATE") by and among Ormat Industries Ltd., an
Israeli public corporation with principal place of business at the Industrial
Area of Yavne ("OIL"), and Ormat Systems Ltd., an Israeli corporation with
principal place of business at the Industrial Area of Yavne ("OSL"). OIL and OSL
may be referred to individually as a "PARTY" or collectively as "PARTIES".

WHEREAS,    Concurrently with the execution and delivery of this Agreement, the
            Parties have entered into an Asset Purchase Agreement (the "PURCHASE
            AGREEMENT") dated as of the date hereof, pursuant to which OIL will
            transfer to OSL, and OSL will acquire, among other things, the
            Purchased Business as defined in the Purchase Agreement;

WHEREAS,    In connection with the Purchase Agreement and the transfers and
            acquisitions under the Purchase Agreement, effective as of the
            Effective Date, OIL wishes to grant OSL: I) an exclusive, perpetual,
            fully paid license to the Patents and Trademarks set forth in ANNEX
            A attached hereto (the "PATENTS" and the "EXCLUSIVE TRADEMARKS");
            and a non-exclusive perpetual, fully paid license to the trademarks
            set forth in Annex B attached hereto (the "Non-Exclusive
            Trademarks"). (the Non-Exclusive Trademarks and the Exclusive
            Trademarks together, the "Trademarks").

NOW, THEREFORE, in consideration of the mutual representations, covenants and
warranties contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, OIL and OSL intending
to legally bound hereby, mutually agree as follows:

1.     DEFINITIONS

       Unless otherwise expressly defined in this Agreement, any capitalized
       term used herein shall bear the meaning ascribed to it in the Purchase
       Agreement.



                                       2

2.     LICENSE

        2.1       Effective as of the Effective Date, and subject to the terms
                  hereof, OIL hereby grants OSL, only with respect to the
                  Patents, for the duration of the term specified in Section
                  6.1, a fully-paid, royalty-free, irrevocable, perpetual
                  exclusive license, without the right to grant sublicenses
                  except as specified in Section 2.5, to make, have made, use,
                  sell, offer to sell, import and create derivatives of
                  (including without limitation modifications, improvements,
                  fixes, enhancements, and upgrades) the inventions claimed in
                  the Patents.

        2.2       Effective as of the Effective Date, and subject to the terms
                  hereof, OIL hereby grants OSL, for the duration of the term
                  specified in Section 6.1, a fully-paid, royalty-free,
                  irrevocable, perpetual exclusive license, without the right to
                  grant sublicenses except as specified in Section 2.5, to use
                  and display the Exclusive Trademarks in connection with the
                  goods and services for which they are described in ANNEX A.

        2.3       Effective as of the Effective Date, and subject to the terms
                  hereof, OIL hereby grants OSL, for the duration of the term
                  specified in Section 6.1, a fully-paid, royalty-free,
                  irrevocable, perpetual non-exclusive license, without the
                  right to grant sublicenses except as specified in Section 2.5,
                  to use and display the Non-Exclusive Trademarks in connection
                  with the goods and services for which they are described in
                  ANNEX B.

        2.4       Any sale and/or transfer by OIL of Patents or Trademarks
                  licensed hereunder, in any way whatsoever, to any third party,
                  shall be subject to all rights granted to OSL pursuant to this
                  Agreement.

        2.5       OSL may grant: i) to any third party sublicenses of OSL's
                  rights to the Patents or the Exclusive Trademarks; and ii) to
                  OTI a sublicense of OSL's rights to the Non-Exclusive
                  Trademarks, provided that such sublicense shall provide that
                  OTI may not further sublicense such rights except to OTI's
                  direct and indirect subsidiaries who sign a sublicense
                  agreement in the form acceptable to OIL.

3.     DERIVATIVES AND RESERVATION OF RIGHTS

        3.1       Rights to Derivatives.


                  As between the Parties, OSL shall own all derivatives created
                  by or for OSL from the Patents licensed herein or any part
                  thereto ("OSL DERIVATIVES"); provided,




                                      3

                  however, that OSL shall only have such rights to such
                  derivatives which are derived from Patents expressly licensed
                  herein.

        3.2       Reservation of Rights.

                  Except as expressly provided herein, no license or immunity is
                  granted under this Agreement by OIL, directly or by
                  implication, estoppel or otherwise to OSL, OTI, OR any third
                  parties acquiring items or services therefrom, whether singly
                  or for the combination of such acquired items or services with
                  other items or for the use of such combination.

4.     TRADEMARK QUALITY CONTROL

        4.1       OSL acknowledges that OIL is the owner of the Trademarks and
                  the goodwill associated with the Trademarks, and agrees that
                  all goodwill, including any increase in the value of the
                  Trademarks as a result of this Agreement, will inure solely to
                  OIL's benefit. OSL will not claim any title or any proprietary
                  right to the Trademarks or in any derivation, adaptation, or
                  variation thereof. OSL agrees that nothing in this Agreement
                  shall give OSL any right, title or interest in the Trademarks
                  other than the right to use the Trademarks in accordance with
                  this Agreement. OSL agrees not to challenge the Trademarks, or
                  to register or attempt to register the Trademarks as a
                  trademark, service mark, Internet domain name, trade name, or
                  any similar trademarks or name, with any domestic or foreign
                  governmental or quasi-governmental authority or otherwise.

        4.2       OSL may use the Trademarks in accordance with the
                  specifications, directions, and processes furnished to OSL by
                  OIL from time to time. OSL shall not make any use of the
                  Trademarks that impair or are likely to impair the goodwill
                  associated therewith. The quality of the products manufactured
                  and services offered by OSL shall be satisfactory to OIL or as
                  specified by or approved by OIL. OIL shall have the right to
                  review OSL's use of the Trademarks and the goods and services
                  offered thereunder upon reasonable notice to verify that is in
                  accordance with such specifications, directions, processes and
                  quality.

5.     INFRINGEMENT


         Each party shall notify the other in writing within seven (7) days of
         becoming aware of any infringements or imitations by others of Patents
         or Trademarks. OSL may, only with OIL's prior written approval,
         institute legal proceedings at its own expense against any third party





                                       4

         that OSL reasonably believes to be infringing a Patent or Trademark in
         order to eliminate such infringement. OIL may, at its option, join as a
         party plaintiff in such action at its own expense. After OSL has
         recovered and distributed its own and OIL's reasonable attorney's fees
         and direct costs expenses in litigation related to the infringement of
         the Patents or Trademarks, or, if litigation is not initiated, in the
         investigation and analysis related to the potential litigation, all
         remaining recovery shall be for the account of OSL unless OIL has
         participated in such action, in which case all remaining recovery shall
         be shared equally between OSL and OIL; provided, however, that OSL may
         not settle or compromise any such action without the prior written
         consent of OIL, which consent shall not be unreasonably withheld or
         delayed. With the exception of litigation already commenced by filing
         appropriate pleadings in court, upon expiration or termination of this
         Agreement, any and all rights or obligations of OSL in resolving any
         possible infringement claim hereunder shall revert to OIL.

6.     TERM AND TERMINATION

         6.1      TERM. This Agreement is effective as of the Effective Date and
                  continues in perpetuity thereafter, unless terminated earlier
                  in accordance with this Section 6. The term of all Patent
                  licenses granted hereunder shall continue until the earlier of
                  (i) expiration of such Patents; (ii) the termination of this
                  Agreement or (iii) the assignment of the Patents to OSL. The
                  term of all Exclusive Trademark licenses granted hereunder
                  continues until the earlier of: (i) the termination of this
                  Agreement; or (ii) the assignment of the Exclusive Trademarks
                  to OSL. The term of all Non-Exclusive Trademark licenses shall
                  continue until the termination of this Agreement.

        6.2       Termination for Insolvency. Either party may cancel the
                  Agreement forthwith by written notice to the other, and may
                  regard the other party as in default under this Agreement, if
                  the other party becomes insolvent, makes a general assignment
                  for the benefit of creditors, files a voluntary petition of
                  bankruptcy, suffers or permits the appointment of a receiver
                  for its business or assets, or becomes subject to any
                  proceedings under any bankruptcy or insolvency law,
                  voluntarily or otherwise. In the event that any of the above
                  events occur, the effected party shall immediately notify the
                  other party of its occurrence. Notwithstanding the foregoing,
                  OSL can elect to retain all of its rights under this Agreement
                  despite OIL's bankruptcy or insolvency.




                                       5

        6.3       Termination for Material Breach. Either party may terminate
                  this Agreement in writing for the material breach of this
                  Agreement by the other party that remains uncured thirty (30)
                  days following receipt of a written notice of such breach.

        6.4       Effect of Termination. Upon termination of this Agreement, the
                  licenses granted hereunder, and all sublicenses of those
                  rights shall terminate, and neither OSL nor its sublicensees
                  or any further sublicensees shall have any further right to
                  use the Patents or Trademarks.

7.     WARRANTY DISCLAIMERS

       THE PATENTS AND TRADEMARKS ARE LICENSED ON AN "AS IS" BASIS, AND OIL
       MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE
       LICENSED PATENTS, THE LICENSED TRADEMARKS AND/OR THE LICENSES GRANTED IN
       THIS AGREEMENT. OIL HEREBY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS,
       IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF NONINFRINGEMENT,
       MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE. NEITHER PARTY WILL
       BE LIABLE FOR INDIRECT, SPECIAL, EXEMPLARY, INCIDENTAL, PUNITIVE OR
       CONSEQUENTIAL DAMAGES, ARISING IN CONNECTION WITH THIS AGREEMENT.

8.     MISCELLANEOUS PROVISIONS

        8.1       Binding Effect; Successors and Assigns; Assignment. This
                  Agreement shall be binding upon and inure to the benefit of
                  the parties hereto and their respective heirs, successors,
                  assigns and legal representatives. Without derogating from the
                  provisions of Section 2.5 above, neither party may assign this
                  Agreement in any manner, including without limitation by
                  change in control, merger or reorganization, in whole or in
                  part without the prior written consent of the other party. Any
                  assignment in violation of the foregoing shall be void.

        8.2       Counterparts; Signatures; Titles and Headings. This Agreement
                  may be executed in counterparts, each of which shall be deemed
                  an original agreement, but all of which together shall
                  constitute one and the same instrument. This Agreement shall
                  be deemed executed and delivered upon the delivery of original
                  signed copies, or facsimile copies containing telecopied
                  signatures, to each other party hereto. The




                                       6

                  headings in this Agreement are for reference purposes only and
                  shall not in any way affect the meaning or interpretation of
                  this Agreement.

        8.3       Governing Law; Jurisdiction and Venue. This Agreement shall be
                  governed by and construed in accordance with the laws of the
                  State of Israel, without reference to choice of law principles
                  thereof, and the parties agree to submit to the exclusive
                  jurisdiction and venue of Israel and the courts of
                  Tel-Aviv-Jaffa, Israel.


                  It is hereby clarified that in case the first paragraph of
                  this Section 8 is found, by a court of competent jurisdiction,
                  to be unenforceable or otherwise invalid, each party hereto
                  waives its right to trial of any issue by jury.

        8.4       Severability. If any provision of this Agreement shall be
                  determined by any court of competent jurisdiction (or any
                  other agreed-upon dispute resolving body) to be unenforceable
                  or otherwise invalid as written, the same shall be enforced
                  and validated to the fullest extent permitted by law. All
                  provisions of this Agreement are severable, and the
                  unenforceability or invalidity of any single provision hereof
                  shall not affect the remaining provisions.

        8.5       Notices. Except as otherwise provided herein, all notices
                  shall be in writing and shall be effective upon receipt, if
                  delivered personally or if mailed by overnight courier,
                  postage prepaid, or upon generation of a confirmation if sent
                  by facsimile (provided that such transmission is followed by
                  mailing of a conforming copy) to the parties at their
                  addresses set forth in the first paragraph of this Agreement
                  or such other address as subsequently may be specified in
                  writing by a party to the other parties.

        8.6       No Strict Construction; Interpretation. The parties hereto
                  acknowledge that this Agreement has been prepared jointly by
                  the parties hereto and their respective legal counsel, and
                  shall not be strictly construed against any party as a result
                  of the party drafting any given provision hereof. Unless
                  otherwise indicated to the contrary herein by the context or
                  use thereof, (a) the words "herein," "hereto," "hereof," and
                  words of similar import refer to this Agreement as a whole and
                  not to any particular Section, subsection or paragraph hereof,
                  (b) words importing the masculine gender shall include the
                  feminine and neutral genders and vice versa, and (c) words
                  importing the singular shall include the plural and vice
                  versa.



                                       7

        8.7       Entire Agreement; Modification and Waiver. Except for the
                  agreements specifically referenced in or contemplated by this
                  Agreement, this Agreement constitutes the entire agreement
                  between the parties with respect to the matters covered hereby
                  and supersedes all previous written, oral or implied
                  understandings between them with respect to such matters. This
                  Agreement may be amended or modified only by a writing signed
                  by the party against whom enforcement of such amendment or
                  modification is sought. Any of the terms or conditions of this
                  Agreement may be waived at any time by the party or parties
                  entitled to the benefit thereof, but only by a writing signed
                  by the party or parties waiving such terms or conditions. No
                  waiver of any provisions of this Agreement or of any rights or
                  benefits arising hereunder shall be deemed to constitute or
                  shall constitute a waiver of any other provisions of this
                  Agreement (whether or not similar) nor shall such waiver
                  constitute a continuing waiver unless otherwise expressly
                  provided in writing.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the day first above written.


ORMAT INDUSTRIES LTD.


By: /s/ Lucien Y. Bronicki
    ----------------------------------
    Name: Lucien Y. Bronicki
   Title: Chairman of the Board


ORMAT SYSTEMS LTD.


By: /s/ Etty Rosner
    -----------------------------------
    Name: Etty Rosner






   Title: V.P. Contract Administrator




                                                                    EXHIBIT 21.1



          LIST OF SIGNIFICANT SUBSIDIARIES OF THE COMPANY, THE STATE OR
         JURISDICTION OF INCORPORATION OR ORGANIZATION OF EACH, AND THE
                 NAMES UNDER WHICH SUCH SUBSIDIARIES DO BUSINESS



   --------------------------------------------------------------------------
                                         STATE/JURISDICTION OF INCORPORATION
      NAME OF SIGNIFICANT SUBSIDIARY               OR ORGANIZATION
   --------------------------------------------------------------------------
            Ormat Systems Ltd.                          Israel
   --------------------------------------------------------------------------
         Ormat International, Inc.                     Delaware
   --------------------------------------------------------------------------
            Ormat Nevada, Inc.                         Delaware
   --------------------------------------------------------------------------
           Ormat Funding Corp.                         Delaware
   --------------------------------------------------------------------------
          OrCal Geothermal, Inc.                       Delaware
   --------------------------------------------------------------------------
             OrHeber 1, Inc.                           Delaware
   --------------------------------------------------------------------------
                ORMESA LLC                             Delaware
   --------------------------------------------------------------------------
           Ormat Holding Corp.                      Cayman Islands
   --------------------------------------------------------------------------
          Heber Field Company                         California
   --------------------------------------------------------------------------
       Second Imperial Geothermal                     California
               Company L.P.
   --------------------------------------------------------------------------
         Heber Geothermal Company                     California
   --------------------------------------------------------------------------
             OrPower 4, Inc.                        Cayman Islands
   --------------------------------------------------------------------------
       Ormat Momtombo Power Company                 Cayman Islands
   --------------------------------------------------------------------------
             Orleyte Company                        Cayman Islands
   --------------------------------------------------------------------------
           Ormat-Leyte Co. Ltd.                      Philippines
   --------------------------------------------------------------------------
              OrMammoth Inc.                           Delaware
   --------------------------------------------------------------------------




                                                                    Exhibit 23.1




            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            --------------------------------------------------------

We hereby consent to the use in this Registration Statement on Form S-1 of our
reports dated as follows:

     o    July 19, 2004 relating to the financial statement of Ormat
          Technologies, Inc. and subsidiaries,

     o    April 30, 2004, except for Notes 3 and 9, as to which the date is July
          1, 2004, relating to the financial statements of Puna Geothermal
          Venture,

     o    July 19, 2004 relating to the financial statements of Combined Heber
          and Affiliates, and

     o    January 26, 2004 relating to the financial statements of
          Mammoth-Pacific L.P.

These reports appear in such Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.


/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Sacramento, California
July 20, 2004




                                                                    Exhibit 99.1

BLM Geothermal Resources Leases

--------------------------------------------------------------------------------
                   GOVERNMENT       RENT       TERM
PROJECTS             LEASES         ($)      EXPIRATION     ACREAGE   ROYALTY(1)
--------------------------------------------------------------------------------
STEAMBOAT HILLS   BLM N-12085       n/a         *           502.5        x
--------------------------------------------------------------------------------
MAMMOTH           BLM CA-11667      n/a         *           1590         x
--------------------------------------------------------------------------------
DESERT PEAK       BLM N-13069       n/a         *           640          x
--------------------------------------------------------------------------------
                  BLM N-13072A      n/a         *           1280         x
--------------------------------------------------------------------------------
ORMESA            BLM CA-964        n/a         *           1791.6       x
--------------------------------------------------------------------------------
                  BLM CA-6219       n/a         *           1920         x
--------------------------------------------------------------------------------
                  BLM CA-6218       n/a         *           2486         x
--------------------------------------------------------------------------------
                  BLM CA-6217       n/a         *           1600         x
--------------------------------------------------------------------------------
                  BLM CA-17568      n/a         *           633.32       x
--------------------------------------------------------------------------------
                  BLM 1903          4480        *           2240         x
--------------------------------------------------------------------------------
BRADY             BLM N-62739       1280      2008          640
--------------------------------------------------------------------------------

(1) Royalty rates which vary from month to month depending on production levels
    are defined in the Geothermal Steam Act of 1970.







 *  No expiration as long as production continues.




                                                                    Exhibit 99.2


BLM Site Leases

--------------------------------------------------------------------------------
                       GOVERNMENT          RENT      TERM
PROJECTS                 LEASES            ($)     EXPIRATION       ACREAGE
--------------------------------------------------------------------------------
MAMMOTH               BLM CA-21918         600     2019             1280
--------------------------------------------------------------------------------
ORMESA                BLM CA-17129         1542    2015             15.42
--------------------------------------------------------------------------------
                      BLM CA-20172         970     2017             9.7
--------------------------------------------------------------------------------
                      BLM CA-22079         900     2019             8.166
--------------------------------------------------------------------------------
                      BLM CA-22405         556     2018             5.56
--------------------------------------------------------------------------------