MIDAMERICAN ENERGY HOLDINGS CO /NEW/ (Form: 10-K, Received: 02/27/2012 11:33:59)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2011

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to _______



Commission	Exact name of registrant as specified in its charter;	IRS Employer
File Number	State or other jurisdiction of incorporation or organization	Identification No.
001-14881	MIDAMERICAN ENERGY HOLDINGS COMPANY	94-2213782
	(An Iowa Corporation)
	666 Grand Avenue, Suite 500
	Des Moines, Iowa 50309-2580
	515-242-4300

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer o	Accelerated filer o	Non-accelerated filer x	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x

All of the shares of common equity of MidAmerican Energy Holdings Company are privately held by a limited group of investors. As of January 31, 2012 , 74,609,001 shares of common stock were outstanding.

TABLE OF CONTENTS



PART I

Item 1.	Business	1
Item 1A.	Risk Factors	30
Item 1B.	Unresolved Staff Comments	41
Item 2 .	Properties	41
Item 3.	Legal Proceedings	42
Item 4.	Mine Safety Disclosures	42

PART II

Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	43
Item 6.	Selected Financial Data	43
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	44
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	76
Item 8.	Financial Statements and Supplementary Data	80
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	138
Item 9A.	Controls and Procedures	138
Item 9B.	Other Information	138

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	139
Item 11.	Executive Compensation	140
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	150
Item 13.	Certain Relationships and Related Transactions, and Director Independence	152
Item 14.	Principal Accountant Fees and Services	153

PART IV

Item 15.	Exhibits and Financial Statement Schedules	154
Signatures		160
Exhibit Index		162

Definition of Abbreviations and Industry Terms

When used in Part I, Items 1 through 4, and Part II, Items 5 through 7A and Items 9, 9A and 9B, the following terms have the definitions indicated.



MidAmerican Energy Holdings Company and Related Entities
MEHC		MidAmerican Energy Holdings Company
Company		MidAmerican Energy Holdings Company and its subsidiaries
PacifiCorp		PacifiCorp and its subsidiaries
MidAmerican Funding		MidAmerican Funding, LLC
MidAmerican Energy		MidAmerican Energy Company
Northern Natural Gas		Northern Natural Gas Company
Kern River		Kern River Gas Transmission Company
Northern Powergrid Holdings		Northern Powergrid Holdings Company
MidAmerican Energy Pipeline Group		Consists of Northern Natural Gas and Kern River
MidAmerican Renewables		Consists of MidAmerican Renewables, LLC and CalEnergy Philippines
CE Casecnan		CE Casecnan Water and Energy Company, Inc.
HomeServices		HomeServices of America, Inc. and its subsidiaries
ETT		Electric Transmission Texas, LLC
Domestic Regulated Businesses		PacifiCorp, MidAmerican Energy Company, Northern Natural Gas Company and Kern River Gas Transmission Company
Utilities		PacifiCorp and MidAmerican Energy Company
Pipeline Companies		Northern Natural Gas Company and Kern River Gas Transmission Company
Distribution Companies		Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc
Berkshire Hathaway		Berkshire Hathaway Inc. and its subsidiaries
Topaz		Topaz Solar Farms LLC
Topaz Project		Topaz Solar Farms LLC's 550-megawatt solar project
Agua Caliente		Agua Caliente Solar, LLC
Agua Caliente Project		Agua Caliente Solar, LLC's 290-megawatt solar project

Certain Industry Terms
AFUDC		Allowance for Funds Used During Construction
Bcf		Billion cubic feet
CAIR		Clean Air Interstate Rule
CPUC		California Public Utilities Commission
CSAPR		Cross-State Air Pollution Rule
Dodd-Frank Reform Act		Dodd-Frank Wall Street Reform and Consumer Protection Act
Dth		Decatherms
DSM		Demand-side Management
EBA		Energy Balancing Account
ECAM		Energy Cost Adjustment Mechanism
EPA		United States Environmental Protection Agency
ERCOT		Electric Reliability Council of Texas
FERC		Federal Energy Regulatory Commission
GEMA		Gas and Electricity Markets Authority
GHG		Greenhouse Gases
GHG Reporting		Greenhouse Gases Reporting
GWh		Gigawatt Hours



Definition of Abbreviations and Industry Terms (continued)

Certain Industry Terms (continued)
IPUC		Idaho Public Utilities Commission
IUB		Iowa Utilities Board
kV		Kilovolt
LNG		Liquefied Natural Gas
LDC		Local Distribution Company
MATS		Mercury and Air Toxics Standards
MISO		Midwest Independent Transmission System Operator, Inc.
MW		Megawatts
MWh		Megawatt Hours
NRC		Nuclear Regulatory Commission
OPUC		Oregon Public Utility Commission
PCAM		Power Cost Adjustment Mechanism
PTAM		Post Test-year Adjustment Mechanism
RAC		Renewable Adjustment Clause
RCRA		Resource Conservation and Recovery Act
REC		Renewable Energy Credit
RPS		Renewable Portfolio Standards
RTO		Regional Transmission Organization
SIP		State Implementation Plan
SEC		United States Securities and Exchange Commission
TAM		Transition Adjustment Mechanism
UPSC		Utah Public Service Commission
WECC		Western Electricity Coordinating Council
WPSC		Wyoming Public Service Commission
WUTC		Washington Utilities and Transportation Commission

iii

Forward-Looking Statements

This report contains statements that do not directly or exclusively relate to historical facts. These statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can typically be identified by the use of forward-looking words, such as "will," "may," "could," "project," "believe," "anticipate," "expect," "estimate," "continue," "intend," "potential," "plan," "forecast" and similar terms. These statements are based upon the Company's current intentions, assumptions, expectations and beliefs and are subject to risks, uncertainties and other important factors. Many of these factors are outside the control of the Company and could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include, among others:


•	general economic, political and business conditions, as well as changes in laws and regulations affecting the Company's operations or related industries;


•	changes in, and compliance with, environmental laws, regulations, decisions and policies that could, among other items, increase operating and capital costs, reduce generating facility output, accelerate generating facility retirements or delay generating facility construction or acquisition;


•	the outcome of general rate cases and other proceedings conducted by regulatory commissions or other governmental and legal bodies and the Company's ability to recover costs in a timely manner;


•	changes in economic, industry, competition or weather conditions, as well as demographic trends, that could affect customer growth and usage, electricity and natural gas supply or the Company's ability to obtain long-term contracts with customers and suppliers;


•	a high degree of variance between actual and forecasted load that could impact the Company's hedging strategy and the cost of balancing its generation resources and wholesale activities with its retail load obligations;


•	performance and availability of the Company's generating facilities, including the impacts of outages and repairs, transmission constraints, weather and operating conditions;


•	changes in prices, availability and demand for both purchases and sales of wholesale electricity, coal, natural gas, other fuel sources and fuel transportation that could have a significant impact on generating capacity and energy costs;


•	the financial condition and creditworthiness of the Company's significant customers and suppliers;


•	changes in business strategy or development plans;


•	availability, terms and deployment of capital, including reductions in demand for investment-grade commercial paper, debt securities and other sources of debt financing and volatility in the London Interbank Offered Rate, the base interest rate for MEHC's and its subsidiaries' credit facilities;


•	changes in MEHC's and its subsidiaries' credit ratings;


•	risks relating to nuclear generation;


•	the impact of derivative contracts used to mitigate or manage volume, price and interest rate risk, including increased collateral requirements, and changes in commodity prices, interest rates and other conditions that affect the fair value of derivative contracts;


•	the impact of inflation on costs and our ability to recover such costs in regulated rates;


•	increases in employee healthcare costs;


•	the impact of investment performance and changes in interest rates, legislation, healthcare cost trends, mortality and morbidity on pension and other postretirement benefits expense and funding requirements;


•	changes in the residential real estate brokerage and mortgage industries and regulations that could affect brokerage and mortgage transaction levels;


•	unanticipated construction delays, changes in costs, receipt of required permits and authorizations, ability to fund capital projects and other factors that could affect future generating facilities and infrastructure additions;


•	the availability and price of natural gas in applicable geographic regions;


•	the impact of new accounting guidance or changes in current accounting estimates and assumptions on the Company's consolidated financial results;


•	the Company's ability to successfully integrate future acquired operations into its business;


•	other risks or unforeseen events, including the effects of storms, floods, litigation, wars, terrorism, embargoes and other catastrophic events; and


•	other business or investment considerations that may be disclosed from time to time in MEHC's filings with the SEC or in other publicly disseminated written documents.

Further details of the potential risks and uncertainties affecting the Company are described in Item 1A and other discussions contained in this Form 10-K. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing factors should not be construed as exclusive.

PART I

Item 1. Business

General

MEHC is a holding company that owns subsidiaries principally engaged in energy businesses and is a consolidated subsidiary of Berkshire Hathaway. The balance of MEHC's common stock is owned by Mr. Walter Scott, Jr., a member of MEHC's Board of Directors (along with family members and related entities), and Mr. Gregory E. Abel, MEHC's Chairman, President and Chief Executive Officer. As of January 31, 2012 , Berkshire Hathaway, Mr. Scott (along with family members and related entities) and Mr. Abel owned 89.8%, 9.4% and 0.8%, respectively, of MEHC's voting common stock.

MEHC and Berkshire Hathaway entered into an Equity Commitment Agreement (the "Berkshire Equity Commitment") pursuant to which Berkshire Hathaway has agreed to purchase up to $2.0 billion of MEHC's common equity upon any requests authorized from time to time by MEHC's Board of Directors. The proceeds of any such equity contribution shall only be used for the purpose of (a) paying when due MEHC's debt obligations and (b) funding the general corporate purposes and capital requirements of MEHC's regulated subsidiaries. Berkshire Hathaway will have up to 180 days to fund any such request in increments of at least $250 million pursuant to one or more drawings authorized by MEHC's Board of Directors. The funding of each drawing will be made by means of a cash equity contribution to MEHC in exchange for additional shares of MEHC's common stock. The Berkshire Equity Commitment expires on February 28, 2014.

The Company's operations are organized and managed as eight distinct platforms: PacifiCorp, MidAmerican Funding (which primarily consists of MidAmerican Energy), Northern Natural Gas, Kern River, Northern Powergrid Holdings (which primarily consists of Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc), CalEnergy Philippines (which owns a majority interest in the Casecnan project in the Philippines), MidAmerican Renewables, LLC (formerly CalEnergy U.S., which owns interests in independent power projects in the United States), and HomeServices. Through these platforms, the Company owns and operates an electric utility company in the Western United States, an electric and natural gas utility company in the Midwestern United States, two interstate natural gas pipeline companies in the United States, two electricity distribution companies in Great Britain, a diversified portfolio of independent power projects and the second largest residential real estate brokerage firm in the United States.

MEHC's energy subsidiaries generate, transmit, store, distribute and supply energy. Approximately 93% of the Company's operating income during 2011 was generated from rate-regulated businesses. As of December 31, 2011 , MEHC's electric and natural gas utility subsidiaries served 6.3 million electricity customers and end-users and 0.7 million natural gas customers. MEHC's natural gas pipeline subsidiaries operate interstate natural gas transmission systems that transported approximately 8% of the total natural gas consumed in the United States during 2011 . These pipeline subsidiaries have approximately 16,600 miles of pipeline and a design capacity of approximately 7.7 Bcf of natural gas per day. As of December 31, 2011 , the Company owned approximately 19,700 MW of generation in operation and under construction, including approximately 18,700 MW of generation that is part of the regulated asset base of its electric utility businesses and approximately 1,000 MW of generation in independent power projects.

Refer to Note 22 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional reportable segment information regarding MEHC's platforms. Effective December 31, 2011, the Company changed its reportable segments. Northern Natural Gas and Kern River have been aggregated in the reportable segment called MidAmerican Energy Pipeline Group and CalEnergy Philippines and MidAmerican Renewables, LLC have been aggregated in the reportable segment called MidAmerican Renewables.

MEHC's principal executive offices are located at 666 Grand Avenue, Suite 500, Des Moines, Iowa 50309-2580 and its telephone number is (515) 242-4300. MEHC was initially incorporated in 1971 as California Energy Company, Inc. under the laws of the state of Delaware and through a merger transaction in 1999 was reincorporated in Iowa under the name MidAmerican Energy Holdings Company.

PacifiCorp

General

PacifiCorp, an indirect wholly owned subsidiary of MEHC, is a United States regulated electric utility company headquartered in Oregon that serves 1.7 million retail electric customers in portions of Utah, Oregon, Wyoming, Washington, Idaho and California. PacifiCorp is principally engaged in the business of generating, transmitting, distributing and selling electricity. PacifiCorp's combined service territory covers approximately 136,000 square miles and includes diverse regional economies ranging from rural, agricultural and mining areas to urban, manufacturing and government service centers. No single segment of the economy dominates the service territory, which helps mitigate PacifiCorp's exposure to economic fluctuations. In the eastern portion of the service territory, consisting of Utah, Wyoming and southeastern Idaho, the principal industries are manufacturing, mining or extraction of natural resources, agriculture, technology and recreation. In the western portion of the service territory, consisting of Oregon, southern Washington and northern California, the principal industries are agriculture, manufacturing, forest products, food processing, technology and primary metals. In addition to retail sales, PacifiCorp sells electricity to other utilities, energy marketing companies, financial institutions and other market participants on a wholesale basis.

PacifiCorp's operations are conducted under numerous franchise agreements, certificates, permits and licenses obtained from federal, state and local authorities. The average term of the franchise agreements is approximately 30 years, although their terms range from five years to indefinite. Several of these franchise agreements allow the municipality the right to seek amendment to the franchise agreement at a specified time during the term. PacifiCorp generally has an exclusive right to serve electric customers within its service territories and, in turn, has an obligation to provide electric service to those customers. In return, the state utility commissions have established rates on a cost-of-service basis, which are designed to allow PacifiCorp an opportunity to recover its costs of providing services and to earn a reasonable return on its investment.

Regulated Electric Operations

Customers

The GWh and percentages of electricity sold to retail customers by jurisdiction for the years ended December 31 were as follows:



	2011			2010			2009

Utah	23,245	43	%	22,477	42	%	22,098	42	%
Oregon	13,014	24		12,717	24		13,422	25
Wyoming	9,793	18		9,680	18		9,202	17
Washington	4,006	7		3,985	8		4,184	8
Idaho	3,440	6		3,326	6		2,956	6
California	809	2		831	2		848	2
	54,307	100	%	53,016	100	%	52,710	100	%

Electricity sold to retail and wholesale customers by class of customer and the average number of retail customers for the years ended December 31 were as follows:



	2011			2010			2009
GWh sold:
Residential	16,046	25	%	15,795	24	%	15,999	24	%
Commercial	16,489	25		15,969	25		16,194	25
Industrial	21,229	32		20,680	32		19,934	31
Other	543	1		572	1		583	1
Total retail	54,307	83		53,016	82		52,710	81
Wholesale	10,767	17		11,415	18		12,349	19
Total GWh sold	65,074	100	%	64,431	100	%	65,059	100	%

Average number of retail customers (in thousands):
Residential	1,483	85	%	1,475	85	%	1,467	85	%
Commercial	221	13		220	13		214	13
Industrial	34	2		34	2		34	2
Other	4	—		4	—		4	—
Total	1,742	100	%	1,733	100	%	1,719	100	%

In addition to the variations in weather from year to year, fluctuations in economic conditions within PacifiCorp's service territory and elsewhere impact customer usage, particularly for industrial and wholesale customers. Beginning in the fourth quarter of 2008 and continuing into 2009, certain customer usage levels declined due to the effects of the economic conditions in the United States. The declining usage trend reversed during 2010 in the eastern side of PacifiCorp's service territory although partially offset by unfavorable weather conditions. The declining usage trend continued during 2010 in the western side of PacifiCorp's service territory. During 2011, PacifiCorp's customer usage levels increased in the eastern service territory primarily due to improving economic conditions and increased in the western service territory mainly due to weather impacts.

The annual hourly peak customer demand, which represents the highest demand on a given day and at a given hour, is typically highest in the summer across PacifiCorp's service territory when air conditioning and irrigation systems are heavily used. The service territory also has a winter peak, which is primarily due to heating requirements in the western portion of PacifiCorp's service territory. During 2011 , PacifiCorp's peak demand was 9,431 MW in the summer and 8,786 MW in the winter.

Generating Facilities and Fuel Supply

PacifiCorp has ownership interest in a diverse portfolio of generating facilities. The following table presents certain information regarding PacifiCorp's owned generating facilities as of December 31, 2011 :



				Facility	Net Owned
				Net Capacity	Capacity
Generating Facility	Location	Energy Source	Installed	(MW) ⁽¹⁾	(MW) ⁽¹⁾
COAL:
Jim Bridger	Rock Springs, WY	Coal	1974-1979	2,118	1,412
Hunter Nos. 1, 2 and 3	Castle Dale, UT	Coal	1978-1983	1,352	1,147
Huntington	Huntington, UT	Coal	1974-1977	909	909
Dave Johnston	Glenrock, WY	Coal	1959-1972	762	762
Naughton	Kemmerer, WY	Coal	1963-1971	700	700
Cholla No. 4	Joseph City, AZ	Coal	1981	395	395
Wyodak	Gillette, WY	Coal	1978	335	268
Carbon	Castle Gate, UT	Coal	1954-1957	172	172
Craig Nos. 1 and 2	Craig, CO	Coal	1979-1980	863	166
Colstrip Nos. 3 and 4	Colstrip, MT	Coal	1984-1986	1,480	148
Hayden Nos. 1 and 2	Hayden, CO	Coal	1965-1976	446	78
				9,532	6,157
NATURAL GAS:
Lake Side	Vineyard, UT	Natural gas/steam	2007	558	558
Currant Creek	Mona, UT	Natural gas/steam	2005-2006	550	550
Chehalis	Chehalis, WA	Natural gas/steam	2003	520	520
Hermiston	Hermiston, OR	Natural gas/steam	1996	474	237
Gadsby Steam	Salt Lake City, UT	Natural gas	1951-1955	231	231
Gadsby Peakers	Salt Lake City, UT	Natural gas	2002	120	120
				2,453	2,216
HYDROELECTRIC:
Lewis River System	WA	Hydroelectric	1931-1958	578	578
North Umpqua River System	OR	Hydroelectric	1950-1956	204	204
Klamath River System	CA, OR	Hydroelectric	1903-1962	170	170
Bear River System	ID, UT	Hydroelectric	1908-1984	105	105
Rogue River System	OR	Hydroelectric	1912-1957	52	52
Minor hydroelectric facilities	Various	Hydroelectric	1895-1986	36	36
				1,145	1,145
WIND:
Marengo	Dayton, WA	Wind	2007-2008	210	210
Glenrock	Glenrock, WY	Wind	2008-2009	138	138
Seven Mile Hill	Medicine Bow, WY	Wind	2008	119	119
Dunlap Ranch	Medicine Bow, WY	Wind	2010	111	111
Leaning Juniper	Arlington, OR	Wind	2006	101	101
High Plains	McFadden, WY	Wind	2009	99	99
Rolling Hills	Glenrock, WY	Wind	2009	99	99
Goodnoe Hills	Goldendale, WA	Wind	2008	94	94
Foote Creek	Arlington, WY	Wind	1999	41	32
McFadden Ridge	McFadden, WY	Wind	2009	28	28
				1,040	1,031
OTHER:
Blundell	Milford, UT	Geothermal	1984, 2007	34	34
Camas Co-Gen	Camas, WA	Black liquor	1996	14	14
				48	48

Total Available Generating Capacity				14,218	10,597

PROJECTS UNDER CONSTRUCTION ⁽²⁾ :
Lake Side 2	Vineyard, UT	Natural gas/steam		637	637
				14,855	11,234

(1)

Facility Net Capacity represents (except for wind-powered generating facilities, which are nominal ratings) the total capability of a generating unit as demonstrated by actual operating or test experience less power generated and used for auxiliaries and other station uses, and is determined using average annual temperatures. A wind turbine generator's nominal rating is the manufacturer's contractually specified capability (in MW) under specified conditions. Net Owned Capacity indicates PacifiCorp's ownership of Facility Net Capacity.


(2)	Facility Net Capacity and Net Owned Capacity for projects under construction each represent the estimated ratings.

The following table shows the percentages of PacifiCorp's total energy supplied by energy source for the years ended December 31:



	2011		2010		2009

Coal	59	%	62	%	63	%
Natural gas	9		12		12
Hydroelectric	7		5		5
Other ⁽¹⁾	5		5		4
Total energy generated	80		84		84
Energy purchased - short-term contracts and other	12		8		10
Energy purchased - long-term contracts	8		8		6
	100	%	100	%	100	%


(1)	All or some of the renewable energy attributes associated with generation from these generating facilities may be: (a) used in future years to comply with RPS or other regulatory requirements, or (b) sold to third parties in the form of renewable energy credits or other environmental commodities.

PacifiCorp is required to have resources available to continuously meet its customer needs. The percentage of PacifiCorp's energy supplied by energy source varies from year to year and is subject to numerous operational and economic factors such as planned and unplanned outages; fuel commodity prices; fuel transportation costs; weather; environmental considerations; transmission constraints; and wholesale market prices of electricity. PacifiCorp evaluates these factors continuously in order to facilitate economical dispatch of its generating facilities. When factors for one energy source are less favorable, PacifiCorp must place more reliance on other energy sources. For example, PacifiCorp can generate more electricity using its low cost hydroelectric and wind-powered generating facilities when factors associated with these facilities are favorable. When factors associated with hydroelectric and wind resources are less favorable, PacifiCorp increases its reliance on coal- and natural gas-fueled generation or purchased electricity. In addition to meeting its customers' energy needs, PacifiCorp is required to maintain operating reserves on its system to mitigate unplanned outages or other disruption in supply, and to meet intra-hour changes in load and resource balance. This operating reserve requirement is dispersed across PacifiCorp's generation portfolio on a least-cost basis based on the operating characteristics of the portfolio. Operating reserves may be held on hydroelectric, coal-fueled or natural gas-fueled resources. PacifiCorp manages certain risks relating to its supply of electricity and fuel requirements by entering into various contracts, which may be accounted for as derivatives, including forwards, futures, options, swaps and other agreements. Refer to Item 7A in this Form 10-K for a discussion of commodity price risk and derivative contracts.

PacifiCorp has interests in coal mines that support its coal-fueled generating facilities and operates the Deer Creek, Bridger surface and Bridger underground coal mines. These mines supplied 28%, 29% and 31% of PacifiCorp's total coal requirements during the years ended December 31, 2011, 2010 and 2009, respectively. The remaining coal requirements are acquired through long- and short-term third-party contracts. PacifiCorp also operates the Cottonwood Preparatory Plant and Wyodak Coal Crushing Facility. PacifiCorp's mines are located adjacent to certain of its coal-fueled generating facilities, which significantly reduces overall transportation costs. Most of PacifiCorp's coal reserves are held pursuant to leases from the federal government through the Bureau of Land Management and from certain states and private parties. The leases generally have multi-year terms that may be renewed or extended only with the consent of the lessor and require payment of rents and royalties. In addition, federal and state regulations require that comprehensive environmental protection and reclamation standards be met during the course of mining operations and upon completion of mining activities.

Coal reserve estimates are subject to adjustment as a result of the development of additional engineering and geological data, new mining technology and changes in regulation and economic factors affecting the utilization of such reserves. Recoverable coal reserves of operating mines as of December 31, 2011 , based on PacifiCorp's most recent engineering studies, were as follows (in millions):



Coal Mine	Location	Generating Facility Served	Mining Method	Recoverable Tons

Bridger	Rock Springs, WY	Jim Bridger	Surface	41	(1	)
Bridger	Rock Springs, WY	Jim Bridger	Underground	39	(1	)
Deer Creek	Huntington, UT	Huntington, Hunter and Carbon	Underground	27	(2	)
Trapper	Craig, CO	Craig	Surface	45	(3	)
				152


(1)	These coal reserves are leased and mined by Bridger Coal Company, a joint venture between Pacific Minerals, Inc. ("PMI") and a subsidiary of Idaho Power Company. PMI, a wholly owned subsidiary of PacifiCorp, has a two-thirds interest in the joint venture. The amounts included above represent only PacifiCorp's two-thirds interest in the coal reserves.


(2)	These coal reserves are leased by PacifiCorp and mined by a wholly owned subsidiary of PacifiCorp.


(3)	These coal reserves are leased and mined by Trapper Mining, Inc., a cooperative in which PacifiCorp has an ownership interest of 21%. The amount included above represents only PacifiCorp's 21% interest in the coal reserves. PacifiCorp does not operate the Trapper mine.

For surface mine operations, PacifiCorp removes the overburden with heavy earth-moving equipment, such as draglines and power shovels. Once exposed, PacifiCorp drills, fractures and systematically removes the coal using haul trucks or conveyors to transport the coal to the associated generating facility. PacifiCorp reclaims disturbed areas as part of its normal mining activities. After final coal removal, draglines, power shovels, excavators or loaders are used to backfill the remaining pits with the overburden removed at the beginning of the process. Once the overburden and topsoil have been replaced, vegetation and plant life are re-established, and other improvements are made that have local community and environmental benefits. Draglines are used at the Bridger surface mine and draglines with shovels and trucks are used at the Trapper surface mine.

For underground mine operations, a longwall is used as a mechanical shearer to extract coal from long rectangular blocks of medium to thick seams. In longwall mining, PacifiCorp also uses continuous miners to develop access to these long rectangular coal blocks. Hydraulically powered supports temporarily hold up the roof of the mine while a rotating drum mechanically advances across the face of the coal seam, cutting the coal from the face. Chain conveyors then move the loosened coal to an underground mine conveyor system for delivery to the surface. Once coal is extracted from an area, the roof is allowed to collapse in a controlled fashion.

In June 2011, Fossil Rock Fuels LLC, a wholly owned subsidiary of PacifiCorp, acquired the Cottonwood coal reserve lease in Emery County Utah. PacifiCorp intends to mine the Cottonwood coal reserves in the future and has estimated the recoverable tons to be 47 million.

Recoverability by surface mining methods typically ranges from 90% to 95%. Recoverability by underground mining techniques ranges from 50% to 70%. To meet applicable standards, PacifiCorp blends coal mined at its owned mines with contracted coal and utilizes emissions reduction technologies for controlling sulfur dioxide and other emissions. For fuel needs at PacifiCorp's coal-fueled generating facilities in excess of coal reserves available, PacifiCorp believes it will be able to purchase coal under both long- and short-term contracts to supply its generating facilities over their currently expected remaining useful lives.

During the year ended December 31, 2011 , PacifiCorp-owned coal-fueled generating facilities held sufficient sulfur dioxide emission allowances to comply with the EPA Title IV requirements. For a further discussion regarding EPA requirements and other environmental laws and regulations, refer to "Environmental Laws and Regulations" in Item 7 of this Form 10-K.

PacifiCorp uses natural gas as fuel for its combined- and simple-cycle natural gas-fueled generating facilities. Oil and natural gas are also used for igniter fuel and to fuel generation for transmission support and standby purposes. These sources are presently in adequate supply and available to meet PacifiCorp's needs.

PacifiCorp operates the majority of its hydroelectric generating portfolio under long-term licenses. The FERC regulates 98% of the net capacity of this portfolio through 15 individual licenses, which have terms of 30 to 50 years, while a portion of the portfolio is licensed under the Oregon Hydroelectric Act. For further discussion of PacifiCorp's hydroelectric relicensing and decommissioning activities, including updated information regarding the Klamath River hydroelectric system, refer to Note 16 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

PacifiCorp has pursued additional renewable resources as a viable, economical and environmentally prudent means of supplying electricity. Renewable resources have low to no emissions, require little or no fossil fuel and are complemented by PacifiCorp's other generating facilities and wholesale transactions. Wind-powered generating facilities placed in service by December 31, 2012 are eligible for federal renewable electricity production tax credits for 10 years from the date the facilities are placed in service.

PacifiCorp purchases and sells electricity in the wholesale markets as needed to balance its generation and long-term purchase commitments with its retail load and long-term wholesale sales obligations. PacifiCorp may also purchase electricity in the wholesale markets when it is more economical than generating electricity from its own facilities. When prudent, PacifiCorp enters into financial swap contracts and forward electricity sales and purchases for physical delivery at fixed prices to reduce its exposure to electricity price volatility.

Transmission and Distribution

PacifiCorp operates one balancing authority area in the western portion of its service territory and one balancing authority area in the eastern portion of its service territory. A balancing authority area is a geographic area with transmission systems that control generation to maintain schedules with other balancing authority areas and ensure reliable operations. In operating the balancing authority areas, PacifiCorp is responsible for continuously balancing electricity supply and demand by dispatching generating resources and interchange transactions so that generation internal to the balancing authority area, plus net imported power, matches customer loads. PacifiCorp also schedules deliveries of energy over its transmission system in accordance with FERC requirements.

PacifiCorp's transmission system is part of the Western Interconnection, the regional grid in the Western United States. The Western Interconnection includes the interconnected transmission systems of 14 western states, two Canadian provinces and parts of Mexico. PacifiCorp's transmission system, together with contractual rights on other transmission systems, enables PacifiCorp to integrate and access generation resources to meet its customer load requirements. PacifiCorp's transmission and distribution system included approximately 16,200 miles of transmission lines and 900 substations as of December 31, 2011 .

PacifiCorp's Energy Gateway Transmission Expansion Program represents plans to build approximately 2,000 miles of new high-voltage transmission lines, with an estimated cost exceeding $6 billion, primarily in Wyoming, Utah, Idaho and Oregon. The $6 billion estimated cost includes: (a) the 345-kV Populus to Terminal transmission line was fully placed in service in 2010; (b) the 100-mile high-voltage transmission line being built between the Mona substation in central Utah and the Oquirrh substation in the Salt Lake Valley expected to be placed in service in 2013; (c) the 345-kV transmission line being built between the Sigurd Substation in central Utah and the Red Butte Substation in southwest Utah expected to be placed in service in 2015; and (d) other segments that are expected to be placed in service through 2021, depending on siting, permitting and construction schedules. The transmission line segments are intended to: (a) address customer load growth; (b) improve system reliability; (c) reduce transmission system constraints; (d) provide access to diverse generation resources, including renewable resources; and (e) improve the flow of electricity throughout PacifiCorp's six-state service area. Proposed transmission line segments are re-evaluated to ensure optimal benefits and timing before committing to move forward with permitting and construction. Through December 31, 2011, $1.1 billion had been spent and $827 million, including amounts capitalized for equity AFUDC, had been placed in service.

Future Generation

As required by certain state regulations, PacifiCorp uses an Integrated Resource Plan ("IRP") to develop a long-term view of prudent future actions required to help ensure that PacifiCorp continues to provide reliable and cost-effective electric service to its customers while maintaining compliance with existing and evolving environmental laws and regulations. The IRP process identifies the amount and timing of PacifiCorp's expected future resource needs and an associated optimal future resource mix that accounts for planning uncertainty, risks, reliability impacts, state energy policies and other factors. The IRP is a coordinated effort with stakeholders in each of the six states where PacifiCorp operates. PacifiCorp files its IRP on a biennial basis, and receives a formal notification in five states as to whether the IRP meets the commission's IRP standards and guidelines, which is referred to as "acknowledgment." In March 2011, PacifiCorp filed its 2011 IRP with the state commissions. In June 2011, an addendum to the 2011 IRP with supplemental resource analysis was filed with the state commissions. PacifiCorp has received acknowledgment of its 2011 IRP from the WPSC, the WUTC and the IPUC. In January 2012, PacifiCorp filed an updated 2011 IRP action plan with the OPUC containing additional details to respond to issues raised by parties to the acknowledgment proceedings.

Demand-side Management

PacifiCorp has provided a comprehensive set of DSM programs to its customers since the 1970s. The programs are designed to reduce energy consumption and more effectively manage when energy is used, including management of seasonal peak loads. PacifiCorp offers services to customers such as energy engineering audits and information on how to improve the efficiency of their homes and businesses. To assist customers in investing in energy efficiency, PacifiCorp offers rebates or incentives encouraging the purchase and installation of high-efficiency equipment such as lighting, heating and cooling equipment, weatherization, motors, process equipment and systems, as well as incentives for efficient construction. Incentives are also paid to solicit participation in load management programs by residential, business and agricultural customers through programs such as PacifiCorp's residential and small commercial air conditioner load control program and irrigation equipment load control programs. Although subject to prudence reviews, state regulations allow for contemporaneous recovery of costs incurred for the DSM programs through state-specific energy efficiency surcharges to retail customers or for recovery of costs through regulated rates. In addition to these DSM programs, PacifiCorp has load curtailment contracts with a number of large industrial customers that deliver up to 305 MW of load reduction when needed. Recovery of the costs associated with the large industrial load management program is determined through PacifiCorp's general rate case process. During 2011 , $114 million was expended on PacifiCorp's DSM programs resulting in an estimated 539,197 MWh of first-year energy savings and an estimated 467 MW of peak load management. Total demand-side load available for control during 2011 , including both load management from the large industrial curtailment contracts and DSM programs, was 719 MW.

MidAmerican Energy

General

MidAmerican Energy, an indirect wholly owned subsidiary of MEHC, is a United States regulated electric and natural gas utility company headquartered in Iowa that serves 0.7 million regulated retail electric customers in portions of Iowa, Illinois and South Dakota and 0.7 million regulated retail and transportation natural gas customers in portions of Iowa, South Dakota, Illinois and Nebraska. MidAmerican Energy is principally engaged in the business of generating, transmitting, distributing and selling electricity and in distributing, selling and transporting natural gas. MidAmerican Energy has a diverse customer base consisting of residential, agricultural and a variety of commercial and industrial customer groups. Some of the larger industrial groups served by MidAmerican Energy include the processing and sales of food products; the manufacturing, processing and fabrication of primary metals; farm and other non-electrical machinery; real estate; and cement and gypsum products. In addition to retail sales and natural gas transportation, MidAmerican Energy sells electricity to markets operated by RTOs and electricity and natural gas to other utilities and market participants on a wholesale basis. MidAmerican Energy is a transmission-owning member of the MISO and participates in its energy and ancillary services markets.

MidAmerican Energy's regulated electric and natural gas operations are conducted under numerous franchise agreements, certificates, permits and licenses obtained from federal, state and local authorities. The franchise agreements, with various expiration dates, are typically for 20- to 25-year terms. Several of these franchise agreements allow the municipality the right to seek amendment to the franchise agreement at a specified time during the term. MidAmerican Energy generally has an exclusive right to serve electric customers within its service territories and, in turn, has an obligation to provide electricity service to those customers. In return, the state utility commissions have established rates on a cost-of-service basis, which are designed to allow MidAmerican Energy an opportunity to recover its costs of providing services and to earn a reasonable return on its investment.

MidAmerican Energy has nonregulated business activities that consist of competitive electricity and natural gas retail sales and natural gas income-sharing arrangements. Nonregulated electric activities predominantly include sales to retail customers in Illinois, Texas and other states that allow customers to choose their energy supplier. Nonregulated natural gas activities predominately include sales to retail customers in Iowa and Illinois. For its nonregulated retail energy activities, MidAmerican Energy purchases electricity and natural gas from producers and third party energy marketing companies and sells it directly to commercial and industrial end-users. MidAmerican Energy does not own nonregulated electricity or natural gas production assets, but hedges its contracted retail obligations either with physical supply arrangements or financial products. As of December 31, 2011 , MidAmerican Energy had contracts in place for the retail sale of electricity and natural gas totaling 17,515,000 MWh and 25,112,000 Dth, respectively, with weighted average lives of 1.3 years and 1.0 years, respectively. In addition, MidAmerican Energy manages natural gas supplies for a number of smaller commercial end-users, which includes the sale of natural gas to these customers to meet their supply requirements.

The percentages of MidAmerican Energy's operating revenue derived from the following business activities for the years ended December 31 were as follows:



	2011		2010		2009

Regulated electric	47	%	47	%	47	%
Regulated gas	22		22		23
Nonregulated and other	31		31		30
	100	%	100	%	100	%

Regulated Electric Operations

Customers

The GWh and percentages of electricity sold to retail customers by jurisdiction for the years ended December 31 were as follows:



	2011			2010			2009

Iowa	19,597	90	%	19,435	90	%	18,074	90	%
Illinois	2,066	9		2,059	9		1,908	9
South Dakota	210	1		216	1		203	1
	21,873	100	%	21,710	100	%	20,185	100	%

Electricity sold to retail and wholesale customers by class of customer and the average number of retail customers for the years ended December 31 were as follows:



	2011			2010			2009
GWh sold:
Residential	6,476	20	%	6,549	19	%	5,907	18	%
Commercial	4,189	13		4,226	12		4,093	12
Industrial	9,586	29		9,310	27		8,627	26
Other	1,622	5		1,625	4		1,558	4
Total retail	21,873	67		21,710	62		20,185	60
Wholesale	10,584	33		13,130	38		13,424	40
Total GWh sold	32,457	100	%	34,840	100	%	33,609	100	%

Average number of retail customers (in thousands):
Residential	630	86	%	627	86	%	624	86	%
Commercial	84	12		84	12		83	12
Industrial	2	—		2	—		2	—
Other	14	2		14	2		14	2
Total	730	100	%	727	100	%	723	100	%

In addition to the variations in weather from year to year, fluctuations in economic conditions within the service territory and elsewhere can impact customer usage, particularly for industrial and wholesale customers. The increase in retail demand during 2010 was substantially the result of weather and higher industrial customer usage driven by improved economic conditions in the United States compared to 2009. The decrease in wholesale sales for 2011 compared to 2010 was driven primarily by the impact of lower market prices.

There are seasonal variations in MidAmerican Energy's electric business that are principally related to the use of electricity for air conditioning and the related effects of weather. Typically, 35-40% of MidAmerican Energy's regulated electric revenue is reported in the months of June, July, August and September.

The annual hourly peak demand on MidAmerican Energy's electric system usually occurs as a result of air conditioning use during the cooling season. Peak demand represents the highest demand on a given day and at a given hour. On July 19, 2011, retail customer usage of electricity caused a record hourly peak demand of 4,752 MW on MidAmerican Energy's electric distribution system, which is 237 MW greater than the previous peak demand of 4,515 MW set July 14, 2010.

Generating Facilities and Fuel Supply

MidAmerican Energy has ownership interest in a diverse portfolio of generating facilities. The following table presents certain information regarding MidAmerican Energy's owned generating facilities as of December 31, 2011 :



				Facility	Net Owned
				Net Capacity	Capacity
Generating Facility	Location	Energy Source	Installed	(MW) ⁽¹⁾	(MW) ⁽¹⁾
COAL:
Walter Scott, Jr. Nos. 1, 2, 3 and 4	Council Bluffs, IA	Coal	1954-2007	1,642	1,167
George Neal Nos. 1, 2 and 3	Sergeant Bluff, IA	Coal	1964-1975	956	810
Louisa	Muscatine, IA	Coal	1983	750	660
Ottumwa	Ottumwa, IA	Coal	1981	664	345
George Neal No. 4	Salix, IA	Coal	1979	645	262
Riverside Nos. 3 and 5	Bettendorf, IA	Coal	1925-1961	137	137
				4,794	3,381
NATURAL GAS:
Greater Des Moines	Pleasant Hill, IA	Natural gas	2003-2004	495	495
Electrifarm	Waterloo, IA	Natural gas/oil	1975-1978	189	189
Pleasant Hill	Pleasant Hill, IA	Natural gas/oil	1990-1994	157	157
Sycamore	Johnston, IA	Natural gas/oil	1974	149	149
River Hills	Des Moines, IA	Natural gas	1966-1967	121	121
Coralville	Coralville, IA	Natural gas	1970	65	65
Moline	Moline, IL	Natural gas	1970	58	58
Parr	Charles City, IA	Natural gas	1969	33	33
28 portable power modules	Various	Oil	2000	56	56
				1,323	1,323
WIND:
Rolling Hills	Massena, IA	Wind	2011	444	444
Pomeroy	Pomeroy, IA	Wind	2007-2011	286	286
Century	Blairsburg, IA	Wind	2005-2008	200	200
Intrepid	Schaller, IA	Wind	2004-2005	176	176
Adair	Adair, IA	Wind	2008	175	175
Walnut	Walnut, IA	Wind	2008	153	153
Carroll	Carroll, IA	Wind	2008	150	150
Laurel	Laurel, IA	Wind	2011	120	120
Victory	Westside, IA	Wind	2006	99	99
Charles City	Charles City, IA	Wind	2008	75	75
				1,878	1,878
NUCLEAR:
Quad Cities Nos. 1 and 2	Cordova, IL	Uranium	1972	1,760	440

OTHER:
Moline Nos. 1-4	Moline, IL	Hydroelectric	1941	3	3

Total Available Generating Capacity				9,758	7,025

PROJECTS UNDER CONSTRUCTION ⁽²⁾ :
Various wind projects	Iowa	Wind		407	407
				10,165	7,432

(1)

Facility Net Capacity represents (except for wind-powered generating facilities, which are nominal ratings) total facility accredited net generating capacity based on MidAmerican Energy's accreditation approved by the MISO. A wind turbine generator's nominal rating is the manufacturer's contractually specified capability (in MW) under specified conditions. The accreditation of the wind-powered generating facilities totaled 172 MW and is considerably less than the nominal ratings due to the varying nature of wind. Additionally, the Laurel and Rolling Hills wind-powered generating facilities and 30 MW of the Pomeroy wind-powered generating facility were placed in service in late 2011 and were not yet accredited by the MISO. Net Owned Capacity indicates MidAmerican Energy's ownership of Facility Net Capacity.


(2)	Facility Net Capacity and Net Owned Capacity for projects under construction each represent the estimated nominal ratings.

The following table shows the percentages of MidAmerican Energy's total energy supplied by energy source for the years ended December 31:



	2011		2010		2009

Coal	64	%	66	%	60	%
Nuclear	11		11		11
Natural gas	1		2		1
Other ⁽¹⁾	13		10		10
Total energy generated	89		89		82
Energy purchased - short-term contracts and other	10		10		11
Energy purchased - long-term contracts	1		1		7
	100	%	100	%	100	%


(1)	All or some of the renewable energy attributes associated with generation from these generating facilities may be: (a) used in future years to comply with RPS or other regulatory requirements or (b) sold to third parties in the form of renewable energy credits or other environmental commodities.

The percentage of MidAmerican Energy's energy supplied by energy source varies from year to year and is subject to numerous operational and economic factors such as planned and unplanned outages; fuel commodity prices; fuel transportation costs; weather; environmental considerations; transmission constraints; and wholesale market prices of electricity. When factors for one energy source are less favorable, MidAmerican Energy must place more reliance on other energy sources. For example, MidAmerican Energy can generate more electricity using its low cost wind-powered generating facilities when factors associated with these facilities are favorable. When factors associated with wind resources are less favorable, MidAmerican Energy must increase its reliance on more expensive generation or purchased electricity. MidAmerican Energy manages certain risks relating to its supply of electricity and fuel requirements by entering into various contracts, which may be accounted for as derivatives, including forwards, futures, options, swaps and other agreements. Refer to Item 7A in this Form 10-K for a discussion of commodity price risk and derivative contracts.

All of the coal-fueled generating facilities operated by MidAmerican Energy are fueled by low-sulfur, western coal from the Powder River Basin in northeast Wyoming. MidAmerican Energy's coal supply portfolio includes multiple suppliers and mines under short-term and multi-year agreements of varying terms and quantities. MidAmerican Energy's coal supply portfolio has all of its expected 2012 requirements under fixed-price contracts. MidAmerican Energy regularly monitors the western coal market for opportunities to enhance its coal supply portfolio. During the year ended December 31, 2011 , MidAmerican Energy-owned generating facilities held sufficient allowances for sulfur dioxide and nitrogen oxides emissions to comply with the EPA Title IV and CAIR or CSAPR requirements. For a further discussion regarding EPA requirements and other environmental laws and regulations, refer to "Environmental Laws and Regulations" in Item 7 of this Form 10-K.

MidAmerican Energy has a long-haul coal transportation agreement with Union Pacific Railroad Company ("Union Pacific") that expires in 2012. Under this agreement, Union Pacific delivers coal directly to MidAmerican Energy's George Neal and Walter Scott, Jr. Energy Centers and to an interchange point with Canadian Pacific Railway for short-haul delivery to the Louisa and Riverside Energy Centers. MidAmerican Energy has the ability to use BNSF Railway Company, an affiliate company, for delivery of coal to the Walter Scott, Jr., Louisa and Riverside Energy Centers should the need arise.

MidAmerican Energy is a 25% joint owner of Quad Cities Generating Station Units 1 and 2 ("Quad Cities Station"), a nuclear power plant. Exelon Generation Company, LLC ("Exelon Generation"), the 75% joint owner and the operator of Quad Cities Station, is a subsidiary of Exelon Corporation. Approximately one-third of the nuclear fuel assemblies in each reactor core at Quad Cities Station is replaced every 24 months. MidAmerican Energy has been advised by Exelon Generation that the following requirements for Quad Cities Station can be met under existing supplies or commitments: uranium requirements through 2015 and partial requirements through 2020; uranium conversion requirements through 2015 and partial requirements through 2020; enrichment requirements through 2015 and partial requirements through 2028; and fuel fabrication requirements through 2019. MidAmerican Energy has been advised by Exelon Generation that it does not anticipate it will have difficulty in contracting for uranium, uranium conversion, enrichment or fabrication of nuclear fuel needed to operate Quad Cities Station during these time periods.

MidAmerican Energy uses natural gas and oil as fuel for intermediate and peak demand electric generation, igniter fuel, transmission support and standby purposes. These sources are presently in adequate supply and available to meet MidAmerican Energy's needs.

MidAmerican Energy owns more wind-powered generating capacity than any other United States rate-regulated electric utility and believes wind-powered generation offers a viable, economical and environmentally prudent means of supplying electricity. Pursuant to ratemaking principles approved by the IUB, all of MidAmerican Energy's wind-powered generating facilities in service at December 31, 2011 are authorized to earn a fixed rate of return on equity over their useful lives ranging from 11.7% to 12.2% in any future Iowa rate proceeding. Additionally, MidAmerican Energy is constructing 407 MW (nominal ratings) of wind-powered generation that it expects to place in service by December 31, 2012, which are authorized to earn a 12.2% return on equity in any future Iowa rate proceeding. Renewable resources have low to no emissions, require little or no fossil fuel and are complemented by MidAmerican Energy's other generating facilities and wholesale transactions. Wind-powered generating facilities placed in service by December 31, 2012 are eligible for federal renewable electricity production tax credits for 10 years from the date the facilities are placed in-service.

MidAmerican Energy purchases and sells electricity and ancillary services in the wholesale markets as needed to balance its generation and long-term purchase commitments with its retail load and long-term wholesale sales obligations. MidAmerican Energy may also purchase electricity in the wholesale markets when it is more economical than generating electricity from its own facilities. MidAmerican Energy utilizes both swaps and fixed-price electricity sales and purchases contracts to reduce its exposure to electricity price volatility.

MidAmerican Energy can enter into wholesale bilateral transactions with a number of parties within the MISO market footprint and can also participate directly in the MISO market. MidAmerican Energy's wholesale transactions can also occur through the Southwest Power Pool, Inc. ("SPP") and PJM Interconnection, L.L.C. ("PJM") RTOs and several other major transmission-owning utilities in the region as a result of transmission interconnections the MISO has with such organizations.

Transmission and Distribution

MidAmerican Energy's transmission and distribution systems included 2,300 miles of transmission lines and 400 substations as of December 31, 2011 . Electricity from MidAmerican Energy's generating facilities and purchased electricity is delivered to wholesale markets and its retail customers via the transmission facilities of MidAmerican Energy and others. MidAmerican Energy determined that participation in an RTO energy and ancillary services market as a transmission-owning member would be superior to continuing as a stand-alone balancing control area and provide MidAmerican Energy with enhanced wholesale marketing opportunities and improved economic dispatch of its generating facilities. Effective September 1, 2009, MidAmerican Energy integrated its transmission facilities with the MISO as a transmission-owning member. Accordingly, MidAmerican Energy now operates its transmission assets at the direction of the MISO.

The MISO manages its energy and ancillary service markets using reliability-constrained economic dispatch of the region's generation. Every five minutes, the MISO analyzes generation commitments to provide market liquidity and transparent pricing while minimizing congestion and maximizing efficient energy transmission. Additionally, the MISO provides transmission service to MidAmerican Energy and others through its open access transmission tariff throughout the MISO footprint.

The long-term transmission planning function is also performed by the MISO through its tariff. Recently, the MISO received FERC approval on changes to this tariff that allows for broad cost allocation for certain types of Multi‑Value Projects ("MVP"). The MISO has identified 17 candidate projects that provide multiple benefits and will qualify for broad cost allocation under their tariff. Four of these candidate projects are expected to be part of the MidAmerican Energy transmission system and owned and operated by MidAmerican Energy. While the analyses performed by the MISO in relation to the MVP demonstrate benefits that exceed costs for the RTO as a whole, the experience for individual members may not necessarily be consistent with that of the MISO as a whole. Therefore, while it is believed that the MISO's transmission system improvements will be beneficial to MidAmerican Energy, incremental charges could exceed incremental benefits.

Regulated Natural Gas Operations

MidAmerican Energy is engaged in the procurement, transportation, storage and distribution of natural gas for customers in its service territory. MidAmerican Energy purchases natural gas from various suppliers and contracts with interstate natural gas pipelines for transportation of the gas from the production areas to MidAmerican Energy's service territory and for storage services to manage fluctuations in system demand and seasonal pricing. MidAmerican Energy sells natural gas and delivery services to end-use customers on its distribution system; sells natural gas to other utilities, municipalities and energy marketing companies; and transports natural gas through its distribution system for a number of end-use customers who have independently secured their supply of natural gas. During 2011 , 49% of the total natural gas delivered through MidAmerican Energy's distribution system was transportation service.

The percentages of natural gas sold to retail customers by jurisdiction for the years ended December 31 were as follows:



	2011		2010		2009

Iowa	76	%	77	%	76	%
South Dakota	13		12		13
Illinois	10		10		10
Nebraska	1		1		1
	100	%	100	%	100	%

The percentages of natural gas sold to retail and wholesale customers by class of customer, total Dth of natural gas sold, total Dth of transportation service and the average number of retail customers for the years ended December 31 were as follows:



	2011		2010		2009

Residential	49	%	45	%	42	%
Commercial ⁽¹⁾	24		22		22
Industrial ⁽¹⁾	4		4		4
Total retail	77		71		68
Wholesale ⁽²⁾	23		29		32
	100	%	100	%	100	%

Total Dth of natural gas sold (000's)	100,154		112,117		121,355
Total Dth of transportation service (000's)	73,045		71,185		69,642
Total average number of retail customers (in millions)	0.7		0.7		0.7


(1)	Commercial and industrial customers are classified primarily based on the nature of their business and natural gas usage. Commercial customers are non-residential customers that use natural gas principally for heating. Industrial customers are non-residential customers that use natural gas principally for their manufacturing processes.


(2)	Wholesale sales are generally made to other utilities, municipalities and energy marketing companies for eventual resale to end-use customers.

There are seasonal variations in MidAmerican Energy's regulated natural gas business that are principally due to the use of natural gas for heating. Typically, 50-60% of MidAmerican Energy's regulated natural gas revenue is reported in the months of January, February, March and December.

On January 15, 2009, MidAmerican Energy recorded its all-time highest peak-day delivery through its distribution system of 1,155,473 Dth. This peak-day delivery consisted of 74% traditional retail sales service and 26% transportation service. MidAmerican Energy's 2011/2012 winter heating season has been mild to date and the peak-day delivery as of February 10, 2012 was 949,368 Dth reached on January 19, 2012. This preliminary peak-day delivery included 68% traditional retail sales service and 32% transportation service.

Fuel Supply and Capacity

MidAmerican Energy is allowed to recover its cost of natural gas from all of its regulated retail natural gas customers through purchased gas adjustment clauses ("PGA"). Accordingly, as long as MidAmerican Energy is prudent in its procurement practices, MidAmerican Energy's regulated retail natural gas customers retain the risk associated with the market price of natural gas. MidAmerican Energy uses several strategies designed to reduce volatility of natural gas prices for its regulated retail natural gas customers while maintaining system reliability. These strategies include purchasing a geographically diverse supply portfolio from producers and third party energy marketing companies, the use of storage gas and peaking facilities, short- and long-term financial and physical gas purchase contracts and regulatory arrangements to share savings and costs with customers.

MidAmerican Energy contracts for firm natural gas pipeline capacity to transport natural gas from production areas to its service territory through direct interconnects to the pipeline systems of several interstate natural gas pipeline systems, including Northern Natural Gas.

MidAmerican Energy utilizes natural gas storage leased from interstate pipelines to meet retail customer requirements and to manage the daily changes in demand due to changes in weather. The storage gas is typically replaced during off-peak months when the demand for natural gas is historically lower than during the heating season. In addition, MidAmerican Energy also utilizes its three LNG facilities to meet peak day demands in the winter. The leased storage and LNG facilities reduce MidAmerican Energy's dependence on natural gas purchases during the volatile winter heating season and can deliver approximately 50% of MidAmerican Energy's design day retail sales requirements.

Natural gas property consists primarily of natural gas mains and services lines, meters, and related distribution equipment, including feeder lines to communities served from natural gas pipelines owned by others. The natural gas distribution facilities of MidAmerican Energy included 22,000 miles of natural gas mains and service lines as of December 31, 2011 .

Demand-side Management

MidAmerican Energy has provided a comprehensive set of DSM programs to its Iowa electric and gas customers since 1990 and to customers in its other jurisdictions in more recent years. The programs are designed to reduce energy consumption and more effectively manage when energy is used, including management of seasonal peak loads. Current programs offer services to customers such as energy engineering audits and information on how to improve the efficiency of their homes and businesses. To assist customers in investing in energy efficiency, MidAmerican Energy offers rebates or incentives encouraging the purchase and installation of high-efficiency equipment such as lighting, heating and cooling equipment, weatherization, motors, process equipment and systems, as well as incentives for efficient construction. Incentives are also paid to residential customers who participate in the air conditioner load control program and nonresidential customers who participate in the nonresidential load management program. Although subject to prudence reviews, state regulations allow for contemporaneous recovery of costs incurred for the DSM programs through state-specific energy efficiency service charges paid by all retail electric and gas customers. During 2011 , $75 million was expended on MidAmerican Energy's DSM programs resulting in an estimated 212,000 MWh of electric and 468,000 Dth of gas first-year energy savings and an estimated 375 MW of electric and 5,407 Dth per day of gas peak load management.

MidAmerican Energy Pipeline Group

The MidAmerican Energy Pipeline Group consists of MEHC's interstate natural gas pipeline companies, Northern Natural Gas and Kern River.

Northern Natural Gas

Northern Natural Gas, an indirect wholly owned subsidiary of MEHC, owns one of the largest interstate natural gas pipeline systems in the United States, which reaches from southern Texas to Michigan's Upper Peninsula. Northern Natural Gas primarily transports and stores natural gas for utilities, municipalities, other pipeline companies, gas marketing companies, industrial and commercial users and other end-users. During 2011 , Northern Natural Gas' transportation and storage revenue accounted for 91% of its total operating revenue, of which 90% was generated from reservation demand charges under firm transportation and storage contracts. About 64% of the reservation demand charges under the firm transportation and storage contracts were from utilities. Except for quantities of natural gas owned and managed for operational and system balancing purposes, Northern Natural Gas does not own the natural gas that is transported through its system. The sale of natural gas for operational and system balancing purposes accounts for the majority of the remaining 9% of Northern Natural Gas' 2011 operating revenue. Northern Natural Gas' transportation and most of its storage operations are subject to a regulated tariff that is on file with the FERC. The tariff rates are designed to provide Northern Natural Gas with an opportunity to recover its costs of providing services and earn a reasonable return on its investments.

Northern Natural Gas' pipeline system, which is interconnected with many interstate and intrastate pipelines in the national grid system, consists of two distinct, but operationally integrated, systems. Its traditional end-use and distribution market area in the northern part of its system, referred to as the Market Area, includes points in Iowa, Nebraska, Minnesota, Wisconsin, South Dakota, Michigan and Illinois. Its natural gas supply and delivery service area in the southern part of its system, referred to as the Field Area, includes points in Kansas, Texas, Oklahoma and New Mexico. Northern Natural Gas' pipeline system consists of 14,900 miles of natural gas pipelines, including 6,500 miles of mainline transmission pipelines and 8,400 miles of branch and lateral pipelines, with a Market Area design capacity of 5.5 Bcf per day, a Field Area delivery capacity of 2.0 Bcf per day to the Market Area and 73 Bcf of storage cycle capacity in five storage facilities. Northern Natural Gas' pipeline system is configured with approximately 2,400 active receipt and delivery points (excluding farm taps) which are integrated with the facilities of LDCs. Many of Northern Natural Gas' LDC customers are part of combined utilities that also use natural gas as a fuel source for electric generation. Northern Natural Gas delivers approximately 0.9 Tcf of natural gas to its customers annually. Based on review of the relevant 2010 industry data, Northern Natural Gas' system is the largest single pipeline in the United States as measured by pipeline miles.

Northern Natural Gas has access to multiple supply basins. The pipeline is positioned such that direct access is available from producers in the Anadarko, Permian and Hugoton basins with increased production from shale and tight sands formations adjacent to Northern Natural Gas' pipeline. During 2011 , the pipeline connected over 250,000 Dth per day of supply access from the Wolfberry shale formation in west Texas and from the Granite Wash tight sands formations in the Texas panhandle and in Oklahoma. Additionally, because of its location and multiple interconnections with several interstate and intrastate pipelines, with receipt, delivery or bi-directional capabilities, Northern Natural Gas also accesses significant natural gas supplies from the Rocky Mountains and Western Canadian Basins. The Rocky Mountains Basin is accessed through interconnects with Trailblazer Pipeline Company, Kinder Morgan Interstate Gas Transmission, LLC, Cheyenne Plains Gas Pipeline Company, LLC, Colorado Interstate Gas Pipeline Company and Rockies Express Pipeline, LLC ("REX"). The Western Canadian production areas are accessed through Northern Border Pipeline Company ("Northern Border"), Great Lakes Gas Transmission Limited Partnership ("Great Lakes") and Viking Gas Transmission Company ("Viking"). This supply diversity and access to both stable and growing production areas provides significant flexibility to Northern Natural Gas' system and customers.

During 2011 , 79% of Northern Natural Gas' transportation and storage revenue was generated from Market Area customer transportation contracts, of which 93% was generated from reservation demand charges and the balance from usage charges. Northern Natural Gas transports natural gas primarily to local distribution markets and end-users in the Market Area. Northern Natural Gas directly serves 78 utilities, including MidAmerican Energy, and in turn, these utilities serve numerous residential, commercial and industrial customers. A majority of Northern Natural Gas' capacity in the Market Area is committed to customers under firm transportation contracts, where customers pay Northern Natural Gas a monthly reservation charge for the right to transport natural gas through Northern Natural Gas' system. As of December 31, 2011 , 58% of Northern Natural Gas' customers' entitlement in the Market Area is contracted beyond 2015. The weighted average remaining contract term for Northern Natural Gas' Market Area firm transportation contracts is approximately four years as of December 31, 2011 .

During 2011 , 10% of Northern Natural Gas' transportation and storage revenue was generated from Field Area customer transportation contracts. In the Field Area, customers holding entitlement consist primarily of energy marketing companies, producers, midstream gatherers and producers, and power generators. The majority of this entitlement is contracted on a short-term basis. Northern Natural Gas expects the current level of Field Area contracting to continue in the foreseeable future, as Market Area customers presently need to purchase competitively-priced supplies from the Field Area to support their existing and growth demand requirements. However, the revenue received from these contracts is expected to vary in relationship to the difference, or "spread," in natural gas prices between the MidContinent and Permian Regions and the price of the alternative supplies that are available to Northern Natural Gas' Market Area.

During 2011 , 11% of Northern Natural Gas' transportation and storage revenue was generated from storage services. Northern Natural Gas' storage services are provided through the operation of one underground natural gas storage field in Iowa, two underground natural gas storage facilities in Kansas and two LNG storage peaking units, one in Iowa and one in Minnesota. The three underground natural gas storage facilities and two LNG storage peaking units have a total firm service and operational storage cycle capacity of 73 Bcf and over 2.0 Bcf of peak day delivery capability. These storage facilities provide operational flexibility for the daily balancing of Northern Natural Gas' system and provide services to customers to meet their winter peaking and year-round load swing requirements.

Since June 2006, Northern Natural Gas has added 14 Bcf of firm storage cycle capacity through investments and modifications made at its Cunningham, Kansas and Redfield, Iowa storage facilities. This capacity was sold to LDCs for terms of 20-21 years.

Northern Natural Gas' system experiences significant seasonal swings in demand and revenue, with the highest demand typically occurring during the months of November through March. This seasonality provides Northern Natural Gas with opportunities to deliver additional value-added services, such as firm and interruptible storage services. As a result of Northern Natural Gas' geographic location in the middle of the United States and its many interconnections with other pipelines, Northern Natural Gas has the opportunity to augment its steady end user and LDC revenue by capitalizing on opportunities for shippers to reach additional markets, such as Chicago, Illinois, other parts of the Midwest, and Texas, through interconnects.

Kern River

Kern River, an indirect wholly owned subsidiary of MEHC, owns an interstate natural gas pipeline system that extends from supply areas in the Rocky Mountains to consuming markets in Utah, Nevada and California. Kern River's pipeline system consists of 1,700 miles of natural gas pipelines, including 1,400 miles of mainline section and 300 miles of common facilities, with a design capacity of 2,166,575 Dth per day. Kern River owns the entire mainline section, which extends from the system's point of origination near Opal, Wyoming, through the Central Rocky Mountains area into Daggett, California. The mainline section consists of 1,300 miles of 36-inch diameter pipeline and 100 miles of various laterals that connect to the mainline. The common facilities are jointly owned by Kern River and Mojave Pipeline Company ("Mojave"), a wholly owned subsidiary of El Paso Corporation, as tenants-in-common, and ownership may increase or decrease pursuant to the capital contributions made by each respective joint owner. Kern River has exclusive rights to 1,613,400 Dth per day of the common facilities' capacity, and Mojave has exclusive rights to 414,000 Dth per day of capacity. Operation and maintenance of the common facilities are the responsibility of Mojave Pipeline Operating Company, an affiliate of Mojave. Except for quantities of natural gas owned for operational purposes, Kern River does not own the natural gas that is transported through its system. Kern River's transportation operations are subject to a regulated tariff that is on file with the FERC. The tariff rates are designed to provide Kern River with an opportunity to recover its costs of providing services and earn a reasonable return on its investments.

Kern River has completed two significant expansion projects in the last two years. The 2010 Expansion project was placed in service in April 2010 and added 145,000 Dth per day of capacity. The Apex Expansion project was placed in service in October 2011 and added 266,000 Dth per day of capacity.

Over 95% of Kern River's design capacity of 2,166,575 Dth per day is contracted pursuant to long-term firm natural gas transportation service agreements, whereby Kern River receives natural gas on behalf of customers at designated receipt points and transports the natural gas on a firm basis to designated delivery points. In return for this service, each customer pays Kern River a fixed monthly reservation fee based on each customer's maximum daily quantity and a commodity charge based on the actual amount of natural gas transported pursuant to its long-term firm natural gas transportation service agreements and Kern River's tariff.

These long-term firm natural gas transportation service agreements expire between April 30, 2013 and September 30, 2031 and have a weighted-average remaining contract term of eight years. Kern River's customers include electric utilities and natural gas distribution utilities, major oil and natural gas companies or affiliates of such companies, electricity generating companies, energy marketing and trading companies, and financial institutions. The utilities provide services in Utah, Nevada and California. As of December 31, 2011 , nearly 85% of the firm capacity under contract has primary delivery points in California, with the flexibility to access secondary delivery points in Nevada and Utah.

Competition

The Pipeline Companies compete with other pipelines on the basis of cost, which includes both the natural gas commodity cost and its transportation cost, flexibility, reliability of service and overall customer service. Natural gas also competes with alternative energy sources, including coal, nuclear energy, wind, geothermal, solar and fuel oil. Legislation and governmental regulations, the weather, the futures market, production costs and other factors beyond the control of the Pipeline Companies influence the price of the natural gas commodity.

The natural gas industry is undergoing a significant shift in supply sources. Production from conventional sources continues to decline while production from unconventional sources, such as shale gas, is rapidly increasing. This shift will affect the supply patterns, the flows and rates that may be charged on pipeline systems. The impact will vary among pipelines according to the location and the number of competitors attached to these new supply sources.

Electric power generation has been the source of most of the growth in demand for natural gas over the last 10 years, and this trend is expected to continue in the future. The growth of natural gas in this sector is influenced by regulation, competition with other energy sources, primarily coal, and increased consumption of electricity as a result of economic growth. Short-term market shifts have been driven by relative costs of coal-fueled generation versus natural gas-fueled generation. A long-term shift away from the use of coal in power generation could be driven by environmental regulations. The future demand for natural gas could be increased by regulations limiting or discouraging coal use. However, natural gas demand could potentially be adversely affected by laws mandating or encouraging renewable power sources that produce fewer GHG emissions than natural gas.

The Pipeline Companies' ability to extend existing customer contracts, remarket expiring contracted capacity or market new capacity is dependent on competitive alternatives, the regulatory environment and the market supply and demand factors at the relevant dates these contracts are eligible to be renewed or extended. The duration of new or renegotiated contracts will be affected by current commodity and transportation prices, competitive conditions and customers' judgments concerning future market trends and volatility.

Subject to regulatory requirements, the Pipeline Companies attempt to recontract or remarket capacity at the maximum rates allowed under their tariffs, although at times the Pipeline Companies discount these rates to remain competitive. The Pipeline Companies' existing contracts mature at various times and in varying amounts of entitlement. The Pipeline Companies manage the recontracting process to mitigate the risk of a significant negative impact on operating revenue.

Historically, the Pipeline Companies have been able to provide competitively priced services because of access to a variety of relatively low cost supply basins, cost control measures and the relatively high level of firm entitlement that is sold on a seasonal and annual basis, which lowers the per unit cost of transportation. To date, the Pipeline Companies have avoided significant pipeline system bypasses and have not experienced any significant non-renewal of firm contracts; however, there could be contracts turned back in the future.

Northern Natural Gas' major competitors in the Market Area include ANR Pipeline Company, Northern Border and Natural Gas Pipeline Company of America LLC. Other competitors include Great Lakes and Viking. In the Field Area, where the vast majority of Northern Natural Gas' capacity is used for transportation services provided on a short-term firm basis, Northern Natural Gas competes with a large number of interstate and intrastate pipeline companies.

With respect to the Field area, Northern Natural Gas believes that the current level of contracting is sustainable to support the firm requirements of Northern Natural Gas' Market Area customers. Generally, the take-away capacity at the Field-Market demarcation point between Northern Natural Gas' Field and Market Areas is fully contracted by Northern Natural Gas' Market Area customers.

Northern Natural Gas needs to compete aggressively to serve existing load and add new customers and load. Northern Natural Gas has been successful in competing for a significant amount of the increased demand related to residential and commercial needs and the construction of new power plants. The growth related to utilities has historically been driven by population growth and increased commercial and industrial needs. The new power plant growth originates from re-powering coal-fueled generation, as well as new combustion and combined-cycle gas-fueled generation. The growth also may be supportive of the continued sale of Northern Natural Gas' storage services and Field Area transportation services.

Kern River competes with various interstate pipelines in developing expansion projects and entering into long-term agreements to serve market growth in Southern California; Las Vegas, Nevada; and Salt Lake City, Utah. Kern River also competes with various interstate pipelines and their customers to market unutilized capacity under shorter term transactions. Kern River provides its customers with supply diversity through pipeline interconnections with Northwest Pipeline Corporation, Colorado Interstate, Overland Trails Pipeline Company, Questar Pipeline Company, and Questar Overthrust Pipeline Company and through indirect pipeline interconnections with Wyoming Interstate Company and REX. These interconnections, in addition to the direct interconnections to natural gas processing facilities, allow Kern River to access natural gas reserves in Colorado, northwestern New Mexico, Wyoming, Utah and the Western Canadian Sedimentary Basin.

Kern River is the only interstate pipeline that presently delivers natural gas directly from the Rocky Mountain gas supply basin to end-users in the Southern California market. This enables direct connect customers to avoid paying a "rate stack" (i.e., additional transportation costs attributable to the movement from one or more interstate pipeline systems to an intrastate system within California). Kern River's levelized rate structure and access to upstream pipelines, storage facilities and economic Rocky Mountain gas reserves increases its competitiveness and attractiveness to end-users. Kern River believes it has an advantage relative to other interstate pipelines serving Southern California because its relatively new pipeline can be economically expanded and has required significantly less capital expenditures and ongoing maintenance than other systems to comply with the Pipeline Safety Improvement Act of 2002. Kern River's favorable market position is tied to the availability and relatively favorable price of gas reserves in the Rocky Mountain area, an area that has attracted considerable expansion of pipeline capacity serving markets other than Southern California and Nevada.

During 2011 , Northern Natural Gas had three customers, including MidAmerican Energy, that each accounted for greater than 10% of its transportation and storage revenue and its ten largest customers accounted for 65% of its system-wide transportation and storage revenue. Northern Natural Gas has agreements to retain the vast majority of its two largest non-affiliated customers' volumes through at least 2017. During 2011 , Kern River had one customer who accounted for greater than 10% of its revenue. The loss of any of these significant customers, if not replaced, could have a material adverse effect on the Pipeline Companies' respective businesses.

Northern Powergrid Holdings

General

Northern Powergrid Holdings, an indirect wholly owned subsidiary of MEHC, is a holding company which owns two companies that distribute electricity in Great Britain, Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc. The Distribution Companies serve 3.9 million end-users and operate in the north-east of England from North Northumberland through Tyne and Wear, County Durham, Cleveland and Yorkshire to North Lincolnshire, an area covering 10,000 square miles. The principal function of the Distribution Companies is to build, maintain and operate the electricity distribution network through which the end-user receives a supply of electricity. In addition to the Distribution Companies, Northern Powergrid Holdings also owns an engineering contracting business that provides electrical infrastructure contracting services to third parties and a hydrocarbon exploration and development business that is focused on developing integrated upstream gas projects in Europe and Australia.

Electricity Distribution

The Distribution Companies receive electricity from the national grid transmission system and distribute it to end-users' premises using their networks of transformers, switchgear and distribution lines and cables. Substantially all of the end-users in the Distribution Companies' distribution service areas are connected to the Distribution Companies' networks and electricity can only be delivered to these end-users through their distribution systems, thus providing the Distribution Companies with distribution volumes that are relatively stable from year to year. The Distribution Companies charge fees for the use of their distribution systems to the suppliers of electricity. The suppliers purchase electricity from generators, sell the electricity to end-user customers and use the Distribution Companies' distribution networks pursuant to an industry standard "Distribution Connection and Use of System Agreement." One supplier, RWE Npower PLC and certain of its affiliates, represented 29% of the total combined distribution revenue of the Distribution Companies during 2011 .

The service territory geographically features a diverse economy with no dominant sector. The mix of rural, agricultural, urban and industrial areas covers a broad customer base ranging from domestic usage through farming and retail to major industry including automotives, chemicals, mining, steelmaking and offshore marine construction. The industry within the area is concentrated around the principal centers of Newcastle, Middlesbrough, Sheffield and Leeds.

The price controlled revenue of the regulated distribution companies is set out in the special conditions of the licenses of those companies. The licenses are enforced by the regulator, the Gas and Electricity Markets Authority through its office of gas and electric markets (known as "Ofgem") and limit increases (or may require decreases) based upon the rate of inflation, other specified factors and other regulatory action. Changes to the price controls can be made only by agreement between a distribution company and the regulator or, if there is no agreement, following a report on a reference by the regulator to the Competition Commission. It has been the convention in the United Kingdom for regulators to conduct periodic regulatory reviews before making proposals for any changes to the price controls. The current electricity distribution price control became effective April 1, 2010 and is expected to continue through March 31, 2015. Ofgem has indicated that future price controls are likely to be set for a period of eight or nine years, with the potential for a mid-period review if the outputs required of a licensee have changed.

GWh and percentages of electricity distributed to end-users and the total number of end-users as of and for the years ended December 31 were as follows:



	2011			2010			2009

Northern Powergrid (Northeast) Limited:
Residential	5,437	35	%	5,764	36	%	5,610	36	%
Commercial	2,476	16		2,614	17		2,586	17
Industrial	7,174	47		7,206	45		7,103	46
Other	269	2		275	2		268	1
	15,356	100	%	15,859	100	%	15,567	100	%

Northern Powergrid (Yorkshire) plc:
Residential	7,885	35	%	8,250	36	%	8,153	36	%
Commercial	3,475	15		3,585	16		3,611	16
Industrial	10,948	48		10,938	47		10,570	47
Other	317	2		321	1		308	1
	22,625	100	%	23,094	100	%	22,642	100	%

Total electricity distributed	37,981			38,953			38,209

Number of end-users (in millions):
Northern Powergrid (Northeast) Limited	1.6			1.6			1.6
Northern Powergrid (Yorkshire) plc	2.3			2.2			2.2
	3.9			3.8			3.8

As of December 31, 2011 , the Distribution Companies' combined electricity distribution network included 18,000 miles of overhead lines, 40,000 miles of underground cables and 700 major substations.

MidAmerican Renewables

The subsidiaries comprising the MidAmerican Renewables reportable segment own interests in 15 independent power projects in the United States and one independent power project in the Philippines. The following table presents certain information concerning these independent power projects as of December 31, 2011 :



						Facility
				Power		Net or	Net
				Purchase		Contract	Owned
		Energy		Agreement	Power	Capacity	Capacity
	Location	Source	Installed	Expiration	Purchaser ⁽¹⁾	(MW) ⁽²⁾	(MW) ⁽²⁾
NATURAL GAS:
Saranac	New York	Natural Gas	1994	2013	EDF	240	90
Power Resources	Texas	Natural Gas	1988	2012	EDF	212	106
Yuma	Arizona	Natural Gas	1994	2024	SDG&E	50	25
Cordova	Illinois	Natural Gas	2001	2019	CECG	537	537
						1,039	758

GEOTHERMAL:
Imperial Valley Projects	California	Geothermal	1982-2000	(3)	(3)	327	164

HYDROELECTRIC:
Casecnan Project ⁽⁴⁾	Philippines	Hydroelectric	2001	2021	NIA	150	128
Wailuku	Hawaii	Hydroelectric	1993	2023	HELCO	10	5
						160	133

Total Available Generating Capacity						1,526	1,055


(1)	EDF Trading North America LLC ("EDF"); San Diego Gas & Electric Company ("SDG&E"); Constellation Energy Commodities Group, Inc. ("CECG"); the Philippine National Irrigation Administration ("NIA"); and Hawaii Electric Light Company, Inc. ("HELCO").


(2)	Facility Net or Contract Capacity represents total plant accredited net generating capacity from the summer of 2011 as approved by MAPP for Cordova and contract capacity for most other projects. Net Owned Capacity indicates the Company's ownership of the Facility Net or Contract Capacity.


(3)	82% of the Company's interests in the Imperial Valley Projects' Contract Capacity are sold to Southern California Edison Company under long-term power purchase agreements expiring in 2016 through 2026.


(4)	Under the terms of the agreement with the NIA, the Company will own and operate the Casecnan project for a 20-year cooperation period which ends December 11, 2021, after which ownership and operation of the project will be transferred to the NIA at no cost on an "as-is" basis. NIA also pays the Company for delivery of water pursuant to the agreement.

In January 2012, MEHC, through a wholly-owned subsidiary, acquired Topaz and its 550-MW Topaz Project in California from a subsidiary of First Solar, Inc. ("First Solar"). The Topaz Project is expected to cost approximately $2.44 billion, including all interest during construction, and will be completed in 22 blocks with an aggregate tested capacity of 586 MW. The Topaz Project expects to place 45 MW in service in 2012, 236 MW in service in 2013, 252 MW in service in 2014 and 53 MW in service in 2015. The Topaz Project is being constructed pursuant to a fixed price, date certain, turn-key engineering procurement and construction contract with a subsidiary of First Solar. Topaz will sell all the electricity, renewable energy credits and other environmental attributes produced by the project to Pacific Gas and Electric Company ("PG&E") pursuant to a 25 year power purchase agreement. A subsidiary of First Solar will operate and maintain the project under a 25 year, fixed-fee operating and maintenance agreement.

In January 2012, MEHC, through a wholly-owned subsidiary, acquired from NRG Energy, Inc. a 49 percent interest in Agua Caliente Solar, LLC ("Agua Caliente"), the owner of a 290-MW solar project (the "Agua Caliente Project") in Arizona. The Agua Caliente Project is expected to cost approximately $1.8 billion and will be completed in 12 blocks with an aggregate tested capacity of 310 MW. The first 30-MW block of the Agua Caliente Project was placed in service in January 2012 and the Agua Caliente Project expects to place 112 additional MW in service in 2012, 136 MW in service in 2013 and 32 MW in service in 2014. The project is being constructed pursuant to a fixed price, date certain, turn-key engineering, procurement and construction contract with a subsidiary of First Solar. Agua Caliente will sell all the electricity, renewable energy credits and other environmental attributes produced by the project to PG&E pursuant to a 25 year power purchase agreement. A subsidiary of First Solar will operate and maintain the project under a 25 year, fixed-fee operating and maintenance agreement.

In December 2011, MEHC, through a wholly-owned subsidiary, signed definitive agreements to acquire the 81-MW Bishop Hill II wind-powered generation project (the "Bishop Hill II Project") in Illinois. The Bishop Hill II Project is expected to be placed in service in 2012. Once completed, the Bishop Hill II Project will sell all of its generation to Ameren Illinois Company pursuant to a 20-year power purchase agreement. Subject to certain closing conditions, the acquisition is expected to close in March 2012.

HomeServices

HomeServices, a majority-owned subsidiary of MEHC, is the second largest full-service residential real estate brokerage firm in the United States. In addition to providing traditional residential real estate brokerage services, HomeServices offers other integrated real estate services, including mortgage originations through a joint venture; title and closing services; property and casualty insurance; home warranties; relocation services; and other home-related services. HomeServices' real estate brokerage business is subject to seasonal fluctuations because more home sale transactions tend to close during the second and third quarters of the year. As a result, HomeServices' operating results and profitability are typically higher in the second and third quarters relative to the remainder of the year. HomeServices currently operates in nearly 300 brokerage offices in 20 states with over 14,000 sales associates under 22 brand names. The United States residential real estate brokerage business is subject to the general real estate market conditions, is highly competitive and consists of numerous local brokers and agents in each market seeking to represent sellers and buyers in residential real estate transactions.

Other Investments

Electric Transmission Joint Ventures

In December 2007, approval was received from the Public Utility Commission of Texas ("PUCT") to establish ETT, a company owned equally by subsidiaries of American Electric Power Company, Inc. ("AEP") and MEHC, to own and operate electric transmission assets in the ERCOT footprint. The PUCT order also approved initial rates based on a 9.96% after tax rate of return on equity and a debt to equity capital structure of 60:40. Presently, ETT has approximately $1.5 billion of Competitive Renewable Energy Zones ("CREZ") projects forecast for completion between 2012 and 2013. Additionally, AEP subsidiaries have transferred to ETT the obligation to build approximately $1.7 billion of transmission projects within ERCOT which, if approved, are forecast for completion between 2012 and 2021. Through December 31, 2011, $1.1 billion has been spent, of which $617 million has been placed in service. ETT's transmission system included 445 miles of transmission lines and 19 substations as of December 31, 2011 .

Electric Transmission America, LLC ("ETA"), is a company owned equally by subsidiaries of AEP and MEHC to pursue transmission opportunities outside of ERCOT. ETA has a joint venture with Westar Energy, Inc. ("Prairie Wind Transmission, LLC") to build and own new electric transmission assets within the SPP. The Prairie Wind Transmission, LLC transmission project in Kansas is expected to begin construction in 2012 and has received the necessary approvals from the FERC, including a return on equity, inclusive of incentives, of 12.8%. ETA also has interests in other transmission projects currently in development in the SPP, MISO and the PJM Interconnection.

Natural Gas Storage Joint Venture

In January 2011, approval was received from the Regulatory Commission of Alaska ("RCA") authorizing Cook Inlet Natural Gas Storage Alaska, LLC ("CINGSA"), a wholly-owned subsidiary of Alaska Storage Holdings Company, LLC ("ASHC"), to own, construct and operate an underground natural gas storage facility in south central Alaska. ASHC is owned 65% by ENSTAR Natural Gas Company, an indirect wholly-owned subsidiary of SEMCO ENERGY, Inc., 26.5% by Alaska Gas Transmission Company, LLC, an indirect wholly-owned subsidiary of MEHC and 8.5% by other minority partners. CINGSA's gas storage facility will include a natural gas reservoir, five injection/withdrawal wells and associated piping allowing for an initial working gas capacity of 11 Bcf and the ability to deliver gas up to 0.15 Bcf per day. The facility is expected to be in-service by the summer of 2012 at an estimated cost of $180 million. The RCA order also approved the inception rates and terms of service. CINGSA has contracted to provide service to four customers for 20 years.

Employees

As of December 31, 2011 , the Company had approximately 15,800 employees, of which approximately 7,300 are covered by union contracts. The majority of the union employees are employed by the Utilities and are represented by the International Brotherhood of Electrical Workers, the Utility Workers Union of America, the International Brotherhood of Boilermakers and the United Mine Workers of America. These collective bargaining agreements have expiration dates ranging through September 2018. HomeServices' sales associates are independent contractors and not employees.

General Regulation

MEHC's subsidiaries are subject to comprehensive governmental regulation, which significantly influences their operating environment, prices charged to customers, capital structure, costs and their ability to recover costs. In addition to the following discussion, refer to "Regulatory Matters" in Item 7 of this Form 10-K.

Domestic Regulated Public Utility Subsidiaries

The Utilities are subject to comprehensive regulation by various federal, state and local agencies. The more significant aspects of this regulatory framework are described below.

State Regulation

Historically, state regulatory commissions have established retail electric and natural gas rates on a cost-of-service basis, which are designed to allow a utility an opportunity to recover what state regulatory commissions deem to be the utility's reasonable costs of providing services, including a fair opportunity to earn a reasonable return on its investments. A utility's cost of service generally reflects its allowed operating expenses, including cost of sales; operation and maintenance expense; depreciation expense; and income and other tax expense, reduced by wholesale electricity sales and other revenue. The allowed operating expenses are typically based on estimates of normalized costs, which may differ from realized costs in a given year covered by the established rates. State regulatory commissions may adjust rates pursuant to a review of (a) the utility's revenue and expenses during a defined test period, (b) the utility's level of investment, or (c) for other reasons. State regulatory commissions typically have the authority to review and change rates on their own initiative; however, they may also initiate reviews at the request of a utility, utility customer, a governmental agency or a representative of a group of customers. The utility and such parties, however, may agree with one another not to request a review of or changes to rates for a specified period of time.

The retail electric rates of the Utilities are generally based on the cost of providing traditional bundled services, including generation, transmission and distribution services. PacifiCorp has established power cost adjustment mechanisms and other cost recovery mechanisms in certain states, which helps mitigate its exposure to changes in costs from those assumed in establishing base rates. As discussed below, MidAmerican Energy is seeking approval from the IUB to implement two adjustment clauses to recover certain anticipated increases in retail coal and coal transportation costs and environmental control expenditures.

Except for Oregon, Washington and Illinois, the Utilities have an exclusive right to serve retail customers within their service territories, and in turn, have an obligation to provide service to those customers. Under Oregon law, PacifiCorp has the exclusive right and obligation to provide electricity distribution services to all customers within its allocated service territory; however, nonresidential customers have the right to choose alternative electricity service suppliers. The impact of this right on the Company's consolidated financial results has not been material. In Washington, state law does not provide for exclusive service territory allocation. PacifiCorp's service territory in Washington is surrounded by other public utilities with whom PacifiCorp has from time to time entered into service area agreements under the jurisdiction of the WUTC. In Illinois, state law has established a competitive environment so that all Illinois customers are free to choose their service supplier. MidAmerican Energy has an obligation to serve customers at regulated cost-based rates that leave MidAmerican Energy's system, but later choose to return, as well as a continuing obligation to serve customers who have not selected a competitive electricity provider. To date, there has been no significant loss of customers in Illinois.

PacifiCorp

In addition to recovery through base rates, PacifiCorp also achieves recovery of certain costs through various adjustment mechanisms as summarized below.



State Regulator	Base Rate Test Period	Adjustment Mechanism
UPSC	Forecasted or historical with known and measurable changes ⁽¹⁾	EBA under which 70% of the difference between base net power costs set during a general rate case and actual net power costs is deferred and reflected in future rates.

		Balancing account to provide for the recovery or refund of the difference between the level of REC revenues included in base rates and actual REC revenues.

		Recovery mechanism for single capital investments that in total exceed 1% of existing rate base when a general rate case has occurred within the preceding 18 months.

OPUC	Forecasted	Annual TAM based on forecasted net variable power costs; no true-up to actual net variable power costs.

		Renewable Adjustment Clause to recover the revenue requirement of new renewable resources and associated transmission that are not reflected in general rates.

		Balancing account to provide for the refund of actual REC revenues.

WPSC	Forecasted or historical with known and measurable changes ⁽¹⁾	ECAM under which 70% of the difference between base net power costs set during a general rate case and actual net power costs is deferred and reflected in future rates.

		REC and sulfur dioxide revenue adjustment mechanism to provide for recovery or refund of 100% of any difference between actual REC and sulfur dioxide revenues and the level forecasted in base rates.

WUTC	Historical with known and measurable changes	Deferral mechanism of costs for up to 24 months of new base load generation resources and eligible renewable resources and related transmission that qualify under the state's emissions performance standard and are not reflected in base rates.

		REC revenue tracking mechanism to provide for the refund of Washington-allocated REC revenues.

IPUC	Historical with known and measurable changes	ECAM under which 90% of the difference between base net power costs set during a general rate case and actual net power costs is deferred and reflected in future rates. Also provides for recovery or refund of 100% of the difference between the level of REC and sulfur dioxide revenues included in base rates and actual REC and sulfur dioxide revenues.

CPUC	Forecasted	PTAM for major capital additions that allows for rate adjustments outside of the context of a traditional general rate case for the revenue requirement associated with capital additions exceeding $50 million on a total-company basis. Filed as eligible capital additions are placed into service.

		Energy Cost Adjustment Clause that allows for an annual update to actual and forecasted net variable power costs.

		PTAM for attrition, a mechanism that allows for an annual adjustment to costs other than net variable power costs.


(1)	PacifiCorp has relied on both historical test periods with known and measurable adjustments, as well as forecasted test periods.

Generally, PacifiCorp's DSM program costs are collected through separately established rates that are adjusted periodically based on actual and expected costs, as approved by the respective state regulatory commission. As such, DSM program activities have no impact on net income.

MidAmerican Energy

Iowa law permits rate-regulated utilities to seek ratemaking principles with the IUB prior to the construction of certain types of new generating facilities. Pursuant to this law, MidAmerican Energy has applied for and obtained IUB ratemaking principles orders for 484 MW of coal-fueled generation, 495 MW of combined cycle natural gas-fueled generation and 1,878 MW (nominal ratings) of wind-powered generation in service at December 31, 2011. The related ratemaking principles approved by the IUB have authorized, upon the establishment of new Iowa electric base rates, a fixed rate of return on equity for the generating facilities covered by each settlement agreement with interested parties, including the OCA, over the regulatory life of those facilities. As of December 31, 2011, $3.3 billion, or 42%, of property, plant and equipment, net, was subject to the agreements at a weighted average return on equity of 12.0%. Additionally, MidAmerican Energy is constructing 407 MW (nominal ratings) of wind-powered generating facilities to be placed in service in 2012 subject to an existing ratemaking principles order authorizing a fixed rate of return on equity of 12.2%. That order, which also applies to 594 MW (nominal ratings) placed in service in 2011, was appealed by an intervenor and is currently pending before the Iowa Supreme Court. Many of the IUB orders approved settlement agreements that also provided for sharing with customers revenues associated with Iowa retail electric returns on equity in excess of 11.75% and for rate freezes into the future. Under a 2009 settlement agreement, MidAmerican Energy was allowed to record revenue sharing to increase its 2011 returns on equity to 10% for the wind-powered generating facilities placed in service in 2011.

The IUB approved over the past several years a series of electric settlement agreements between MidAmerican Energy, the OCA and other intervenors under which MidAmerican Energy agreed not to seek a general increase in electric base rates to become effective prior to January 1, 2014. However, if MidAmerican Energy's Iowa jurisdictional return on equity fell below 10% for 2011 or was projected to fall below 10% for 2013, then MidAmerican Energy was permitted to seek a general increase in electric base rates to become effective in 2012 or 2013, respectively. As a party to the settlement agreements, the OCA agreed not to request or support any decrease in MidAmerican Energy's Iowa electric base rates to become effective prior to January 1, 2014. The settlement agreements specifically allowed the IUB to approve or order electric rate design or cost of service rate changes that could have resulted in changes to rates for specific customers as long as such changes did not result in an overall increase in revenue for MidAmerican Energy.

MidAmerican Energy's actual Iowa jurisdictional return on equity for 2011 was below 10%. Accordingly, on February 21, 2012, MidAmerican Energy filed an application with the IUB for an interim and final increase in Iowa retail electric rates in the form of two adjustment clauses to be added to customers' bills. The requested adjustment clauses and a modification to current revenue sharing provisions are consistent with a November 2011 settlement agreement between MidAmerican Energy and the OCA, in which the parties agree to support the proposed changes. The adjustment clauses would recover anticipated increases in retail coal and coal transportation costs and environmental control expenditures subject to an aggregate maximum of $39 million, or 3.4%, for 2012 and an additional $37 million for an aggregate maximum of $76 million for 2013, or a 3.2% increase from 2012. The requested modification to the existing revenue sharing provisions provides for MidAmerican Energy to share with its customers 20% of revenue associated with Iowa electric returns on equity between 10% and 10.5%, 50% of revenue associated with Iowa electric returns on equity between 10.5% and 11.75%, 75% of revenue associated with Iowa electric returns on equity between 11.75% and 13.0% and 83.3% of revenue associated with Iowa electric returns on equity above 13.0%. Such shared amounts would reduce MidAmerican Energy's investment in the Walter Scott, Jr. Energy Center Unit 4. There would be no revenue sharing for Iowa electric returns on equity below 10%. Pursuant to the settlement agreement, MidAmerican Energy is not precluded from seeking interim rate relief in 2013.

MidAmerican Energy is exposed to fluctuations in electric energy costs relating to retail sales in Iowa and Illinois as it does not have energy cost adjustment mechanisms through which fluctuations in electric energy costs can be recovered in those jurisdictions. Upon implementation of the adjustment clauses, subject to the aggregate maximums, discussed above, MidAmerican Energy will be able to mitigate a portion of its exposure to fluctuating electric energy costs in Iowa. Beginning November 2011, MidAmerican Energy is allowed to petition for implementation of a fuel adjustment clause in Illinois. MidAmerican Energy's cost of gas is collected for each jurisdiction in its gas rates through a uniform PGA, which is updated monthly to reflect changes in actual costs. Subject to prudence reviews, the PGA accomplishes a pass-through of MidAmerican Energy's cost of gas to its customers and, accordingly, has no direct effect on net income. MidAmerican Energy's DSM program costs are collected through separately established rates that are adjusted annually based on actual and expected costs, as approved by the respective state regulatory commission. As such, recovery of DSM program costs has no impact on net income.

MidAmerican Energy has begun preliminary investigation into possible development of a nuclear generation facility. In support of such investigatory activities, Iowa law authorizes recovery of approximately $15 million over three years beginning in October 2010 from MidAmerican Energy's Iowa customers for the cost of this effort, subject to the review of the IUB. MidAmerican Energy has not entered into any material commitments with regard to nuclear facility development.

Federal Regulation

The FERC is an independent agency with broad authority to implement provisions of the Federal Power Act, the Natural Gas Act ("NGA"), the Energy Policy Act of 2005 ("Energy Policy Act") and other federal statutes. The FERC regulates rates for wholesale sales of electricity; transmission of electricity, including pricing and regional planning for the expansion of transmission systems; electric system reliability; utility holding companies; accounting; securities issuances; and other matters, including construction and operation of hydroelectric facilities. The FERC also has the enforcement authority to assess civil penalties of up to $1 million per day per violation of rules, regulations and orders issued under the Federal Power Act. The Utilities have implemented programs that facilitate compliance with the FERC regulations described below, including having instituted compliance monitoring procedures. MidAmerican Energy is also subject to regulation by the NRC pursuant to the Atomic Energy Act of 1954, as amended ("Atomic Energy Act"), with respect to its ownership of Quad Cities Station.

Wholesale Electricity and Capacity

The FERC regulates the Utilities' rates charged to wholesale customers for electricity and transmission capacity and related services. Most of the Utilities' wholesale electricity sales and purchases occur under market-based pricing allowed by the FERC and are therefore subject to market volatility.

The Utilities are currently authorized by the FERC to sell electricity in wholesale electricity markets at market-based rates and are subject to triennial reviews conducted by the FERC. During such reviews, the Utilities each must demonstrate a lack of market power over sales of wholesale electricity and electric generation capacity in their respective market areas. PacifiCorp's most recent triennial filing was made in June 2010. In June 2011, the FERC issued an order finding that PacifiCorp's submittals satisfied the FERC's requirements for market-based rate authority. MidAmerican Energy's most recent triennial filings were submitted in June 2011 for the FERC-defined Northeast Region and November 2011 for the FERC-defined Central Region. In February 2012, the FERC issued an order finding that MidAmerican Energy's June 2011 submittal satisfied the FERC's requirements for market-based rate authority. The November 2011 submission is currently pending before the FERC. Under the FERC's market-based rules, the Utilities must also file with the FERC a notice of change in status when there is a significant change in the conditions that the FERC relied upon in granting market-based pricing authority.

Transmission

PacifiCorp's wholesale transmission services are regulated by the FERC under cost-based regulation subject to PacifiCorp's Open Access Transmission Tariff ("OATT"). These services are offered on a non-discriminatory basis, which means that all potential customers are provided an equal opportunity to access the transmission system. PacifiCorp's transmission business is managed and operated independently from its wholesale marketing business in accordance with the FERC's Standards of Conduct. PacifiCorp has made several required compliance filings in accordance with these rules.

In December 2011, PacifiCorp adopted a cost-based formula rate under its OATT for its transmission services. Cost-based formula rates are intended to be an effective means of recovering PacifiCorp's investments and associated costs of its transmission system without the need to file rate cases with the FERC, although the rates are subject to legal challenges at the FERC. A significant portion of these services are provided to PacifiCorp's commercial and trading function.

Effective September 1, 2009, MidAmerican Energy turned over functional control of its transmission system to the MISO as a transmission-owning member, as approved by the FERC. Accordingly, the MISO is now the transmission provider under its FERC-approved OATT. While the MISO is responsible for directing the operation of MidAmerican Energy's transmission system, MidAmerican Energy retains ownership of its transmission assets and, therefore, is subject to the FERC's reliability standards discussed below. MidAmerican Energy's transmission business is managed and operated independently from its wholesale marketing business in accordance with the FERC Standards of Conduct.

The FERC has established an extensive number of reliability standards developed by the North American Electric Reliability Corporation ("NERC") and the WECC, including critical infrastructure protection standards and regional standard variations. The Utilities must comply with all applicable standards. Compliance, enforcement and monitoring oversight of these standards is carried out by the FERC, the NERC and WECC for PacifiCorp and the Midwest Reliability Organization ("MRO") for MidAmerican Energy. In 2007, the WECC audited PacifiCorp's compliance with several of the approved reliability standards, and in November 2008, the FERC assumed control of certain aspects of the WECC's audit. The aspects of the 2007 audit not under the FERC's authority are closed as a result of PacifiCorp's July 2009 settlement with the WECC, which did not have a material impact on the Company's consolidated financial results.

Hydroelectric Relicensing

PacifiCorp's Klamath River hydroelectric system is the only significant hydroelectric system for which PacifiCorp is currently engaged in the relicensing process with the FERC. PacifiCorp also has requested the FERC to allow decommissioning of certain hydroelectric systems. Most of PacifiCorp's hydroelectric generating facilities are licensed by the FERC as major systems under the Federal Power Act, and certain of these systems are licensed under the Oregon Hydroelectric Act. Refer to Note 16 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for an update regarding hydroelectric relicensing for PacifiCorp's Klamath River hydroelectric system.

Nuclear Regulatory Commission

MidAmerican Energy is subject to the jurisdiction of the NRC with respect to its license and 25% ownership interest in Quad Cities Station. Exelon Generation, the operator and 75% owner of Quad Cities Station, is under contract with MidAmerican Energy to secure and keep in effect all necessary NRC licenses and authorizations.

The NRC regulates the granting of permits and licenses for the construction and operation of nuclear generating stations and regularly inspects such stations for compliance with applicable laws, regulations and license terms. Current licenses for Quad Cities Station provide for operation until December 14, 2032. The NRC review and regulatory process covers, among other things, operations, maintenance, and environmental and radiological aspects of such stations. The NRC may modify, suspend or revoke licenses and impose civil penalties for failure to comply with the Atomic Energy Act, the regulations under such Act or the terms of such licenses. Following the March 2011 earthquake and tsunami in Japan that severely damaged the Fukushima Daiichi nuclear generating facility, the NRC launched a review of the incident to determine any issues that may be applicable to the nuclear industry in the United States. The impact of the NRC's review cannot be predicted but could result in higher operations and maintenance expense, higher capital costs or extended outages at Quad Cities Station.

Federal regulations provide that any nuclear operating facility may be required to cease operation if the NRC determines there are deficiencies in state, local or utility emergency preparedness plans relating to such facility, and the deficiencies are not corrected. Exelon Generation has advised MidAmerican Energy that an emergency preparedness plan for Quad Cities Station has been approved by the NRC. Exelon Generation has also advised MidAmerican Energy that state and local plans relating to Quad Cities Station have been approved by the Federal Emergency Management Agency.

MidAmerican Energy maintains financial protection against catastrophic loss associated with its interest in Quad Cities Station through a combination of insurance purchased by Exelon Generation (the operator and joint owner of Quad Cities Station), insurance purchased directly by MidAmerican Energy, and the mandatory industry-wide loss funding mechanism afforded under the Price-Anderson Amendments Act of 1988, which was amended and extended by the Energy Policy Act of 2005. The general types of coverage are: nuclear liability, property damage or loss and nuclear worker liability.

United States Mine Safety

PacifiCorp's mining operations are regulated by the Federal Mine Safety and Health Administration, which administers federal mine safety and health laws and regulations, and state regulatory agencies. The Federal Mine Safety and Health Administration has the statutory authority to institute a civil action for relief, including a temporary or permanent injunction, restraining order or other appropriate order against a mine operator who fails to pay penalties or fines for violations of federal mine safety standards. Federal law requires PacifiCorp to have a written emergency response plan specific to each underground mine it operates, which is reviewed by the Federal Mine Safety and Health Administration every six months, and to have at least two rescue teams located within one hour of each mine. Information regarding PacifiCorp's mine safety violations and other legal matters disclosed in accordance with Section 1503(a) of the Dodd-Frank Reform Act is included in Exhibit 95 to this Form 10-K.

Interstate Natural Gas Pipeline Subsidiaries

The Pipeline Companies are regulated by the FERC, which administers, most significantly, the NGA and the Natural Gas Policy Act of 1978. Under this authority, the FERC regulates, among other items, (a) rates, charges, terms and conditions of service and (b) the construction and operation of interstate pipelines, storage and related facilities, including the extension, expansion or abandonment of such facilities. The Pipeline Companies hold certificates of public convenience and necessity issued by the FERC, which authorizes them to construct, operate and maintain their pipeline and related facilities and services.

FERC regulations and the Pipeline Companies' tariffs allow each of the Pipeline Companies to charge approved rates for the services set forth in their respective tariff. These rates are a function of the cost of providing services to their customers, including operations and maintenance costs, taxes, interest, depreciation and amortization and an opportunity to earn a reasonable return on its investments. Both Northern Natural Gas' and Kern River's tariff rates have been developed under a rate design methodology whereby substantially all fixed costs, including a return on invested capital and income taxes, are collected through reservation charges, which are paid by firm transportation and storage customers regardless of volumes shipped. Commodity charges, which are paid only with respect to volumes actually shipped, are designed to recover the remaining, primarily variable, cost. Kern River's reservation rates have historically been approved using a "levelized" cost-of-service methodology so that the rate remains constant over the levelization period. This levelized cost of service has been achieved by using a FERC-approved depreciation schedule in which depreciation increases as interest expense and return on equity amounts decrease. Both Northern Natural Gas' and Kern River's rates are subject to change in future general rate proceedings.

Natural gas transportation companies may not grant any undue preference to any customer. FERC regulations also restrict each pipeline's marketing affiliates' access to certain non-public information regarding their affiliated interstate natural gas transmission pipelines.

Interstate natural gas pipelines are also subject to regulations by a federal agency within the United States Department of Transportation ("DOT"), pursuant to the Natural Gas Pipeline Safety Act of 1968, as amended ("NGPSA"), the Pipeline Safety Improvement Act of 2002 ("2002 Act"), the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006 ("2006 Act") and the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 ("2011 Act").

The NGPSA establishes safety requirements in the design, construction, operation and maintenance of interstate natural gas facilities. The NGPSA also requires an entity that owns or operates pipeline facilities to comply with applicable safety standards, to establish and keep current inspection and maintenance plans and to comply with such plans. The Pipeline Companies conduct internal audits of their facilities every four years; with more frequent reviews of those deemed higher risk. The DOT routinely audits and inspects the pipeline facilities for compliance with its regulations. Compliance issues that arise during these audits or during the normal course of business are addressed on a timely basis. The Pipeline Companies believe that their respective pipeline systems comply in all material respects with the NGPSA and with DOT regulations issued pursuant to the NGPSA.

The 2002 Act and the 2006 Act further amended the NGPSA and established additional safety and pipeline integrity regulations for all natural gas pipelines in high-consequence areas. The 2002 Act imposed major new requirements in the areas of operator qualifications, risk analysis and integrity management. The 2002 Act requires more frequent periodic inspection or testing of natural gas pipelines in areas where the potential consequences of a natural gas pipeline accident may be significant or may do considerable harm to persons or property, which are referred to as high consequence areas. Pursuant to the 2002 Act, the DOT promulgated new regulations that require natural gas pipeline operators to develop comprehensive integrity management programs, to identify applicable threats to natural gas pipeline segments that could impact high consequence areas, to assess these segments, and to provide ongoing mitigation and monitoring. The regulations require that all baseline high consequence area segments be assessed by December 17, 2012 and require recurring inspections every seven years thereafter. The Pipeline Companies have completed the required high consequence area line pipe baseline integrity assessments and will complete other associated assessments in 2012. Kern River also completed the required in-line inspections in early 2011 on that portion of its pipeline system required by the conditions associated with a special permit which allowed for an increase to the maximum allowable operating pressure.

The 2006 Act required pipeline operators to institute human factors management plans for personnel employed in pipeline control centers. DOT regulations published pursuant to the 2006 Act required development of written control room management procedures no later than August 2011, and implementation of the procedures no later than February 1, 2013. The implementation date was subsequently accelerated to August 2011 for many of the control room management program elements as many required little implementation time once the program and procedures were written. Some elements, including alarm management, required more time to implement and these aspects of the program have a required implementation date of August 2012. The Pipeline Companies met the August 2011 deadline for the applicable parts of the program and are taking the necessary steps to ensure compliance with all aspects of the 2006 Act requirements by the established dates.

As a result of recent natural gas pipeline incidents, most notably the San Bruno natural gas pipeline explosion that occurred in September 2010 in California, the DOT issued an Advanced Notice of Proposed Rule Making in August 2011, and additionally in January 2012, the President signed the 2011 Act. The new natural gas pipeline safety legislation and the rulemaking measure strengthen the DOT's ability to regulate interstate natural gas pipeline companies, increase the maximum allowable civil penalties for violations, and impose additional natural gas pipeline integrity requirements on the transmission pipeline industry. While the general requirements of the new legislation are known, the DOT is now developing the new rules and regulations. The full extent of the new regulations under development and the cost of compliance are not fully known at this time.

United Kingdom Electricity Distribution Companies

The Distribution Companies, as holders of electricity distribution licenses, are subject to regulation by the GEMA. GEMA discharges certain of its powers through its staff within Ofgem. Each of fourteen licensed distribution network operators ("DNOs") distributes electricity from the national grid system to end users within their respective distribution service areas.

DNOs are subject to price controls, enforced by Ofgem, that limit the revenue that may be recovered and retained from their electricity distribution activities. The regulatory regime that has been applied to electricity distributors in the United Kingdom encourages companies to look for efficiency gains in order to improve profits. The distribution price control formula also adjusts the revenue received by DNOs to reflect a number of factors, including, but not limited to, the rate of inflation (as measured by the retail price index), the quality of service delivered by the licensee's distribution system and system losses (i.e., the difference between the number of units entering and leaving the licensee's system). Currently, price controls are established every five years, although the formula has been, and may be, reviewed at the regulator's discretion. Ofgem has indicated that future price controls are likely to be set for a period of eight or nine years, with the potential for a mid-period review if the outputs required of a licensee have changed. The procedure and methodology adopted at a price control review are at the reasonable discretion of Ofgem. Historically, Ofgem's judgment of the future allowed revenue of licensees has been based upon, among other things:


•	actual operating costs of each of the licensees;


•	pension deficiency payments of each of the licensees;


•	operating costs which each of the licensees would incur if it were as efficient as, in Ofgem's judgment, the more efficient licensees;


•	taxes that each licensee is expected to pay;


•	regulatory value ascribed to and the allowance for depreciation related to the distribution network assets;


•	rate of return to be allowed on investment in the distribution network assets by all licensees; and


•	financial ratios of each of the licensees and the license requirement for each licensee to maintain investment grade status.

The current electricity distribution price control became effective April 1, 2010 and is expected to continue through March 31, 2015. A resetting of the formula can now be made by GEMA without the consent of the DNO, but if a licensee wishes to appeal such a modification, the licensee may insist that the matter is referred to the UK's Competition Commission for it to determine whether the modification should be made. Certain other interested parties also have the same right. The Distribution Companies each agreed to Ofgem's proposals for the resetting of the formula that commenced April 1, 2010.

A number of incentive schemes also operate within the current price control period to encourage DNOs to provide an appropriate quality of service to end users with specified payments to be made for failures to meet prescribed standards of service. The aggregate of these guaranteed standards payments is uncapped, but may be excused in certain prescribed circumstances that are generally beyond the control of the DNO.

The most recent price control review conducted by Ofgem led to an increase in allowed revenue for the Distribution Companies. As a result, excluding the effects of incentive schemes, it is expected the base allowed revenue of Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc will be permitted to increase by approximately 7.7% and 6.5%, respectively, plus inflation (as measured by the United Kingdom's Retail Prices Index) in each of the five regulatory years that commenced April 1, 2010.

Ofgem also monitors DNO compliance with license conditions and enforces the remedies resulting from any breach of condition. License conditions include the prices and terms of service, financial strength of the DNO, the provision of information to Ofgem and the public, as well as maintaining transparency, non-discrimination and avoidance of cross-subsidy in the provision of such services. Ofgem also monitors and enforces certain duties of a DNO set out in the Electricity Act of 1989 including the duty to develop and maintain an efficient, coordinated and economical system of electricity distribution. Under the Utilities Act 2000, the regulators are able to impose financial penalties on DNOs who contravene any of their license duties or certain of their duties under the Electricity Act 1989, as amended, or who are failing to achieve a satisfactory performance in relation to the individual standards prescribed by GEMA. Any penalty imposed must be reasonable and may not exceed 10% of the licensee's revenue.

Independent Power Projects

Foreign

The Philippine Congress has passed the Electric Power Industry Reform Act of 2001 ("EPIRA"), which is aimed at restructuring the Philippine power industry, privatizing the National Power Corporation and introducing a competitive electricity market, among other initiatives. The implementation of EPIRA may impact the Company's future operations in the Philippines and the Philippine power industry as a whole, the effect of which is not yet known as changes resulting from EPIRA are ongoing.

Domestic

The Cordova, Saranac, Power Resources and Agua Caliente independent power projects are Exempt Wholesale Generators ("EWG") under the Energy Policy Act while the Yuma, Imperial Valley and Wailuku independent power projects are currently certified as Qualifying Facilities ("QF") under the Public Utility Regulatory Policies Act of 1978. Both EWGs and QFs are generally exempt from compliance with extensive federal and state regulations that control the financial structure of an electric generating plant and the prices and terms at which electricity may be sold by the facilities. In addition, the Cordova, Saranac, Power Resources and Yuma independent power projects have obtained authority from the FERC to sell their power using market-based rates.

EWGs are permitted to sell capacity and electricity only in the wholesale markets, not to end users. Additionally, utilities are required to purchase electricity produced by QFs at a price that does not exceed the purchasing utility's "avoided cost" and to sell back-up power to the QFs on a non-discriminatory basis, unless they have successfully petitioned the FERC for an exemption from this purchase requirement. Avoided cost is defined generally as the price at which the utility could purchase or produce the same amount of power from sources other than the QF on a long-term basis. The Energy Policy Act eliminated the purchase requirement for utilities with respect to new contracts under certain conditions. New QF contracts are also subject to FERC rate filing requirements, unlike QF contracts entered into prior to the Energy Policy Act. FERC regulations also permit QFs and utilities to negotiate agreements for utility purchases of power at rates other than the utilities' avoided cost.

Residential Real Estate Brokerage Company

HomeServices is regulated by the United States Department of Housing and Urban Development ("HUD"), most significantly under the Real Estate Settlement Procedures Act ("RESPA"), and by state agencies where it operates. RESPA primarily governs the real estate settlement process by mandating all parties fully inform borrowers about all closing costs, lender servicing and escrow account practices, and business relationships between closing service providers and other parties to the transaction. In addition, certain provisions of the Dodd-Frank Reform Act, enacted in July 2010 and effective in July 2011, require real estate mortgage lenders to verify a borrower's ability to repay the underlying loan, which can be achieved within the context of a safe harbor if the mortgage is a "qualifying" mortgage that satisfies specific statutory criteria and the costs of the loan to the borrower do not exceed a mandated threshold percentage. In implementing these provisions, HomeServices and its affiliates incurred additional legal and regulatory compliance costs.

Environmental Laws and Regulations

The Company is subject to federal, state, local and foreign laws and regulations regarding air and water quality, RPS, emissions performance standards, climate change, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact the Company's current and future operations. In addition to imposing continuing compliance obligations and capital expenditure requirements, these laws and regulations provide regulators with the authority to levy substantial penalties for noncompliance including fines, injunctive relief and other sanctions. These laws and regulations are administered by the EPA and various other state, local and international agencies. All such laws and regulations are subject to a range of interpretation, which may ultimately be resolved by the courts. Environmental laws and regulations continue to evolve, and the Company is unable to predict the impact of the changing laws and regulations on its operations and consolidated financial results. The Company believes it is in material compliance with all applicable laws and regulations.

Refer to "Environmental Laws and Regulations" in Item 7 of this Form 10-K for additional information regarding environmental laws and regulations and "Liquidity and Capital Resources" for the Company's forecasted environmental-related capital expenditures.

Item 1A. Risk Factors

We and our subsidiaries are subject to certain risks and uncertainties in our business operations, including, but not limited to, those described below. Careful consideration of these risks, together with all of the other information included in this Form 10-K and the other public information filed by us, should be made before making an investment decision. Additional risks and uncertainties not presently known or that are currently deemed immaterial may also impair our business operations.

Our Corporate and Financial Structure Risks

We are a holding company and depend on distributions from subsidiaries, including joint ventures, to meet our obligations.

We are a holding company with no material assets other than the ownership interests in our subsidiaries and joint ventures, collectively referred to as our subsidiaries. Accordingly, cash flows and the ability to meet our obligations are largely dependent upon the earnings of our subsidiaries and the payment of such earnings to us in the form of dividends or other distributions. Our subsidiaries are separate and distinct legal entities that do not guarantee the payment of any of our obligations or have an obligation, contingent or otherwise, to pay directly, or to make funds available for the payment of, amounts due pursuant to our senior and subordinated debt or our other obligations. Distributions from subsidiaries may also be limited by:


•	their respective earnings, capital requirements, and required debt and preferred stock payments;


•	the satisfaction of certain terms contained in financing, ring-fencing or organizational documents; and


•	regulatory restrictions that limit the ability of our regulated utility subsidiaries to distribute profits.

We are substantially leveraged, the terms of our senior and subordinated debt do not restrict the incurrence of additional debt by us or our subsidiaries, and our senior and subordinated debt are structurally subordinated to the debt of our subsidiaries, each of which could adversely affect our consolidated financial results.

A significant portion of our capital structure is comprised of debt, and we expect to incur additional debt in the future to fund acquisitions, capital investments or the development and construction of new or expanded facilities at our subsidiaries. As of December 31, 2011 , we had the following outstanding obligations:


•	senior unsecured debt of $5.363 billion ;


•	subordinated debt of $22 million , which is held by Berkshire Hathaway and its affiliates; and


•	guarantees and letters of credit in respect of subsidiary and equity method investment debt aggregating $90 million .

Our consolidated subsidiaries also have significant amounts of outstanding debt, which totaled $13.687 billion as of December 31, 2011 . These amounts exclude (a) trade debt, (b) preferred stock obligations, (c) letters of credit in respect of subsidiary debt, and (d) our share of the outstanding debt of our own or our subsidiaries' equity method investments.

Given our substantial leverage, we may not have sufficient cash to service our debt, which could limit our ability to finance future acquisitions, develop and construct additional projects, or operate successfully under adverse conditions, including those brought on by declining national and global economies, unfavorable financial markets or growth conditions where our capital needs may exceed our ability to fund them. Our leverage could also impair our credit quality or the credit quality of our subsidiaries, making it more difficult to finance operations or issue future debt on favorable terms, and could result in a downgrade in debt ratings by credit rating agencies.

The terms of our senior and subordinated debt do not limit our ability or the ability of our subsidiaries to incur additional debt or issue preferred stock. Accordingly, we or our subsidiaries could enter into acquisitions, new financings, refinancings, recapitalizations, capital leases or other highly leveraged transactions that could significantly increase our or our subsidiaries' total amount of outstanding debt. The interest payments needed to service this increased level of debt could adversely affect our consolidated financial results. Many of our subsidiaries' debt agreements contain covenants, or may in the future contain covenants, that restrict or limit, among other things, such subsidiaries' ability to create liens, sell assets, make certain distributions, incur additional debt or miss contractual deadlines or requirements, and our ability to comply with these covenants may be affected by events beyond our control. Further, if an event of default accelerates a repayment obligation and such acceleration results in an event of default under some or all of our other debt, we may not have sufficient funds to repay all of the accelerated debt, and the other risks described under "Our Corporate and Financial Structure Risks" may be magnified as well.

Because we are a holding company, the claims of our senior and subordinated debt holders are structurally subordinated with respect to the assets and earnings of our subsidiaries. Therefore, the rights of our creditors to participate in the assets of any subsidiary in the event of a liquidation or reorganization are subject to the prior claims of the subsidiary's creditors and preferred shareholders. In addition, a significant amount of the stock or assets of our operating subsidiaries is directly or indirectly pledged to secure their financings and, therefore, may be unavailable as potential sources of repayment of our senior and subordinated debt.

A downgrade in our credit ratings or the credit ratings of our subsidiaries could negatively affect our or our subsidiaries' access to capital, increase the cost of borrowing or raise energy transaction credit support requirements.

Our senior unsecured debt is rated by various rating agencies. We cannot assure that our senior unsecured debt rating will not be reduced in the future. Although none of our outstanding debt has rating-downgrade triggers that would accelerate a repayment obligation, a credit rating downgrade would increase our borrowing costs and commitment fees on our revolving credit agreements and other financing arrangements, perhaps significantly. In addition, we would likely be required to pay a higher interest rate in future financings, and the potential pool of investors and funding sources would likely decrease. Further, access to the commercial paper market, the principal source of short-term borrowings, could be significantly limited, resulting in higher interest costs.

Similarly, any downgrade or other event negatively affecting the credit ratings of our subsidiaries could make their costs of borrowing higher or access to funding sources more limited, which in turn could cause us to provide liquidity in the form of capital contributions or loans to such subsidiaries, thus reducing our and our subsidiaries' liquidity and borrowing capacity.

Most of our subsidiaries' large wholesale customers, suppliers and counterparties require our subsidiaries to have sufficient creditworthiness in order to enter into transactions, particularly in the wholesale energy markets. If the credit ratings of our subsidiaries were to decline, especially below investment grade, financing costs and borrowings would likely increase because certain counterparties may require collateral in the form of cash, a letter of credit or some other security for existing transactions and as a condition to entering into transactions with our subsidiaries. Such amounts may be material and may adversely affect our subsidiaries' liquidity and cash flows.

Our majority shareholder, Berkshire Hathaway, could exercise control over us in a manner that would benefit Berkshire Hathaway to the detriment of our creditors.

Berkshire Hathaway is our majority owner and has control over all decisions requiring shareholder approval, including the election of our directors. In circumstances involving a conflict of interest between Berkshire Hathaway and our creditors, Berkshire Hathaway could exercise its control in a manner that would benefit Berkshire Hathaway to the detriment of our creditors.

Our Business Risks

Much of our growth has been achieved through acquisitions, and additional acquisitions may not be successful.

Much of our growth has been achieved through acquisitions. Future acquisitions may range from buying individual assets to the purchase of entire businesses. We will continue to investigate and pursue opportunities for future acquisitions that we believe may increase shareholder value and expand or complement existing businesses. We may participate in bidding or other negotiations at any time for such acquisition opportunities which may or may not be successful. Any transaction that does take place may involve consideration in the form of cash or debt or equity securities.

Completion of any acquisition entails numerous risks, including, among others, the:


•	failure to complete the transaction for various reasons, such as the inability to obtain the required regulatory approvals, materially adverse developments in the potential acquiree's business or financial condition or successful intervening offers by third parties;


•	failure of the combined business to realize the expected benefits or to meet regulatory commitments; and


•	need for substantial additional capital and financial investments.

An acquisition could cause an interruption of, or loss of momentum in, the activities of one or more of our businesses. The diversion of management's attention and any delays or difficulties encountered in connection with the approval and integration of the acquired operations could adversely affect our combined businesses and financial results and could impair our ability to realize the anticipated benefits of the acquisition.

We cannot assure you that future acquisitions, if any, or any related integration efforts will be successful, or that our ability to repay our obligations will not be adversely affected by any future acquisitions.

We and our businesses are subject to extensive federal, state, local and foreign legislation and regulation, including numerous environmental, health, safety and other laws and regulations that affect us and our businesses' operations and costs. These laws and regulations are complex, dynamic and subject to new interpretations or change. In addition, new laws and regulations are continually being proposed and enacted that create new or revised requirements or standards on us and our businesses.

We and our businesses are required to comply with numerous federal, state, local and foreign laws and regulations that have broad application to us and our subsidiaries and limit our ability to independently make and implement management decisions regarding, among other items, acquiring businesses; constructing, acquiring or disposing of operating assets; operating generating facilities and transmission and distribution assets; complying with pipeline safety and integrity and environmental requirements; setting rates charged to customers; establishing capital structures and issuing debt or equity securities; transacting between subsidiaries and affiliates; and paying dividends. These laws and regulations are implemented and enforced by federal, state and local regulatory agencies, such as, among others, the FERC, the EPA, the DOT, the NRC and various state regulatory commissions in the United States, and GEMA, which discharges certain of its powers through its staff within Ofgem, in the United Kingdom. Refer to "General Regulation" and "Environmental Laws and Regulations" in Item 1 of this Form 10-K for examples of laws and regulations and other requirements significantly affecting us and our present and future operations.

Compliance with applicable laws and regulations generally requires our subsidiaries to obtain and comply with a wide variety of licenses, permits, inspections and other approvals. Further, compliance with laws and regulations can require significant capital and operating expenditures, including expenditures for new equipment, inspection, cleanup costs, removal and remediation costs, damages arising out of contaminated properties and fines, penalties and injunctive measures affecting operating assets for failure to comply with environmental regulations. Compliance activities pursuant to laws and regulations could be prohibitively expensive. As a result, some facilities may be required to shut down or alter their operations. Further, our subsidiaries may not be able to obtain or maintain all required environmental or other regulatory approvals and permits for their operating assets or development projects. Delays in or active opposition by third parties to obtaining any required environmental or regulatory authorizations, failure to comply with the terms and conditions of the authorizations or enhanced regulatory or environmental requirements may increase costs or prevent or delay our subsidiaries from operating their facilities, developing new facilities, expanding existing facilities or favorably locating new facilities. If our subsidiaries fail to comply with any environmental or other regulatory requirements, they may be subject to penalties and fines or other sanctions, including changes to the way our electric generating facilities are operated or how the Pipeline Companies are permitted to operate their systems that may impact generation or throughput. The costs of complying with laws and regulations could adversely affect our consolidated financial results. Not being able to operate existing facilities or develop new generating facilities to meet customer electricity needs could require our subsidiaries to increase their purchases of electricity on the wholesale market, which could increase market and price risks and adversely affect our consolidated financial results.

Existing laws and regulations, while comprehensive, are subject to changes and revisions from ongoing policy initiatives by legislators and regulators and to interpretations that may ultimately be resolved by the courts. For example, changes in laws and regulations could result in, but are not limited to, increased competition within our subsidiaries' service territories; new environmental requirements, including the implementation of RPS and GHG emissions reduction goals; the issuance of stricter air quality standards and the implementation of energy efficiency mandates; the issuance of regulations over the management and disposal of coal combustion byproducts; changes to our subsidiaries' service territories as a result of condemnation or takeover by municipalities or other governmental entities, particularly where they lack the exclusive right to serve their customers; the inability of our subsidiaries' to recover their costs; new pipeline safety requirements; or a negative impact on our subsidiaries' current transportation and cost recovery arrangements.

In addition to changes in existing legislation and regulation, new laws and regulations are likely to be enacted that impose additional or new requirements or standards on our businesses. For example, while significant measures to regulate emissions at the federal level were considered by the United States Congress in 2010, comprehensive legislation has not been adopted; however, the EPA issued the CSAPR and MATS rules in 2011. Implementing actions required under, and otherwise complying with, new federal and state laws and regulations and changes in existing ones are among the most challenging aspects of managing utility operations. We cannot predict the future course of new laws and regulations, changes in existing ones or new interpretations by agency orders or court decisions nor can their impact on us be determined at this time; however, any one of these could adversely affect our consolidated financial results through higher capital expenditures and operating costs and cause an overall change in how we operate our businesses. To the extent that our regulated subsidiaries are not allowed by their regulators to recover or cannot otherwise recover the costs to comply with new laws and regulations or changes in existing ones, the additional requirements could have a material adverse effect on our consolidated financial results. Additionally, even if such costs are recoverable in rates, if they are substantial and result in rates increasing to levels that substantially reduce customer demand or reduce our Pipeline Companies throughput, this could have a material adverse effect on our consolidated financial results.

Recovery of costs by our regulated subsidiaries is subject to regulatory review and approval, and the inability to recover costs may adversely affect our consolidated financial results.

State Rate Proceedings

The Utilities establish rates for their regulated retail service through state regulatory proceedings. These proceedings typically involve multiple parties, including government bodies and officials, consumer advocacy groups and various consumers of energy, who have differing concerns, but who generally have the common objective of limiting rate increases. Decisions are subject to appeal, potentially leading to further uncertainty associated with the approval proceedings.

Each state sets retail rates based in part upon the state regulatory commission's acceptance of an allocated share of total utility costs. When states adopt different methods to calculate interjurisdictional cost allocations, some costs may not be incorporated into rates of any state. Ratemaking is also generally done on the basis of estimates of normalized costs, so if a given year's realized costs are higher than normalized costs, rates may not be sufficient to cover those costs. In some cases, actual costs are lower than the normalized or estimated costs recovered through rates and from time-to-time may result in a state regulator requiring refunds to customers. Each state regulatory commission generally sets rates based on a test year established in accordance with that commission's policies. The test year data adopted by each state regulatory commission may create a lag between the incurrence of a cost and its recovery in rates. Each state regulatory commission also decides the allowed levels of expense and investment that they deem are just and reasonable in providing the service and may disallow recovery in rates for any costs that do not meet such standard. Additionally, each state regulatory commission establishes the allowed rate of return the Utilities will be given an opportunity to earn on their sources of capital. While rate regulation is premised on providing a fair opportunity to earn a reasonable rate of return on invested capital, the state regulatory commissions do not guarantee that we will be able to realize a reasonable rate of return.

In certain states, the Utilities are not permitted to pass through energy cost increases above the level assumed in establishing base rates without a general rate case. Any significant increase in fuel costs for electricity generation or purchased electricity costs could have a negative impact on the Utilities, despite efforts to minimize this impact through future general rate cases or the use of hedging contracts. Any of these consequences could adversely affect our consolidated financial results.

FERC Jurisdiction

The FERC establishes cost-based rates associated with transmission services provided by PacifiCorp and MidAmerican Energy's transmission facilities. Under the Federal Power Act, the Utilities may voluntarily file, or be obligated to file for changes, including general rate changes, to their system-wide transmission service rates. General rate changes implemented may be subject to refund. The FERC also has responsibility for approving both cost- and market-based rates under which the Utilities sell electricity at wholesale, has licensing authority over most of PacifiCorp's hydroelectric generating facilities and has broad jurisdiction over energy markets. The FERC may impose price limitations, bidding rules and other mechanisms to address some of the volatility of these markets or could revoke or restrict the ability of the Utilities to sell electricity at market-based rates, which could adversely affect our consolidated financial results. As a transmission owning member of the MISO, MidAmerican Energy is also subject to MISO-directed modifications of market rules, which are subject to FERC approval and operational procedures. The FERC may also impose substantial civil penalties for any non-compliance with the Federal Power Act and the FERC's rules and orders.

The FERC has jurisdiction over the construction and operation of natural gas pipelines and related facilities used in the transportation, storage and sale of natural gas in interstate commerce, including the rates, charges and terms and conditions of service for the transportation, storage and sale of natural gas in interstate commerce and the modification or abandonment of such facilities and rates. The FERC also has market transparency authority and has adopted additional reporting and internet posting requirements for natural gas pipelines and buyers and sellers of natural gas.

Rates for our interstate natural gas transmission and storage operations at the Pipeline Companies are established by the FERC. In accordance with the FERC's rate-making principles, the Pipeline Companies current maximum tariff rates are designed to recover prudently incurred costs included in their pipeline system's regulatory cost of service that are associated with the construction, operation and maintenance of their pipeline system and to afford our Pipeline Companies an opportunity to earn a reasonable rate of return. Nevertheless, the rates the FERC authorizes our Pipeline Companies to charge their customers may not be sufficient to cover the costs incurred to provide services in any given period. Moreover, from time to time, the FERC may change, alter or refine its policies or methodologies for establishing pipeline rates and terms and conditions of service. In addition, the FERC has expressed its intent to continue reviewing data submitted in interstate natural gas pipelines' annual FERC Form 2 filings to determine whether pipelines may be earning more than their allowed rate of return and, when appropriate, to institute proceedings against such pipelines under Section 5 of the NGA to reduce rates. It is not possible to determine at this time whether any such actions would be instituted with respect to our Pipeline Companies' rates or what the outcome would be, but such proceedings could result in rate adjustments.

Under FERC policy, interstate pipelines and their customers may execute contracts at negotiated rates, which may be above or below the FERC regulated maximum tariff rate for that service. In a rate proceeding, these negotiated or discounted rate contracts are generally not subject to adjustment for increased costs which could occur due to inflation, increases in the cost of capital or taxes or other factors. It is possible that the cost to perform services under negotiated or discounted rate contracts will exceed the expected cost used when the negotiated or discounted rates were agreed to, which could result either in losses or lower rates of return in providing such services. FERC policy allows interstate natural gas pipelines to recover such costs under certain circumstances in rate cases. However, with respect to discounts granted to affiliates and negotiated rates, the interstate natural gas pipeline has a strong burden of proof to support such recovery on the basis that the discounted or negotiated rate was necessary in order to meet competition.

United Kingdom Electricity Distribution

The Distribution Companies, as DNOs and holders of electricity distribution licenses, are subject to regulation by GEMA. Most of the revenue of a DNO is controlled by a distribution price control formula set out in the electricity distribution license. The price control formula does not directly constrain profits from year to year, but is a control on revenue that operates independently of most of the DNO's costs. A resetting of the formula requires the consent of the DNO; however, license modifications may be unilaterally imposed by Ofgem without such consent following review by the British competition commission. GEMA is able to impose financial penalties on DNOs that contravene any of their electricity distribution license duties or certain of their duties under British law, or fail to achieve satisfactory performance of individual standards prescribed by GEMA. Any penalty imposed must be reasonable and may not exceed 10% of the DNO's revenue. During the term of the price control, additional costs have a direct impact on the financial results of the Distribution Companies.

Through our subsidiaries, we are actively pursuing, developing and constructing new or expanded facilities, the completion and expected cost of which are subject to significant risk, and our subsidiaries have significant funding needs related to their planned capital expenditures.

Through our subsidiaries, we actively pursue, develop and construct new or expanded facilities. We expect that these subsidiaries will incur substantial annual capital expenditures over the next several years. Such expenditures could include, among others, amounts for new electric generating facilities, electric transmission or distribution projects, environmental control and compliance systems, natural gas storage facilities, new or expanded pipeline systems, as well as the continued maintenance and upgrades of existing assets.

Development and construction of major facilities are subject to substantial risks, including fluctuations in the price and availability of commodities, manufactured goods, equipment, labor, siting and permitting and other items over a multi-year construction period, as well as counterparty risk and the economic viability of our suppliers, customers and contractors. Certain of our construction projects are substantially dependent upon a single contractor and replacement of such contractor may be difficult and cannot be assured. These risks may result in the inability to timely complete a project or higher than expected costs to complete an asset and place it in service. Such costs may not be recoverable in the regulated rates or market or contract prices our subsidiaries are able to charge their customers. It is also possible that additional generation needs may be obtained through power purchase agreements, which could increase long-term purchase obligations and force reliance on the operating performance of a third party. The inability to successfully and timely complete a project, avoid unexpected costs or to recover any such costs could adversely affect our consolidated financial results.

Furthermore, our subsidiaries depend upon both internal and external sources of liquidity to provide working capital and to fund capital requirements. In some cases, we will commit to provide significant amounts of equity to our subsidiaries that are engaged in construction projects. If we do not provide needed funding to our subsidiaries and the subsidiaries are unable to obtain funding from external sources, they may need to postpone or cancel planned capital expenditures.

Failure to construct these planned projects could limit opportunities for revenue growth, increase operating costs and adversely affect the reliability of electricity service to our customers. For example, if PacifiCorp is not able to expand its existing portfolio of generating facilities, it may be required to enter into long-term wholesale electricity purchase contracts or purchase wholesale electricity at more volatile and potentially higher prices in the spot markets to support retail loads.

A sustained decrease in demand for electricity or natural gas in the markets served by our subsidiaries would significantly decrease our operating revenue and adversely affect our consolidated financial results.

A sustained decrease in demand for electricity or natural gas in the markets served by our subsidiaries would significantly reduce our operating revenue and adversely affect our consolidated financial results. Factors that could lead to a decrease in market demand include, among others:


•	a depression, recession or other adverse economic condition that results in a lower level of economic activity or reduced spending by consumers on electricity or natural gas, such as the significant adverse changes in the economy and credit markets experienced in 2008 and 2009;


•	an increase in the market price of electricity or natural gas or a decrease in the price of other competing forms of energy;


•	shifts in competitively priced natural gas supply sources away from the sources connected to our Pipeline Companies' systems;


•	efforts by customers, legislators and regulators to reduce the consumption of energy through various conservation and energy efficiency measures and programs;


•	laws mandating or encouraging renewable energy resources which may reduce the demand for natural gas;


•	higher fuel taxes or other governmental or regulatory actions that increase, directly or indirectly, the cost of natural gas or other fuel sources for electricity generation or that limit the use of natural gas or the generation of electricity from fossil fuels; and


•	a shift to more energy-efficient or alternative fuel machinery or an improvement in fuel economy, whether as a result of technological advances by manufacturers, legislation mandating higher fuel economy or lower emissions, price differentials, incentives or otherwise.

Our subsidiaries are subject to market risk associated with the wholesale energy markets, which could adversely affect our consolidated financial results.

In general, our primary market risk is the risk of adverse fluctuations in the market price of wholesale electricity and fuel, including natural gas, coal and fuel oil, which is compounded by volumetric changes affecting the availability of or demand for electricity and fuel. The market price of wholesale electricity may be influenced by several factors, such as the adequacy or type of generating capacity; scheduled and unscheduled outages of generating facilities; prices and availability of fuel sources for generation; disruptions or constraints to transmission and distribution facilities; weather conditions; economic growth; and changes in technology. Volumetric changes are caused by unanticipated changes in generation availability or changes in customer needs that can be due to the weather, electricity and fuel prices, the economy, regulations or customer behavior. For example, the Utilities purchase electricity and fuel in the open market as part of their normal operating businesses. If market prices rise, especially in a time when larger than expected volumes must be purchased at market or short-term prices, PacifiCorp or MidAmerican Energy may incur significantly greater expense than anticipated. Likewise, if electricity market prices decline in a period when PacifiCorp or MidAmerican Energy is a net seller of electricity in the wholesale market, PacifiCorp or MidAmerican Energy will earn less revenue.

Our subsidiaries are subject to counterparty credit risk, which could adversely affect our consolidated financial results.

Our subsidiaries are subject to counterparty credit risk related to contractual obligations with wholesale suppliers, customers and, as is the case for MidAmerican Energy, other participants in organized RTO markets. Adverse economic conditions or other events affecting counterparties with whom our subsidiaries conduct business could impair the ability of these counterparties to timely pay for services. Our subsidiaries depend on these counterparties to remit payments on a timely basis. For example, certain wholesale suppliers, customers and other RTO market participants experienced deteriorating credit quality in 2008 and 2009. If our wholesale customers are unable to pay us for energy, there may be a significant adverse impact on our consolidated financial results.

Transactional activities of MidAmerican Energy and other participants in organized RTO markets are governed by credit policies specified in each respective RTO's governing tariff and related business practices. Credit policies of RTO's, which have been developed through extensive stakeholder participation, generally seek to minimize potential loss in the event of a market participant default without unnecessarily inhibiting access to the marketplace. In the event of a default by a RTO market participant on its market-related obligations, losses are allocated among all other market participants in proportion to each participant's share of overall market activity during the period of time the loss was incurred. Because of this, MidAmerican Energy has potential indirect exposure to every other market participant in the RTO markets where it actively participates, including the MISO, the PJM, and the ERCOT.

We continue to monitor the creditworthiness of wholesale suppliers and customers in an attempt to reduce the impact of any potential counterparty default. If strategies used to minimize these risk exposures are ineffective or if our subsidiaries' wholesale customers' financial condition deteriorates as a result of economic conditions causing them to be unable to pay, significant losses could result. Although our subsidiaries monitor the creditworthiness of their customers in an attempt to reduce the impact of any potential counterparty default, defaults in payment could adversely affect our consolidated financial results.

Our subsidiaries are subject to counterparty performance risk, which could adversely affect our consolidated financial results.

Our subsidiaries are subject to counterparty performance risk related to performance of contractual obligations by wholesale suppliers, customers and, as is the case for MidAmerican Energy, other participants in organized RTO markets. Each subsidiary relies on wholesale suppliers to deliver commodities, primarily natural gas, coal and electricity, in accordance with short- and long-term contracts. Failure or delay by suppliers to provide these commodities pursuant to existing contracts could disrupt the delivery of electricity and require the utilities to incur additional expenses to meet customer needs. In addition, when these contracts terminate, the utilities may be unable to purchase the commodities on terms equivalent to the terms of current contracts.

Our subsidiaries rely on wholesale customers to take delivery of the energy they have committed to purchase. Failure of customers to take delivery may require these subsidiaries to find other customers to take the energy at lower prices than the original customers committed to pay. If our subsidiaries' wholesale customers are unable to fulfill their obligations, there may be a significant adverse impact on our consolidated financial results.

Our subsidiaries are subject to the risk that customers will not renew their contracts or that our subsidiaries will be unable to obtain new customers for expanded capacity, each of which could adversely affect our consolidated financial results.

Certain of our subsidiaries are dependent upon a relatively small number of customers for a significant portion of their revenue. For example:


•	a significant portion of the Pipeline Companies' capacity is contracted under long-term arrangements, and the Pipeline Companies are dependent upon relatively few customers for a substantial portion of their revenue; and


•	generally, a single power purchaser takes electricity from our Philippine hydroelectric generating facility and each of our United States qualifying generating facilities and, when commercially operational, from our unregulated solar-powered projects.

If our subsidiaries are unable to renew, remarket, or find replacements for their customer agreements on favorable terms, our sales volumes and operating revenue would be exposed to reduction and increased volatility. For example, without the benefit of long-term transportation agreements, we cannot assure that the Pipeline Companies will be able to transport natural gas at efficient capacity levels. Similarly, without long-term power purchase agreements, we cannot assure that our unregulated power generators will be able to operate profitably. Failure to maintain existing long-term agreements or secure new long-term agreements, or being required to discount rates significantly upon renewal or replacement, could adversely affect our consolidated financial results. The replacement of any existing long-term agreements depends on market conditions and other factors that may be beyond our subsidiaries' control.

Disruptions in the financial markets could affect our and our subsidiaries' ability to obtain debt financing, draw upon or renew existing credit facilities, and have other adverse effects on us and our subsidiaries.

During 2008 and 2009, the United States, the United Kingdom and global credit markets experienced historic dislocations and liquidity disruptions that caused financing to be unavailable in certain cases. These circumstances materially impacted liquidity in the bank and debt capital markets during this period, making financing terms less attractive for borrowers that were able to find financing, and in other cases resulted in the unavailability of certain types of debt financing. While there has been a gradual recovery in the United States economy and an improvement in its financial markets, there remains much financial and economic uncertainty on a global basis, especially in the European community, which may adversely affect the United States' credit markets. Uncertainty in the credit markets may negatively impact our and our subsidiaries' ability to access funds on favorable terms or at all. If we or our subsidiaries are unable to access the bank and debt markets to meet liquidity and capital expenditure needs, it may adversely affect the timing and amount of our capital expenditures, acquisition financing and our consolidated financial results.

Inflation and changes in commodity prices and fuel transportation costs may adversely affect our consolidated financial results.

Inflation may affect our businesses by increasing both operating and capital costs. As a result of existing rate agreements, contractual arrangements or competitive price pressures, our subsidiaries may not be able to pass the costs of inflation on to their customers. If our subsidiaries are unable to manage cost increases or successfully pass them on to their customers, our consolidated financial results could be adversely affected.

Some of our subsidiaries' financial results may be adversely affected if they are unable to obtain adequate, reliable and affordable access to electricity transmission service and natural gas transportation.

Some of our subsidiaries depend on electricity transmission and natural gas transportation facilities owned and operated by other companies to transport electricity and natural gas to both wholesale and retail markets, as well as natural gas purchased to supply certain of our subsidiaries' generating facilities. A lack of available transmission and transportation could hinder our subsidiaries from providing adequate or cost-effective electricity or natural gas to their wholesale markets and retail electric and natural gas customers and could adversely affect our consolidated financial results.

The different regional power markets have varying and dynamic regulatory structures, which could affect our businesses' growth and performance. In addition, the independent system operators who oversee the transmission systems in certain portions of the regional power markets in which we transact have imposed in the past, and may impose in the future, price limitations and other mechanisms to counter volatility in the power markets. These types of price limitations and other mechanisms may adversely affect our consolidated financial results.

Our operating results may fluctuate on a seasonal and quarterly basis and may be adversely affected by weather.

In most parts of the United States and other markets in which our subsidiaries operate, demand for electricity peaks during the hot summer months when irrigation and cooling needs are higher. Market prices for electricity also generally peak at that time. In other areas, demand for electricity peaks during the winter. In addition, demand for natural gas and other fuels generally peaks during the winter when heating needs are higher. This is especially true in Northern Natural Gas' market area and MidAmerican Energy's retail natural gas business. Further, extreme weather conditions, such as heat waves, winter storms or floods could cause these seasonal fluctuations to be more pronounced. Periods of low rainfall or snowpack may impact electricity generation at PacifiCorp's hydroelectric generating facilities, which may result in greater purchases of electricity from the wholesale market or from other sources at market prices. Additionally, the Utilities have added substantial wind-powered generating capacity, and our unregulated businesses are adding solar-powered generating capacity, each of which is also a climate-dependent resource.

As a result, the overall financial results of our subsidiaries may fluctuate substantially on a seasonal and quarterly basis. We have historically sold less energy, and consequently earned less income, when weather conditions are mild. Unusually mild weather in the future may adversely affect our consolidated financial results through lower revenue or margins. Conversely, unusually extreme weather conditions could increase our costs to provide energy and could adversely affect our consolidated financial results. The extent of fluctuation in our consolidated financial results may change depending on a number of factors related to our subsidiaries' regulatory environment and contractual agreements, including their ability to recover energy costs, the existence of revenue sharing provisions and terms of the wholesale sale contracts.

Our subsidiaries are subject to operating uncertainties that could adversely affect our consolidated financial results.

The operation of complex, integrated electric and natural gas utility (including generation, transmission and distribution) systems or interstate natural gas pipeline systems that are spread over large geographic areas involves many operating uncertainties and events beyond our control. These potential events include the breakdown or failure of electricity generating equipment, compressors, pipelines, transmission and distribution lines or other equipment or processes; unscheduled generating facility outages; strikes, lockouts or other labor-related actions; shortage of qualified labor; transmission and distribution system constraints or outages; cyber attacks; fuel shortages or interruptions; unavailability of critical equipment, materials and supplies; low water flows and other weather-related impacts; performance below expected levels of output, capacity or efficiency; operator error and catastrophic events such as severe storms, floods, fires, earthquakes, explosions, and mining accidents. A catastrophic event might result in injury or loss of life, extensive property damage or environmental damage. Any of these risks or other operational risks could significantly reduce or eliminate our subsidiaries' revenue or significantly increase their expenses, thereby reducing the availability of distributions to us. For example, if our subsidiaries cannot operate their electricity or natural gas facilities at full capacity due to damage caused by a catastrophic event, their revenue could decrease and their expenses could increase due to the need to obtain energy from more expensive sources. Further, we and our subsidiaries self-insure many risks, and current and future insurance coverage may not be sufficient to replace lost revenue or cover repair and replacement costs. The scope, cost and availability of our and our subsidiaries' insurance coverage may change, including the portion that is self-insured. Any reduction of our subsidiaries' revenue or increase in their expenses resulting from the risks described above, could adversely affect our consolidated financial results.

Potential terrorist activities or military or other actions, including cyber attacks, could adversely affect our consolidated financial results.

The ongoing threat of terrorism and the impact of military and other actions by the United States and its allies create increased political, economic and financial market instability, which subjects our subsidiaries' operations to increased risks. The United States government has issued warnings that energy assets, specifically pipeline, nuclear generation and other electric utility infrastructure are potential targets for terrorist organizations. Cyber attacks could adversely affect our subsidiaries' ability to operate their facilities, information technology and business systems, or compromise confidential customer and employee information. Political, economic or financial market instability or damage to the operating assets of our subsidiaries, customers or suppliers may result in business interruptions, lost revenue, higher commodity prices, disruption in fuel supplies, lower energy consumption and unstable markets, particularly with respect to electricity and natural gas, increased security, repair or other costs that may materially adversely affect us and our subsidiaries in ways that cannot be predicted at this time. Any of these risks could materially affect our consolidated financial results. Furthermore, instability in the financial markets as a result of terrorism, sustained or significant cyber attacks, or war could also materially adversely affect our ability and the ability of our subsidiaries to raise capital.

MidAmerican Energy is subject to the unique risks associated with nuclear generation.

The ownership and operation of nuclear power plants, such as MidAmerican Energy's 25% ownership interest in Quad Cities Station, involves certain risks. These risks include, among other items, mechanical or structural problems, inadequacy or lapses in maintenance protocols, the impairment of reactor operation and safety systems due to human error, the costs of storage, handling and disposal of nuclear materials, limitations on the amounts and types of insurance coverage commercially available, and uncertainties with respect to the technological and financial aspects of decommissioning nuclear facilities at the end of their useful lives. The prolonged unavailability of Quad Cities Station could materially adversely affect MidAmerican Energy's financial results, particularly when the cost to produce power at the plant is significantly less than market wholesale prices. The following are among the more significant of these risks:

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Operational Risk - Operations at any nuclear power plant could degrade to the point where the plant would have to be shut down. If such degradations were to occur, the process of identifying and correcting the causes of the operational downgrade to return the plant to operation could require significant time and expense, resulting in both lost revenue and increased fuel and purchased electricity costs to meet supply commitments. Rather than incurring substantial costs to restart the plant, the plant could be shut down. Furthermore, a shut-down or failure at any other nuclear plant could cause regulators to require a shut-down or reduced availability at Quad Cities Station.

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Regulatory Risk - The NRC may modify, suspend or revoke licenses and impose civil penalties for failure to comply with the Atomic Energy Act applicable regulations or the terms of the licenses of nuclear facilities. Unless extended, the NRC operating licenses for Quad Cities Station will expire in 2032. Changes in regulations by the NRC could require a substantial increase in capital expenditures or result in increased operating or decommissioning costs.

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Nuclear Accident and Catastrophic Risks - Accidents and other unforeseen catastrophic events have occurred at nuclear facilities other than Quad Cities Station, both in the United States and elsewhere, such as at the Fukushima Daiichi nuclear plant in Japan as a result of the earthquake and tsunami in March 2011. The consequences of an accident or catastrophic event can be severe and include loss of life and property damage. Any resulting liability from a nuclear accident or catastrophic event could exceed MidAmerican Energy's resources, including insurance coverage.

We own investments and projects located in foreign countries that are exposed to increased economic, regulatory and political risks.

We own and may acquire significant energy-related investments and projects outside of the United States. In addition to any disruption in the global financial markets, the economic, regulatory and political conditions in some of the countries where we have operations or are pursuing investment opportunities may present increased risks related to, among others, inflation, foreign currency exchange rate fluctuations, currency repatriation restrictions, nationalization, renegotiation, privatization, availability of financing on suitable terms, customer creditworthiness, construction delays, business interruption, political instability, civil unrest, guerilla activity, terrorism, expropriation, trade sanctions, contract nullification and changes in law, regulations or tax policy. We may not be capable of either fully insuring against or effectively hedging these risks.

We are exposed to risks related to fluctuations in foreign currency exchange rates.

Our business operations and investments outside the United States increase our risk related to fluctuations in foreign currency exchange rates, primarily the British pound. Our principal reporting currency is the United States dollar, and the value of the assets and liabilities, earnings, cash flows and potential distributions from our foreign operations changes with the fluctuations of the currency in which they transact. We may selectively reduce some foreign currency exchange rate risk by, among other things, requiring contracted amounts be settled in, or indexed to, United States dollars or a currency freely convertible into United States dollars, or hedging through foreign currency derivatives. These efforts, however, may not be effective and could negatively affect our consolidated financial results. We may not be able to obtain sufficient dollars or other hard currency or available dollars may not be allocated to pay such obligations, which could adversely affect our consolidated financial results.

Cyclical fluctuations in the residential real estate brokerage and mortgage businesses could adversely affect HomeServices.

The residential real estate brokerage and mortgage industries tend to experience cycles of greater and lesser activity and profitability and are typically affected by changes in economic conditions, including the current downturn in the United States housing market, which are beyond HomeServices' control. Any of the following, among others, are examples of items that could have a material adverse effect on HomeServices' businesses by causing a general decline in the number of home sales, sale prices or the number of home financings which, in turn, would adversely affect its financial results:


•	rising interest rates or unemployment rates, including the significant rise in unemployment in the United States which may continue into future periods;


•	periods of economic slowdown or recession in the markets served, such as the significant adverse changes in the economy experienced in recent years;


•	decreasing home affordability;


•	lack of available mortgage credit for potential homebuyers, such as the reduced availability of credit generally experienced in recent years and that may continue into future periods;


•	declining demand for residential real estate as an investment;


•	nontraditional sources of new competition; and


•	changes in applicable tax law.

Poor performance of plan and fund investments and other factors impacting the pension and other postretirement benefit plans and nuclear decommissioning and mine reclamation trust funds could unfavorably impact our cash flows and liquidity.

Costs of providing our defined benefit pension and other postretirement benefit plans depend upon a number of factors, including the rates of return on plan assets, the level and nature of benefits provided, discount rates, the interest rates used to measure required minimum funding levels, changes in benefit design, changes in laws and government regulation and our required or voluntary contributions made to the plans. All of our pension plans and PacifiCorp's other postretirement benefit plan are in underfunded positions. Even with sustained growth in the investments over future periods to increase the value of these plans' assets, we will likely be required to make significant cash contributions to fund these plans in the future. Additionally, our plans have investments in sovereign debt and foreign currency denominated securities. Credit rating downgrades and default by the entities in which our plans have invested could add to the volatility and timing of future contributions. Furthermore, the Pension Protection Act of 2006, as amended, may result in more volatility in the amount and timing of future contributions. Similarly, funds dedicated to nuclear decommissioning and mine reclamation are invested in debt and equity securities and poor performance of these investments will reduce the amount of funds available for their intended purpose, which would require us to make additional cash contributions. Such cash funding obligations, which are also impacted by the other factors described above, could have a material impact on our liquidity by reducing our cash flows.

We and our subsidiaries are involved in numerous legal proceedings, the outcomes of which are uncertain and could adversely affect our consolidated financial results.

We and our subsidiaries are party to numerous legal proceedings. Litigation is subject to many uncertainties, and we cannot predict the outcome of individual matters. It is possible that the final resolution of some of the matters in which we and our subsidiaries are involved could result in additional payments in excess of established reserves over an extended period of time and in amounts that could have a material adverse effect on our consolidated financial results. Similarly, it is also possible that the terms of resolution could require that we or our subsidiaries change business practices and procedures, which could also have a material adverse effect on our consolidated financial results. Further, litigation could result in the imposition of financial penalties or injunctions which could limit our ability to take certain desired actions or the denial of needed permits, licenses or regulatory authority to conduct our business, including the siting or permitting of facilities. Any of these outcomes could adversely affect our consolidated financial results.

Potential changes in accounting standards may impact our consolidated financial results and disclosures in the future, which may change the way analysts measure our business or financial performance.

The Financial Accounting Standards Board ("FASB") and the SEC continuously make changes to accounting standards and disclosure and other financial reporting requirements. New or revised accounting standards and requirements issued by the FASB or the SEC or new accounting orders issued by the FERC could significantly impact our consolidated financial results and disclosures.


Item 1B.	Unresolved Staff Comments

Not applicable.

Item 2. Properties

The Company's energy properties consist of the physical assets necessary to support its electricity and natural gas businesses. Properties of the Company's electricity businesses include electric generation, transmission and distribution facilities, as well as coal mining assets that support certain of the Company's electric generating facilities. Properties of the Company's natural gas businesses include natural gas distribution facilities, interstate pipelines, storage facilities, compressor stations and meter stations. In addition to these physical assets, the Company has rights-of-way, mineral rights and water rights that enable the Company to utilize its facilities. It is the opinion of the Company's management that the principal depreciable properties owned by the Company are in good operating condition and are well maintained. Pursuant to separate financing agreements, substantially all of PacifiCorp's electric utility properties and substantially all of the assets of Cordova Energy Company LLC are pledged or encumbered to support or otherwise provide the security for their related subsidiary debt. For additional information regarding the Company's energy properties, refer to Item 1 of this Form 10-K and Notes 3, 4 and 22 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

The following table summarizes the electric generating facilities of MEHC's subsidiaries as of December 31, 2011 :



			Facility Net	Net Owned
Energy			Capacity	Capacity
Source	Entity	Location by Significance	(MW)	(MW)

Coal	PacifiCorp and MidAmerican Energy	Iowa, Wyoming, Utah, Arizona, Colorado and Montana	14,326	9,538

Natural gas and other	PacifiCorp, MidAmerican Energy and MidAmerican Renewables	Utah, Iowa, Illinois, Washington, Oregon, Texas, New York and Arizona	4,829	4,311

Wind	PacifiCorp and MidAmerican Energy	Iowa, Wyoming, Washington and Oregon	2,918	2,909

Hydroelectric	PacifiCorp, MidAmerican Energy and MidAmerican Renewables	Washington, Oregon, The Philippines, Idaho, California, Utah, Hawaii, Montana, Illinois and Wyoming	1,308	1,281

Nuclear	MidAmerican Energy	Illinois	1,760	440

Geothermal	PacifiCorp and MidAmerican Renewables	California and Utah	361	198
		Total	25,502	18,677

The right to construct and operate the Company's electric transmission and distribution facilities and interstate natural gas pipelines across certain property was obtained in most circumstances through negotiations and, where necessary, through the exercise of the power of eminent domain. PacifiCorp, MidAmerican Energy, Northern Natural Gas and Kern River in the United States and Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc in Great Britain continue to have the power of eminent domain in each of the jurisdictions in which they operate their respective facilities, but the United States utilities do not have the power of eminent domain with respect to governmental or Native American tribal lands. Although the main Kern River pipeline crosses the Moapa Indian Reservation, all facilities in the Moapa Indian Reservation are located within a utility corridor that is reserved to the United States Department of Interior, Bureau of Land Management.

With respect to real property, each of the electric transmission and distribution facilities and interstate natural gas pipelines fall into two basic categories: (1) parcels that are owned in fee, such as certain of the electric generation stations, electric substations, natural gas compressor stations, natural gas meter stations and office sites; and (2) parcels where the interest derives from leases, easements, rights-of-way, permits or licenses from landowners or governmental authorities permitting the use of such land for the construction, operation and maintenance of the electric transmission and distribution facilities and interstate natural gas pipelines. The Company believes that each of its energy subsidiaries has satisfactory title to all of the real property making up their respective facilities in all material respects.

Item 3. Legal Proceedings

None


Item 4.	Mine Safety Disclosures

Information regarding the Company's mine safety violations and other legal matters disclosed in accordance with Section 1503(a) of the Dodd-Frank Reform Act is included in Exhibit 95 to this Form 10-K.

PART II


Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

MEHC's common stock is owned by Berkshire Hathaway, Mr. Walter Scott, Jr. and certain of his family members and family controlled trusts and corporations, and Mr. Gregory E. Abel, its Chairman, President and Chief Executive Officer, and has not been registered with the SEC pursuant to the Securities Act of 1933, as amended, listed on a stock exchange or otherwise publicly held or traded. MEHC has not declared or paid any cash dividends on its common stock during the last ten fiscal years and does not presently anticipate that it will declare any dividends on its common stock in the foreseeable future.

For a discussion of unregistered sales of equity securities and regulatory restrictions that limit PacifiCorp's and MidAmerican Energy's ability to pay dividends on their common stock to MEHC, refer to Note 17 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Item 6. Selected Financial Data

The following table sets forth the Company's selected consolidated historical financial data, which should be read in conjunction with the information in Item 7 of this Form 10-K and with the Company's historical Consolidated Financial Statements and notes thereto in Item 8 of this Form 10-K. The selected consolidated historical financial data has been derived from the Company's audited historical Consolidated Financial Statements and notes thereto (in millions).



	Years Ended December 31,
	2011		2010		2009		2008		2007
Consolidated Statement of Operations Data:
Operating revenue	$	11,173	$	11,127	$	11,204	$	12,668	$	12,376
Net income ⁽¹⁾	1,352		1,310		1,188		1,871		1,219
Net income attributable to noncontrolling interests	21		72		31		21		30
Net income attributable to MEHC ⁽¹⁾	1,331		1,238		1,157		1,850		1,189

	As of December 31,
	2011		2010		2009		2008		2007
Consolidated Balance Sheet Data:
Total assets	$	47,718	$	45,668	$	44,684	$	41,441	$	39,216
Short-term debt	865		320		179		836		130
Long-term debt, including current maturities:
MEHC senior debt	5,363		5,371		5,371		5,121		5,471
MEHC subordinated debt	22		315		590		1,321		1,125
Subsidiary debt	13,687		13,805		13,791		12,954		13,097
Total MEHC shareholders' equity	14,092		13,232		12,576		10,207		9,326
Noncontrolling interests	173		176		267		270		256


(1)	Reflects the $646 million after-tax gain recognized on the termination of the Constellation Energy Group, Inc. ("Constellation Energy") merger agreement on December 17, 2008.


Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is management's discussion and analysis of certain significant factors that have affected the consolidated financial condition and results of operations of the Company during the periods included herein. Explanations include management's best estimate of the impact of weather, customer growth and other factors. This discussion should be read in conjunction with Item 6 of this Form 10-K and with the Company's historical Consolidated Financial Statements and Notes to Consolidated Financial Statements in Item 8 of this Form 10-K. The Company's actual results in the future could differ significantly from the historical results.

The reportable segment financial information includes all necessary adjustments and eliminations needed to conform to the Company's significant accounting policies. The differences between the segment amounts and the consolidated amounts, described as "MEHC and Other," relate principally to corporate functions, including administrative costs and intersegment eliminations. Effective December 31, 2011, the Company changed its reportable segments. Northern Natural Gas and Kern River have been aggregated in the reportable segment called MidAmerican Energy Pipeline Group, and CalEnergy Philippines and MidAmerican Renewables, LLC, formerly CalEnergy U.S., have been aggregated in the reportable segment called MidAmerican Renewables. Prior year amounts have been changed to conform to the current presentation.

Results of Operations

Overview

Net income attributable to MEHC for 2011 was $1.331 billion , an increase of $93 million , or 8% , compared to 2010 . PacifiCorp's net income was $554 million for 2011, a decrease of $15 million, or 3%, compared to 2010 as higher retail prices approved by regulators, higher customer load and the net impact of the Utah general rate case settlement were more than offset by lower wholesale revenue, higher purchased power costs, lower AFUDC, higher depreciation and amortization, higher operating expense and lower sales of RECs. Net income at MidAmerican Funding was $304 million for 2011, a decrease of $36 million, or 11%, compared to 2010 due to lower wholesale electric margins, resulting from lower average prices and volumes, and the effects of ratemaking on income taxes, partially offset by higher AFUDC, lower interest expense, lower operating expense and lower depreciation and amortization. MidAmerican Energy Pipeline Group's net income was $236 million for 2011, an increase of $11 million, or 5%, compared to 2010 due to lower interest expense and higher AFUDC. Northern Powergrid Holdings' net income was $389 million for 2011, an increase of $113 million, or 41%, compared to 2010 due to higher distribution revenue resulting from lower regulatory provisions and higher tariffs, higher deferred income tax benefits in 2011 related to enacted changes in the United Kingdom's corporate income tax rate and $12 million due to a weaker United States dollar, partially offset by a tax free gain of $45 million recognized on the sale of CE Gas (Australia) Limited in 2010. Additionally, net income attributable to MEHC was favorably impacted by an after-tax charge of $38 million related to the CE Casecnan noncontrolling interest settlement in 2010, lower MEHC subordinated interest expense in 2011 of $16 million, higher variable energy and water delivery fees earned in 2011 on higher rainfall at the Casecnan project totaling $14 million and higher equity income from ETT in 2011 of $10 million, partially offset by charges associated with the early redemption of MEHC subordinated debt in 2011 totaling $24 million and a dividend received in 2010 from BYD Company Limited totaling $6 million.

Net income attributable to MEHC for 2010 was $1.238 billion , an increase of $81 million , or 7% , compared to 2009 . PacifiCorp's net income was $569 million for 2010, an increase of $27 million, or 5%, compared to 2009 due to higher retail prices approved by regulators, higher sales of RECs, higher benefits associated with deferred net power costs, higher AFUDC and a lower effective income tax rate due to the effects of ratemaking and higher production tax credits, partially offset by lower net wholesale electricity activities, higher depreciation on higher plant placed in-service and higher operating expense. Net income at MidAmerican Energy was $340 million for 2010, an increase of $13 million, or 4%, compared to 2009 due to higher margins on warmer weather and $21 million of income tax benefits for changes related to the tax capitalization policy for overhead costs and repairs deductions. These improvements were partially offset by higher maintenance costs from plant outages and storm damage. MidAmerican Energy Pipeline Group's net income was $225 million for 2010, a decrease of $49 million, or 18%, compared to 2009 as a result of lower revenue from less favorable market conditions. Net income at Northern Powergrid Holdings was $276 million for 2010, an increase of $98 million, or 55%, compared to 2009 due to a $45 million tax free gain on the sale of CE Gas (Australia) Limited, the recognition of deferred income tax benefits totaling $25 million upon enactment of the reduction in the United Kingdom corporate income tax rate from 28% to 27%, a $15 million after-tax impairment of certain Australian hydrocarbon exploration and development assets in 2009 and higher distribution revenue. Additionally, net income attributable to MEHC was unfavorably impacted by the noncontrolling interest settlement totaling $38 million, lower rainfall and related lower revenue earned in 2010 at the Casecnan project totaling $23 million and an after-tax gain in 2009 on the Constellation Energy common stock investment of $22 million, partially offset by an after-tax stock-based compensation charge of $75 million in 2009 as a result of the purchase of shares of common stock that were issued upon the exercise of stock options.

Segment Results

Operating revenue and operating income for the Company's reportable segments for the years ended December 31 are summarized as follows (in millions):



	2011			2010			Change					2010			2009			Change
Operating revenue:
PacifiCorp	$	4,586		$	4,432		$	154		3	%	$	4,432		$	4,457		$	(25	)	(1	)%
MidAmerican Funding	3,503			3,815			(312		)	(8	)	3,815			3,699			116			3
MidAmerican Energy Pipeline Group	977			981			(4		)	—		981			1,061			(80		)	(8	)
Northern Powergrid Holdings	1,014			802			212			26		802			825			(23		)	(3	)
MidAmerican Renewables	161			137			24			18		137			178			(41		)	(23	)
HomeServices	992			1,020			(28		)	(3	)	1,020			1,037			(17		)	(2	)
MEHC and Other	(60		)	(60		)	—			—		(60		)	(53		)	(7		)	(13	)
Total operating revenue	$	11,173		$	11,127		$	46		—		$	11,127		$	11,204		$	(77	)	(1	)

Operating income:
PacifiCorp	$	1,099		$	1,055		$	44		4	%	$	1,055		$	1,079		$	(24	)	(2	)%
MidAmerican Funding	428			460			(32		)	(7	)	460			469			(9		)	(2	)
MidAmerican Energy Pipeline Group	468			472			(4		)	(1	)	472			558			(86		)	(15	)
Northern Powergrid Holdings	615			474			141			30		474			394			80			20
MidAmerican Renewables	106			88			18			20		88			128			(40		)	(31	)
HomeServices	24			17			7			41		17			11			6			55
MEHC and Other	(56		)	(64		)	8			13		(64		)	(174		)	110			63
Total operating income	$	2,684		$	2,502		$	182		7		$	2,502		$	2,465		$	37		2

PacifiCorp

Operating revenue increased $154 million for 2011 compared to 2010 due to higher retail revenue of $350 million, partially offset by lower wholesale and other revenue of $196 million. The increase in retail revenue was due to higher prices approved by regulators of $280 million and higher customer load. Customer load increased 2% due to higher commercial load in Utah and Oregon, higher industrial load in Utah and the impacts of colder weather on residential load in Oregon. The decrease in wholesale and other revenue was due to a 24% decrease in average wholesale prices and a 6% decrease in wholesale volumes. Additionally, wholesale and other revenue decreased $57 million due to lower sales and higher deferrals of RECs, net of amortization, including the general rate case settlement in Utah totaling $30 million.

Operating income increased $44 million for 2011 compared to 2010 due to the higher operating revenue, partially offset by higher depreciation and amortization of $51 million due to higher plant placed in service, higher operating expense of $41 million and higher energy costs of $18 million. Operating expense increased due to the higher plant placed in service, higher salaries and benefit expenses and material and supplies expense in 2011. Energy costs increased as a result of the higher per unit costs of coal and natural gas totaling $94 million, partially offset by energy cost adjustment mechanisms totaling $76 million, which included the impact of the Utah rate case settlement totaling $60 million. Energy supplied increased 1% for 2011 compared to 2010 as a 23% increase in purchased power volumes, higher than average hydroelectric generation and higher wind-powered generation were partially offset by lower generation from natural gas and coal-fueled generating facilities.

Operating revenue decreased $25 million for 2010 compared to 2009 due to a decrease in wholesale and other revenue of $212 million, partially offset by higher retail revenue of $144 million and an increase in the sale of RECs totaling $43 million. Wholesale and other revenue decreased primarily due to a 17% decrease in average wholesale prices, an 8% decrease in wholesale volumes and the impact of deconsolidating PacifiCorp's coal mining joint venture, Bridger Coal Company ("Bridger Coal"), as a result of adopting authoritative guidance requiring equity method accounting treatment effective January 1, 2010. The lower revenue due to deconsolidating Bridger Coal is largely offset by lower operating expense and depreciation and amortization. Retail revenue increased due to higher prices approved by regulators and higher demand-side management revenue, which is offset by related higher operating expenses, partially offset by lower revenue related to Oregon Senate Bill 408 ("SB 408") and lower customer usage.

Operating income decreased $24 million for 2010 compared to 2009 due to the lower operating revenue, higher depreciation and property taxes associated with recent plant placed in-service and higher maintenance costs primarily due to increased plant overhauls, partially offset by lower energy costs. Energy costs decreased due to a decrease in the average cost of purchased electricity and natural gas, lower natural gas volumes and the effects of regulatory cost recovery adjustment mechanisms for net power costs, partially offset by higher transmission costs of $18 million from higher contract rates, higher volumes of purchased electricity and higher coal prices.

MidAmerican Funding

MidAmerican Funding's operating revenue and operating income for the years ended December 31 are summarized as follows (in millions):



	2011		2010		Change					2010		2009		Change
Operating revenue:
Regulated electric	$	1,662	$	1,779	$	(117	)	(7	)%	$	1,779	$	1,715	$	64		4	%
Regulated natural gas	769		852		(83		)	(10	)	852		857		(5		)	(1	)
Nonregulated and other	1,072		1,184		(112		)	(9	)	1,184		1,127		57			5
Total operating revenue	$	3,503	$	3,815	$	(312	)	(8	)	$	3,815	$	3,699	$	116		3

Operating income:
Regulated electric	$	294	$	319	$	(25	)	(8	)%	$	319	$	331	$	(12	)	(4	)%
Regulated natural gas	66		64		2			3		64		70		(6		)	(9	)
Nonregulated and other	68		77		(9		)	(12	)	77		68		9			13
Total operating income	$	428	$	460	$	(32	)	(7	)	$	460	$	469	$	(9	)	(2	)

Regulated electric operating revenue decreased $117 million for 2011 compared to 2010. Wholesale and other revenue decreased $123 million due to lower volumes of 19% and lower average prices of 8%. Retail revenue increased $6 million due to a 1% increase in customer load.

Regulated electric operating income decreased $25 million for 2011 compared to 2010. The lower operating revenue was partially offset by lower energy costs, operating expense and depreciation and amortization. Energy costs decreased $75 million due to lower purchased energy and lower coal and natural gas generation volumes, as lower wholesale sales prices and higher wind-powered generation made it less economical to dispatch these units, partially offset by the higher average cost of natural gas and coal. Operating expense decreased $9 million due to higher maintenance costs in 2010 from plant outages and storm restoration costs. Depreciation and amortization decreased $8 million due to lower depreciation rates effective June 1, 2011 following the results of a depreciation study. The new rates generally reflect longer estimated useful lives and lower net salvage. The effect of this change is estimated to be $28 million annually based on depreciable plant balances at the time of the change.

Regulated natural gas operating revenue decreased $83 million for 2011 compared to 2010 due to lower wholesale volumes of 30% due to the narrowing of natural gas price spreads and a decrease in the average per-unit cost of gas sold, resulting in lower costs of sales. Regulated natural gas operating income increased $2 million for 2011 compared to 2010 due to lower operating expense.

Nonregulated and other operating revenue decreased $112 million for 2011 compared to 2010 due to lower electricity and natural gas volumes and prices. Nonregulated and other operating income decreased $9 million for 2011 compared to 2010 due to lower margins.

Regulated electric operating revenue increased $64 million for 2010 compared to 2009. Retail revenue increased $100 million on higher volumes of 8% due to higher customer usage, primarily as a result of the impacts of favorable weather, and customer growth. Wholesale and other revenue decreased $36 million due to lower average wholesale sales prices and volumes.

Regulated electric operating income decreased $12 million for 2010 compared to 2009. The higher operating revenue was offset by higher energy costs of $44 million, higher operating expenses of $24 million and higher depreciation and amortization of $8 million. Energy costs increased due to higher coal prices and greater thermal generation as a result of higher retail volumes. Operating expenses increased primarily due to higher maintenance costs from plant outages and storm damage totaling $12 million.

Regulated natural gas operating revenue decreased $5 million for 2010 compared to 2009 due to lower wholesale and retail volumes, partially offset by an increase in the average per-unit cost of gas sold, which was passed on to customers. Regulated natural gas operating income decreased $6 million for 2010 compared to 2009 due to higher operating expenses.

Nonregulated and other operating revenue increased $57 million for 2010 compared to 2009 due to a 10% increase in electric retail volumes, partially offset by a 3% decrease in electric retail prices. Nonregulated and other operating income increased $9 million for 2010 compared to 2009 primarily due to higher electric retail margins.

MidAmerican Energy Pipeline Group

Operating revenue decreased $4 million for 2011 compared to 2010 due to lower transportation and storage revenue from the narrowing of natural gas price spreads, partially offset by higher revenue from long-term contracts related to the Apex and 2010 Expansion projects at Kern River totaling $27 million and higher sales of gas and condensate liquids of $10 million. Operating income decreased $4 million for 2011 compared to 2010 due to the lower operating revenue and higher depreciation and amortization of $11 million on assets placed in service, partially offset by lower operating expense due to reduced maintenance costs and lower natural gas storage losses.

Operating revenue decreased $80 million for 2010 compared to 2009 due to lower rates at Kern River as a result of the FERC order received in 2009 and lower natural gas price spreads, partially offset by the 2010 Expansion project at Kern River being placed in service in April 2010 and higher sales of gas and condensate liquids of $7 million. Operating income decreased $86 million for 2010 compared to 2009 due to the lower operating revenue and higher depreciation and amortization of $9 million.

Northern Powergrid Holdings

Operating revenue increased $212 million for 2011 compared to 2010 due to higher distribution revenue of $197 million and a weaker United States dollar totaling $32 million, partially offset by lower contracting revenue of $11 million and lower revenue of $6 million at CE Gas. Distribution revenue increased due to lower regulatory provisions totaling $126 million and higher tariff rates, partially offset by lower distributed units. Operating income increased $141 million for 2011 compared to 2010 due to the higher distribution revenue and a weaker United States dollar totaling $19 million, partially offset by a tax free gain of $45 million recognized on the sale of CE Gas (Australia) Limited in 2010 and higher distribution costs and depreciation and amortization.

Operating revenue decreased $23 million for 2010 compared to 2009 due to lower contracting revenue of $30 million, lower gas production of $17 million and the stronger United States dollar totaling $6 million, partially offset by higher distribution revenue of $31 million. Distribution revenue increased due to higher rates implemented April 1, 2010 related to the Distribution Price Control Review and higher volumes, partially offset by unfavorable movements in certain regulatory provisions totaling $77 million. Operating income increased $80 million for 2010 compared to 2009 due to a tax free gain of $45 million recognized on the sale of CE Gas (Australia) Limited in 2010, a $20 million impairment of certain Australian hydrocarbon exploration and development assets in 2009 and the higher distribution revenue, partially offset by the lower gas production.

MidAmerican Renewables

Operating revenue increased $24 million for 2011 compared to 2010 due to higher variable energy and variable water delivery fees earned in 2011 from higher rainfall at the Casecnan project. Operating income increased $18 million for 2011 compared to 2010 due to the higher revenue at the Casecnan project, partially offset by higher maintenance costs at an independent power project in the United States.

Operating revenue decreased $41 million and operating income decreased $40 million for 2010 compared to 2009 due to lower than normal rainfall in 2010 and above normal rainfall in 2009 at the Casecnan project, which resulted in lower variable energy and water delivery fees earned in 2010.

HomeServices

Operating revenue decreased $28 million for 2011 compared to 2010 due to a 4% decrease in average home sale prices. Operating income increased $7 million for 2011 compared to 2010 as the lower operating revenue, net of commissions, was more than offset by lower operating expense.

Operating revenue decreased $17 million for 2010 compared to 2009 due to a 7% decrease in closed brokerage units, partially offset by higher average home sale prices. Operating income increased $6 million for 2010 compared to 2009 as the lower operating revenue, net of commissions, was more than offset by lower operating expenses.

MEHC and Other

Operating loss decreased $110 million for 2010 compared to 2009 due to $125 million of stock-based compensation expense in 2009 as a result of the purchase of common stock issued by MEHC upon the exercise of the last remaining stock options that had been granted to certain members of management at the time of Berkshire Hathaway's acquisition of MEHC in 2000.

Consolidated Other Income and Expense Items

Interest Expense

Interest expense for the years ended December 31 is summarized as follows (in millions):



	2011		2010		Change					2010		2009		Change

Subsidiary debt	$	841	$	844	$	(3	)	—	%	$	844	$	864	$	(20	)	(2	)%
MEHC senior debt and other	329		329		—			—		329		331		(2		)	(1	)
MEHC subordinated debt-Berkshire Hathaway	13		30		(17		)	(57	)	30		58		(28		)	(48	)
MEHC subordinated debt-other	13		22		(9		)	(41	)	22		22		—			—
Total interest expense	$	1,196	$	1,225	$	(29	)	(2	)	$	1,225	$	1,275	$	(50	)	(4	)

Interest expense decreased $29 million for 2011 compared to 2010 due to scheduled maturities and principal repayments, partially offset by a weaker United States dollar and the debt issuances at PacifiCorp ($400 million in May 2011), Northern Natural Gas ($200 million in April 2011) and Northern Powergrid Holdings (£151 million in the third quarter of 2010 and £119 million in the first quarter of 2011).

Interest expense decreased $50 million for 2010 compared to 2009 due to scheduled maturities, principal repayments and lower interest rates on variable rate debt.

Capitalized Interest

Capitalized interest decreased $14 million for 2011 compared to 2010 due to lower construction work-in-progress balances at PacifiCorp, partially offset by higher construction work-in-progress balances at MidAmerican Energy and Kern River.

Capitalized interest increased $13 million for 2010 compared to 2009 due to higher construction work-in-progress balances at PacifiCorp.

Interest and Dividend Income

Interest and dividend income decreased $10 million for 2011 compared to 2010 due to an $11 million dividend received in 2010 from BYD Company Limited.

Interest and dividend income decreased $14 million for 2010 compared to 2009 due to interest associated with SB 408 refunds received in 2009 at PacifiCorp, income earned in 2009 related to the Constellation Energy investments and lower average cash balances, partially offset by the dividend received in 2010 from BYD Company Limited.

Other, net

Other, net decreased $59 million for 2011 compared to 2010 due to costs associated with the early redemption of MEHC subordinated debt totaling $40 million, lower equity AFUDC of $17 million and lower Rabbi Trust earnings, partially by the impairment of an asset in 2010 totaling $8 million at MidAmerican Funding. Equity AFUDC decreased due to lower construction work-in-progress balances at PacifiCorp, partially offset by higher construction work-in-progress balances at MidAmerican Energy and Kern River.

Other, net decreased $36 million for 2010 compared to 2009 due primarily to a $37 million pre-tax gain on the Constellation Energy common stock investment in 2009 and the impairment of an asset in 2010 at MidAmerican Funding, partially offset by higher equity AFUDC in 2010, primarily at PacifiCorp and MidAmerican Energy.

Income Tax Expense

Income tax expense increased $96 million for 2011 compared to 2010. The effective tax rates were 18% and 14% for 2011 and 2010, respectively. The increase in the effective tax rate was due to the effects of ratemaking, lower tax benefits received at MidAmerican Energy for changes related to the tax capitalization and repairs deductions policies totaling $26 million and higher United States income taxes on foreign earnings, partially offset by additional production tax credits in 2011 totaling $29 million, higher deferred income tax benefits in 2011 related to enacted changes in the United Kingdom's corporate income tax rate discussed below and lower state income taxes.

In July 2011, the Company recognized $40 million of deferred income tax benefits upon the enactment of a reduction in the United Kingdom corporate income tax rate from 27% to 26% effective April 1, 2011, and a further reduction to 25% effective April 1, 2012. In July 2010, the Company recognized $25 million of deferred income tax benefits upon the enactment of the reduction in the United Kingdom corporate income tax rate from 28% to 27% effective April 1, 2011.

Federal renewable electricity production tax credits are earned on qualifying wind-powered generation placed in service. In 2004, the Utilities began placing qualified wind-powered generation in service and that has continued through 2011. Federal renewable electricity production tax credits are recognized as energy from wind-powered generating facilities is sold based on a per kilowatt rate as prescribed pursuant to the applicable federal income tax law and are eligible for the credit for 10 years from the date the qualifying generating facilities were placed in service. A credit of $0.022 per kilowatt hour was applied to 2011 production.

Income tax expense decreased $84 million for 2010 compared to 2009. The effective tax rates were 14% and 20% for 2010 and 2009, respectively. The decrease in the effective tax rate was primarily due to deferred income tax benefits totaling $25 million upon the enactment of the reduction in the United Kingdom corporate income tax rate from 28% to 27%, additional production tax credits totaling $20 million, a non-taxable gain on the sale of CE Gas (Australia) Limited and higher tax benefits received at MidAmerican Energy for changes related to the tax capitalization policy and repairs deductions totaling $6 million, partially offset by the impact of ratemaking. The benefits for changes to the tax capitalization policy and the repairs deductions were realized as MidAmerican Energy changed the method by which it determines current income tax deductions for overhead costs and repairs on certain of its regulated utility assets, which results in current deductibility for costs that are capitalized for book purposes. Iowa, MidAmerican Energy's largest jurisdiction for rate-regulated operations, requires immediate income recognition of such temporary differences.

Equity Income

Equity income increased $10 million for 2011 compared to 2010 due to continued investment at ETT and higher earnings at CE Generation due to improved results at the gas plants, partially offset by lower earnings at HomeServices' mortgage joint venture due to lower refinancing activity and higher compliance costs.

Equity income decreased $12 million for 2010 compared to 2009 due to lower earnings at CE Generation, primarily due to the expiration of a favorable power purchase contract in the second quarter of 2009 at the Saranac project.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests decreased $51 million for 2011 compared to 2010 and increased $41 million for 2010 compared to 2009 due to a $54 million pre-tax charge in 2010 related to the CE Casecnan noncontrolling interest settlement.

Liquidity and Capital Resources

Each of MEHC's direct and indirect subsidiaries is organized as a legal entity separate and apart from MEHC and its other subsidiaries. It should not be assumed that the assets of any subsidiary will be available to satisfy MEHC's obligations or the obligations of its other subsidiaries. However, unrestricted cash or other assets that are available for distribution may, subject to applicable law, regulatory commitments and the terms of financing and ring-fencing arrangements for such parties, be advanced, loaned, paid as dividends or otherwise distributed or contributed to MEHC or affiliates thereof. The long-term debt of subsidiaries may include provisions that allow MEHC's subsidiaries to redeem it in whole or in part at any time. These provisions generally include make-whole premiums. Refer to Note 17 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion regarding the limitation of distributions from MEHC's subsidiaries.

As of December 31, 2011 , the Company's total net liquidity was $3.741 billion . The components of total net liquidity are as follows (in millions):



										Northern
							MidAmerican			Powergrid
	MEHC			PacifiCorp			Funding			Holdings			Other			Total

Cash and cash equivalents	$	13		$	47		$	1		$	21		$	204		$	286

Credit facilities	552			1,355			654			233			50			2,844
Less:
Short-term debt	(108		)	(688		)	—			(69		)	—			(865		)
Tax-exempt bond support and letters of credit	(25		)	(304		)	(195		)	—			—			(524		)
Net credit facilities	419			363			459			164			50			1,455

Net liquidity before Berkshire Equity Commitment	$	432		$	410		$	460		$	185		$	254		$	1,741
Berkshire Equity Commitment ⁽¹⁾	2,000															2,000
Total net liquidity	$	2,432														$	3,741
Unsecured revolving credit facilities:
Maturity date	2013			2012, 2013			2012, 2013			2013			2013
Largest single bank commitment as a % of total revolving credit facilities ⁽²⁾	18		%	16		%	23		%	33		%	100		%

(1)

MEHC has an Equity Commitment Agreement with Berkshire Hathaway (the "Berkshire Equity Commitment") pursuant to which Berkshire Hathaway has agreed to purchase up to $2.0 billion of MEHC's common equity upon any requests authorized from time to time by MEHC's Board of Directors. The proceeds of any such equity contribution shall only be used for the purpose of (a) paying when due MEHC's debt obligations and (b) funding the general corporate purposes and capital requirements of MEHC's regulated subsidiaries. The Berkshire Equity Commitment expires on February 28, 2014.


(2)	An inability of financial institutions to honor their commitments could adversely affect the Company's short-term liquidity and ability to meet long-term commitments.

The above table does not include unused revolving credit facilities and letters of credit for investments that are accounted for under the equity method.

In January 2012, MEHC entered into a $500 million revolving loan agreement with a subsidiary of Berkshire Hathaway that expires June 30, 2012. Refer to Note 9 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion regarding the Company's credit facilities.

In January 2012, subsidiaries of MEHC acquired ownership interests in two solar projects. Refer to Note 23 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion regarding the Company's equity commitments, letters of credit and other related items.

Operating Activities

Net cash flows from operating activities for the years ended December 31, 2011 and 2010 were $3.220 billion and $2.759 billion , respectively. The increase was primarily due to higher income tax receipts of $270 million mainly attributable to bonus depreciation, improved operating results, changes in collateral posted for derivative contracts and a Kern River customer rate refund in 2010, partially offset by changes in working capital.

Net cash flows from operating activities for the years ended December 31, 2010 and 2009 were $2.759 billion and $3.572 billion , respectively. The decrease was mainly due to lower income tax receipts of $391 million due to the timing of repairs deductions and bonus depreciation, changes in collateral posted for derivative contracts, $128 million of net cash flows in 2009 related to the Constellation Energy transaction, which is comprised of $536 million of proceeds received from the sale of Constellation Energy common stock and $408 million of income taxes paid on gains recognized on the termination of the Constellation Energy merger agreement in December 2008 and the sale of stock in 2009, higher contributions to pension and other postretirement benefit plans and rate case refunds paid in 2010 at Kern River.

In September 2010, the President signed the Small Business Jobs Act into law, extending retroactively to January 1, 2010 the 50% bonus depreciation for qualifying property purchased and placed in service in 2010. In December 2010, the President signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 into law, which provided for 100% bonus depreciation for qualifying property purchased and placed in service after September 8, 2010 and prior to January 1, 2012, and extended 50% bonus depreciation for qualifying property purchased and placed in service after December 31, 2010 and prior to January 1, 2013. As a result of the new laws, the Company's cash flows from operations benefited in 2011 and are expected to benefit in 2012 due to bonus depreciation on qualifying assets placed in service.

Investing Activities

Net cash flows from investing activities for the years ended December 31, 2011 and 2010 were $(2.816) billion and $(2.484) billion , respectively. The change was primarily due to higher capital expenditures of $91 million, proceeds received from the sale of certain Australian hydrocarbon exploration and development assets during the second quarter of 2010 totaling $78 million and net proceeds received from the sale of CE Gas (Australia) Limited during the third quarter of 2010 totaling $59 million and higher investments in companies accounted for under the equity method totaling $58 million.

Net cash flows from investing activities for the years ended December 31, 2010 and 2009 were $(2.484) billion and $(2.669) billion , respectively. Capital expenditures decreased $820 million . In January 2009, the Company received $1 billion, plus accrued interest, in full satisfaction of the 14% Senior Notes from Constellation Energy. In July 2009, the Company purchased 225 million shares, representing approximately a 10% interest, of BYD Company Limited common stock for $232 million. Additionally, the Company received proceeds from the sales of certain CE Gas assets in 2010 totaling $137 million, partially offset by higher investments in companies accounted for under the equity method totaling $32 million.

Capital Expenditures

Capital expenditures, which exclude amounts for non-cash equity AFUDC and other non-cash items, by reportable segment for the years ended December 31 are summarized as follows (in millions):



	2011		2010		2009
Capital expenditures:
PacifiCorp	$	1,506	$	1,607	$	2,328
MidAmerican Funding	566		338		439
MidAmerican Energy Pipeline Group	289		293		250
Northern Powergrid Holdings	309		349		387
Other	14		6		9
Total capital expenditures	$	2,684	$	2,593	$	3,413

The Company's capital expenditures relate primarily to the Utilities and consisted mainly of the following for the years ended December 31:

2011:


•	The construction of wind-powered generating facilities at MidAmerican Energy totaling $295 million, which excludes $647 million of costs for which payments are due in December 2013. MidAmerican Energy placed in service 594 MW during 2011 and is constructing an additional 407 MW to be placed in service in 2012.

•

Transmission system investments totaling $240 million, including permitting and right-of-way costs for the 100-mile high-voltage transmission line being built between the Mona substation in central Utah and the Oquirrh substation in the Salt Lake Valley. A 65-mile segment of the Mona to Oquirrh transmission project will be a single-circuit 500-kV transmission line, while the remaining 35-mile segment will be a double-circuit 345-kV transmission line. The transmission line is expected to be placed in service in 2013.


•	Emissions control equipment on existing generating facilities totaling $217 million for installation or upgrade of sulfur dioxide scrubbers, low nitrogen oxide burners and particulate matter control systems.


•	The development and construction of the Lake Side 2 637-MW combined-cycle combustion turbine natural gas-fueled generating facility ("Lake Side 2") totaling $180 million, which is expected to be placed in service in 2014.


•	Distribution, generation, mining and other infrastructure needed to serve existing and expected demand totaling $1.140 billion.

2010:


•	Emissions control equipment totaling $348 million.


•	Transmission system investments totaling $303 million, including construction costs for the first major segment of the Energy Gateway Transmission Expansion Program, a 135-mile, double circuit, 345-kilovolt transmission line between the Populus substation in southern Idaho and the Terminal substation near Salt Lake City, Utah, which was fully placed in-service in 2010.


•	The development and construction of wind-powered generating facilities totaling $228 million. During 2010, PacifiCorp placed in service a 111 MW wind-powered generating facility, and MidAmerican Energy began contracting for the construction of 594 MW of wind-powered generating projects.


•	Distribution, generation, mining and other infrastructure needed to serve existing and expected demand totaling $1.066 billion.

2009:


•	Transmission system investments totaling $715 million, including a major segment of the Energy Gateway Transmission Expansion Program at PacifiCorp.


•	Emissions control equipment totaling $372 million.


•	The development and construction of wind-powered generating facilities totaling $250 million, including 127 MW PacifiCorp placed in service in September 2009 and construction costs for PacifiCorp's 111-MW Dunlap Ranch wind-powered generating facility.


•	Distribution, generation, mining and other infrastructure needed to serve existing and expected demand totaling $1.430 billion.

Additionally, capital expenditures for the years ended December 31, 2011 , 2010 and 2009 include costs related to Kern River's expansion projects totaling $174 million, $129 million and $65 million, respectively. The 2010 Expansion project was placed in service in April 2010 and added 145,000 Dth per day of capacity. The Apex Expansion project was placed in service in October 2011 and added 266,000 Dth per day of capacity. The remaining amounts are for ongoing investments in distribution and other infrastructure needed at the other platforms to serve existing and expected demand.

Financing Activities

Net cash flows from financing activities for the year ended December 31, 2011 were $(589) million . Uses of cash totaled $1.924 billion and consisted mainly of $1.548 billion for repayments of subsidiary debt, repayments of MEHC subordinated debt totaling $334 million, including $191 million called and repaid at par value, and net payments to noncontrolling interest totaling $24 million. Sources of cash totaled $1.335 billion and consisted of proceeds from subsidiary debt totaling $790 million and net proceeds from short-term debt totaling $545 million. Debt issuances during the year ended December 31, 2011 included the following:


•	In May 2011, PacifiCorp issued $400 million of 3.85% First Mortgage Bonds due June 15, 2021. The net proceeds were used to fund capital expenditures, repay short-term debt and for general corporate purposes.


•	In April 2011, Northern Natural Gas issued $200 million of 4.25% Senior Notes due June 1, 2021. The net proceeds were used to partially repay its $250 million, 7.0% Senior Notes due June 1, 2011.


•	In January and February 2011, Northern Powergrid (Northeast) Limited issued £119 million of notes with maturity dates ranging from 2018 to 2020 at interest rates ranging from 3.901% to 4.586% under its finance contract with the European Investment Bank.

Net cash flows from financing activities for the year ended December 31, 2010 were $(234) million . Uses of cash totaled $614 million and consisted mainly of repayments of MEHC subordinated debt totaling $281 million, including $92 million called and repaid at par value, repayments of subsidiary debt totaling $192 million, net payments to noncontrolling interests totaling $80 million and net purchases of common stock totaling $56 million. Sources of cash totaled $380 million and consisted of proceeds from subsidiary debt totaling $231 million and net proceeds from short-term debt totaling $149 million.

Net cash flows from financing activities for the year ended December 31, 2009 were $(758) million . Uses of cash totaled $2.0 billion and consisted mainly of repayments of MEHC subordinated debt totaling $734 million, net repayments of short-term debt totaling $664 million, repayments of subsidiary debt totaling $444 million, net purchases of common stock of $123 million and net payments to noncontrolling interests totaling $19 million. Sources of cash totaled $1.242 billion and consisted of proceeds from the issuance of subsidiary debt totaling $992 million and proceeds from the issuance of MEHC senior debt totaling $250 million.

2012 Long-term Debt Transactions

In February 2012, Topaz issued $850 million of the 5.75% Series A Senior Secured Notes. The principal of the notes amortize beginning September 2015 with a final maturity in September 2039. The net proceeds will be used to fund or reimburse the costs and expenses related to the development, construction and financing of the Topaz Project, including amounts that have been advanced by, or will be advanced by, MEHC for the Topaz Project. Any unused amounts will be invested or, in certain circumstances, loaned to MEHC. Topaz expects to issue approximately $430 million of additional senior secured notes contingent upon certain contractual conditions and market conditions to fund construction costs.

In January 2012, PacifiCorp issued $350 million of its 2.95% First Mortgage Bonds due February 1, 2022 and $300 million of its 4.10% First Mortgage Bonds due February 1, 2042. The net proceeds were used to repay short-term debt, fund capital expenditures and for general corporate purposes.

The Company may from time to time seek to acquire its outstanding debt securities through cash purchases in the open market, privately negotiated transactions or otherwise. Any debt securities repurchased by the Company may be reissued or resold by the Company from time to time and will depend on prevailing market conditions, the Company's liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Future Uses of Cash

The Company has available a variety of sources of liquidity and capital resources, both internal and external, including net cash flows from operating activities, public and private debt offerings, the issuance of commercial paper, the use of unsecured revolving credit facilities, the issuance of equity and other sources. These sources are expected to provide funds required for current operations, capital expenditures, acquisitions, investments, debt retirements and other capital requirements. The availability and terms under which each subsidiary has access to external financing depends on a variety of factors, including its credit ratings, investors' judgment of risk and conditions in the overall capital market, including the condition of the utility industry in general. Additionally, MEHC has the Berkshire Equity Commitment pursuant to which Berkshire Hathaway has agreed to purchase up to $2.0 billion of MEHC's common equity upon any requests authorized from time to time by MEHC's Board of Directors. The Berkshire Equity Commitment expires on February 28, 2014 and may only be used for the purpose of (a) paying when due MEHC's debt obligations and (b) funding the general corporate purposes and capital requirements of MEHC's regulated subsidiaries. Berkshire Hathaway will have up to 180 days to fund any such request in increments of at least $250 million pursuant to one or more drawings authorized by MEHC's Board of Directors. The funding of any such drawing will be made by means of a cash equity contribution to MEHC in exchange for additional shares of MEHC's common stock.

Capital Expenditures

The Company has significant future capital requirements. Capital expenditure needs are reviewed regularly by management and may change significantly as a result of these reviews, which may consider, among other factors, changes in rules and regulations, including environmental and nuclear; outcomes of regulatory proceedings; changes in income tax laws; general business conditions; load projections; system reliability standards; the cost and efficiency of construction labor, equipment and materials; and the cost and availability of capital. Prudently incurred expenditures for compliance-related items, such as pollution-control technologies, replacement generation, nuclear decommissioning, hydroelectric relicensing, hydroelectric decommissioning and associated operating costs are generally incorporated into MEHC's energy subsidiaries' regulated retail rates.

Forecasted capital expenditures, which exclude amounts for non-cash equity AFUDC and other non-cash items, for the years ended December 31 are as follows (in millions):



	2012		2013		2014
Forecasted capital expenditures :
Construction and other development projects	$	2,094	$	2,051	$	1,959
Operating projects	1,753		1,426		1,638
Total	$	3,847	$	3,477	$	3,597

Construction and other development projects consist mainly of large scale projects at MidAmerican Renewables and the Utilities.

In January 2012, MEHC acquired Topaz and its 550-MW Topaz Project in California from a subsidiary of First Solar, Inc. ("First Solar"). The Topaz Project is expected to cost approximately $2.44 billion, including all interest during construction, and will be completed in 22 blocks with an aggregate tested capacity of 586 MW. The Topaz Project expects to place 45 MW in service in 2012, 236 MW in service in 2013, 252 MW in service in 2014 and 53 MW in service in 2015. The Topaz Project is being constructed pursuant to a fixed price, date certain, turn-key engineering, procurement and construction contract with a subsidiary of First Solar.

MEHC has committed to provide Topaz with equity to fund the costs of the Topaz Project in an amount up to $2.44 billion less, among other things, the gross proceeds of long-term debt issuances (including the gross proceeds of $850 million of the 5.75% Series A Senior Secured Notes issued by Topaz in February 2012), project revenue prior to completion and the total equity contributions made by MEHC or its subsidiaries. If MEHC does not maintain a minimum credit rating from two of the following three rating agencies of at least BBB- from Standard & Poor's Ratings Services or Fitch Ratings or Baa3 from Moody's Investors Service, MEHC's obligations under the equity commitment agreement would be supported by cash collateral or a letter of credit issued by a financial institution that meets certain minimum criteria specified in the financing documents. Upon reaching the final commercial operation date of the Topaz Project, MEHC will have no further obligation to make any equity contribution and any unused equity contribution obligations will be canceled.

The Utilities anticipate costs for emissions control equipment will total $1.361 billion between 2012 and 2014, which includes equipment to meet anticipated air quality and visibility targets, including the reduction of sulfur dioxide, nitrogen oxides and particulate matter emissions. This estimate includes the installation of new or the replacement of existing emissions control equipment at a number of units at several of the Utilities coal-fueled generating facilities.

PacifiCorp anticipates costs for transmission projects will total $1.205 billion between 2012 and 2014. The costs include PacifiCorp's Energy Gateway Transmission Expansion Program totaling $905 million, including the following estimated costs:

•

$245 million for the 100-mile high-voltage transmission line being built between the Mona substation in central Utah and the Oquirrh substation in the Salt Lake Valley. A 65-mile segment of the Mona to Oquirrh transmission project will be a single-circuit 500-kV transmission line, while the remaining 35-mile segment will be a double-circuit 345-kV transmission line. The project is estimated to cost $374 million and is expected to be placed in service in 2013.


•	$288 million for the 160-mile single-circuit 345-kV transmission line being built between the Sigurd Substation in central Utah and the Red Butte Substation in southwest Utah. The Sigurd to Red Butte project is estimated to cost $380 million and is expected to be placed in service in 2015.


•	$372 million for other segments associated with the Energy Gateway Transmission Expansion Program that are expected to be placed in service through 2021, depending on siting, permitting and construction schedules.

PacifiCorp anticipates costs for additional natural gas-fueled generating facilities will total $893 million between 2012 and 2014, which includes the construction of the Lake Side 2 natural gas-fueled generating facility that is expected to be placed in service in 2014, and the initial development and construction of another combined-cycle combustion turbine natural gas-fueled generating facility planned to be placed in service in 2016.

MidAmerican Energy is constructing 407 MW (nominal ratings) of wind-powered generation that it expects to place in service in 2012. Total costs are estimated to be $680 million, with the payment of over half of those costs deferred until the fourth quarter of 2015.

MidAmerican Renewables anticipates costs for the Bishop Hill II Project, an 81 MW wind-powered generating facility, will total $164 million in 2012. The Bishop Hill II Project is expected to be placed in service in 2012. Definitive agreements have been executed, subject to customary closing conditions, and the acquisition is expected to close in March 2012.

In December 2011, MidAmerican Energy received approval from the MISO for several MVPs located in Iowa and Illinois totaling approximately $550 million in capital expenditures, the bulk of which will be incurred in 2014-2017. As of December 31, 2011, MidAmerican Energy had not contractually committed to material amounts for these projects.

Separately, in July 2011, the FERC issued Order No. 1000, which addresses transmission planning and cost allocation issues. Among other things, Order No. 1000 removes the federal right of first refusal for certain new transmission investments approved by the MISO following its compliance filing with the FERC. MidAmerican Energy believes its approved MVPs are not subject to the loss of right of first refusal unless the projects are re-evaluated and changed under a three-year review process required by the FERC. MidAmerican Energy continues to actively review other impacts of Order No. 1000.

Capital expenditures related to operating projects consist of routine expenditures for distribution, generation, mining and other infrastructure needed to serve existing and expected demand.

Equity Investments

ETT, a company owned equally by subsidiaries of American Electric Power Company, Inc. and MEHC, owns and operates electric transmission assets in the ERCOT. In order to fund ETT's ongoing transmission investment, MEHC expects to make equity contributions to ETT during 2012 , 2013 and 2014 of $107 million, $58 million and $4 million, respectively.

In January 2012, MEHC, through a wholly-owned subsidiary, acquired from NRG Energy, Inc. a 49 percent interest in Agua Caliente, the owner of the 290-MW Agua Caliente Project in Arizona. The Agua Caliente Project is expected to costs approximately $1.8 billion and will be completed in 12 blocks with an aggregate tested capacity of 310 MW. The first 30-MW block of the Agua Caliente Project was placed in service in January 2012 and the Agua Caliente Project expects to place 112 additional MW in service in 2012, 136 MW in service in 2013 and 32 MW in service in 2014. The project is being constructed pursuant to a fixed price, date certain, turn-key engineering, procurement and construction contract with a subsidiary of First Solar. Construction costs are expected to be funded with equity contributions from MEHC and NRG Energy, Inc. and proceeds from a $967 million secured loan maturing in 2037 from an agency of the United States government as part of the United States Department of Energy loan guarantee program. Funding requests are submitted on a monthly basis and the approved loans accrue interest at a fixed rate based on the current average yield of comparable maturity United States Treasury rates plus a spread of 0.375%.

Pursuant to an equity funding and contribution agreement, MEHC has committed to provide Agua Caliente with funding for (a) base equity contributions of up to an aggregate amount of $303 million for the construction of the project, and (b) transmission upgrade costs. In January 2012, MEHC entered into a $303 million letter of credit facility related to its funding commitments. The equity funding and contribution agreement and the letter of credit commitment decreases as equity is contributed to the Agua Caliente Project.

Contractual Obligations

The Company has contractual cash obligations that may affect its consolidated financial condition. The following table summarizes the Company's material contractual cash obligations as of December 31, 2011 (in millions):



	Payments Due By Periods
			2013-		2015-		2017 and
	2012		2014		2016		After		Total

MEHC senior debt	$	742	$	250	$	—	$	4,375	$	5,367
MEHC subordinated debt	22		—		—		—		22
Subsidiary debt	434		2,043		663		10,526		13,666
Interest payments on long-term debt ⁽¹⁾	1,073		1,951		1,809		12,060		16,893
Short-term debt	865		—		—		—		865
Coal, electricity and natural gas contract commitments ⁽¹⁾	1,389		1,958		1,261		3,621		8,229
Construction commitments ⁽¹⁾	757		466		442		52		1,717
Operating leases and easements ⁽¹⁾	89		127		71		366		653
Maintenance, service and other contracts ⁽¹⁾	192		172		51		142		557
Total contractual cash obligations	$	5,563	$	6,967	$	4,297	$	31,142	$	47,969


(1)	Not reflected on the Consolidated Balance Sheets.

The Company has other types of commitments that arise primarily from unused lines of credit, letters of credit or relate to construction and other development costs (Liquidity and Capital Resources included within this Item 7), asset retirement obligations (Note 13) and uncertain tax positions (Note 15) which have not been included in the above table because the amount and timing of the cash payments are not certain. Additionally, refer to Note 23 for commitments that arose subsequent to December 31, 2011 and that are not included in the above table. Refer, where applicable, to the respective referenced note in Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information.

Regulatory Matters

MEHC's regulated subsidiaries and certain affiliates are subject to comprehensive regulation. In addition to the discussion contained herein regarding regulatory matters, refer to Item 1 of this Form 10-K for further discussion regarding the general regulatory framework at MEHC's regulated subsidiaries.

PacifiCorp

Utah

In March 2009, PacifiCorp filed for an ECAM with the UPSC. The filing recommended that the UPSC adopt the mechanism to recover the difference between base net power costs set in the next Utah general rate case and actual net power costs. In July 2010, the UPSC issued an order approving a stipulation that would establish deferred accounts for both net power costs and REC revenues in excess of the levels currently included in rates, subject to the UPSC's final determination of the ratemaking treatment of the deferrals. In December 2010, the UPSC approved a separate stipulation that provided a $3 million monthly credit to customers effective January 1, 2011 to be applied toward the UPSC's final decision. In March 2011, the UPSC issued its final order approving the use of an EBA in Utah to begin at the conclusion of the general rate case described below. Under the EBA, which has been established as a four year pilot program, 70% of any difference between actual net power costs incurred and the amount of net power costs recovered through base rates are deferred during the calendar year. PacifiCorp must then file by March 15 of the following year to initiate collection or refund of the deferred balance. In April 2011, PacifiCorp filed a petition with the UPSC for clarification and reconsideration of certain aspects of the EBA order, including reconsideration of the UPSC's decision to exclude financial swaps from the EBA, which was granted in May 2011.

In January 2011, PacifiCorp filed a general rate case with the UPSC requesting a rate increase of $232 million, or an average price increase of 14%. In June 2011, PacifiCorp filed its rebuttal testimony with the UPSC reducing the requested rate increase to $188 million, or an average price increase of 11%. In July 2011, PacifiCorp filed a settlement with the UPSC, which was approved by the UPSC in August 2011 and resulted in a $117 million rate increase, or an average price increase of 7% effective September 21, 2011. The settlement resolved all major dockets outstanding before the UPSC. Under the terms of the settlement, financial swaps are included in the EBA and a collaborative process with Utah stakeholders may result in future modifications to PacifiCorp's risk management and hedging policies. The settlement also concluded the ratemaking treatment of deferred accounts for net power costs and estimated sales of RECs in excess of the levels included in rates since the 2009 general rate case. The settlement provides for $60 million of net power costs in excess of amounts included in base rates to be recovered from Utah customers over a three-year period beginning June 1, 2012, without carrying charges. The settlement also provides for a $33 million credit to customers related to sales of RECs that substantially occurred in prior years and that will be credited to Utah customers over a period of approximately nine months beginning September 21, 2011, plus carrying charges. The settlement also establishes a balancing account for prospective REC sales. The settlement stipulation defers decisions regarding the ratemaking treatment associated with the Klamath hydroelectric system's four mainstem dams and relicensing and settlement costs as described in Note 16 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

In November 2011, PacifiCorp filed with the UPSC to decrease its DSM cost recovery tariff in Utah by 1% of a customer's eligible monthly charges. In January 2012, the UPSC approved an all-party stipulation to reduce the DSM surcharge by 0.4% effective February 1, 2012. In addition, approximately $5 million will be credited to customers over a one-year period beginning June 1, 2012.

In February 2012, PacifiCorp filed a general rate case with the UPSC requesting a rate increase of $172 million, or an average price increase of 10%.

Oregon

In March 2011, PacifiCorp made its initial filing for the annual TAM with the OPUC for an annual increase of $62 million to recover the anticipated net power costs forecasted for calendar year 2012. In July 2011, PacifiCorp filed updated net power costs, reflecting an increase in the overall request to $63 million. In August 2011, PacifiCorp filed its surrebuttal testimony in the TAM proceeding decreasing the overall request to $59 million due to a reduction in forecasted net power costs. In September 2011, PacifiCorp reached a settlement with several parties, including the OPUC staff, to reduce the requested increase to $51 million, or an average price increase of 4%, subject to final net power cost updates in November 2011. In November 2011, the OPUC approved the overall rate increase of $51 million, or an average price increase of 4%. The new rates were effective January 1, 2012.

In October 2010, PacifiCorp filed its 2009 tax report under SB 408. In January 2011, PacifiCorp entered into a stipulation with the OPUC staff and the Citizens' Utility Board of Oregon, whereby PacifiCorp, the OPUC staff and the Citizens' Utility Board of Oregon agreed to a surcharge of $13 million, plus interest. In April 2011, the OPUC issued an order adopting the stipulation without significant modification. The $13 million, plus interest, was recorded in earnings in the second quarter of 2011 and is being collected over a one-year period that began in June 2011.

In May 2011, Oregon Senate Bill 967 ("SB 967") was enacted into law. SB 967 repealed and replaced SB 408, and as a result, PacifiCorp will no longer be required to file tax reports under SB 408. Among other matters, SB 967 directs the OPUC to consider the income tax component of rates when conducting ratemaking proceedings. The enactment of SB 967 did not impact PacifiCorp's consolidated financial results.

Wyoming

In April 2010, PacifiCorp filed an application with the WPSC requesting approval of a new ECAM to replace the existing PCAM. The PCAM concluded with the final deferral of net power costs in November 2010 and collection through March 2012. In February 2011, the WPSC issued an order approving an ECAM effective December 1, 2010, under which 70% of any difference between actual net power costs incurred and the amount of net power costs recovered through base rates, subject to certain other adjustments, are deferred as incurred during the calendar year. PacifiCorp must then file by March 15 of the following year to initiate collection or refund of the deferred balance beginning June 1.

In November 2010, PacifiCorp filed a general rate case with the WPSC requesting a rate increase of $98 million, or an average price increase of 17%. In May 2011, PacifiCorp filed its rebuttal testimony with the WPSC reducing the requested rate increase to $80 million. In June 2011, the WPSC approved a multi-party stipulation resulting in an annual rate increase of $62 million, or an average price increase of 11%. The stipulation also established a surcredit and a balancing account to pass on to or collect from customers any difference between the amount of the REC sales established in the surcredit and actual REC sales. The surcredit will be established annually based on PacifiCorp's forecasted REC sales, and the difference between the surcredit and actual REC sales will be tracked in the balancing account. For 2011, the surcredit was set at $17 million, or a 3% reduction. The rates were effective September 22, 2011.

In February 2011, PacifiCorp filed its final PCAM application with the WPSC requesting recovery of $16 million in deferred net power costs over the 12-month period ending March 31, 2012. PacifiCorp requested and received approval from the WPSC to implement an $11 million interim rate increase over the $5 million reflected in the tariff to be effective from April 1, 2011 until the WPSC issues a final order. In September 2011, PacifiCorp reached an agreement with intervening parties and filed a stipulation with the WPSC to recover $14 million in deferred net power costs. In October 2011, the WPSC approved the stipulation with an effective date of November 1, 2011.

In December 2011, PacifiCorp filed a general rate case with the WPSC requesting an annual increase of $63 million, or an average price increase of 10%. If approved by the WPSC, the new rates are expected to be effective October 9, 2012.

Washington

In May 2010, PacifiCorp filed a general rate case with the WUTC requesting an annual increase of $57 million, or an average price increase of 21%. In November 2010, the requested annual increase was reduced to $49 million, or an average price increase of 18%. In March 2011, the WUTC issued a final order and clarification letter approving an annual increase of $33 million, or an average price increase of 12%, reduced in the first year by a customer bill credit of $5 million, or 2%, related to the sale of RECs expected during the twelve-month period ended March 31, 2012, as well as requiring PacifiCorp to submit additional information to the WUTC regarding the sales of RECs. The new rates were effective in April 2011. Although both PacifiCorp and the WUTC staff filed petitions for reconsideration of various items on the final order, the WUTC denied the petitions for reconsideration. In May 2011 PacifiCorp submitted to the WUTC the additional information required by the March 2011 order regarding PacifiCorp's proceeds from sales of RECs for the period January 1, 2009 forward and a detailed proposal for a tracking mechanism for proceeds of RECs. Intervening parties and WUTC staff are proposing that PacifiCorp refund to customers the amount of REC sales in excess of the amount included in base rates since January 1, 2009. Initial and reply briefs from all parties were filed in November 2011. Oral arguments were held before the WUTC in January 2012, and an order is expected during the first quarter of 2012.

In July 2011, PacifiCorp filed a general rate case with the WUTC requesting an annual increase of $13 million, or an average price increase of 4%, with an effective date no later than June 1, 2012. In February 2012, the parties to the proceeding filed a settlement agreement with the WUTC reflecting an annual increase of $5 million, or an average price increase of 2%. A hearing on the settlement agreement is scheduled for March 2012.

Idaho

In May 2010, PacifiCorp filed a general rate case with the IPUC requesting an annual increase of $28 million, or an average price increase of 14%. In November 2010, the requested annual increase was reduced to $25 million, or an average price increase of 12%. In December 2010, the IPUC issued an interim order approving an annual increase of $14 million, or an average price increase of 7% with an effective date of December 28, 2010. In February 2011, the IPUC issued its final order with no revisions to the December 2010 increase. In March 2011, PacifiCorp petitioned the IPUC seeking reconsideration or rehearing on certain aspects of the order, including the IPUC's conclusion that 27% of PacifiCorp's Populus to Terminal transmission line investment is not currently used and useful and should be carried as plant held for future use. The Idaho-allocated share of 27% of the investment is approximately $13 million. In April 2011, the IPUC issued an order, accepting in part and rejecting in part, PacifiCorp's motion for reconsideration, resulting in no significant changes to the IPUC's initial order. In May 2011, PacifiCorp filed an appeal of the Populus to Terminal decision to the Idaho Supreme Court requesting a determination on the legality of the IPUC's decision to exclude 27% of the Populus to Terminal line as a result of its conclusion that the line is not fully used and useful. As a result of the general rate case settlement process discussed below, PacifiCorp joined in a motion filed with the Idaho Supreme Court in October 2011, to stay the procedural schedule associated with the appeal until January 30, 2012, and the Idaho Supreme Court granted the motion. The matter was settled in the general rate case described below and the appeal was dismissed.

In May 2011, PacifiCorp filed a general rate case with the IPUC requesting an annual increase of $33 million, or an average price increase of 15%. In October 2011, a settlement was reached with the majority of parties in the case providing for a two-year agreement to increase rates by $17 million each year effective January 1, 2012 and January 1, 2013, representing average price increases of 8% and 7%, respectively. The settlement also resolved the dispute over the 27% of PacifiCorp's Populus to Terminal investment, providing for recovery of PacifiCorp's investment beginning on or after January 1, 2014. In January 2012, PacifiCorp received an order from the IPUC approving the settlement.

In February 2011, PacifiCorp filed an ECAM application with the IPUC requesting recovery of $13 million in deferred net power costs. In March 2011, the IPUC issued an order approving recovery of $10 million beginning April 1, 2011 and the remaining $3 million beginning in 2012.

In February 2012, PacifiCorp filed an ECAM application with the IPUC requesting recovery of $18 million in deferred net power costs through an increase to the current ECAM surcharge rate established in 2011. If approved, the new rates will be effective April 1, 2012.

MidAmerican Energy

On February 21, 2012, MidAmerican Energy filed an application with the IUB for an interim and final increase in Iowa retail electric rates in the form of two adjustment clauses to be added to customers' bills. The requested adjustment clauses and a modification to current revenue sharing provisions are consistent with a November 2011 settlement agreement between MidAmerican Energy and the OCA, in which the parties agree to support the proposed changes. The adjustment clauses would recover anticipated increases in retail coal and coal transportation costs and environmental control expenditures subject to an aggregate maximum of $39 million, or 3.4%, for 2012 and an additional $37 million for an aggregate maximum of $76 million for 2013, or a 3.2% increase from 2012. The requested modification to the existing revenue sharing provisions provides for MidAmerican Energy to share with its customers 20% of revenue associated with Iowa electric returns on equity between 10% and 10.5%, 50% of revenue associated with Iowa electric returns on equity between 10.5% and 11.75%, 75% of revenue associated with Iowa electric returns on equity between 11.75% and 13.0% and 83.3% of revenue associated with Iowa electric returns on equity above 13.0%. Such shared amounts would reduce MidAmerican Energy's investment in the Walter Scott, Jr. Energy Center Unit 4. There would be no revenue sharing for Iowa electric returns on equity below 10%. Pursuant to the settlement agreement, MidAmerican Energy is not precluded from seeking interim rate relief in 2013.

Kern River

In December 2009, the FERC issued an order establishing revised rates for the period of Kern River's current long-term contracts ("Period One rates") and required that rates be established based on a levelized rate design for eligible customers to elect to take service following the expiration of their current contracts ("Period Two rates"). The FERC set all other issues related to Period Two rates for hearing. In November 2010, the FERC issued an order that denied all requests for rehearing related to Period One rates from the FERC's December 2009 order and established that Kern River is entitled to base its Period Two rates on a 100% equity capital structure. In January 2011, Kern River filed a motion for clarification on certain depreciation issues with the FERC.

In July 2011, the FERC issued its order substantially adopting the presiding administrative law judge's initial decision issued in April 2011 regarding Kern River's Period Two rates. According to the decisions, Period Two rates should be based on a return on equity of 11.55%, a capital structure of 100% and a levelization period that coincides with a contract length of 10 or 15 years. Kern River has a regulatory asset approved by the FERC associated with compressor engines and general plant replacements that can be recovered in a future rate case and was not incorporated into Period Two rates at this time. Kern River, as well as others, requested rehearing and clarification of the FERC's July 2011 order on a majority of the issues. Kern River filed tariffs in compliance with the FERC's order in August 2011 and, following an order on compliance, again in September 2011. In late September 2011, the FERC issued a second order on compliance, accepting Kern River's tariff filing. The FERC has not yet responded to the requests for rehearing and clarification of the July 2011 order.

ETT

In December 2011, ETT filed its second Interim Transmission Cost of Service ("TCOS") of 2011 at the PUCT. The application was based on a test year ending October 31, 2011. The filing requested an increase in total transmission invested capital of $82 million and a total revenue requirement increase of $11 million. In January 2012, the PUCT staff recommended approval of ETT's second interim TCOS filing of 2011. ETT, along with PUCT staff, filed a joint proposed notice of approval. On January 31, 2012, the administrative law judge signed the final order making the new rates effective.

Environmental Laws and Regulations

The Company is subject to federal, state, local and foreign laws and regulations regarding air and water quality, RPS, emissions performance standards, climate change, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact the Company's current and future operations. In addition to imposing continuing compliance obligations, these laws and regulations provide regulators with the authority to levy substantial penalties for noncompliance including fines, injunctive relief and other sanctions. These laws and regulations are administered by the EPA and various other state, local and international agencies. All such laws and regulations are subject to a range of interpretation, which may ultimately be resolved by the courts. Environmental laws and regulations continue to evolve, and the Company is unable to predict the impact of the changing laws and regulations on its operations and consolidated financial results. The Company believes it is in material compliance with all applicable laws and regulations. Refer to "Liquidity and Capital Resources" for discussion of the Company's forecasted environmental-related capital expenditures.

Clean Air Standards

The Clean Air Act is a federal law administered by the EPA that provides a framework for protecting and improving the nation's air quality and controlling sources of air emissions. The implementation of new standards is generally outlined in SIPs, which are a collection of regulations, programs and policies to be followed. SIPs vary by state and are subject to public hearings and EPA approval. Some states may adopt additional or more stringent requirements than those implemented by the EPA. The major Clean Air Act programs most directly affecting the Company's operations, are described below.

National Ambient Air Quality Standards

Under the authority of the Clean Air Act, the EPA sets minimum national ambient air quality standards for six principal pollutants, consisting of carbon monoxide, lead, nitrogen oxides, particulate matter, ozone and sulfur dioxide, considered harmful to public health and the environment. Areas that achieve the standards, as determined by ambient air quality monitoring, are characterized as being in attainment, while those that fail to meet the standards are designated as being nonattainment areas. Generally, sources of emissions in a nonattainment area that are determined to contribute to the nonattainment are required to reduce emissions. Most air quality standards require measurement over a defined period of time to determine the average concentration of the pollutant present. Currently, air quality monitoring data indicates that all counties where MidAmerican Energy's major emission sources are located are in attainment of the current national ambient air quality standards.

In December 2009, the EPA designated the Utah counties of Davis and Salt Lake, as well as portions of Box Elder, Cache, Tooele, Utah and Weber counties, to be in nonattainment of the fine particulate matter standard. This designation has the potential to impact PacifiCorp's Lake Side and Gadsby generating facilities, depending on the requirements to be established in the Utah SIP. The impact, if any, on PacifiCorp's generating facilities is not anticipated to be significant.

In January 2010, the EPA proposed a rule to strengthen the national ambient air quality standard for ground level ozone. The proposed rule arose out of legal challenges claiming that a March 2008 rule that reduced the standard from 80 parts per billion to 75 parts per billion was not strict enough. The new rule proposed a standard between 60 and 70 parts per billion. In September 2011, the President requested that the EPA withdraw the proposed ozone standard and allow the review of the standards to proceed through the regularly scheduled review in 2013. The EPA is, therefore, proceeding with implementation of the March 2008 ozone standards and, in December 2011, issued its response to states' recommendations on area attainment designations. Part of the EPA's response recommended that the Upper Green River Basin Area in Wyoming, including all of Sublette and portions of Lincoln and Sweetwater Counties, be designated as nonattainment for the March 2008 ozone standard. While PacifiCorp's Jim Bridger plant is located in Sweetwater County, it is not in the portion proposed for designation as nonattainment and is not expected to be impacted by the proposed designation. The EPA also published a proposed consent decree in the Federal Register in December 2011, requiring it to sign final designations for the March 2008 ozone standard by May 31, 2012.

In January 2010, the EPA finalized a one-hour air quality standard for nitrogen dioxide at 0.10 part per million. The EPA published final designations that are effective February 29, 2012, indicating that based on air quality monitoring data, all areas of the country are designated as "unclassifiable/attainment" for the 2010 nitrogen dioxide national ambient air quality standard.

In June 2010, the EPA finalized a new national ambient air quality standard for sulfur dioxide. Under the new rule, the existing 24-hour and annual standards for sulfur dioxide, which were 140 parts per billion measured over 24 hours and 30 parts per billion measured over an entire year, were replaced with a new one-hour standard of 75 parts per billion. The new rule will utilize a three-year average to determine attainment. The rule will utilize source modeling, in addition to the installation of ambient monitors where sulfur dioxide emissions impact populated areas, with new monitors required to be placed in service no later than January 2013. Attainment designations are due by June 2012, with SIPs due by 2014 and final attainment demonstrations by August 2017.

As new, more stringent standards are adopted, the number of counties designated as nonattainment areas is likely to increase. Businesses operating in newly designated nonattainment counties could face increased regulation and costs to monitor or reduce emissions. For instance, existing major emissions sources may have to install reasonably available control technologies to achieve certain reductions in emissions and undertake additional monitoring, recordkeeping and reporting. The construction or modification of facilities that are sources of emissions could become more difficult in nonattainment areas. Until additional monitoring and modeling is conducted, the impacts on the Company cannot be determined.

Mercury and Air Toxics Standards

The Clean Air Mercury Rule ("CAMR"), issued by the EPA in March 2005, was the United States' first attempt to regulate mercury emissions from coal-fueled generating facilities through the use of a market-based cap-and-trade system. The CAMR, which mandated emissions reductions of approximately 70% by 2018, was overturned by the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit") in February 2008. In March 2011, the EPA proposed a new rule that would require coal-fueled generating facilities to reduce mercury emissions and other hazardous air pollutants through the establishment of "Maximum Achievable Control Technology" standards rather than a cap-and-trade system. The final rule, MATS, was released by the EPA in December 2011 and published in the Federal Register on February 16, 2012, and requires that new and existing coal-fueled facilities achieve emission standards for mercury, acid gases and other non-mercury hazardous air pollutants. Existing sources are required to comply with the new standards within three years after the rule is final, with individual sources granted an additional year to complete installation of controls if approved by the permitting authority. While the final MATS continues to be reviewed by the Company, the Company believes that its emissions reduction projects completed to date or currently permitted or planned for installation, including scrubbers, baghouses and electrostatic precipitators are consistent with the EPA's MATS and will support the Company's ability to comply with the final rule's standards for acid gases and non-mercury metallic hazardous air pollutants. The Company will be required to take additional actions to reduce mercury emissions through the installation of controls or use of sorbent injection at certain of its coal-fueled generating facilities and otherwise comply with the final rule's standards. The Company is evaluating whether or not to close certain units. Incremental costs to install and maintain mercury emissions control equipment at the Company's coal-fueled generating facilities and any requirements to shut down generating facilities will increase the cost of providing service to customers.

Clean Air Interstate Rule, Clean Air Transport Rule and Cross-State Air Pollution Rule

The EPA promulgated the CAIR in March 2005 to reduce emissions of nitrogen oxides and sulfur dioxide, precursors of ozone and particulate matter, from down-wind sources. The CAIR required states in the eastern United States, including Iowa, to reduce emissions by implementing a plan based on a market-based cap-and-trade system, emissions reductions, or both. The CAIR created separate trading programs for nitrogen oxides and sulfur dioxide emissions credits. The nitrogen oxides and sulfur dioxide emissions reductions were planned to be accomplished in two phases, in 2009-2010 and 2015.

In July 2008, a three-judge panel of the D.C. Circuit issued a unanimous decision vacating the CAIR. In December 2008, the D.C. Circuit issued an opinion remanding, without vacating, the CAIR back to the EPA to conduct proceedings to fix the flaws in CAIR consistent with the D.C. Circuit's July 2008 ruling.

In July 2010, the EPA proposed the Clean Air Transport Rule ("Transport Rule"), a replacement of the CAIR, which required electric generating units in 31 states and the District of Columbia to reduce emissions of nitrogen oxides and sulfur dioxide on a state-by-state basis in accordance with each state's modeled contribution to nonattainment of the ozone and fine particulate standards in downwind states. The emissions reductions required under the Transport Rule were intended only to resolve transported emissions and not to resolve air quality issues in the states where the generation is located. The Transport Rule's emissions reduction requirements were proposed to take place in two phases, with the first phase beginning in 2012 and the second phase beginning in 2014. By 2014, the Transport Rule and other state and EPA actions would reduce power plant nitrogen oxides emissions by 52% and sulfur dioxide emissions by 71% from 2005 levels in covered states. The EPA proposed to administer separate trading programs for nitrogen oxides and sulfur dioxide credits under the Transport Rule. Facilities were required to comply with the CAIR until the Transport Rule became effective.

In July 2011, the EPA issued the final Transport Rule, renamed the Cross-State Air Pollution Rule ("CSAPR"), to address interstate transport of sulfur dioxide and nitrogen oxides emissions in 27 eastern and Midwestern states. Upon full implementation in 2014, the CSAPR will reduce total sulfur dioxide emissions by 73% and nitrogen oxides emissions by 54% at electric generating facilities in the 27-state region as compared to 2005 levels. MidAmerican Energy's coal-fueled generating facilities in Iowa are impacted by and required to make emissions reductions and otherwise comply with the CSAPR. In addition to issuing the final rule, the EPA issued a supplemental notice of proposed rulemaking to include Iowa and five other states in the ozone season nitrogen oxides emissions reduction requirements. The ozone season supplemental proposal was finalized in December 2011, and includes Iowa and four other states in the CSAPR ozone season nitrogen oxide emission reduction requirements. While MidAmerican Energy operates natural gas-fueled generating facilities in Iowa and MidAmerican Renewables operates natural gas-fueled generating facilities within the states of Illinois, Texas and New York, which are in the CSAPR region, no significant impact is expected on those generating facilities.

In December 2011, the D.C. Circuit issued a stay on the implementation of the CSAPR pending consideration of several petitions for review before the court. The court held that the CAIR should be administered pending the resolution of the pending petitions for review.

MidAmerican Energy is currently complying with the CAIR and has installed or is in the process of installing emissions controls at some of its generating facilities to comply with the CAIR and may purchase nitrogen oxides and sulfur dioxide emissions credits for emissions in excess of allocated allowances. The cost of these credits is subject to market conditions at the time of purchase and historically has not been material. The full impact of the CSAPR, or the CAIR, cannot be determined until the outcome of the litigation pending in the D.C. Circuit or the stay of the CSAPR is lifted. It is possible that the existing CAIR or the CSAPR may be replaced with more stringent requirements to reduce nitrogen oxides and sulfur dioxide emissions and that these requirements could be extended to the western United States through regulation or legislation such as a multi-pollutant emissions reduction bill.

MidAmerican Renewables' natural gas generating facilities in Texas, Illinois and New York are also subject to the CAIR until the CSAPR is adopted. However, the provisions are not anticipated to have a material impact on the Company. PacifiCorp's generating facilities are not subject to the CAIR or the CSAPR.

Regional Haze

The EPA has initiated a regional haze program intended to improve visibility in designated federally protected areas ("Class I areas"). Some of PacifiCorp's coal-fueled generating facilities in Utah and Wyoming and MidAmerican Energy's coal-fueled generating facilities meet the threshold applicability criteria to be eligible units under the Clean Air Visibility Rules. In accordance with the federal requirements, states were required to submit SIPs by December 2007 to demonstrate reasonable progress towards achieving natural visibility conditions in Class I areas by requiring emissions controls, known as best available retrofit technology, on sources constructed between 1962 and 1977 with emissions that are anticipated to cause or contribute to impairment of visibility. Utah submitted its most recent regional haze SIP amendments in 2011 and suggested that the emissions reduction projects planned by PacifiCorp are sufficient to meet its initial emissions reduction requirements. In September 2011, the Company received a Section 114 request for information from the EPA Region VIII requiring the Company to submit a five-factor best available retrofit technology analysis for PacifiCorp's Hunter Units 1 and 2 and the Huntington generating facility in Utah within 30 days based on the EPA's assertion that Utah failed to submit such an analysis. The Company responded to the request in November 2011 and indicated it would work with the Utah Division of Air Quality to complete the requested analysis which, based on a schedule proposed by Utah to the EPA, will be part of a process to conclude with a submittal to the EPA in February 2013. Wyoming submitted its regional haze SIP to the EPA in January 2011. The EPA is currently under a consent decree to issue a proposed decision on the Wyoming SIP by May 15, 2012, and a final decision by October 15, 2012. PacifiCorp believes that its planned emissions reduction projects will satisfy the regional haze requirements in Utah and Wyoming. It is possible that additional controls may be required after the respective SIPs have been considered by the EPA or that the timing of installation of planned controls could change.

The EPA's rejection of regional haze SIPs based on the state's selection of less stringent controls than the EPA believes are warranted has resulted in lawsuits being filed by states and affected entities. Cases are pending before the Tenth Circuit Court of Appeals by New Mexico and Oklahoma and additional cases are likely to be filed.

In December 2011, the EPA proposed to accept the emission reductions made by states impacted by the CSAPR, including Iowa, as meeting the requirements of the regional haze program. If the EPA finalizes the proposal, no further emission reductions are expected from MidAmerican Energy's coal-fueled generating facilities for purposes of meeting the regional haze requirements.

New Source Review

Under existing New Source Review ("NSR") provisions of the Clean Air Act, any facility that emits regulated pollutants is required to obtain a permit from the EPA or a state regulatory agency prior to (a) beginning construction of a new major stationary source of a regulated pollutant or (b) making a physical or operational change to an existing stationary source of such pollutants that increases certain levels of emissions, unless the changes are exempt under the regulations (including routine maintenance, repair and replacement of equipment). In general, projects subject to NSR regulations require pre-construction review and permitting under the Prevention of Significant Deterioration ("PSD") provisions of the Clean Air Act. Under the PSD program, a project that emits threshold levels of regulated pollutants must undergo an analysis to determine the best available control technology and evaluate the most effective emissions controls after consideration of a number of factors. Violations of NSR regulations, which may be alleged by the EPA, states, environmental groups and others, potentially subject a company to material fines and other sanctions and remedies, including installation of enhanced pollution controls and funding of supplemental environmental projects.

Numerous changes have been proposed to the NSR rules and regulations over the last several years. In addition to the proposed changes, differing interpretations by the EPA and the courts create risk and uncertainty for entities when seeking permits for new projects and installing emissions controls at existing facilities under NSR requirements. The Company monitors these changes and interpretations to ensure permitting activities are conducted in accordance with the applicable requirements.

As part of an industry-wide investigation to assess compliance with the NSR and PSD provisions, the EPA has requested information and supporting documentation from numerous utilities regarding their capital projects for various coal-fueled generating facilities. A NSR enforcement case against an unrelated utility has been decided by the United States Supreme Court, holding that an increase in the annual emissions of a generating facility, when combined with a modification (i.e., a physical or operational change), may trigger NSR permitting. Between 2001 and 2003, PacifiCorp and MidAmerican Energy responded to requests for information relating to their capital projects at their coal-fueled generating facilities. PacifiCorp engaged in periodic discussions with the EPA over several years regarding PacifiCorp's historical projects and their compliance with NSR and PSD provisions. In September 2011, PacifiCorp received a letter from the EPA concluding these discussions. PacifiCorp cannot predict the next steps in this process and could be required to install additional emissions controls and incur additional costs and penalties in the event it is determined that PacifiCorp's historical projects did not meet all regulatory requirements.

In October 2011, MidAmerican Energy received a request from the EPA Region VII pursuant to Section 114 of the Clean Air Act for information on its coal-fueled generating facilities to supplement the requests made in 2002 and 2003. MidAmerican Energy submitted its response to the October 2011 request in December 2011. MidAmerican Energy cannot predict the outcome of this matter at this time.

Climate Change

In April 2011, the United States House of Representatives voted 255-177 on a bill (H.R. 910) that would prevent the EPA from regulating GHG emissions. No action has been taken by the Senate on the bill. While significant measures to regulate GHG emissions at the federal level were considered by the United States Congress in 2010, comprehensive climate change legislation has not been adopted. International discussions regarding climate change continue to be held periodically, but agreement has not been reached on how nations will address future climate change commitments upon the expiration of the Kyoto Protocol in December 2012.

In December 2009, the EPA published its findings that GHG threaten the public health and welfare and is pursuing regulation of GHG emissions under the Clean Air Act. Additionally, in May 2010, the EPA issued the GHG "Tailoring Rule" to address permitting requirements for GHG after determining that GHG are subject to regulation and would trigger Clean Air Act permitting requirements for stationary sources beginning in January 2011. Numerous lawsuits have been filed on both the EPA's endangerment finding and the tailoring rule and are pending in the D.C. Circuit with arguments scheduled to take place in February 2012.

While the debate continues at the federal and international level over the direction of climate change policy, several states have developed or are developing state-specific laws or regional initiatives to report or mitigate GHG emissions. In addition, governmental, non-governmental and environmental organizations have become more active in pursuing climate change related litigation under existing laws.

California mandatory GHG reporting requirements began with 2008 emissions and PacifiCorp has reported its GHG emissions annually since their inception. In September 2009, the EPA issued its final rule regarding mandatory reporting of GHG ("GHG Reporting") beginning January 1, 2010. Under GHG Reporting, suppliers of fossil fuels, manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more per year of GHG are required to submit annual reports to the EPA. PacifiCorp, MidAmerican Energy and MidAmerican Renewables are subject to this requirement and submitted their first reports prior to September 30, 2011. Northern Natural Gas and Kern River reported their combustion-related GHG emissions prior to September 30, 2011, and are required to report their GHG emissions from equipment leaks and venting by September 28, 2012. The EPA released the 2010 GHG emissions reports in January 2012.

In the absence of comprehensive climate legislation or regulation, the Company has continued to invest in lower- and non-carbon generating resources and to operate in an environmentally responsible manner. Examples of the Company's significant investments in programs and facilities that will mitigate its GHG emissions include:

•

MidAmerican Energy owns the largest and PacifiCorp owns the second largest portfolio of wind-powered generating capacity in the United States among rate-regulated utilities. As of December 31, 2011, the Company owned 2,909 MW of operating wind-powered generating capacity at a total cost of $5.4 billion. MidAmerican Energy is constructing an additional 407 MW of wind-powered generation that it expects to place in service in 2012. Additionally, the Company has power purchase agreements with 858 MW of wind-powered generating capacity.


•	PacifiCorp owns 1,145 MW of hydroelectric generating capacity.


•	In January 2012, MEHC, through wholly-owned subsidiaries, acquired the 550-MW Topaz Project and a 49 percent interest in the 290-MW Agua Caliente Project. The electricity delivered by the Topaz Project and Agua Caliente Project is being and will be sold to PG&E and will help PG&E meet its obligations under a California state mandate to procure capacity and electricity from renewable resources.

•

PacifiCorp's Energy Gateway Transmission Expansion Program represents a plan to build approximately 2,000 miles of new high-voltage transmission lines with an estimated cost exceeding $6 billion. The plan includes several transmission line segments that will: (a) address customer load growth; (b) improve system reliability; (c) reduce transmission system constraints; (d) provide access to diverse generation resources, including renewable resources; and (e) improve the flow of electricity throughout PacifiCorp's six-state service area.

•

ETT plans to construct $1.5 billion of transmission investment in support of CREZ. CREZ is a transmission plan that advances the development of over 18,000 MW of new wind-powered generation in Texas. Additionally, AEP subsidiaries have transferred to ETT the obligation to build approximately $1.7 billion of transmission projects within ERCOT. Through December 31, 2011, $1.1 billion has been spent, of which $617 million has been placed in service. ETT's transmission system included 445 miles of transmission lines and 19 substations as of December 31, 2011.


•	PacifiCorp and MidAmerican Energy have offered customers a comprehensive set of DSM programs for more than 20 years. The programs assist customers to manage the timing of their usage, as well as to reduce overall energy consumption, resulting in lower utility bills.


•	The Utilities have installed and upgraded emissions control equipment at certain of its coal-fueled generating facilities to reduce emissions of sulfur dioxide and nitrogen oxides.


•	MEHC holds a 10% interest in BYD Company Limited, which continues to make advances in applying its proprietary battery technology to electric vehicles and has also developed an energy storage system, solar power system, hybrid energy system and other green energy solutions.

The impact of potential federal, regional, state and international accords, legislation, regulation, or judicial proceedings related to climate change cannot be quantified in any meaningful range at this time. New requirements limiting GHG emissions could have a material adverse impact on the Company, the United States and the global economy. Companies and industries with higher GHG emissions, such as utilities with significant coal-fueled generating facilities, will be subject to more direct impacts and greater financial and regulatory risks. The impact is dependent on numerous factors, none of which can be meaningfully quantified at this time. These factors include, but are not limited to, the magnitude and timing of GHG emissions reduction requirements; the design of the requirements; the cost, availability and effectiveness of emissions control technology; the price, distribution method and availability of offsets and allowances used for compliance; government-imposed compliance costs; and the existence and nature of incremental cost recovery mechanisms. Examples of how new requirements may impact the Company include:


•	Additional costs may be incurred to purchase required emissions allowances under any market-based cap-and-trade system in excess of allocations that are received at no cost. These purchases would be necessary until new technologies could be developed and deployed to reduce emissions or lower carbon generation is available;


•	Acquiring and renewing construction and operating permits for new and existing generating facilities may be costly and difficult;


•	Additional costs may be incurred to purchase and deploy new generating technologies;


•	Costs may be incurred to retire existing coal-fueled generating facilities before the end of their otherwise useful lives or to convert them to burn fuels, such as natural gas or biomass, that result in lower emissions;


•	Operating costs may be higher and generating unit outputs may be lower;


•	Higher interest and financing costs and reduced access to capital markets may result to the extent that financial markets view climate change and GHG emissions as a business risk; and


•	The Company's natural gas pipeline operations, electric transmission and retail sales may be impacted in response to changes in customer demand and requirements to reduce GHG emissions.

The impact of events or conditions caused by climate change, whether from natural processes or human activities, could vary widely, from highly localized to worldwide, and the extent to which a utility's operations may be affected is uncertain. Climate change may cause physical and financial risk through, among other things, sea level rise, changes in precipitation and extreme weather events. Consumer demand for energy may increase or decrease, based on overall changes in weather and as customers promote lower energy consumption through the continued use of energy efficiency programs or other means. Availability of resources to generate electricity, such as water for hydroelectric production and cooling purposes, may also be impacted by climate change and could influence the Company's existing and future electricity generating portfolio. These issues may have a direct impact on the costs of electricity production and increase the price customers pay or their demand for electricity.

International Accords

Under the United Nations Framework Convention on Climate Change, adopted in 1992, members of the convention meet periodically to discuss international responses to climate change. To date, the United States has not made a binding reduction commitment as a result of these international discussions.

Federal Legislation

Legislation introduced in the 112th Congress has been focused on repeal or delay of the EPA's ability to regulate GHG emissions. There is currently no federal legislation pending to regulate GHG emissions.

GHG Tailoring Rule

The EPA finalized the GHG "Tailoring Rule" in May 2010 requiring new or modified sources of GHG emissions with increases of 75,000 or more tons per year of total GHG to determine the best available control technology for their GHG emissions beginning in January 2011. New or existing major sources will also be subject to Title V operating permit requirements for GHG. Beginning July 1, 2011 through June 30, 2013, new construction projects that emit GHG emissions of at least 100,000 tons per year and modifications of existing facilities that increase GHG emissions by at least 75,000 tons per year will be subject to permitting requirements and facilities that were previously not subject to Title V permitting requirements will be required to obtain Title V permits if they emit at least 100,000 tons per year of carbon dioxide equivalents. Several legal challenges to the GHG Tailoring Rule have been filed in the D.C. Circuit. The EPA issued a GHG best available control technology guidance document in November 2010 in an effort to provide permitting authorities guidance on how to conduct a best available control technology review for GHG.

MidAmerican Energy has obtained and is in the process of obtaining permits to install emissions reduction equipment at existing generating facilities to comply with CSAPR and was required to assess the impacts of the projects on GHG emissions. A GHG emissions limit was imposed on the permits for those projects and management believes compliance with the GHG limits under these permits will not result in a material adverse impact on its operations. PacifiCorp's permitting of certain existing generating facilities to install emissions reduction equipment to comply with the Regional Haze Rules assessed the impacts of the projects on GHG emissions under the GHG Tailoring Rule. No GHG emissions limit was included in the permits. However, PacifiCorp's Lake Side 2 was subject to a best available control technology review and the permit includes a limit for carbon dioxide equivalent emissions. To date, permitting authorities implementing the GHG Tailoring Rule have included efficiency improvements to demonstrate compliance with best available control technology for GHG, as well as requiring emissions limits for GHGs in permits; as such, the impacts of the Tailoring Rule on the Company have not been material.

GHG New Source Performance Standards

Under the Clean Air Act, the EPA may establish emissions standards that reflect the degree of emissions reductions achievable through the best technology that has been demonstrated, taking into consideration the cost of achieving those reductions and any non-air quality health and environmental impact and energy requirements. The EPA entered into a settlement agreement with a number of parties, including certain state governments and environmental groups, in December 2010 to promulgate emissions standards covering GHG by September 30, 2011, as amended, and issue final regulations by May 26, 2012. However, in mid-September, the EPA indicated it would not meet the September 30, 2011 deadline to promulgate the standards and it has not yet established a new schedule for issuing the proposed rules. It is unclear what standards the EPA will establish for new and modified sources or what the guidelines will be for existing sources. Until the standards are proposed and finalized, the impact on the Company cannot be determined.

Regional and State Activities

Several states have promulgated or otherwise participate in state-specific or regional laws or initiatives to report or mitigate GHG emissions. These are expected to impact PacifiCorp, MidAmerican Energy and other MEHC energy subsidiaries, and include:

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The Western Climate Initiative was established as a comprehensive regional effort to reduce GHG emissions by 15% below 2005 levels by 2020 through a cap-and-trade program that includes the electricity sector. The Western Climate Initiative initially included the states of California, Montana, New Mexico, Oregon, Utah and Washington and the Canadian provinces of British Columbia, Manitoba, Ontario and Quebec. However, only California, British Columbia and Quebec are moving forward under the initiative, with the other states focused on efforts to design, promote and implement cost-effective policies to reduce GHG emissions and create economic opportunities.

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In October 2011, the California Air Resources Board adopted a GHG cap-and-trade program with an effective date of January 1, 2012; compliance obligations will be imposed on entities beginning in 2013. In addition, California law imposes a GHG emissions performance standard to all electricity generated within the state or delivered from outside the state that is no higher than the GHG emissions levels of a state-of-the-art combined-cycle natural gas-fueled generating facility, as well as legislation that adopts an economy-wide cap on GHG emissions to 1990 levels by 2020.

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Over the past several years, the states of California, Washington and Oregon have adopted GHG emissions performance standards for base load electrical generating resources. Under the laws in all three states, the emissions performance standards provide that emissions must not exceed 1,100 pounds of carbon dioxide per MWh. These GHG emissions performance standards generally prohibit electric utilities from entering into long-term financial commitments (e.g., new ownership investments, upgrades, or new or renewed contracts with a term of five or more years) unless any base load generation supplied under long-term financial commitments comply with the GHG emissions performance standards.

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The Washington and Oregon governors enacted legislation in May 2007 and August 2007, respectively, establishing goals for the reduction of GHG emissions in their respective states. Washington's goals seek to (a) reduce emissions to 1990 levels by 2020; (b) reduce emissions to 25% below 1990 levels by 2035; and (c) reduce emissions to 50% below 1990 levels by 2050, or 70% below Washington's forecasted emissions in 2050. Oregon's goals seek to (a) cease the growth of Oregon GHG emissions by 2010; (b) reduce GHG levels to 10% below 1990 levels by 2020; and (c) reduce GHG levels to at least 75% below 1990 levels by 2050. Each state's legislation also calls for state government to develop policy recommendations in the future to assist in the monitoring and achievement of these goals.

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In Iowa, legislation enacted in 2007 required the Iowa Climate Change Advisory Council ("ICCAC"), a 23-member group appointed by the Iowa governor, to develop scenarios designed to reduce statewide GHG emissions, including one scenario that would reduce emissions by 50% by 2050, and submit its recommendations to the legislature. The ICCAC also developed a second scenario to reduce GHG emissions by 90% with reductions in both scenarios from 2005 emissions levels. In January 2009, the ICCAC presented to the Iowa governor and legislature several policy options to consider to achieve GHG emissions reductions, including enhanced energy efficiency programs and increased renewable generation. No legislation has yet been enacted that would require GHG emissions reductions.

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In November 2007, the Iowa governor signed the Midwest Greenhouse Gas Accord and the Energy Security and Climate Stewardship Platform for the Midwest. The signatories to the platform were other Midwestern states that agreed to implement a regional cap-and-trade system for GHG emissions. Advisory group recommendations included the assessment of 2020 emissions reduction targets of 15%, 20% and 25% below 2005 levels and a 2050 target of 60% to 80% below 2005 levels. In addition, the accord calls for the participating states to collectively meet at least 2% of regional annual retail sales of electricity and natural gas through energy efficiency improvements by 2015 and continue to achieve an additional 2% in efficiency improvements every year thereafter. There has been no further progress in implementing a Midwest regional cap-and-trade program.

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The Regional Greenhouse Gas Initiative, a mandatory, market-based effort to reduce GHG emissions in ten Northeastern and Mid-Atlantic states, requires, beginning in 2009, the reduction of carbon dioxide emissions from the power sector of 10% by 2018. In May 2011, New Jersey withdrew from participation in the Regional Greenhouse Gas Initiative and in June 2011, a lawsuit filed in New York alleged that the state of New York unlawfully joined the Regional Greenhouse Gas Initiative without legislative approval.

GHG Litigation

The Company closely monitors ongoing environmental litigation. Many of the pending cases described below relate to lawsuits against industry that attempt to link GHG emissions to public or private harm. The Company believes the cases are without merit, despite decisions where United States Courts of Appeals reversed district court rulings dismissing the cases in 2009. The lower courts initially refrained from adjudicating the cases under the "political question" doctrine, because of their inherently political nature. Nevertheless, an adverse ruling in any of these cases would likely result in increased regulation of GHG emitters, including the Company's generating facilities, and financial uncertainty.

In September 2009, the United States Court of Appeals for the Second Circuit ("Second Circuit") issued its opinion in the case of Connecticut v. American Electric Power, et al , which remanded to the lower court a nuisance action by eight states and the City of New York against five large utility emitters of carbon dioxide. The United States District Court for the Southern District of New York ("Southern District of New York") dismissed the case in 2005, holding that the claims that GHG emissions from the defendants' coal-fueled generating facilities were causing harmful climate change and should be enjoined as a public nuisance under federal common law presented a "political question" that the court lacked jurisdiction to decide. The Second Circuit rejected this conclusion and stated the Southern District of New York was not precluded from determining the case on its merits. In December 2010, the United States Supreme Court agreed to hear the case on appeal from the Second Circuit and issued its decision in June 2011 dismissing the federal common law claim of nuisance and holding that the Clean Air Act provides a means to seek limits on emissions of carbon dioxide on power plants.

In October 2009, a three-judge panel in the United States Court of Appeals for the Fifth Circuit ("Fifth Circuit") issued its opinion in the case of Ned Comer, et al. v. Murphy Oil USA, et al ., ("Comer I") a putative class action lawsuit against insurance, oil, coal and chemical companies, based on claims that the defendants' GHG emissions contributed to global warming that in turn caused a rise in sea levels and added to the ferocity of Hurricane Katrina, which combined to damage the plaintiff's private property, as well as public property. In 2007, the United States District Court for the Southern District of Mississippi ("Southern District of Mississippi") dismissed the case based on the lack of standing and further held that the claims were barred by the political question doctrine. In March 2010, the full court of the Fifth Circuit agreed to rehear the case; however, in May 2010, the Fifth Circuit dismissed the appeal for failure to have a quorum, resulting in the Southern District of Mississippi's decision, holding that property owners did not have standing to sue for climate change and that climate change was a political question for the United States Congress, standing as good law. The plaintiffs filed a petition asking the United States Supreme Court to direct the Fifth Circuit to reinstate the appeal and return it to the original panel. In January 2011, the United States Supreme Court denied the request, resulting in the original dismissal of the case to stand. However, on May 27, 2011, the Comer case was refiled ("Comer II") in the Southern District of Mississippi. The defendants in Comer II have filed a motion to dismiss, which is pending before the court. The Company was not a party in Comer I and is not a party in Comer II.

In October 2009, the United States District Court for the Northern District of California ("Northern District of California") granted the defendants' motions to dismiss in the case of Native Village of Kivalina v. ExxonMobil Corporation, et al . The plaintiffs filed their complaint in February 2008, asserting claims against 24 defendants, including electric generating companies, oil companies and a coal company, for public nuisance under state and federal common law based on the defendants' GHG emissions. MEHC was a named defendant in the Kivalina case. The Northern District of California dismissed all of the plaintiffs' federal claims, holding that the court lacked subject matter jurisdiction to hear the claims under the political question doctrine, and that the plaintiffs lacked standing to bring their claims. The Northern District of California declined to hear the state law claims and the case was dismissed without prejudice to their future presentation in an appropriate state court. In November 2009, the plaintiff's appealed the case to the United States Court of Appeals for the Ninth Circuit ("Ninth Circuit") where briefing has been completed, but the case has not yet been scheduled for oral argument. In February 2011, the Ninth Circuit stayed the case, pending the issuance of the United States Supreme Court's decision in Connecticut v. American Electric Power, et al. The oral arguments in Kivalina were held before the Ninth Circuit in November 2011 and the parties await the court's decision.

Renewable Portfolio Standards

The RPS described below could significantly impact the Company's consolidated financial results. Resources that meet the qualifying electricity requirements under the RPS vary from state to state. Each state's RPS requires some form of compliance reporting, and the Company can be subject to penalties in the event of noncompliance.

In November 2006, Washington voters approved a ballot initiative establishing a RPS requirement for qualifying electric utilities, including PacifiCorp. The requirements are 3% of retail sales by January 1, 2012 through 2015, 9% of retail sales by January 1, 2016 through 2019 and 15% of retail sales by January 1, 2020. The WUTC has adopted final rules to implement the initiative.

In June 2007, the Oregon Renewable Energy Act ("OREA") was adopted, providing a comprehensive renewable energy policy and RPS for Oregon. Subject to certain exemptions and cost limitations established in the OREA, PacifiCorp and other qualifying electric utilities must meet minimum qualifying electricity requirements for electricity sold to retail customers of at least 5% in 2011 through 2014, 15% in 2015 through 2019, 20% in 2020 through 2024, and 25% in 2025 and subsequent years. As required by the OREA, the OPUC has approved an automatic adjustment clause to allow an electric utility, including PacifiCorp, to recover prudently incurred costs of its investments in renewable energy generating facilities and associated transmission costs.

In April 2011, the California governor signed into law Senate Bill 2 of the First Extraordinary Session that expanded the RPS to require all California retail sellers to procure an average of 20% of retail load from renewable resources by December 31, 2013, 25% by December 31, 2016 and 33% by December 31, 2020 and each year thereafter. In December 2011, the CPUC adopted a decision confirming that multi-jurisdictional utilities, such as PacifiCorp, are not subject to the percentage limits within the three categories of RPS-eligible resources established by the legislation that have been imposed on other California retail sellers. The CPUC is in the process of an extensive rulemaking to implement the new requirements under the legislation.

In March 2008, Utah's governor signed Utah Senate Bill 202. Among other things, this law provides that, beginning in the year 2025, 20% of adjusted retail electric sales of all Utah utilities be supplied by renewable energy, if it is cost effective. Retail electric sales will be adjusted by deducting the amount of generation from sources that produce zero or reduced carbon emissions, and for sales avoided as a result of energy efficiency and DSM programs. Qualifying renewable energy sources can be located anywhere in the WECC areas, and renewable energy credits can be used.

Water Quality Standards

The federal Water Pollution Control Act ("Clean Water Act") establishes the framework for maintaining and improving water quality in the United States through a program that regulates, among other things, discharges to and withdrawals from waterways. The Clean Water Act requires that cooling water intake structures reflect the "best technology available for minimizing adverse environmental impact" to aquatic organisms. In July 2004, the EPA established significant new technology-based performance standards for existing electric generating facilities that take in more than 50 million gallons of water per day. These rules were aimed at minimizing the adverse environmental impacts of cooling water intake structures by reducing the number of aquatic organisms lost as a result of water withdrawals. In response to a legal challenge to the rule, in January 2007, the Second Circuit remanded almost all aspects of the rule to the EPA, without addressing whether companies with cooling water intake structures were required to comply with these requirements. On appeal from the Second Circuit, in April 2009, the United States Supreme Court ruled that the EPA permissibly relied on a cost-benefit analysis in setting the national performance standards regarding "best technology available for minimizing adverse environmental impact" at cooling water intake structures and in providing for cost-benefit variances from those standards as part of the §316(b) Clean Water Act Phase II regulations. The United States Supreme Court remanded the case back to the Second Circuit to conduct further proceedings consistent with its opinion.

In March 2011, the EPA released a proposed rule under §316(b) of the Clean Water Act to regulate cooling water intakes at existing facilities. The proposed rule establishes requirements for all power generating facilities that withdraw more than two million gallons per day, based on total design intake capacity, of water from waters of the United States and use at least 25% of the withdrawn water exclusively for cooling purposes. PacifiCorp's Dave Johnston generating facility and all of MidAmerican Energy's coal-fueled generating facilities, except Louisa, Ottumwa and Walter Scott, Jr. Unit 4, which have water cooling towers, withdraw more than two million gallons per day of water from waters of the United States. PacifiCorp's Jim Bridger, Naughton, Gadsby, Hunter, Carbon and Huntington generating facilities currently utilize closed cycle cooling towers but withdraw more than two million gallons of water per day. The proposed rule includes impingement (i.e., when fish and other organisms are trapped against screens when water is drawn into a facility's cooling system) mortality standards to be met through average impingement mortality or intake velocity design criteria and entrainment (i.e., when organisms are drawn into the facility) standards to be determined on a case-by-case basis. The standards are required to be met as soon as possible after the effective date of the final rule, but no later than eight years thereafter. The rule is required to be finalized by the EPA by July 2012. Assuming the final rule is issued by July 2012, PacifiCorp's and MidAmerican Energy's generating facilities impacted by the final rule will be required to complete impingement and entrainment studies in 2013. The costs of compliance with the cooling water intake structure rule cannot be determined until the rule is final and the prescribed studies are conducted. In the event that PacifiCorp's or MidAmerican Energy's existing intake structures require modification, the costs are not anticipated to be significant.

Coal Combustion Byproduct Disposal

In December 2008, an ash impoundment dike at the Tennessee Valley Authority's Kingston power plant collapsed after heavy rain, releasing a significant amount of fly ash and bottom ash, coal combustion byproducts, and water to the surrounding area. In light of this incident, federal and state officials have called for greater regulation of the storage and disposal of coal combustion byproducts. In May 2010, the EPA released a proposed rule to regulate the management and disposal of coal combustion byproducts, presenting two alternatives to regulation under the RCRA. Under the first option, coal combustion byproducts would be regulated as special waste under RCRA Subtitle C and the EPA would establish requirements for coal combustion byproducts from the point of generation to disposition, including the closure of disposal units. Alternatively, the EPA is considering regulation under RCRA Subtitle D under which it would establish minimum nationwide standards for the disposal of coal combustion byproducts. Under both options, surface impoundments utilized for coal combustion byproducts would have to be cleaned and closed unless they could meet more stringent regulatory requirements; in addition, more stringent requirements would be implemented for new ash landfills and expansions of existing ash landfills. PacifiCorp operates 16 surface impoundments and six landfills that contain coal combustion byproducts. MidAmerican Energy operates eight surface impoundments and four landfills that contain coal combustion byproducts. These ash impoundments and landfills may be impacted by the newly proposed regulation, particularly if the materials are regulated as hazardous or special waste under RCRA Subtitle C, and could pose significant additional costs associated with ash management and disposal activities at the Company's coal-fueled generating facilities. The public comment period closed in November 2010. The EPA has not indicated when the rule will be finalized, and the substance of the final rule is not known. The United States House of Representatives passed H.R. 2273 in October 2011, which would regulate coal combustion byproducts under RCRA Subtitle D. A Senate bill similar to the House bill has been introduced, but action has not been taken on the bill. The impact of the proposed regulations on coal combustion byproducts cannot be determined at this time; however, both PacifiCorp and MidAmerican Energy have begun developing surface impoundment and landfill compliance plan options to ensure that physical infrastructure decisions are aligned with the potential outcomes of the rulemaking.

Other

Other laws, regulations and agencies to which the Company is subject to include, but are not limited to:


•	The federal Comprehensive Environmental Response, Compensation and Liability Act and similar state laws may require any current or former owners or operators of a disposal site, as well as transporters or generators of hazardous substances sent to such disposal site, to share in environmental remediation costs.

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The Nuclear Waste Policy Act of 1982, under which the United States Department of Energy is responsible for the selection and development of repositories for, and the permanent disposal of, spent nuclear fuel and high-level radioactive wastes. Refer to Note 13 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding nuclear decommissioning obligations.


•	The federal Surface Mining Control and Reclamation Act of 1977 and similar state statutes establish operational, reclamation and closure standards that must be met during and upon completion of mining activities.

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The FERC oversees the relicensing of existing hydroelectric systems and is also responsible for the oversight and issuance of licenses for new construction of hydroelectric systems, dam safety inspections and environmental monitoring. Refer to Note 16 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the relicensing of certain of PacifiCorp's existing hydroelectric facilities.

MEHC expects its Domestic Regulated Businesses will be allowed to recover the prudently incurred costs to comply with the environmental laws and regulations discussed above. The Company's planning efforts take into consideration the complexity of balancing factors such as: (a) pending environmental regulations and requirements to reduce emissions, address waste disposal, ensure water quality, and protect wildlife; (b) avoidance of excessive reliance on any one generation technology; (c) costs and trade-offs of various resource options including energy efficiency, demand response programs, and renewable generation; (d) state-specific energy policies, resource preferences, and economic development efforts; (e) additional transmission investment to reduce power costs and increase efficiency and reliability of the integrated transmission system; and (f) keeping rates as affordable as possible. Due to the number of generating units impacted by environmental regulations, deferring installation of compliance-related projects is often not feasible or cost effective and places the Company at risk of not having access to necessary capital, material, and labor while attempting to perform major equipment installations in a compressed timeframe concurrent with other utilities across the country. Therefore, the Company has established installation schedules with permitting agencies that coordinate compliance timeframes with construction and tie-in of major environmental compliance projects as units are scheduled off-line for planned maintenance outages; these coordinated efforts help reduce costs associated with replacement power and maintain system reliability.

Collateral and Contingent Features

Debt and preferred securities of MEHC and certain of its subsidiaries are rated by credit rating agencies. Assigned credit ratings are based on each rating agency's assessment of the rated company's ability to, in general, meet the obligations of its issued debt or preferred securities. The credit ratings are not a recommendation to buy, sell or hold securities, and there is no assurance that a particular credit rating will continue for any given period of time.

MEHC and its subsidiaries have no credit rating downgrade triggers that would accelerate the maturity dates of outstanding debt, and a change in ratings is not an event of default under the applicable debt instruments, except for those discussed in Note 23 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K related to the Topaz financing. The Company's unsecured revolving credit facilities do not require the maintenance of a minimum credit rating level in order to draw upon their availability, but, under certain instances, must maintain sufficient covenant tests if ratings drop below a certain level. However, commitment fees and interest rates under the credit facilities are tied to credit ratings and increase or decrease when the ratings change. A ratings downgrade could also increase the future cost of commercial paper, short- and long-term debt issuances or new credit facilities.

In accordance with industry practice, certain wholesale agreements, including derivative contracts, contain provisions that require certain of MEHC's subsidiaries, principally the Utilities, to maintain specific credit ratings on their unsecured debt from one or more of the three recognized credit rating agencies. These agreements may either specifically provide bilateral rights to demand cash or other security if credit exposures on a net basis exceed specified rating-dependent threshold levels ("credit-risk-related contingent features") or provide the right for counterparties to demand "adequate assurance" in the event of a material adverse change in the subsidiary's creditworthiness. These rights can vary by contract and by counterparty. As of December 31, 2011 , these subsidiary's credit ratings from the three recognized credit rating agencies were investment grade. If all credit-risk-related contingent features or adequate assurance provisions for these agreements had been triggered as of December 31, 2011 , the Company would have been required to post $569 million of additional collateral. The Company's collateral requirements could fluctuate considerably due to market price volatility, changes in credit ratings, changes in legislation or regulation, or other factors. Refer to Note 7 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for a discussion of the Company's collateral requirements specific to the Company's derivative contracts.

In July 2010, the President signed into law the Dodd-Frank Reform Act. The Dodd-Frank Reform Act reshapes financial regulation in the United States by creating new regulators, regulating new markets and firms, and providing new enforcement powers to regulators. Virtually all major areas of the Dodd-Frank Reform Act, including collateral requirements on derivative contracts, are the subject of regulatory interpretation and implementation rules requiring rulemaking proceedings, some of which have been completed and others that are expected to be finalized in 2012.

The Company is a party to derivative contracts, including over-the-counter derivative contracts. The Dodd-Frank Reform Act provides for extensive new regulation of over-the-counter derivative contracts and certain market participants, including imposition of mandatory clearing, exchange trading, capital and margin requirements for "swap dealers" and "major swap participants." The Dodd-Frank Reform Act provides certain exemptions from these regulations for commercial end-users that use derivatives to hedge and manage the commercial risk of their businesses. Although the Company generally does not enter into over-the-counter derivative contracts for purposes unrelated to hedging of commercial risk and does not believe it will be considered a swap dealer or major swap participant, the outcome of the rulemaking proceedings cannot be predicted and, therefore, the impact of the Dodd-Frank Reform Act on the Company's consolidated financial results cannot be determined at this time.

Inflation

Historically, overall inflation and changing prices in the economies where MEHC's subsidiaries operate have not had a significant impact on the Company's consolidated financial results. In the United States, MEHC's regulated subsidiaries operate under cost-of-service based rate structures administered by various state commissions and the FERC. Under these rate structures, MEHC's regulated subsidiaries are allowed to include prudent costs in their rates, including the impact of inflation. The price control formula used by the United Kingdom Distribution Companies incorporates the rate of inflation in determining rates charged to customers. MEHC's subsidiaries attempt to minimize the potential impact of inflation on their operations by employing prudent risk management and hedging strategies and by considering, among other areas, its impact on purchases of energy, operating expenses, materials and equipment costs, contract negotiations, future capital spending programs and long-term debt issuances. There can be no assurance that such actions will be successful.

Off-Balance Sheet Arrangements

The Company has certain investments that are accounted for under the equity method in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Accordingly, an amount is recorded on the Company's Consolidated Balance Sheets as an equity investment and is increased or decreased for the Company's pro-rata share of earnings or losses, respectively, less any dividends from such investments.

As of December 31, 2011 , the Company's investments that are accounted for under the equity method had short- and long-term debt of $1.045 billion, unused revolving credit facilities of $147 million and letters of credit outstanding of $57 million. As of December 31, 2011 , the Company's pro-rata share of such short- and long-term debt was $508 million, unused revolving credit facilities was $73 million and outstanding letters of credit was $29 million. The entire amount of the Company's pro-rata share of the outstanding short- and long-term debt and unused revolving credit facilities is non-recourse to the Company. $25 million of the Company's pro-rata share of the outstanding letters of credit is recourse to the Company. Although the Company is generally not required to support debt service obligations of its equity investees, default with respect to this non-recourse short- and long-term debt could result in a loss of invested equity.

New Accounting Pronouncements

For a discussion of new accounting pronouncements affecting the Company, refer to Note 2 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Critical Accounting Estimates

Certain accounting measurements require management to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized on the Consolidated Financial Statements based on such estimates involve numerous assumptions subject to varying and potentially significant degrees of judgment and uncertainty and will likely change in the future as additional information becomes available. The following critical accounting estimates are impacted significantly by the Company's methods, judgments and assumptions used in the preparation of the Consolidated Financial Statements and should be read in conjunction with the Company's Summary of Significant Accounting Policies included in Note 2 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Accounting for the Effects of Certain Types of Regulation

The Domestic Regulated Businesses prepare their financial statements in accordance with authoritative guidance for regulated operations, which recognizes the economic effects of regulation. Accordingly, the Domestic Regulated Businesses are required to defer the recognition of certain costs or income if it is probable that, through the ratemaking process, there will be a corresponding increase or decrease in future regulated rates.

The Company continually evaluates the applicability of the guidance for regulated operations and whether its regulatory assets and liabilities are probable of inclusion in future regulated rates by considering factors such as a change in the regulator's approach to setting rates from cost-based ratemaking to another form of regulation, other regulatory actions or the impact of competition which could limit the Domestic Regulated Businesses' ability to recover their costs. Based upon this continuous evaluation, the Company believes the application of the guidance for regulated operations is appropriate and its existing regulatory assets and liabilities are probable of inclusion in future regulated rates. The evaluation reflects the current political and regulatory climate at both the federal and state levels and is subject to change in the future. If it becomes no longer probable that the deferred costs or income will be included in future regulated rates, the related regulatory assets and liabilities will be written off to net income, returned to customers or re-established as accumulated other comprehensive income (loss) ("AOCI"). Total regulatory assets were $2.918 billion and total regulatory liabilities were $1.731 billion as of December 31, 2011 . Refer to Note 5 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the Domestic Regulated Businesses' regulatory assets and liabilities.

Derivatives

The Company is exposed to the impact of market fluctuations in commodity prices, interest rates and foreign currency exchange rates. The Company is principally exposed to electricity, natural gas, coal and fuel oil commodity price risk primarily through MEHC's ownership of the Utilities as they have an obligation to serve retail customer load in their regulated service territories. MidAmerican Energy also provides nonregulated retail electricity and natural gas services in competitive markets. The Utilities' load and generating facilities represent substantial underlying commodity positions. Exposures to commodity prices consist mainly of variations in the price of fuel required to generate electricity, wholesale electricity that is purchased and sold, and natural gas supply for regulated and nonregulated retail customers. Commodity prices are subject to wide price swings as supply and demand are impacted by, among many other unpredictable items, weather, market liquidity, generating facility availability, customer usage, storage, and transmission and transportation constraints. Interest rate risk exists on variable-rate debt and future debt issuances. Additionally, the Company is exposed to foreign currency exchange rate risk from its business operations and investments in Great Britain. Each of the Company's business platforms has established a risk management process that is designed to identify, assess, monitor, report, manage and mitigate each of the various types of risk involved in its business. The Company employs a number of different derivative contracts, which may include forwards, futures, options, swaps and other agreements, to manage price risk for electricity, natural gas and other commodities; interest rate risk; and foreign currency exchange rate risk. The Company does not hedge all of its commodity price, interest rate and foreign currency exchange rate risks, thereby exposing the unhedged portion to changes in market prices. Refer to Notes 6 and 7 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the Company's derivative contracts.

Measurement Principles

Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which the Company transacts. When quoted prices for identical contracts are not available, the Company uses forward price curves. Forward price curves represent the Company's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. The Company bases its forward price curves upon market price quotations, when available, or internally developed and commercial models, with internal and external fundamental data inputs. Market price quotations are obtained from independent energy brokers, exchanges, direct communication with market participants and actual transactions executed by the Company. Market price quotations for certain major electricity and natural gas trading hubs are generally readily obtainable for the applicable term of the Company's outstanding derivative contracts; therefore, the Company's forward price curves for those locations and periods reflect observable market quotes. As of December 31, 2011 , the Company had a net derivative liability of $468 million related to contracts valued using either quoted prices or forward price curves based upon observable market quotes. Market price quotations for other electricity and natural gas trading hubs are not as readily obtainable due to the length of the contract. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, the Company uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The estimated fair value of these derivative contracts is a function of underlying forward commodity prices, interest rates, currency rates, related volatility, counterparty creditworthiness and duration of contracts. The assumptions used in these models are critical, since any changes in assumptions could have a significant impact on the estimated fair value of the contracts. As of December 31, 2011 , the Company had a net derivative asset of $23 million related to contracts where the Company uses internal models with unobservable inputs.

Classification and Recognition Methodology

Almost all of the Company's derivative contracts are probable of inclusion in the rates of its rate-regulated subsidiaries and changes in the estimated fair value of derivative contracts are generally recorded as net regulatory assets or liabilities. Accordingly, amounts are generally not recognized in earnings until the contracts are settled and the forecasted transaction has occurred. As of December 31, 2011 , the Company had $400 million recorded as net regulatory assets related to derivative contracts on the Consolidated Balance Sheets. If it becomes no longer probable that a derivative contract will be included in regulated rates, the regulatory asset or liability will be written off and recognized in earnings.

Impairment of Long-Lived Assets and Goodwill

The Company evaluates long-lived assets for impairment, including property, plant and equipment, when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable or the assets are being held for sale. Upon the occurrence of a triggering event, the asset is reviewed to assess whether the estimated undiscounted cash flows expected from the use of the asset plus the residual value from the ultimate disposal exceeds the carrying value of the asset. If the carrying value exceeds the estimated recoverable amounts, the asset is written down to the estimated fair value. The impacts of regulation are considered when evaluating the carrying value of regulated assets. Substantially all property, plant and equipment was used in regulated businesses as of December 31, 2011 . For all other assets, any resulting impairment loss is reflected on the Consolidated Statements of Operations.

The estimate of cash flows arising from the future use of the asset that are used in the impairment analysis requires judgment regarding what the Company would expect to recover from the future use of the asset. Changes in judgment that could significantly alter the calculation of the fair value or the recoverable amount of the asset may result from significant changes in the regulatory environment, the business climate, management's plans, legal factors, market price of the asset, the use of the asset or the physical condition of the asset, future market prices, load growth, competition and many other factors over the life of the asset. Any resulting impairment loss is highly dependent on the underlying assumptions and could significantly affect the Company's results of operations.

The Company's Consolidated Balance Sheet as of December 31, 2011 includes goodwill of acquired businesses of $4.996 billion . The Company evaluates goodwill for impairment at least annually and completed its annual review as of October 31. Additionally, no indicators of impairment were identified as of December 31, 2011 . A significant amount of judgment is required in estimating the fair value of the reporting unit and performing goodwill impairment tests. The Company uses a variety of methods to estimate a reporting unit's fair value, principally discounted projected future net cash flows. Key assumptions used include, but are not limited to, the use of estimated future cash flows; multiples of earnings; and an appropriate discount rate. Estimated future cash flows are impacted by, among other factors, growth rates, changes in regulations and rates, ability to renew contracts and estimates of future commodity prices. In estimating future cash flows, the Company incorporates current market information, as well as historical factors. Refer to Note 22 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the Company's goodwill.

Pension and Other Postretirement Benefits

The Company sponsors defined benefit pension and other postretirement benefit plans that cover the majority of its employees. The Company recognizes the funded status of its defined benefit pension and other postretirement benefit plans on the Consolidated Balance Sheets. Funded status is the fair value of plan assets minus the benefit obligation as of the measurement date. As of December 31, 2011 , the Company recognized a net liability totaling $794 million for the funded status of the Company's defined benefit pension and other postretirement benefit plans. As of December 31, 2011 , amounts not yet recognized as a component of net periodic benefit cost that were included in net regulatory assets and AOCI totaled $822 million and $673 million , respectively.

The expense and benefit obligations relating to these defined benefit pension and other postretirement benefit plans are based on actuarial valuations. Inherent in these valuations are key assumptions, including discount rates, expected long-term rate of return on plan assets and healthcare cost trend rates. These key assumptions are reviewed annually and modified as appropriate. The Company believes that the assumptions utilized in recording obligations under the plans are reasonable based on prior plan experience and current market and economic conditions. Refer to Note 14 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for disclosures about the Company's defined benefit pension and other postretirement benefit plans, including the key assumptions used to calculate the funded status and net periodic benefit cost for these plans as of and for the year ended December 31, 2011 .

The Company chooses a discount rate based upon high quality debt security investment yields in effect as of the measurement date that corresponds to the expected benefit period. The pension and other postretirement benefit liabilities increase as the discount rate is reduced.

In establishing its assumption as to the expected long-term rate of return on plan assets, the Company utilizes the expected asset allocation and return assumptions for each asset class based on historical performance and forward-looking views of the financial markets. Pension and other postretirement benefits expense increases as the expected long-term rate of return on plan assets decreases. The Company regularly reviews its actual asset allocations and rebalances its investments to its targeted allocations when considered appropriate.

The Company chooses a healthcare cost trend rate that reflects the near and long-term expectations of increases in medical costs and corresponds to the expected benefit payment periods. The healthcare cost trend rate gradually declines to 5% in 2016 at which point the rate is assumed to remain constant. Refer to Note 14 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for healthcare cost trend rate sensitivity disclosures.

The key assumptions used may differ materially from period to period due to changing market and economic conditions. These differences may result in a significant impact to pension and other postretirement benefits expense and the funded status. If changes were to occur for the following key assumptions, the approximate effect on the Consolidated Financial Statements would be as follows (in millions):



	Domestic Plans
						Other Postretirement					United Kingdom
	Pension Plans					Benefit Plans					Pension Plan
	+0.5%			-0.5%		+0.5%			-0.5%		+0.5%			-0.5%

Effect on December 31, 2011
Benefit Obligations:
Discount rate	$	(103	)	$	114	$	(41	)	$	45	$	(137	)	$	157

Effect on 2011 Periodic Cost:
Discount rate	$	(4	)	$	4	$	(2	)	$	3	$	(13	)	$	13
Expected rate of return on plan assets	(8		)	8		(3		)	3		(8		)	8

A variety of factors affect the funded status of the plans, including asset returns, discount rates, plan changes and the Company's funding policy for each plan. Additionally, federal laws may require the Company to increase future contributions to its domestic pension plans, which may create more volatility in annual contributions than historically experienced and could have a material impact on the Company's consolidated financial results.

Income Taxes

In determining the Company's income taxes, management is required to interpret complex income tax laws and regulations, which includes consideration of regulatory implications imposed by the Company's various regulatory jurisdictions. The Company's income tax returns are subject to continuous examinations by federal, state, local and foreign income tax authorities that may give rise to different interpretations of these complex laws and regulations. Due to the nature of the examination process, it generally takes years before these examinations are completed and these matters are resolved. The Company recognizes the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the Consolidated Financial Statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Although the ultimate resolution of the Company's federal, state, local and foreign income tax examinations is uncertain, the Company believes it has made adequate provisions for these income tax positions. The aggregate amount of any additional income tax liabilities that may result from these examinations, if any, is not expected to have a material adverse impact on the Company's consolidated financial results. Refer to Note 15 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the Company's income taxes.

The Utilities are required to pass income tax benefits related to certain property-related basis differences and other various differences on to their customers in certain state jurisdictions. These amounts were recognized as a net regulatory asset totaling $1.003 billion as of December 31, 2011 and will be included in regulated rates when the temporary differences reverse. Management believes the existing net regulatory assets are probable of inclusion in regulated rates. If it becomes no longer probable that these costs will be included in regulated rates, the related regulatory asset will be charged to net income.

The Company has not established deferred income taxes on the undistributed foreign earnings of Northern Powergrid Holdings or the related currency translation adjustment that have been determined by management to be reinvested indefinitely. The cumulative earnings were approximately $2.0 billion as of December 31, 2011 . The Company periodically evaluates its capital requirements. If circumstances change in the future and a portion of Northern Powergrid Holdings' undistributed earnings were repatriated, the dividends would be subject to taxation in the United States. However, any United States income tax liability would be offset, in part, by available United States income tax credits with respect to corporate income taxes previously paid principally in the United Kingdom. Because of the availability of foreign income tax credits, it is not practicable to determine the United States income tax liability that would be recognized if such cumulative earnings were not reinvested indefinitely. The Company has established deferred income taxes on all other undistributed foreign earnings.

Revenue Recognition - Unbilled Revenue

Unbilled revenue was $474 million as of December 31, 2011 . Revenue from energy business customers is recognized as electricity or natural gas is delivered or services are provided. The determination of customer billings is based on a systematic reading of meters, fixed reservation charges based on contractual quantities and rates or, in the case of the United Kingdom distribution businesses, when information is received from the national settlement system. At the end of each month, amounts of energy provided to customers since the date of the last meter reading are estimated, and the corresponding unbilled revenue is recorded. Factors that can impact the estimate of unbilled energy include, but are not limited to, seasonal weather patterns, total volumes supplied to the system, line losses, economic impacts and composition of sales among customer classes. Estimates are reversed in the following month and actual revenue is recorded based on subsequent meter readings.


Item 7A.	Quantitative and Qualitative Disclosures About Market Risk

The Company's Consolidated Balance Sheets include assets and liabilities with fair values that are subject to market risks. The Company's significant market risks are primarily associated with commodity prices, interest rates, equity prices, foreign currency exchange rates and the extension of credit to counterparties with which the Company transacts. The following discussion addresses the significant market risks associated with the Company's business activities. Each of the Company's business platforms has established guidelines for credit risk management. Refer to Notes 2 and 7 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the Company's contracts accounted for as derivatives.

Commodity Price Risk

The Company is principally exposed to electricity, natural gas, coal and fuel oil commodity price risk primarily through MEHC's ownership of the Utilities as they have an obligation to serve retail customer load in their regulated service territories. MidAmerican Energy also provides nonregulated retail electricity and natural gas services in competitive markets. The Utilities' load and generating facilities represent substantial underlying commodity positions. Exposures to commodity prices consist mainly of variations in the price of fuel required to generate electricity, wholesale electricity that is purchased and sold, and natural gas supply for regulated and nonregulated retail customers. Commodity prices are subject to wide price swings as supply and demand are impacted by, among many other unpredictable items, weather, market liquidity, generating facility availability, customer usage, storage, and transmission and transportation constraints. The Company does not engage in a material amount of proprietary trading activities. To mitigate a portion of its commodity price risk, the Company uses commodity derivative contracts, which may include forwards, futures, options, swaps and other agreements, to effectively secure future supply or sell future production generally at fixed prices. The Company does not hedge all of its commodity price risk, thereby exposing the unhedged portion to changes in market prices. The Company's exposure to commodity price risk is generally limited by its ability to include the costs in regulated rates, which is subject to regulatory lag that occurs between the time the costs are incurred and when the costs are included in regulated rates.

The table that follows summarizes the Company's price risk on commodity contracts accounted for as derivatives, excluding collateral netting of $156 million and $141 million as of December 31, 2011 and 2010 , respectively, and shows the effects of a hypothetical 10% increase and 10% decrease in forward market prices with the contracted or expected volumes. The selected hypothetical change does not reflect what could be considered the best or worst case scenarios (dollars in millions).



	Fair Value -			Estimated Fair Value after
	Net Asset			Hypothetical Change in Price
	(Liability)			10% increase			10% decrease
As of December 31, 2011:
Not designated as hedging contracts	$	(399	)	$	(341	)	$	(457	)
Designated as hedging contracts	(46		)	(7		)	(85		)
Total commodity derivative contracts	$	(445	)	$	(348	)	$	(542	)

As of December 31, 2010:
Not designated as hedging contracts	$	(565	)	$	(537	)	$	(593	)
Designated as hedging contracts	(48		)	(9		)	(87		)
Total commodity derivative contracts	$	(613	)	$	(546	)	$	(680	)

The majority of the Company's commodity derivative contracts not designated as hedging contracts are recoverable from customers in regulated rates and, therefore, net unrealized gains and losses associated with interim price movements on commodity derivative contracts do not expose the Company to earnings volatility. As of December 31, 2011 and 2010 , a net regulatory asset of $400 million and $564 million , respectively, was recorded related to the net derivative liability of $399 million and $565 million , respectively. For the Company's commodity derivative contracts designated as hedging contracts, net unrealized gains and losses associated with interim price movements on commodity derivative contracts, to the extent the hedge is considered effective, generally do not expose the Company to earnings volatility. The settled cost of these commodity derivative contracts is generally included in regulated rates. Consolidated financial results would be negatively impacted if the costs of wholesale electricity, natural gas or fuel are higher than what is included in regulated rates, including the impacts of adjustment mechanisms.

Interest Rate Risk

The Company is exposed to interest rate risk on its outstanding variable-rate short- and long-term debt and future debt issuances. The Company manages its interest rate risk by limiting its exposure to variable interest rates primarily through the issuance of fixed-rate long-term debt and by monitoring market changes in interest rates. As a result of the fixed interest rates, the Company's fixed-rate long-term debt does not expose the Company to the risk of loss due to changes in market interest rates. Additionally, because fixed-rate long-term debt is not carried at fair value on the Consolidated Balance Sheets, changes in fair value would impact earnings and cash flows only if the Company were to reacquire all or a portion of these instruments prior to their maturity. The Company may from time to time enter into interest rate derivative contracts, such as interest rate swaps or locks, to mitigate the Company's exposure to interest rate risk. The nature and amount of the Company's short- and long-term debt can be expected to vary from period to period as a result of future business requirements, market conditions and other factors. Refer to Notes 6, 9, 10, 11 and 12 of Notes to Consolidated Financial Statements in Item 1 of this Form 10-K for additional discussion of the Company's short- and long-term debt.

As of December 31, 2011 and 2010 , the Company had short- and long-term variable-rate obligations totaling $1.715 billion and $1.170 billion , respectively, that expose the Company to the risk of increased interest expense in the event of increases in short-term interest rates. The market risk related to the Company's variable-rate debt as of December 31, 2011 is not hedged. If variable interest rates were to increase by 10% from December 31 levels, it would not have a material effect on the Company's consolidated annual interest expense. The carrying value of the variable-rate obligations approximates fair value as of December 31, 2011 and 2010 .

Equity Price Risk

Market prices for equity securities are subject to fluctuation and consequently the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the investee, the relative price of alternative investments and general market conditions.

As of December 31, 2011 and 2010 , the Company's investment in BYD Company Limited common stock represented approximately 68% and 84% , respectively, of the total fair value of the Company's equity securities. The Company's remaining equity securities are primarily related to certain trust funds in which realized and unrealized gains and losses are recorded as net regulatory assets or liabilities since the Company expects to recover costs for these activities through regulated rates. The following table summarizes our investment in BYD Company Limited as of December 31, 2011 and 2010 and the effects of a hypothetical 30% increase and a 30% decrease in market price as of those dates. The selected hypothetical change does not reflect what could be considered the best or worst case scenarios (dollars in millions).



				Estimated		Hypothetical
			Hypothetical	Fair Value after		Percentage Increase
	Fair		Price	Hypothetical		(Decrease) in MEHC
	Value		Change	Change in Prices		Shareholders' Equity

As of December 31, 2011	$	488	30% increase	$	634	1	%
			30% decrease	342		(1	)

As of December 31, 2010	$	1,182	30% increase	$	1,537	2	%
			30% decrease	827		(2	)

Foreign Currency Exchange Rate Risk

MEHC's business operations and investments outside of the United States increase its risk related to fluctuations in foreign currency exchange rates primarily in relation to the British pound. MEHC's reporting currency is the United States dollar, and the value of the assets and liabilities, earnings, cash flows and potential distributions from MEHC's foreign operations changes with the fluctuations of the currency in which they transact.

Northern Powergrid Holdings' functional currency is the British pound. At December 31, 2011 , a 10% devaluation in the British pound to the United States dollar would result in the Company's Consolidated Balance Sheet being negatively impacted by a $270 million cumulative translation adjustment in AOCI. A 10% devaluation in the average currency exchange rate would have resulted in lower reported earnings for Northern Powergrid Holdings of $39 million in 2011 .

Credit Risk

Domestic Regulated Operations

The Utilities extend unsecured credit to other utilities, energy marketing companies, financial institutions and other market participants in conjunction with their wholesale energy supply and marketing activities. Credit risk relates to the risk of loss that might occur as a result of nonperformance by counterparties on their contractual obligations to make or take delivery of electricity, natural gas or other commodities and to make financial settlements of these obligations. Credit risk may be concentrated to the extent that one or more groups of counterparties have similar economic, industry or other characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in market or other conditions. In addition, credit risk includes not only the risk that a counterparty may default due to circumstances relating directly to it, but also the risk that a counterparty may default due to circumstances involving other market participants that have a direct or indirect relationship with the counterparty.

The Utilities analyze the financial condition of each significant wholesale counterparty before entering into any transactions, establish limits on the amount of unsecured credit to be extended to each counterparty and evaluate the appropriateness of unsecured credit limits on an ongoing basis. To mitigate exposure to the financial risks of wholesale counterparties, the Utilities enter into netting and collateral arrangements that may include margining and cross-product netting agreements and obtain third-party guarantees, letters of credit and cash deposits. Counterparties may be assessed fees for delayed payments. If required, the Utilities exercise rights under these arrangements, including calling on the counterparty's credit support arrangement.

As of December 31, 2011 , PacifiCorp's aggregate credit exposure from wholesale activities totaled $338 million, based on settlement and mark-to-market exposures, net of collateral. As of December 31, 2011 , $333 million, or 99%, of PacifiCorp's credit exposure was with counterparties having investment grade credit ratings by either Moody's Investor Service or Standard & Poor's Rating Services. As of December 31, 2011 , $5 million, or 1%, of such credit exposure was with counterparties having externally rated "non-investment grade" credit ratings. As of December 31, 2011 , four counterparties comprised $274 million, or 81%, of the aggregate credit exposure. All four counterparties are rated investment grade by Moody's Investor Service and Standard & Poor's Rating Services, and PacifiCorp is not aware of any factors that would likely result in a downgrade of the counterparties' credit ratings to below investment grade over the remaining term of transactions outstanding as of December 31, 2011 .

During 2011 , approximately 89% of MidAmerican Energy's electric wholesale sales revenues resulted from participation in RTOs, including the MISO and the PJM. MidAmerican Energy has potential indirect credit exposure to other market participants in these RTO markets. In the event of a default by a RTO market participant on its market-related obligations, losses are allocated among all other market participants in proportion to each participant's share of overall market activity during the period of time the loss was incurred, diversifying MidAmerican Energy's exposure to credit losses from individual participants. Transactional activities of MidAmerican Energy and other participants in organized RTO markets are governed by credit policies specified in each respective RTO's governing tariff or related business practices. Credit policies of RTO's, which have been developed through extensive stakeholder participation, generally seek to minimize potential loss in the event of a market participant default without unnecessarily inhibiting access to the marketplace. MidAmerican Energy's share of historical losses from defaults by other RTO market participants has not been material. As of December 31, 2011 , MidAmerican Energy's aggregate direct credit exposure from electric wholesale marketing counterparties was not material.

Northern Natural Gas' primary customers include utilities in the upper Midwest. Kern River's primary customers are major oil and natural gas companies or affiliates of such companies, electric generating companies, energy marketing and trading companies, financial institutions and natural gas distribution utilities which provide services in Utah, Nevada and California. As a general policy, collateral is not required for receivables from creditworthy customers. Customers' financial condition and creditworthiness, as defined by the tariff, are regularly evaluated and historical losses have been minimal. In order to provide protection against credit risk, and as permitted by the separate terms of each of Northern Natural Gas' and Kern River's tariffs, the companies have required customers that lack creditworthiness to provide cash deposits, letters of credit or other security until their creditworthiness improves.

Northern Powergrid Holdings

The Distribution Companies charge fees for the use of their electrical infrastructure to supply companies and generators connected to their networks. The supply companies, which purchase electricity from generators and traders and sell the electricity to end-use customers, use the Distribution Companies' distribution networks pursuant to the multilateral "Distribution Connection and Use of System Agreement." The Distribution Companies' customers are concentrated in a small number of electricity supply businesses with RWE Npower PLC accounting for approximately 29% of distribution revenue in 2011 . Ofgem has determined a framework which sets credit limits for each supply business based on its credit rating or payment history and requires them to provide credit cover if their value at risk (measured as being equivalent to 45 days usage) exceeds the credit limit. Acceptable credit typically is provided in the form of a parent company guarantee, letter of credit or an escrow account. Ofgem has indicated that, provided the Distribution Companies have implemented credit control, billing and collection in line with best practice guidelines and can demonstrate compliance with the guidelines or are able to satisfactorily explain departure from the guidelines, any bad debt losses arising from supplier default will be recovered through an increase in future allowed income. Losses incurred to date have not been material.

CalEnergy Philippines

NIA's obligations under the Casecnan project agreement is CE Casecnan's sole source of operating revenue. Because of the dependence on a single customer, any material failure of the customer to fulfill its obligations under the project agreement and any material failure of the ROP to fulfill its obligation under the performance undertaking would significantly impair the ability to meet existing and future obligations. Total operating revenue for the Casecnan project was $130 million for the year ended December 31, 2011 . The Casecnan project agreement expires in December 2021.


Item 8.	Financial Statements and Supplementary Data



Report Of Independent Registered Public Accounting Firm		81

Consolidated Balance Sheets as of December 31, 2011 and 2010		82

Consolidated Statements of Operations for the Years Ended December 31, 2011, 2010 and 2009		84

Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009		85

Consolidated Statements of Changes in Equity for the Years Ended December 31, 2011, 2010 and 2009		86

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2011, 2010 and 2009		87

Notes To Consolidated Financial Statements		88

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

MidAmerican Energy Holdings Company

Des Moines, Iowa

We have audited the accompanying consolidated balance sheets of MidAmerican Energy Holdings Company and subsidiaries (the "Company") as of December 31, 2011 and 2010 , and the related consolidated statements of operations, cash flows, changes in equity, and comprehensive income for each of the three years in the period ended December 31, 2011 . Our audits also included the financial statement schedules listed in the Index at Item 15(a)(ii). These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

We conducted our audits 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of MidAmerican Energy Holdings Company and subsidiaries as of December 31, 2011 and 2010 , and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 , in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.


/s/	Deloitte & Touche LLP

Des Moines, Iowa

February 27, 2012

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Amounts in millions)



	As of December 31,
	2011		2010
ASSETS
Current assets:
Cash and cash equivalents	$	286	$	470
Trade receivables, net	1,270		1,225
Income taxes receivable	456		396
Inventories	690		585
Derivative contracts	38		131
Investments and restricted cash and investments	51		44
Other current assets	492		501
Total current assets	3,283		3,352

Property, plant and equipment, net	34,167		31,899
Goodwill	4,996		5,025
Investments and restricted cash and investments	1,948		2,469
Regulatory assets	2,835		2,433
Derivative contracts	9		13
Other assets	480		477

Total assets	$	47,718	$	45,668

The accompanying notes are an integral part of these consolidated financial statements.

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

(Amounts in millions)



	As of December 31,
	2011			2010
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	989		$	827
Accrued employee expenses	155			159
Accrued interest	326			341
Accrued property, income and other taxes	340			287
Derivative contracts	160			158
Short-term debt	865			320
Current portion of long-term debt	1,198			1,286
Other current liabilities	514			450
Total current liabilities	4,547			3,828

Regulatory liabilities	1,663			1,638
Derivative contracts	176			458
MEHC senior debt	4,621			5,371
MEHC subordinated debt	—			172
Subsidiary debt	13,253			12,662
Deferred income taxes	7,076			6,298
Other long-term liabilities	2,117			1,833
Total liabilities	33,453			32,260

Commitments and contingencies (Note 16)

Equity:
MEHC shareholders' equity:
Common stock - 115 shares authorized, no par value, 75 shares issued and outstanding	—			—
Additional paid-in capital	5,423			5,427
Retained earnings	9,310			7,979
Accumulated other comprehensive loss, net	(641		)	(174		)
Total MEHC shareholders' equity	14,092			13,232
Noncontrolling interests	173			176
Total equity	14,265			13,408

Total liabilities and equity	$	47,718		$	45,668

The accompanying notes are an integral part of these consolidated financial statements.

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in millions)



	Years Ended December 31,
	2011			2010			2009
Operating revenue:
Energy	$	10,181		$	10,107		$	10,167
Real estate	992			1,020			1,037
Total operating revenue	11,173			11,127			11,204

Operating costs and expenses:
Energy:
Cost of sales	3,648			3,890			3,904
Operating expense	2,544			2,470			2,571
Depreciation and amortization	1,329			1,262			1,238
Real estate	968			1,003			1,026
Total operating costs and expenses	8,489			8,625			8,739

Operating income	2,684			2,502			2,465

Other income (expense):
Interest expense	(1,196		)	(1,225		)	(1,275		)
Capitalized interest	40			54			41
Interest and dividend income	14			24			38
Other, net	51			110			146
Total other income (expense)	(1,091		)	(1,037		)	(1,050		)

Income before income tax expense and equity income	1,593			1,465			1,415
Income tax expense	294			198			282
Equity income	53			43			55
Net income	1,352			1,310			1,188
Net income attributable to noncontrolling interests	21			72			31
Net income attributable to MEHC	$	1,331		$	1,238		$	1,157

The accompanying notes are an integral part of these consolidated financial statements.

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in millions)



	Years Ended December 31,
	2011			2010			2009
Cash flows from operating activities:
Net income	$	1,352		$	1,310		$	1,188
Adjustments to reconcile net income to net cash flows from operating activities:
Loss (gain) on other items, net	50			(39		)	11
Depreciation and amortization	1,341			1,276			1,256
Stock-based compensation	—			—			123
Changes in regulatory assets and liabilities	(12		)	20			23
Deferred income taxes and amortization of investment tax credits	937			854			864
Other, net	(66		)	(55		)	(45		)
Changes in other operating assets and liabilities:
Trade receivables and other assets	(139		)	(44		)	17
Derivative collateral, net	(8		)	(96		)	81
Trading securities	—			—			499
Contributions to pension and other postretirement benefit plans, net	(133		)	(139		)	(82		)
Accrued property, income and other taxes	(53		)	(332		)	(296		)
Accounts payable and other liabilities	(49		)	4			(67		)
Net cash flows from operating activities	3,220			2,759			3,572

Cash flows from investing activities:
Capital expenditures	(2,684		)	(2,593		)	(3,413		)
Purchases of available-for-sale securities	(123		)	(106		)	(499		)
Proceeds from sales of available-for-sale securities	111			100			256
Proceeds from Constellation Energy Group, Inc. 14% note	—			—			1,000
Proceeds from sales of assets and business, net	10			146			13
Equity method investments	(124		)	(66		)	(34		)
(Increase) decrease in restricted cash and other	(6		)	35			8
Net cash flows from investing activities	(2,816		)	(2,484		)	(2,669		)

Cash flows from financing activities:
Proceeds from MEHC senior debt	—			—			250
Repayments of MEHC subordinated debt	(334		)	(281		)	(734		)
Proceeds from subsidiary debt	790			231			992
Repayments of subsidiary debt	(1,548		)	(192		)	(444		)
Net proceeds from (repayments of) short-term debt	545			149			(664		)
Net purchases of common stock	—			(56		)	(123		)
Net payments to noncontrolling interests	(24		)	(80		)	(19		)
Other, net	(18		)	(5		)	(16		)
Net cash flows from financing activities	(589		)	(234		)	(758		)

Effect of exchange rate changes	1			—			4

Net change in cash and cash equivalents	(184		)	41			149
Cash and cash equivalents at beginning of period	470			429			280
Cash and cash equivalents at end of period	$	286		$	470		$	429

The accompanying notes are an integral part of these consolidated financial statements.

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in millions)



	MEHC Shareholders' Equity
											Accumulated
											Other
					Additional						Comprehensive
	Common				Paid-in			Retained			Income (Loss),			Noncontrolling			Total
	Shares		Stock		Capital			Earnings			Net			Interests			Equity

Balance, December 31, 2008	75		$	—	$	5,455		$	5,631		$	(879	)	$	270		$	10,477
Net income	—		—		—			1,157			—			31			1,188
Other comprehensive income	—		—		—			—			1,214			—			1,214
Stock-based compensation	—		—		123			—			—			—			123
Exercise of common stock options	1		—		25			—			—			—			25
Common stock purchases	(1	)	—		(148		)	—			—			—			(148		)
Contributions	—		—		—			—			—			28			28
Distributions	—		—		—			—			—			(73		)	(73		)
Other equity transactions	—		—		(2		)	—			—			11			9
Balance, December 31, 2009	75		—		5,453			6,788			335			267			12,843
Deconsolidation of Bridger Coal	—		—		—			—			—			(84		)	(84		)
Net income	—		—		—			1,238			—			72			1,310
Other comprehensive loss	—		—		—			—			(509		)	—			(509		)
Common stock purchases	—		—		(9		)	(47		)	—			—			(56		)
Purchase of noncontrolling interest	—		—		(13		)	—			—			(44		)	(57		)
Distributions	—		—		—			—			—			(34		)	(34		)
Other equity transactions	—		—		(4		)	—			—			(1		)	(5		)
Balance, December 31, 2010	75		—		5,427			7,979			(174		)	176			13,408
Net income	—		—		—			1,331			—			21			1,352
Other comprehensive loss	—		—		—			—			(467		)	—			(467		)
Distributions	—		—		—			—			—			(25		)	(25		)
Other equity transactions	—		—		(4		)	—			—			1			(3		)
Balance, December 31, 2011	75		$	—	$	5,423		$	9,310		$	(641	)	$	173		$	14,265

The accompanying notes are an integral part of these consolidated financial statements.

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in millions)



	Years Ended December 31,
	2011			2010			2009

Net income	$	1,352		$	1,310		$	1,188

Other comprehensive (loss) income, net of tax:
Unrecognized amounts on retirement benefits, net of tax of $(10), $29 and $(45)	(30		)	54			(114		)
Foreign currency translation adjustment	(10		)	(106		)	255
Unrealized (losses) gains on available-for-sale securities, net of tax of $(279), $(318) and $709	(419		)	(480		)	1,066
Unrealized (losses) gains on cash flow hedges, net of tax of $(5), $15 and $3	(8		)	23			7
Total other comprehensive (loss) income, net of tax	(467		)	(509		)	1,214

Comprehensive income	885			801			2,402
Comprehensive income attributable to noncontrolling interests	21			72			31
Comprehensive income attributable to MEHC	$	864		$	729		$	2,371

The accompanying notes are an integral part of these consolidated financial statements.

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)	Organization and Operations

MidAmerican Energy Holdings Company ("MEHC") is a holding company that owns subsidiaries principally engaged in energy businesses (collectively with its subsidiaries, the "Company"). MEHC is a consolidated subsidiary of Berkshire Hathaway Inc. ("Berkshire Hathaway").

The Company's operations are organized and managed as eight distinct platforms: PacifiCorp, MidAmerican Funding, LLC ("MidAmerican Funding") (which primarily consists of MidAmerican Energy Company ("MidAmerican Energy")), Northern Natural Gas Company ("Northern Natural Gas"), Kern River Gas Transmission Company ("Kern River"), Northern Powergrid Holdings Company ("Northern Powergrid Holdings") (which primarily consists of Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc), CalEnergy Philippines (which owns a majority interest in the Casecnan project in the Philippines), MidAmerican Renewables, LLC (formerly CalEnergy U.S., which owns interests in independent power projects in the United States), and HomeServices of America, Inc. (collectively with its subsidiaries, "HomeServices"). Through these platforms, the Company owns and operates an electric utility company in the Western United States, an electric and natural gas utility company in the Midwestern United States, two interstate natural gas pipeline companies in the United States, two electricity distribution companies in Great Britain, a diversified portfolio of independent power projects and the second largest residential real estate brokerage firm in the United States. Effective December 31, 2011, Northern Natural Gas and Kern River have been aggregated in the reportable segment called MidAmerican Energy Pipeline Group, and CalEnergy Philippines and MidAmerican Renewables, LLC have been aggregated in the reportable segment called MidAmerican Renewables.


(2)	Summary of Significant Accounting Policies

Basis of Consolidation and Presentation

The Consolidated Financial Statements include the accounts of MEHC and its subsidiaries in which it holds a controlling financial interest as of the financial statement date. The Consolidated Statements of Operations include the revenue and expenses of any acquired entities from the date of acquisition. Intercompany accounts and transactions have been eliminated.

As of December 31, 2011, the Company changed its presentation of regulatory assets and liabilities, which previously had been classified entirely as noncurrent, to present such regulatory assets and liabilities as either current or noncurrent based on the timing of the collection or refund of the respective regulatory asset or liability. To conform to the presentation as of December 31, 2011, the Company reclassified on the Consolidated Balance Sheet as of December 31, 2010, $64 million from noncurrent regulatory assets to other current assets and $26 million from noncurrent regulatory liabilities to other current liabilities. Additionally, to conform to the presentation as of December 31, 2011, the Company reclassified on the Consolidated Balance Sheet as of December 31, 2010, equity method investments totaling $588 million from other assets to noncurrent investments and restricted cash and investments.

Use of Estimates in Preparation of Financial Statements

The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. These estimates include, but are not limited to, the effects of regulation; goodwill; long-lived asset recovery; certain assumptions made in accounting for pension and other postretirement benefits; asset retirement obligations ("AROs"); income taxes; unbilled revenue; valuation of certain financial assets and liabilities, including derivative contracts; and accounting for contingencies. Actual results may differ from the estimates used in preparing the Consolidated Financial Statements.

Accounting for the Effects of Certain Types of Regulation

PacifiCorp, MidAmerican Energy, Northern Natural Gas and Kern River (the "Domestic Regulated Businesses") prepare their financial statements in accordance with authoritative guidance for regulated operations, which recognizes the economic effects of regulation. Accordingly, the Domestic Regulated Businesses are required to defer the recognition of certain costs or income if it is probable that, through the ratemaking process, there will be a corresponding increase or decrease in future regulated rates.

Fair Value Measurements

As defined under GAAP, fair value is the price that would be received to sell an asset or paid to transfer a liability between market participants in the principal market or in the most advantageous market when no principal market exists. Adjustments to transaction prices or quoted market prices may be required in illiquid or disorderly markets in order to estimate fair value. Different valuation techniques may be appropriate under the circumstances to determine the value that would be received to sell an asset or paid to transfer a liability in an orderly transaction. Market participants are assumed to be independent, knowledgeable, able and willing to transact an exchange and not under duress. Nonperformance or credit risk is considered in determining fair value. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized in a current or future market exchange.

Cash Equivalents and Restricted Cash and Investments

Cash equivalents consist of funds invested in United States Treasury Bills, money market funds and other investments with a maturity of three months or less when purchased. Cash and cash equivalents exclude amounts where availability is restricted by legal requirements, loan agreements or other contractual provisions. Restricted amounts are included in investments and restricted cash and investments on the Consolidated Balance Sheets.

Investments

The Company's management determines the appropriate classification of investments in debt and equity securities at the acquisition date and reevaluates the classification at each balance sheet date. Investments and restricted cash and investments that management does not intend to use in current operations are presented as noncurrent on the Consolidated Balance Sheets.

Available-for-sale securities are carried at fair value with realized gains and losses, as determined on a specific identification basis, recognized in earnings and unrealized gains and losses recognized in AOCI, net of tax. Realized and unrealized gains and losses on securities in a trust related to the decommissioning of nuclear generation assets are recorded as net regulatory assets or liabilities since the Company expects to recover costs for these activities through regulated rates. Trading securities are carried at fair value with changes in fair value recognized in earnings. Held-to-maturity securities are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity.

If in management's judgment a decline in the fair value of an available-for-sale or held-to-maturity investment below cost is deemed other than temporary, the cost of the investment is written down to fair value. Factors considered in judging whether an impairment is other than temporary include: the financial condition, business prospects and creditworthiness of the issuer; the relative amount of the decline; the Company's ability and intent to hold the investment until the fair value recovers; and the length of time that fair value has been less than cost. Impairment losses on equity securities are charged to earnings. With respect to an investment in a debt security, any resulting impairment loss is recognized in earnings if the Company intends to sell or expects to be required to sell the debt security before amortized cost is recovered. If the Company does not expect to ultimately recover the amortized cost basis even if it does not intend to sell the security, the credit loss component is recognized in earnings and any difference between fair value and the amortized cost basis, net of the credit loss, is reflected in other comprehensive income (loss) ("OCI"). For regulated investments, any impairment charge is offset by the establishment of a regulatory asset to the extent recovery in regulated rates is probable.

The Company utilizes the equity method of accounting with respect to investments when it possesses the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when an investor possesses more than 20% of the voting interests of the investee. This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted. In applying the equity method, the Company records the investment at cost and subsequently increases or decreases the carrying value of the investment by the Company's proportionate share of the net earnings or losses and OCI of the investee. The Company records dividends or other equity distributions as reductions in the carrying value of the investment.

Allowance for Doubtful Accounts

Trade receivables are stated at the outstanding principal amount, net of estimated allowances for doubtful accounts. The allowance for doubtful accounts is based on the Company's assessment of the collectibility of amounts owed to the Company by its customers. This assessment requires judgment regarding the ability of customers to pay or the outcome of any pending disputes. As of December 31, 2011 and 2010 , the allowance for doubtful accounts totaled $21 million and $27 million , respectively, and is included in trade receivables, net on the Consolidated Balance Sheets.

Derivatives

The Company employs a number of different derivative contracts, including forwards, futures, options, swaps and other agreements, to manage price risk for electricity, natural gas and other commodities; interest rate risk; and foreign currency exchange rate risk. Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. Derivative balances reflect offsetting permitted under master netting agreements with counterparties and cash collateral paid or received under such agreements. Cash collateral received from or paid to counterparties to secure derivative contract assets or liabilities in excess of amounts offset is included in other current assets on the Consolidated Balance Sheets.

Commodity derivatives used in normal business operations that are settled by physical delivery, among other criteria, are eligible for and may be designated as normal purchases or normal sales. Normal purchases or normal sales contracts are not marked-to-market and settled amounts are recognized as operating revenue or cost of sales on the Consolidated Statements of Operations.

For the Company's derivatives not designated as hedging contracts, the settled amount is generally included in regulated rates. Accordingly, the net unrealized gains and losses associated with interim price movements on contracts that are accounted for as derivatives and probable of inclusion in regulated rates are recorded as regulatory assets and liabilities. For the Company's derivatives not designated as hedging contracts and for which changes in fair value are not recorded as regulatory assets and liabilities, unrealized gains and losses are recognized on the Consolidated Statements of Operations as operating revenue for sales contracts; cost of sales and operating expense for purchase contracts and electricity, natural gas and fuel swap contracts; and interest expense for interest rate derivatives.

For the Company's derivatives designated as hedging contracts, the Company formally assesses, at inception and thereafter, whether the hedging contract is highly effective in offsetting changes in the hedged item. The Company formally documents hedging activity by transaction type and risk management strategy.

Changes in the estimated fair value of a derivative contract designated and qualified as a cash flow hedge, to the extent effective, are included on the Consolidated Statements of Changes in Equity as AOCI, net of tax, until the contract settles and the hedged item is recognized in earnings. The Company discontinues hedge accounting prospectively when it has determined that a derivative contract no longer qualifies as an effective hedge, or when it is no longer probable that the hedged forecasted transaction will occur. When hedge accounting is discontinued because the derivative contract no longer qualifies as an effective hedge, future changes in the estimated fair value of the derivative contract are charged to earnings. Gains and losses related to discontinued hedges that were previously recorded in AOCI will remain in AOCI until the contract settles and the hedged item is recognized in earnings, unless it becomes probable that the hedged forecasted transaction will not occur at which time associated deferred amounts in AOCI will be immediately recognized in earnings.

Inventories

Inventories consist mainly of materials and supplies totaling $331 million and $306 million as of December 31, 2011 and 2010 , respectively, and fuel, which includes coal stocks, stored gas and fuel oil, totaling $359 million and $279 million as of December 31, 2011 and 2010 , respectively. The cost of materials and supplies, coal stocks and fuel oil is determined primarily using the average cost method. The cost of stored gas is determined using either the last-in-first-out ("LIFO") method or the lower of average cost or market. With respect to inventories carried at LIFO cost, the replacement cost would be $27 million and $38 million higher as of December 31, 2011 and 2010 , respectively.

Property, Plant and Equipment, Net

General

Additions to property, plant and equipment are recorded at cost. The Company capitalizes all construction related material, direct labor and contract services, as well as indirect construction costs. Indirect construction costs include capitalized interest, including debt allowance for funds used during construction ("AFUDC"), and equity AFUDC. The cost of additions and betterments are capitalized, while costs incurred that do not improve or extend the useful lives of the related assets are generally expensed. Additionally, MidAmerican Energy has regulatory arrangements in Iowa in which the carrying cost of certain utility plant has been reduced for amounts associated with electric returns on equity exceeding threshold levels.

Depreciation and amortization are generally computed by applying the composite or straight-line method based on either estimated useful lives or mandated recovery periods as prescribed by the Company's various regulatory authorities. Depreciation studies are completed by the Domestic Regulated Businesses to determine the appropriate group lives, net salvage and group depreciation rates. These studies are reviewed and rates are ultimately approved by some of the various regulatory authorities. Net salvage includes the estimated future residual values of the assets and any estimated removal costs recovered through approved depreciation rates. Estimated removal costs are recorded as either a cost of removal regulatory liability or an ARO liability on the Consolidated Balance Sheets, depending on whether the obligation meets the requirements of an ARO. As actual removal costs are incurred, the associated liability is reduced.

Generally when the Company retires or sells a component of domestic regulated property, plant and equipment, it charges the original cost and any net proceeds from the disposition to accumulated depreciation. Any gain or loss on disposals of all other assets is recorded through earnings.

The Domestic Regulated Businesses capitalize debt and equity AFUDC, which represents the estimated costs of debt and equity funds necessary to finance the construction of domestic regulated facilities, as a component of property, plant and equipment, with offsetting credits to the Consolidated Statements of Operations. AFUDC is computed based on guidelines set forth by the Federal Energy Regulatory Commission ("FERC"). After construction is completed, the Company is permitted to earn a return on these costs as a component of the related assets, as well as recover these costs through depreciation expense over the useful lives of the related assets.

Asset Retirement Obligations

The Company recognizes AROs when it has a legal obligation to perform decommissioning, reclamation or removal activities upon retirement of an asset. The Company's AROs are primarily related to the decommissioning of nuclear power plants and obligations associated with its other generating facilities and offshore natural gas pipelines. The fair value of an ARO liability is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made, and is added to the carrying amount of the associated asset, which is then depreciated over the remaining useful life of the asset. Subsequent to the initial recognition, the ARO liability is adjusted for any revisions to the original estimate of undiscounted cash flows (with corresponding adjustments to property, plant and equipment) and for accretion of the ARO liability due to the passage of time. The difference between the ARO liability, the corresponding ARO asset included in property, plant and equipment, net and amounts recovered in rates to satisfy such liabilities is recorded as a regulatory asset or liability.

Impairment

The Company evaluates long-lived assets for impairment, including property, plant and equipment, when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable or the assets are being held for sale. Upon the occurrence of a triggering event, the asset is reviewed to assess whether the estimated undiscounted cash flows expected from the use of the asset plus the residual value from the ultimate disposal exceeds the carrying value of the asset. If the carrying value exceeds the estimated recoverable amounts, the asset is written down to the estimated fair value. The impacts of regulation are considered when evaluating the carrying value of regulated assets. For all other assets, any resulting impairment loss is reflected on the Consolidated Statements of Operations.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business acquisitions. The Company evaluates goodwill for impairment at least annually and completed its annual review as of October 31. Evaluating goodwill for impairment involves a two-step process. The first step is to estimate the fair value of the reporting unit. If the carrying amount of a reporting unit, including goodwill, exceeds the estimated fair value, a second step is performed. Under the second step, the identifiable assets, including identifiable intangible assets, and liabilities of the reporting unit are estimated at fair value as of the current testing date. The excess of the estimated fair value of the reporting unit over the current estimated fair value of net assets establishes the implied value of goodwill. The excess of the recorded goodwill over the implied goodwill value is charged to earnings as an impairment loss. A significant amount of judgment is required in estimating the fair value of the reporting unit and performing goodwill impairment tests. The Company uses a variety of methods to estimate a reporting unit's fair value, principally discounted projected future net cash flows. Key assumptions used include, but are not limited to, the use of estimated future cash flows; multiples of earnings; and an appropriate discount rate. In estimating future cash flows, the Company incorporates current market information, as well as historical factors. As such, the determination of fair value incorporates significant unobservable inputs. During 2011 , 2010 and 2009 , the Company did not record any goodwill impairment.

The Company records goodwill adjustments for (a) the tax benefit associated with the excess of tax-deductible goodwill over the reported amount of goodwill and (b) changes to the purchase price allocation prior to the end of the allocation period, which is not to exceed one year from the acquisition date.

Revenue Recognition

Energy Businesses

Revenue from energy business customers is recognized as electricity or natural gas is delivered or services are provided. Revenue recognized includes billed, as well as unbilled, amounts. As of December 31, 2011 and 2010 , unbilled revenue was $474 million and $452 million , respectively, and is included in trade receivables, net on the Consolidated Balance Sheets. Rates charged by energy businesses are established by regulators or contractual arrangements. When preliminary rates are permitted to be billed prior to final approval by the applicable regulator, certain revenue collected may be subject to refund and a liability for estimated refunds is accrued. The Company records sales, franchise and excise taxes collected directly from customers and remitted directly to the taxing authorities on a net basis on the Consolidated Statements of Operations.

Real Estate Commission Revenue and Related Fees

Commission revenue from real estate brokerage transactions and related amounts due to agents are recognized when a real estate transaction is closed. Title and escrow closing fee revenue from real estate transactions and related amounts due to the title insurer are recognized at closing.

Unamortized Debt Premiums, Discounts and Financing Costs

Premiums, discounts and financing costs incurred for the issuance of long-term debt are amortized over the term of the related financing using the effective interest method.

Foreign Currency

The accounts of foreign-based subsidiaries are measured in most instances using the local currency of the subsidiary as the functional currency. Revenue and expenses of these businesses are translated into United States dollars at the average exchange rate for the period. Assets and liabilities are translated at the exchange rate as of the end of the reporting period. Gains or losses from translating the financial statements of foreign-based operations are included in equity as a component of AOCI. Gains or losses arising from transactions denominated in a currency other than the functional currency of the entity that is party to the transaction are included in earnings.

Income Taxes

Berkshire Hathaway includes the Company in its United States federal income tax return. Consistent with established regulatory practice, the Company's provision for income taxes has been computed on a stand-alone basis.

Deferred income tax assets and liabilities are based on differences between the financial statement and income tax basis of assets and liabilities using estimated income tax rates expected to be in effect for the year in which the differences are expected to reverse. Changes in deferred income tax assets and liabilities that are associated with components of OCI are charged or credited directly to OCI. Changes in deferred income tax assets and liabilities that are associated with income tax benefits related to certain property-related basis differences and other various differences that PacifiCorp and MidAmerican Energy (the "Utilities") are required to pass on to their customers in most state jurisdictions are charged or credited directly to a regulatory asset or liability. These amounts were recognized as a net regulatory asset totaling $1.003 billion and $917 million as of December 31, 2011 and 2010 , respectively, and will be included in regulated rates when the temporary differences reverse. Other changes in deferred income tax assets and liabilities are included as a component of income tax expense. Changes in deferred income tax assets and liabilities attributable to changes in enacted income tax rates are charged or credited to income tax expense in the period of enactment. Valuation allowances are established for certain deferred income tax assets where realization is not likely. Investment tax credits are generally deferred and amortized over the estimated useful lives of the related properties or as prescribed by various regulatory jurisdictions.

In determining the Company's income taxes, management is required to interpret complex income tax laws and regulations, which includes consideration of regulatory implications imposed by the Company's various regulatory jurisdictions. The Company's income tax returns are subject to continuous examinations by federal, state, local and foreign income tax authorities that may give rise to different interpretations of these complex laws and regulations. Due to the nature of the examination process, it generally takes years before these examinations are completed and these matters are resolved. The Company recognizes the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the Consolidated Financial Statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Although the ultimate resolution of the Company's federal, state, local and foreign income tax examinations is uncertain, the Company believes it has made adequate provisions for these income tax positions. The aggregate amount of any additional income tax liabilities that may result from these examinations, if any, is not expected to have a material adverse impact on the Company's consolidated financial results. The Company's unrecognized tax benefits are primarily included in accrued property, income and other taxes and other long-term liabilities on the Consolidated Balance Sheets. Estimated interest and penalties, if any, related to uncertain tax positions are included as a component of income tax expense on the Consolidated Statements of Operations.

New Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-11, which amends FASB Accounting Standards Codification ("ASC") Topic 210, "Balance Sheet." The amendments in this guidance require an entity to provide quantitative disclosures about offsetting financial instruments and derivative instruments. Additionally, this guidance requires qualitative and quantitative disclosures about master netting agreements or similar agreements when the financial instruments and derivative instruments are not offset. This guidance is effective for fiscal years beginning on or after January 1, 2013, and for interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this guidance on its disclosures included within Notes to Consolidated Financial Statements.

In September 2011, the FASB issued ASU No. 2011-09, which amends FASB ASC Subtopic 715-80, "Compensation-Retirement Benefits-Multiemployer Plans." The amendments in this guidance require additional disclosures regarding an entity's participation in multiemployer pension plans and other postretirement benefit plans, as well as certain qualitative and quantitative disclosures regarding individually significant multiemployer pension plans. This guidance is effective for annual reporting periods ending after December 15, 2011. The adoption of this guidance did not have a material impact on the Company's disclosures included within Notes to Consolidated Financial Statements.

In September 2011, the FASB issued ASU No. 2011-08, which amends FASB ASC Topic 350, "Intangibles-Goodwill and Other." The amendments in this guidance provide an entity the option to assess qualitatively whether it is necessary to perform the current two-step goodwill impairment test. An entity would be required to perform step one if it determines qualitatively that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. Otherwise, no further testing would be required. This guidance is effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011, and is not expected to have an impact on the Company's Consolidated Financial Statements.

In June 2011, the FASB issued ASU No. 2011-05, which amends FASB ASC Topic 220, "Comprehensive Income." ASU No. 2011-05 provides an entity with the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Regardless of the option chosen, this guidance also requires presentation of items on the face of the financial statements that are reclassified from other comprehensive income to net income. This guidance does not change the items that must be reported in other comprehensive income, when an item of other comprehensive income must be reclassified to net income or how tax effects of each item of other comprehensive income are presented. This guidance is effective for interim and annual reporting periods beginning after December 15, 2011. The Company is currently evaluating which presentation option will be implemented. In December 2011, the FASB issued ASU No. 2011-12, which also amends FASB ASC Topic 220 to defer indefinitely the ASU No. 2011-05 requirement to present items on the face of the financial statements that are reclassified from other comprehensive income to net income. ASU No. 2011-12 is also effective for interim and annual reporting periods beginning after December 15, 2011.

In May 2011, the FASB issued ASU No. 2011-04, which amends FASB ASC Topic 820, "Fair Value Measurements and Disclosures." The amendments in this guidance are not intended to result in a change in current accounting. ASU No. 2011-04 requires additional disclosures relating to fair value measurements categorized within Level 3 of the fair value hierarchy, including quantitative information about unobservable inputs, the valuation process used by the entity and the sensitivity of unobservable input measurements. Additionally, entities are required to disclose the level of the fair value hierarchy for assets and liabilities that are not measured at fair value in the balance sheet, but for which disclosure of the fair value is required. This guidance is effective for interim and annual reporting periods beginning after December 15, 2011. The Company is currently evaluating the impact of adopting this guidance on its disclosures included within Notes to Consolidated Financial Statements.

In January 2010, the FASB issued ASU No. 2010-06, which amends FASB ASC Topic 820, "Fair Value Measurements and Disclosures." ASU No. 2010-06 requires disclosure of (a) the amount of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and the reasons for those transfers and (b) gross presentation of purchases, sales, issuances and settlements in the Level 3 fair value measurement rollforward. This guidance clarifies that existing fair value measurement disclosures should be presented for each class of assets and liabilities. The existing disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements have also been clarified to ensure such disclosures are presented for the Levels 2 and 3 fair value measurements. The Company adopted this guidance as of January 1, 2010, with the exception of the disclosure requirement to present purchases, sales, issuances and settlements gross in the Level 3 fair value measurement rollforward, which the Company adopted as of January 1, 2011. The adoption of this guidance did not have a material impact on the Company's disclosures included within Notes to Consolidated Financial Statements.

(3) Property, Plant and Equipment, Net

Property, plant and equipment, net consists of the following as of December 31 (in millions):



	Depreciable
	Life	2011			2010
Regulated assets:
Utility generation, distribution and transmission system	5-80 years	$	40,180		$	37,643
Interstate pipeline assets	3-80 years	6,245			5,906
		46,425			43,549
Accumulated depreciation and amortization		(14,390		)	(13,711		)
Regulated assets, net		32,035			29,838

Nonregulated assets:
Independent power plants	5-30 years	677			678
Other assets	3-30 years	429			419
		1,106			1,097
Accumulated depreciation and amortization		(533		)	(492		)
Nonregulated assets, net		573			605

Net operating assets		32,608			30,443
Construction work-in-progress		1,559			1,456
Property, plant and equipment, net		$	34,167		$	31,899

Substantially all of the construction work-in-progress as of December 31, 2011 and 2010 relates to the construction of regulated assets.


(4)	Jointly Owned Utility Facilities

Under joint facility ownership agreements, the Domestic Regulated Businesses, as tenants in common, have undivided interests in jointly owned generation, transmission, distribution and pipeline common facilities. The Company accounts for its proportionate share of each facility, and each joint owner has provided financing for its share of each facility. Operating costs of each facility are assigned to joint owners based on their percentage of ownership or energy production, depending on the nature of the cost. Operating costs and expenses on the Consolidated Statements of Operations include the Company's share of the expenses of these facilities.

The amounts shown in the table below represent the Company's share in each jointly owned facility as of December 31, 2011 (dollars in millions):



					Accumulated		Construction
	Company		Facility In		Depreciation and		Work-in-
	Share		Service		Amortization		Progress

PacifiCorp:
Jim Bridger Nos. 1-4	67	%	$	1,074	$	491	$	21
Hunter No. 1	94		342		146		43
Hunter No. 2	60		291		80		12
Wyodak	80		449		152		1
Colstrip Nos. 3 and 4	10		222		116		2
Hermiston ⁽¹⁾	50		171		52		1
Craig Nos. 1 and 2	19		176		88		—
Hayden No. 1	25		51		24		—
Hayden No. 2	13		32		15		—
Foote Creek	79		37		18		—
Transmission and distribution facilities	Various		315		50		1
Total PacifiCorp			3,160		1,232		81

MidAmerican Energy:
Louisa No. 1	88	%	736		355		1
Walter Scott, Jr. No. 3	79		537		259		1
Walter Scott, Jr. No. 4 ⁽²⁾	60		442		55		—
Quad Cities Nos. 1 and 2 ⁽³⁾	25		573		264		36
Ottumwa No. 1	52		266		166		12
George Neal No. 4	41		170		142		11
George Neal No. 3	72		147		118		7
Transmission facilities	Various		236		71		—
Total MidAmerican Energy			3,107		1,430		68

MidAmerican Energy Pipeline Group - common facilities	Various		349		174		—

Total			$	6,616	$	2,836	$	149


(1)	PacifiCorp has contracted to purchase the remaining 50% of the output of the Hermiston generating facility.


(2)	Facility in service and accumulated depreciation amounts are net of credits applied under Iowa revenue sharing arrangements totaling $306 million and $37 million, respectively.


(3)	Includes amounts related to nuclear fuel.

(5) Regulatory Matters

Regulatory Assets and Liabilities

Regulatory assets represent costs that are expected to be recovered in future regulated rates. The Company's regulatory assets reflected on the Consolidated Balance Sheets consist of the following as of December 31 (in millions):



	Weighted
	Average
	Remaining Life	2011		2010
Noncurrent regulatory assets:
Deferred income taxes ⁽¹⁾	30 years	$	1,069	$	978
Employee benefit plans ⁽²⁾	10 years	834		612
Unrealized loss on regulated derivative contracts	3 years	421		566
Unamortized contract values ⁽³⁾	9 years	187		—
Other	Various	324		277
Noncurrent regulatory assets		2,835		2,433
Current regulatory assets		83		64
Total regulatory assets		$	2,918	$	2,497


(1)	Amounts primarily represent income tax benefits related to state accelerated tax depreciation and certain property-related basis differences that were previously flowed through to customers and will be included in regulated rates when the temporary differences reverse.


(2)	Substantially represents amounts not yet recognized as a component of net periodic benefit cost that are expected to be included in regulated rates when recognized.


(3)	Represents frozen values of contracts previously accounted for as derivatives and recorded at fair value, including $168 million reclassified from unrealized loss on regulated derivative contracts to unamortized contract values as a result of designating certain commodity derivatives as normal purchases or normal sales in December 2011. Refer to Note 7 for additional information.

The Company had regulatory assets not earning a return on investment of $2.602 billion and $2.263 billion as of December 31, 2011 and 2010 , respectively.

Regulatory liabilities represent income to be recognized or amounts to be returned to customers in future periods. The Company's regulatory liabilities reflected on the Consolidated Balance Sheets consist of the following as of December 31 (in millions):



	Weighted
	Average
	Remaining Life	2011		2010
Noncurrent regulatory liabilities:
Cost of removal ⁽¹⁾	30 years	$	1,404	$	1,376
Asset retirement obligations	28 years	88		129
Employee benefit plans ⁽²⁾	19 years	12		23
Unrealized gain on regulated derivative contracts	1 year	21		2
Other	Various	138		108
Noncurrent regulatory liabilities		1,663		1,638
Current regulatory liabilities		68		26
Total regulatory liabilities		$	1,731	$	1,664


(1)	Amounts represent estimated costs, as accrued through depreciation rates and exclusive of ARO liabilities, of removing regulated property, plant and equipment in accordance with accepted regulatory practices. Amounts are deducted from rate base or otherwise accrue a carrying cost.


(2)	Represents amounts not yet recognized as a component of net periodic benefit cost that are to be returned to customers in future periods when recognized.

(6) Fair Value Measurements

The carrying value of the Company's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. The Company has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:


•	Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•

Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).


•	Level 3 - Unobservable inputs reflect the Company's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Company develops these inputs based on the best information available, including its own data.

The following table presents the Company's assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):



	Input Levels for Fair Value Measurements
	Level 1			Level 2			Level 3			Other ⁽¹⁾			Total
As of December 31, 2011
Assets:
Commodity derivatives	$	1		$	166		$	27		$	(147	)	$	47
Money market mutual funds ⁽²⁾	164			—			—			—			164
Debt securities:
United States government obligations	89			—			—			—			89
International government obligations	—			1			—			—			1
Corporate obligations	—			30			—			—			30
Municipal obligations	—			12			—			—			12
Agency, asset and mortgage-backed obligations	—			7			—			—			7
Auction rate securities	—			—			35			—			35
Equity securities:
United States companies	166			—			—			—			166
International companies	489			—			—			—			489
Investment funds	64			—			—			—			64
	$	973		$	216		$	62		$	(147	)	$	1,104

Liabilities - commodity derivatives	$	(37	)	$	(598	)	$	(4	)	$	303		$	(336	)



As of December 31, 2010
Assets:
Commodity derivatives	$	3		$	293		$	23		$	(175	)	$	144
Money market mutual funds ⁽²⁾	301			—			—			—			301
Debt securities:
United States government obligations	74			—			—			—			74
International government obligations	—			1			—			—			1
Corporate obligations	—			32			—			—			32
Municipal obligations	—			13			—			—			13
Agency, asset and mortgage-backed obligations	—			7			—			—			7
Auction rate securities	—			—			50			—			50
Equity securities:
United States companies	166			—			—			—			166
International companies	1,183			—			—			—			1,183
Investment funds	63			—			—			—			63
	$	1,790		$	346		$	73		$	(175	)	$	2,034

Liabilities - commodity derivatives	$	(10	)	$	(568	)	$	(354	)	$	316		$	(616	)


(1)	Represents netting under master netting arrangements and a net cash collateral receivable of $156 million and $141 million as of December 31, 2011 and 2010 , respectively.


(2)	Amounts are included in cash and cash equivalents; current investments and restricted cash and investments; and noncurrent investments and restricted cash and investments on the Consolidated Balance Sheets. The fair value of these money market mutual funds approximates cost.

Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which the Company transacts. When quoted prices for identical contracts are not available, the Company uses forward price curves. Forward price curves represent the Company's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. The Company bases its forward price curves upon market price quotations, when available, or internally developed and commercial models, with internal and external fundamental data inputs. Market price quotations are obtained from independent energy brokers, exchanges, direct communication with market participants and actual transactions executed by the Company. Market price quotations for certain major electricity and natural gas trading hubs are generally readily obtainable for the applicable term of the Company's outstanding derivative contracts; therefore, the Company's forward price curves for those locations and periods reflect observable market quotes. Market price quotations for other electricity and natural gas trading hubs are not as readily obtainable due to the length of the contract. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, the Company uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The estimated fair value of these derivative contracts is a function of underlying forward commodity prices, interest rates, currency rates, related volatility, counterparty creditworthiness and duration of contracts. Refer to Note 7 for further discussion regarding the Company's risk management and hedging activities.

The Company's investments in money market mutual funds and debt and equity securities are accounted for as available-for-sale securities and are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value. In the absence of a quoted market price or net asset value of an identical security, the fair value is determined using pricing models or net asset values based on observable market inputs and quoted market prices of securities with similar characteristics. The fair value of the Company's investments in auction rate securities, where there is no current liquid market, is determined using pricing models based on available observable market data and the Company's judgment about the assumptions, including liquidity and nonperformance risks, which market participants would use when pricing the asset.

The following table reconciles the beginning and ending balances of the Company's assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs for the years ended December 31 (in millions):



	Commodity Derivatives									Auction Rate Securities
	2011			2010			2009			2011			2010		2009

Beginning balance	$	(331	)	$	(359	)	$	(369	)	$	50		$	46	$	37
Changes included in earnings ⁽¹⁾	23			14			22			—			—		—
Changes in fair value recognized in OCI	(3		)	—			—			—			4		9
Changes in fair value recognized in net regulatory assets	144			(33		)	12			—			—		—
Contracts designated as normal purchases or normal sales ⁽²⁾	168			—			—			—			—		—
Sales	—			—			—			(15		)	—		—
Settlements	21			44			(2		)	—			—		—
Transfers to Level 2	—			3			(22		)	—			—		—
Transfers from Level 2	1			—			—			—			—		—
Ending balance	$	23		$	(331	)	$	(359	)	$	35		$	50	$	46


(1)	Changes included in earnings are reported as operating revenue on the Consolidated Statements of Operations. For commodity derivatives held as of December 2011 , 2010 and 2009 , net unrealized gains (losses) included in earnings for the years ended December 31, 2011 , 2010 and 2009 totaled $15 million , $8 million and $15 million , respectively.

(2)

In December 2011, PacifiCorp elected to designate certain derivative contracts as normal purchases or normal sales, an exception afforded by GAAP. As a result of making the designation, the fair value of the contacts was frozen as of December 31, 2011 and $168 million of net derivative liabilities were reclassified from derivative contracts to other assets and liabilities. The frozen liability and associated regulatory asset will be amortized over the remaining terms of the agreements.

100

The Company's long-term debt is carried at cost on the Consolidated Financial Statements. The fair value of the Company's long-term debt has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of the Company's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of the Company's long-term debt as of December 31 (in millions):



	2011				2010
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value

Long-term debt	$	19,072	$	23,327	$	19,491	$	21,637

(7) Risk Management and Hedging Activities

Each of the Company's business platforms has established a risk management process that is designed to identify, assess, monitor, report, manage and mitigate each of the various types of risk involved in its business. To mitigate a portion of its commodity price risk, the Company uses commodity derivative contracts, which may include forwards, futures, options, swaps and other agreements, to effectively secure future supply or sell future production generally at fixed prices. The Company manages its interest rate risk by limiting its exposure to variable interest rates primarily through the issuance of fixed-rate long-term debt and by monitoring market changes in interest rates. Additionally, the Company may from time to time enter into interest rate derivative contracts, such as interest rate swaps or locks, to mitigate the Company's exposure to interest rate risk. The Company does not hedge all of its commodity price, interest rate and foreign currency exchange rate risks, thereby exposing the unhedged portion to changes in market prices.

There have been no significant changes in the Company's accounting policies related to derivatives. Refer to Notes 2, 5 and 6 for additional information on derivative contracts.

101

The following table, which reflects master netting arrangements and excludes contracts that have been designated as normal under the normal purchases or normal sales exception afforded by GAAP, summarizes the fair value of the Company's derivative contracts, on a gross basis, and reconciles those amounts to the amounts presented on a net basis on the Consolidated Balance Sheets (in millions):



	Derivative Assets						Derivative Liabilities
	Current			Noncurrent			Current			Noncurrent			Total
As of December 31, 2011
Not designated as hedging contracts ⁽¹⁾ :
Commodity assets	$	93		$	14		$	73		$	13		$	193
Commodity liabilities	(47		)	(5		)	(324		)	(216		)	(592		)
Total	46			9			(251		)	(203		)	(399		)

Designated as hedging contracts:
Commodity assets	—			—			1			—			1
Commodity liabilities	(6		)	—			(24		)	(17		)	(47		)
Total	(6		)	—			(23		)	(17		)	(46		)

Total derivatives	40			9			(274		)	(220		)	(445		)
Cash collateral (payable) receivable	(2		)	—			114			44			156
Total derivatives - net basis	$	38		$	9		$	(160	)	$	(176	)	$	(289	)



As of December 31, 2010
Not designated as hedging contracts ⁽¹⁾ :
Commodity assets	$	204		$	18		$	47		$	38		$	307
Commodity liabilities	(64		)	(6		)	(269		)	(533		)	(872		)
Total	140			12			(222		)	(495		)	(565		)

Designated as hedging contracts:
Commodity assets	1			2			8			1			12
Commodity liabilities	(1		)	(1		)	(50		)	(8		)	(60		)
Total	—			1			(42		)	(7		)	(48		)

Total derivatives	140			13			(264		)	(502		)	(613		)
Cash collateral (payable) receivable	(9		)	—			106			44			141
Total derivatives - net basis	$	131		$	13		$	(158	)	$	(458	)	$	(472	)


(1)	The Company's commodity derivatives not designated as hedging contracts are generally included in regulated rates, and as of December 31, 2011 and 2010 , a net regulatory asset of $400 million and $564 million , respectively, was recorded related to the net derivative liability of $399 million and $565 million , respectively.

102

Not Designated as Hedging Contracts

The following table reconciles the beginning and ending balances of the Company's net regulatory assets and summarizes the pre-tax gains and losses on commodity derivative contracts recognized in net regulatory assets, as well as amounts reclassified to earnings for the years ended December 31 (in millions):



	2011			2010			2009

Beginning balance	$	564		$	353		$	446
Changes in fair value recognized in net regulatory assets	95			115			(119		)
Net losses reclassified from AOCI	—			49			—
Net losses reclassified to unamortized contract value regulatory asset	(168		)	—			—
Net gains reclassified to operating revenue	12			80			293
Net losses reclassified to cost of sales	(103		)	(33		)	(267		)
Ending balance	$	400		$	564		$	353

Designated as Hedging Contracts

The Company uses derivative contracts accounted for as cash flow hedges to hedge electricity and natural gas commodity prices for delivery to nonregulated customers, spring operational sales, natural gas storage and other transactions.

The following table reconciles the beginning and ending balances of the Company's accumulated other comprehensive loss (pre-tax) and summarizes pre-tax gains and losses on derivative contracts designated and qualifying as cash flow hedges recognized in other comprehensive income ("OCI"), as well as amounts reclassified to earnings for the years ended December 31 (in millions):



	2011			2010			2009
	Commodity			Commodity			Commodity			Interest Rate
	Derivatives			Derivatives			Derivatives			Derivative			Total

Beginning balance ⁽¹⁾	$	37		$	81		$	83		$	6		$	89
Changes in fair value recognized in OCI	25			35			99			—			99
Net losses reclassified to regulatory assets	—			(49		)	—			—			—
Net gains reclassified to operating revenue	3			14			11			—			11
Net losses reclassified to cost of sales	(19		)	(44		)	(112		)	—			(112		)
Net losses reclassified to interest expense	—			—			—			(6		)	(6		)
Ending balance ⁽¹⁾	$	46		$	37		$	81		$	—		$	81


(1)	Certain derivative contracts, principally interest rate locks, have settled and the fair value at the date of settlement remains in AOCI and is recognized in earnings when the forecasted transactions impact earnings.

Realized gains and losses on hedges and hedge ineffectiveness are recognized in income as operating revenue, cost of sales, operating expense or interest expense depending upon the nature of the item being hedged. For the years ended December 31, 2011 , 2010 and 2009 , hedge ineffectiveness was insignificant. As of December 31, 2011 , the Company had cash flow hedges with expiration dates extending through December 2015 and $27 million of pre-tax net unrealized losses are forecasted to be reclassified from AOCI into earnings over the next twelve months as contracts settle.

103

Derivative Contract Volumes

The following table summarizes the net notional amounts of outstanding commodity derivative contracts with fixed price terms that comprise the mark-to-market values as of December 31 (in millions):



	Unit of
	Measure	2011	2010
Electricity purchases (sales)	Megawatt hours	6	(11	)
Natural gas purchases	Decatherms	183	239
Fuel purchases	Gallons	19	20

Credit Risk

MidAmerican Energy also has potential indirect credit exposure to other market participants in the regional transmission organization ("RTO") markets where it actively participates, including the Midwest Independent Transmission System Operator, Inc. and the PJM Interconnection, L.L.C. In the event of a default by a RTO market participant on its market-related obligations, losses are allocated among all other market participants in proportion to each participant's share of overall market activity during the period of time the loss was incurred, diversifying MidAmerican Energy's exposure to credit losses from individual participants. Transactional activities of MidAmerican Energy and other participants in organized RTO markets are governed by credit policies specified in each respective RTO's governing tariff or related business practices. Credit policies of RTO's, which have been developed through extensive stakeholder participation, generally seek to minimize potential loss in the event of a market participant default without unnecessarily inhibiting access to the marketplace. MidAmerican Energy's share of historical losses from defaults by other RTO market participants has not been material.

Collateral and Contingent Features

In accordance with industry practice, certain wholesale derivative contracts contain provisions that require MEHC's subsidiaries, principally the Utilities, to maintain specific credit ratings from one or more of the major credit rating agencies on their unsecured debt. These derivative contracts may either specifically provide bilateral rights to demand cash or other security if credit exposures on a net basis exceed specified rating-dependent threshold levels ("credit-risk-related contingent features") or provide the right for counterparties to demand "adequate assurance" in the event of a material adverse change in the subsidiary's creditworthiness. These rights can vary by contract and by counterparty. As of December 31, 2011 , these subsidiary's credit ratings from the three recognized credit rating agencies were investment grade.

The aggregate fair value of the Company's derivative contracts in liability positions with specific credit-risk-related contingent features totaled $571 million and $603 million as of December 31, 2011 and 2010 , respectively, for which the Company had posted collateral of $125 million and $136 million , respectively. If all credit-risk-related contingent features for derivative contracts in liability positions had been triggered as of December 31, 2011 and 2010 , the Company would have been required to post $332 million and $261 million , respectively, of additional collateral. The Company's collateral requirements could fluctuate considerably due to market price volatility, changes in credit ratings, changes in legislation or regulation, or other factors.

104

(8) Investments and Restricted Cash and Investments

Investments and restricted cash and investments consists of the following as of December 31 (in millions):



	2011			2010
Investments:
BYD Company Limited common stock	$	488		$	1,182
Rabbi trusts	290			284
Other	99			105
Total investments	877			1,571

Equity method investments:
CE Generation, LLC	255			254
Electric Transmission Texas, LLC	221			109
Bridger Coal Company	204			181
Other	52			44
Total equity method investments	732			588

Restricted cash and investments:
Nuclear decommissioning trust funds	308			297
Debt service and other	82			57
Total restricted cash and investments	390			354

Total investments and restricted cash and investments	1,999			2,513
Less current portion	(51		)	(44		)
Noncurrent portion	$	1,948		$	2,469

Investments

MEHC's investment in BYD Company Limited common stock is accounted for as an available-for-sale security with changes in fair value recognized in AOCI. As of December 31, 2011 and 2010 , the fair value of MEHC's investment in BYD Company Limited common stock was $488 million and $1.182 billion , respectively, which resulted in a pre-tax unrealized gain of $256 million and $950 million as of December 31, 2011 and 2010 , respectively.

Rabbi trusts hold corporate-owned life insurance on certain current and former key executives and directors. The Rabbi trusts were established to hold investments used to fund the obligations of various nonqualified executive and director compensation plans and to pay the costs of the trusts. The amount represents the cash surrender value of all of the policies included in the Rabbi trusts, net of amounts borrowed against the cash surrender value.

Equity Method Investments

CE Generation, LLC is a company owned equally by subsidiaries of TransAlta Corporation and MEHC engaged in the independent power business, and through its subsidiaries, owns and operates ten geothermal generating facilities in the Imperial Valley of California and three natural gas-fueled combined cycle cogeneration facilities in New York, Texas and Arizona. Electric Transmission Texas, LLC is owned equally by subsidiaries of American Electric Power Company, Inc. and MEHC and owns and operates electric transmission assets in the Electric Reliability Council of Texas footprint. Bridger Coal Company ("Bridger Coal") is 66.67% owned by a subsidiary of MEHC and 33.33% owned by a subsidiary of Idaho Power Company and is a coal mining joint venture that supplies coal to the Jim Bridger generating facility. Bridger Coal is being accounted for under the equity method of accounting as the power to direct the activities that most significantly impact Bridger Coal's economic performance are shared with the joint venture partner.

105

Restricted Cash and Investments

MidAmerican Energy has established a trust for the investment of funds for decommissioning the Quad Cities Nuclear Station Units 1 and 2 ("Quad Cities Station"). These investments in debt and equity securities are classified as available-for-sale and are reported at fair value. Funds are invested in the trust in accordance with applicable federal investment guidelines and are restricted for use as reimbursement for costs of decommissioning the Quad Cities Station, which are currently licensed for operation until December 2032. As of December 31, 2011 and 2010 , 55% and 57%, respectively, of the fair value of the trust's funds was invested in domestic common equity securities, 10% and 11%, respectively, in domestic corporate debt securities and the remainder in investment grade municipal and United States government securities.

The Company has investments in interest bearing auction rate securities with par values of $58 million and $73 million as of December 31, 2011 and 2010 , respectively, and remaining maturities of 5 to 25 years. The Company considers the securities to be temporarily impaired, except for an other-than-temporary impairment of $3 million, after tax, recorded in 2008, and has recorded unrealized losses on the securities of $12 million and $11 million, after tax, in AOCI as of December 31, 2011 and 2010 , respectively. The Company does not intend to sell or expect to be required to sell the securities until the remaining principal investment is collected.

(9) Short-Term Debt and Revolving Credit Facilities

The following table summarizes MEHC's and its subsidiaries' availability under their revolving credit facilities as of December 31, (in millions):



										Northern
							MidAmerican			Powergrid			Home-
	MEHC			PacifiCorp			Funding			Holdings			Services		Total ⁽¹⁾
2011:
Revolving credit facilities	$	552		$	1,355		$	654		$	233		$	50	$	2,844
Less:
Short-term debt	(108		)	(688		)	—			(69		)	—		(865		)
Tax-exempt bond support and letters of credit	(25		)	(304		)	(195		)	—			—		(524		)
Net revolving credit facilities	$	419		$	363		$	459		$	164		$	50	$	1,455

2010:
Revolving credit facilities	$	585		$	1,395		$	654		$	234		$	50	$	2,918
Less:
Short-term debt	(284		)	(36		)	—			—			—		(320		)
Tax-exempt bond support and letters of credit	(40		)	(304		)	(195		)	—			—		(539		)
Net revolving credit facilities	$	261		$	1,055		$	459		$	234		$	50	$	2,059


(1)	The above table does not include unused revolving credit facilities and letters of credit for investments that are accounted for under the equity method.

As of December 31, 2011 , the Company was in compliance with the covenants of its revolving credit facilities and letter of credit arrangements.

MEHC

MEHC has an unsecured credit facility with $552 million available until July 2012 and $479 million until July 2013. The credit facility has a variable interest rate based on the London Interbank Offered Rate ("LIBOR") plus a spread, which varies based on MEHC's credit ratings for its senior unsecured long-term debt securities, or a base rate, at MEHC's option. This facility is for general corporate purposes and also supports letters of credit for the benefit of certain subsidiaries and affiliates. As of December 31, 2011, MEHC had $108 million of borrowings outstanding under its credit facility at an average rate of 0.787% and had letters of credit issued under the credit agreement totaling $25 million. As of December 31, 2010, MEHC had $284 million of borrowings outstanding under its credit facility at an average rate of 0.508% and had letters of credit issued under the credit agreement totaling $40 million. The revolving credit agreement requires that MEHC's ratio of consolidated debt, including current maturities, to total capitalization not exceed 0.70 to 1.0 as of the last day of any quarter.

106

In January 2012, MEHC entered into a $500 million revolving loan agreement with a subsidiary of Berkshire Hathaway that is available until June 2012. The revolving loan facility has a variable interest rate based on LIBOR plus a spread.

PacifiCorp

PacifiCorp has a $635 million unsecured credit facility expiring in October 2012 and an unsecured credit facility with $720 million available until July 2012 and $630 million until July 2013. The credit facilities include a fixed or variable borrowing option for which rates vary based on the borrowing option and PacifiCorp's credit ratings for its senior unsecured long-term debt securities. These facilities support PacifiCorp's commercial paper program and certain variable-rate tax-exempt bond obligations. As of December 31, 2011, PacifiCorp had $688 million of commercial paper borrowings outstanding at a weighted-average interest rate of 0.5% and no borrowings outstanding under its credit facilities. As discussed in Note 12, in January 2012, PacifiCorp issued $650 million of long-term debt, the proceeds of which were in part used to repay a significant portion of the commercial paper borrowings outstanding as of December 31, 2011. As of December 31, 2010, PacifiCorp had $36 million of commercial paper borrowings outstanding at a weighted-average interest rate of 0.3% and no borrowings outstanding under its credit facilities.

As of December 31, 2011 and 2010, PacifiCorp had $601 million of letters of credit issued under committed arrangements, of which $304 million were issued under the revolving credit agreements. These letters of credit support PacifiCorp's variable-rate tax-exempt bond obligations, were fully available as of December 31, 2011 and 2010, and expire periodically from May 2012 through November 2012.

Each revolving credit agreement and letter of credit arrangement requires that PacifiCorp's ratio of consolidated debt, including current maturities, to total capitalization at no time exceed 0.65 to 1.0.

MidAmerican Funding

MidAmerican Energy has an unsecured credit facility with $645 million available until July 2012 and $530 million until July 2013, which supports MidAmerican Energy's commercial paper program and its variable-rate tax-exempt bond obligations. The facility has a variable interest rate based on LIBOR plus a spread that varies based on MidAmerican Energy's credit ratings for its senior unsecured long-term debt securities, or a base rate, at MidAmerican Energy's option. In addition, MidAmerican Energy has a $5 million unsecured credit facility, which expires in June 2012 and has a variable interest rate based on LIBOR plus a spread. As of December 31, 2011 and 2010 , MidAmerican Energy had no borrowings outstanding under its credit facilities, had no commercial paper borrowings outstanding and had $195 million of the $645 million revolving credit facility reserved to support the variable-rate tax-exempt bond obligations. The $645 million revolving credit agreement requires that MidAmerican Energy's ratio of consolidated debt, including current maturities, to total capitalization not exceed 0.65 to 1.0 as of the last day of any quarter.

MHC Inc., a direct wholly-owned subsidiary of MidAmerican Funding, has a $4 million unsecured credit facility, which expires in June 2012 and has a variable interest rate based on LIBOR plus a spread. As of December 31, 2011 and 2010 , there were no borrowings outstanding under this credit facility.

Northern Powergrid Holdings

Northern Powergrid Holdings has a £150 million unsecured credit facility expiring in March 2013. The facility has a variable interest rate based on sterling LIBOR plus a spread that varies based on its credit ratings. As of December 31, 2011, Northern Powergrid Holdings had $69 million of borrowings outstanding under its credit facility at a weighted average interest rate of 2.14%. As of December 31, 2010, Northern Powergrid Holdings had no borrowings outstanding under its credit facility. The revolving credit agreement requires that Northern Powergrid Holdings' ratio of consolidated senior net debt, including current maturities, to regulated asset value not exceed 0.8 to 1.0 at Northern Powergrid Holdings and 0.65 to 1.0 at Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc as of June 30 and December 31. Additionally, Northern Powergrid Holdings' interest coverage ratio shall not be less than 2.5 to 1.0.

HomeServices

HomeServices has a $50 million unsecured credit facility expiring in December 2013. The facility has a variable interest rate based on the prime lending rate or LIBOR, at HomeServices' option, plus a spread that varies based on HomeServices' senior debt ratio. There were no borrowings outstanding as of December 31, 2011 and 2010 . The revolving credit agreement requires that HomeServices maintain no borrowings under the facility for at least 45 consecutive days on a rolling twelve month basis and borrowings under the facility cannot exceed a ratio of senior debt to EBITDA of 2.0 to 1.0 at the end of any fiscal quarter.

107


(10)	MEHC Senior Debt

MEHC senior debt represents unsecured senior obligations of MEHC and consists of the following, including fair value adjustments and unamortized premiums and discounts, as of December 31 (in millions):



	Par Value		2011		2010

3.15% Senior Notes, due 2012	$	250	$	250	$	250
5.875% Senior Notes, due 2012	492		492		500
5.00% Senior Notes, due 2014	250		250		250
5.75% Senior Notes, due 2018	650		649		649
8.48% Senior Notes, due 2028	475		484		484
6.125% Senior Bonds, due 2036	1,700		1,699		1,699
5.95% Senior Bonds, due 2037	550		547		547
6.50% Senior Bonds, due 2037	1,000		992		992
Total MEHC Senior Debt	$	5,367	$	5,363	$	5,371


(11)	MEHC Subordinated Debt

MEHC subordinated debt consists of the following, including fair value adjustments, as of December 31 (in millions):



	Par Value		2011		2010

CalEnergy Capital Trust III-6.5%, due 2027	$	—	$	—	$	150
MidAmerican Capital Trust II-11%, due 2012	22		22		65
MidAmerican Capital Trust III-11%, due 2011	—		—		100
Total MEHC Subordinated Debt	$	22	$	22	$	315

In the fourth quarter of 2011, MEHC called and repaid at par value $191 million of 6.5% CalEnergy Capital Trust III subordinated debt due in September 2027 and recognized a loss on redemption of $40 million. In July 2010, MEHC called and repaid at par value $92 million of 6.25% CalEnergy Capital Trust II subordinated debt due in February 2012. In January 2009, MEHC repaid $500 million to affiliates of Berkshire Hathaway related to redeemable trust preferred securities issued by MidAmerican Capital Trust IV to affiliates of Berkshire Hathaway in September 2008. Interest expense to Berkshire Hathaway for the years ended December 31, 2011 , 2010 and 2009 was $13 million , $30 million and $58 million , respectively.


(12)	Subsidiary Debt

MEHC's direct and indirect subsidiaries are organized as legal entities separate and apart from MEHC and its other subsidiaries. Pursuant to separate financing agreements, substantially all of PacifiCorp's electric utility properties, the long-term customer contracts of Kern River, the equity interest of MidAmerican Funding's subsidiary and substantially all of the assets of Cordova Energy Company LLC are pledged or encumbered to support or otherwise provide the security for their related subsidiary debt. It should not be assumed that the assets of any subsidiary will be available to satisfy MEHC's obligations or the obligations of its other subsidiaries. However, unrestricted cash or other assets which are available for distribution may, subject to applicable law, regulatory commitments and the terms of financing and ring-fencing arrangements for such parties, be advanced, loaned, paid as dividends or otherwise distributed or contributed to MEHC or affiliates thereof. The long-term debt of subsidiaries may include provisions that allow MEHC's subsidiaries to redeem it in whole or in part at any time. These provisions generally include make-whole premiums.

Distributions at these separate legal entities are limited by various covenants including, among others, leverage ratios, interest coverage ratios and debt service coverage ratios. As of December 31, 2011 , all subsidiaries were in compliance with their long-term debt covenants. However, Cordova Energy Company LLC is currently prohibited from making distributions by the terms of its indenture due to its failure to meet its debt service coverage ratio requirement.

108

Long-term debt of subsidiaries consists of the following, including fair value adjustments and unamortized premiums and discounts, as of December 31 (in millions):



	Par Value		2011		2010

PacifiCorp	$	6,314	$	6,300	$	6,500
MidAmerican Funding	3,465		3,401		3,350
MidAmerican Energy Pipeline Group	1,665		1,665		1,790
Northern Powergrid Holdings	2,027		2,128		1,962
MidAmerican Renewables	195		193		203
Total subsidiary debt	$	13,666	$	13,687	$	13,805

PacifiCorp

PacifiCorp's long-term debt consists of the following, including unamortized premiums and discounts, as of December 31 (dollars in millions):



	Par Value		2011		2010
First mortgage bonds:
5.0% to 8.8%, due through 2016	$	457	$	457	$	1,043
3.9% to 8.5%, due 2017 to 2021	1,271		1,268		869
6.7% to 8.3%, due 2022 to 2026	404		404		404
7.7% due 2031	300		299		299
5.3% to 6.1%, due 2034 to 2036	850		848		848
5.8% to 6.4%, due 2037 to 2039	2,150		2,142		2,142
Tax-exempt bond obligations:
Variable-rate series (2011-0.05% to 0.11%, 2010-0.28% to 0.41%):
Due 2013 ⁽¹⁾⁽²⁾	41		41		41
Due 2014 to 2025 ⁽²⁾	325		325		325
Due 2016 to 2024 ⁽¹⁾⁽²⁾	221		221		221
Variable-rate series, due 2014 to 2025 ⁽¹⁾⁽³⁾	68		68		68
5.6% to 5.7%, due 2021 to 2023 ⁽¹⁾	71		71		71
6.2%, due 2030	13		13		13
Capital lease obligations - 8.8% to 15.7%, due through 2036	143		143		156
Total PacifiCorp	$	6,314	$	6,300	$	6,500


(1)	Secured by pledged first mortgage bonds registered to and held by the tax-exempt bond trustee generally with the same interest rates, maturity dates and redemption provisions as the tax-exempt bond obligations.


(2)	Supported by $601 million of letters of credit issued under committed bank arrangements. These letters of credit were undrawn as of December 31, 2011 and expire periodically through November 2012.


(3)	Interest rates are currently fixed at 3.9% to 4.1% and are scheduled to reset in 2013.

The issuance of PacifiCorp's first mortgage bonds is limited by available property, earnings tests and other provisions of PacifiCorp's mortgage. Approximately $22 billion of PacifiCorp's eligible property (based on original cost) was subject to the lien of the mortgage as of December 31, 2011 .

109

MidAmerican Funding

MidAmerican Funding's long-term debt consists of the following, including fair value adjustments and unamortized premiums and discounts, as of December 31 (dollars in millions):



	Par Value		2011		2010
MidAmerican Funding:
6.75% Senior Notes, due 2011	$	—	$	—	$	200
6.927% Senior Notes, due 2029	325		286		285
Total MidAmerican Funding	325		286		485

MidAmerican Energy:
Tax-exempt bond obligations -
Variable-rate series (2011-0.15%, 2010-0.43%), due 2016-2038	195		195		195
Notes:
5.65% Series, due 2012	—		—		400
5.125% Series, due 2013	275		275		275
4.65% Series, due 2014	350		350		350
5.95% Series, due 2017	250		250		250
5.3% Series, due 2018	350		349		349
6.75% Series, due 2031	400		396		396
5.75% Series, due 2035	300		300		300
5.8% Series, due 2036	350		349		349
Turbine purchase obligation, 1.46%, due 2013	669		650		—
Other	1		1		1
Total MidAmerican Energy	3,140		3,115		2,865

Total MidAmerican Funding	$	3,465	$	3,401	$	3,350

In conjunction with the construction of wind-powered generating facilities, MidAmerican Energy has accrued as construction work-in-progress amounts it is not contractually obligated to pay until December 2013. The amounts ultimately payable were discounted at 1.46% and recognized upon delivery of the equipment as long-term debt. The discount is being amortized as interest expense over the period until payment is due using the effective interest method. As of December 31, 2011, $650 million of such debt, net of associated discount, was outstanding.

In December 2011, MidAmerican Energy redeemed its 5.65% senior notes due July 2012 at a redemption price in accordance with the terms of the indenture.

110

MidAmerican Energy Pipeline Group

MidAmerican Energy Pipeline Group's long-term debt consists of the following, including unamortized premiums and discounts, as of December 31 (dollars in millions):



	Par Value		2011		2010
Northern Natural Gas:
7.0% Senior Notes, due 2011	$	—	$	—	$	250
5.375% Senior Notes, due 2012	300		300		300
5.125% Senior Notes, due 2015	100		100		100
5.75% Senior Notes, due 2018	200		200		200
4.25% Senior Notes, due 2021	200		200		—
5.8% Senior Bonds, due 2037	150		150		150
Total Northern Natural Gas	950		950		1,000

Kern River:
6.676% Senior Notes, due 2016	257		257		283
4.893% Senior Notes, due 2018	458		458		507
Total Kern River	715		715		790

Total MidAmerican Energy Pipeline Group	$	1,665	$	1,665	$	1,790

Kern River's long-term debt amortizes monthly. Kern River provides a debt service reserve letter of credit in amounts that approximate the next six months of principal and interest payments due on the loans, which were equal to $62 million and $64 million as of December 31, 2011 and 2010 , respectively.

Northern Powergrid Holdings

Northern Powergrid Holdings and its subsidiaries' long-term debt consists of the following, including fair value adjustments and unamortized premiums and discounts, as of December 31 (dollars in millions):



	Par Value ⁽¹⁾		2011		2010

8.875% Bonds, due 2020	$	155	$	181	$	184
9.25% Bonds, due 2020	311		355		361
3.901% to 4.586% European Investment Bank loans, due 2018 to 2022	418		418		236
7.25% Bonds, due 2022	311		334		337
7.25% Bonds, due 2028	288		301		303
5.125% Bonds, due 2035	311		307		308
5.125% Bonds, due 2035	233		232		233
Total Northern Powergrid Holdings	$	2,027	$	2,128	$	1,962


(1)	The par values for these debt instruments are denominated in sterling and have been converted to United States dollars at the applicable exchange rate.

111

MidAmerican Renewables

MidAmerican Renewables long-term debt consists of the following, including fair value adjustments, as of December 31 (dollars in millions):



	Par Value		2011		2010

Cordova Funding Corporation Bonds, 8.48% to 9.07%, due 2019 ⁽¹⁾	$	161	$	159	$	168
Other	34		34		35
Total MidAmerican Renewables	$	195	$	193	$	203


(1)	Amortizes semi-annually.

Annual Repayments of Long-Term Debt

The annual repayments of MEHC and subsidiary debt for the years beginning January 1, 2012 and thereafter, excluding fair value adjustments and unamortized premiums and discounts, are as follows (in millions):



											2017 and
	2012		2013		2014		2015		2016		Thereafter		Total

MEHC senior debt	$	742	$	—	$	250	$	—	$	—	$	4,375	$	5,367
MEHC subordinated debt	22		—		—		—		—		—		22
PacifiCorp	34		283		275		147		72		5,503		6,314
MidAmerican Funding	—		944		350		1		34		2,136		3,465
MidAmerican Energy Pipeline Group	388		80		81		185		190		741		1,665
Northern Powergrid Holdings	—		—		—		—		—		2,027		2,027
MidAmerican Renewables	12		14		16		15		19		119		195
Totals	$	1,198	$	1,321	$	972	$	348	$	315	$	14,901	$	19,055


(13)	Asset Retirement Obligations

The Company estimates its ARO liabilities based upon detailed engineering calculations of the amount and timing of the future cash spending for a third party to perform the required work. Spending estimates are escalated for inflation and then discounted at a credit-adjusted, risk-free rate. Changes in estimates could occur for a number of reasons, including plan revisions, inflation and changes in the amount and timing of the expected work.

The Company does not recognize liabilities for AROs for which the fair value cannot be reasonably estimated. Due to the indeterminate removal date, the fair value of the associated liabilities on certain transmission, distribution and other assets cannot currently be estimated, and no amounts are recognized on the Consolidated Financial Statements other than those included in the cost of removal regulatory liability established via approved depreciation rates in accordance with accepted regulatory practices. These accruals totaled $1.404 billion and $1.376 billion as of December 31, 2011 and 2010 , respectively.

112

As a result of the deconsolidation of Bridger Coal on January 1, 2010, the Company deconsolidated $79 million of ARO liabilities and mine reclamation trust funds. The following table reconciles the beginning and ending balances of the Company's ARO liabilities for the years ended December 31, (in millions):



	2011			2010

Beginning balance	$	390		$	463
Deconsolidation of Bridger Coal	—			(79		)
Change in estimated costs	38			(1		)
Additions	39			2
Retirements	(19		)	(17		)
Accretion	23			22
Foreign currency exchange rate changes	(1		)	—
Ending balance	$	470		$	390

Reflected as:
Other current liabilities	$	20		$	8
Other long-term liabilities	450			382
	$	470		$	390

Nuclear decommissioning trust funds	$	308		$	297

The Company's most significant ARO liabilities relate to the decommissioning of nuclear power plants and obligations associated with its other generating facilities and offshore natural gas pipelines. The Nuclear Regulatory Commission ("NRC") regulates the decommissioning of nuclear power plants, which includes the planning and funding for the decommissioning. In accordance with these regulations, MidAmerican Energy submits a biennial report to the NRC providing reasonable assurance that funds will be available to pay for its share of the Quad Cities Station decommissioning. The decommissioning costs are included in base rates in MidAmerican Energy's Iowa tariffs. MidAmerican Energy's share of estimated Quad Cities Station decommissioning costs was $230 million and $178 million as of December 31, 2011 and 2010 , respectively. MidAmerican Energy has established trusts for the investment of decommissioning funds. The fair value of the assets held in the trusts was $306 million and $295 million as of December 31, 2011 and 2010 , respectively, and is reflected in noncurrent investments and restricted cash and investments on the Consolidated Balance Sheets.

The change in estimated costs in 2011 is primarily the result of a new valuation study conducted by the operator of Quad Cities Station, consistent with its practice of periodically performing such studies. The revision decreased regulatory liabilities and did not impact net income. Additionally, Northern Natural Gas revised its offshore pipeline removal estimates based on a May 2011 letter order received from the Galveston District Corps of Engineers. The revision increased property, plant and equipment, net and did not impact net income.

Certain of the Company's decommissioning and reclamation obligations relate to jointly-owned facilities and mine sites, and as such, each subsidiary is committed to pay a proportionate share of the decommissioning or reclamation costs. In the event of a default by any of the other joint participants, the respective subsidiary may be obligated to absorb, directly or by paying additional sums to the entity, a proportionate share of the defaulting party's liability. The Company's estimated share of the decommissioning and reclamation obligations are primarily recorded as ARO liabilities.

(14) Employee Benefit Plans

Domestic Operations

Defined Benefit Plans

PacifiCorp sponsors defined benefit pension plans that cover the majority of its employees. PacifiCorp's pension plans include a noncontributory defined benefit pension plan and a supplemental executive retirement plan ("SERP"). MidAmerican Energy sponsors defined benefit pension plans covering a majority of all employees of MEHC and its domestic energy subsidiaries other than PacifiCorp. MidAmerican Energy's pension plans include a noncontributory defined benefit pension plan and a SERP. The Utilities also provide certain postretirement healthcare and life insurance benefits through various plans to eligible retirees.

113

Changes to the Company's domestic pension and other postretirement benefit plans include the following:

•

Effective January 1, 2012, the Utilities changed the medical benefits for the majority of Medicare-eligible participants in the PacifiCorp-sponsored and MidAmerican Energy-sponsored other postretirement benefit plans. Medicare-eligible participants now enroll in individual medical plans, rather than company-sponsored plans, under which the Utilities contribute fixed amounts to the participant's health reimbursement account. As a result of this change, the Company's benefit obligations for its other postretirement benefit plans and its related regulatory assets decreased $72 million as of December 31, 2011.


•	Non-union employees hired on or after January 1, 2008 are not eligible to participate in the PacifiCorp-sponsored or MidAmerican Energy-sponsored noncontributory defined benefit pension plans. These non-union employees are eligible to receive enhanced benefits under the PacifiCorp-sponsored and MidAmerican Energy-sponsored 401(k) plans.

•

Certain union employees hired on or after specified dates in their union contracts are not eligible to participate in the PacifiCorp-sponsored or MidAmerican Energy-sponsored noncontributory defined benefit pension plans. During the past three years, several unions have elected to cease participation in the PacifiCorp-sponsored or MidAmerican Energy-sponsored noncontributory defined benefit pension plans. As a result of these elections, the benefits for these union employees have been frozen and they are eligible to receive enhanced benefits under the PacifiCorp-sponsored and MidAmerican Energy-sponsored 401(k) plans.

In March 2010, the President signed into law healthcare reform legislation that included provisions to reduce the tax deductibility of other postretirement costs by the amount of retiree drug subsidies received from the federal government beginning after December 31, 2012. As a result of this legislation, the Company increased deferred income tax liabilities and, consistent with the expectation that such additional income tax expense amounts are probable of inclusion in regulated rates, recorded a $53 million increase to net regulatory assets during the year ended December 31, 2010.

The law also contains a provision that requires a 40% excise tax for group health benefits that are provided to employees above certain premium thresholds beginning in 2018. The tax would apply to the amount of premiums in excess of the thresholds. Virtually all major areas of the healthcare reform legislation, including the 40% excise tax, are subject to interpretation and implementation rules that may take several years to complete. As of December 31, 2010, the Company's other postretirement benefit obligation increased by $12 million as a result of the projected impact of the excise tax on benefits provided to a certain bargaining unit.

Net Periodic Benefit Cost

For purposes of calculating the expected return on plan assets, a market-related value is used. The market-related value of plan assets is calculated by spreading the difference between expected and actual investment returns over a five-year period beginning after the first year in which they occur.

Net periodic benefit cost for the plans included the following components for the years ended December 31 (in millions):



	Pension									Other Postretirement
	2011			2010			2009			2011			2010			2009

Service cost	$	28		$	29		$	35		$	11		$	10		$	9
Interest cost	102			105			113			41			42			43
Expected return on plan assets	(118		)	(114		)	(113		)	(43		)	(43		)	(41		)
Net amortization	20			12			—			16			13			13
Net periodic benefit cost	$	32		$	32		$	35		$	25		$	22		$	24

114

Funded Status

The following table is a reconciliation of the fair value of plan assets for the years ended December 31 (in millions):



	Pension						Other Postretirement
	2011			2010			2011			2010

Plan assets at fair value, beginning of year	$	1,506		$	1,322		$	605		$	554
Employer contributions	126			141			30			26
Participant contributions	—			—			16			17
Actual return on plan assets	(13		)	164			—			63
Benefits paid	(133		)	(121		)	(54		)	(55		)
Plan assets at fair value, end of year	$	1,486		$	1,506		$	597		$	605

The following table is a reconciliation of the benefit obligations for the years ended December 31 (in millions):



	Pension						Other Postretirement
	2011			2010			2011			2010

Benefit obligation, beginning of year	$	1,974		$	1,887		$	770		$	746
Service cost	28			29			11			10
Interest cost	102			105			41			42
Participant contributions	—			—			16			17
Plan amendments	(4		)	—			(72		)	(7		)
Curtailment	—			(14		)	—			—
Actuarial loss	123			88			58			14
Benefits paid, net of Medicare subsidy	(133		)	(121		)	(51		)	(52		)
Benefit obligation, end of year	$	2,090		$	1,974		$	773		$	770
Accumulated benefit obligation, end of year	$	2,060		$	1,937

The funded status of the plans and the amounts recognized on the Consolidated Balance Sheets as of December 31 are as follows (in millions):



	Pension						Other Postretirement
	2011			2010			2011			2010

Plan assets at fair value, end of year	$	1,486		$	1,506		$	597		$	605
Less - Benefit obligation, end of year	2,090			1,974			773			770
Funded status	$	(604	)	$	(468	)	$	(176	)	$	(165	)

Amounts recognized on the Consolidated Balance Sheets:
Other assets	$	—		$	—		$	15		$	27
Other current liabilities	(12		)	(12		)	—			—
Other long-term liabilities	(592		)	(456		)	(191		)	(192		)
Amounts recognized	$	(604	)	$	(468	)	$	(176	)	$	(165	)

The SERPs have no plan assets; however the Company has Rabbi trusts that hold corporate-owned life insurance and other investments to provide funding for the future cash requirements of the SERPs. The cash surrender value of all of the policies included in the Rabbi trusts, net of amounts borrowed against the cash surrender value, plus the fair market value of other Rabbi trust investments, was $170 million and $165 million as of December 31, 2011 and 2010 , respectively. These assets are not included in the plan assets in the above table, but are reflected in noncurrent investments and restricted cash and investments on the Consolidated Balance Sheets. The portion of the pension plans' projected benefit obligation related to the SERPs was $175 million and $165 million as of December 31, 2011 and 2010 , respectively.

115

Unrecognized Amounts

The portion of the funded status of the plans not yet recognized in net periodic benefit cost as of December 31 is as follows (in millions):



	Pension						Other Postretirement
	2011			2010			2011			2010

Net loss	$	734		$	518		$	254		$	163
Prior service credit	(41		)	(45		)	(104		)	(43		)
Net transition obligation	—			—			—			19
Regulatory deferrals	(7		)	(18		)	3			4
Total	$	686		$	455		$	153		$	143

A reconciliation of the amounts not yet recognized as components of net periodic benefit cost for the years ended December 31, 2011 and 2010 is as follows (in millions):



							Accumulated
							Other
	Regulatory			Regulatory			Comprehensive
	Asset			Liability			Loss			Total
Pension
Balance, December 31, 2009	$	444		$	(9	)	$	7		$	442
Net loss arising during the year	30			7			3			40
Curtailment	(14		)	—			—			(14		)
Net amortization	(13		)	1			(1		)	(13		)
Total	3			8			2			13
Balance, December 31, 2010	447			(1		)	9			455
Net loss arising during the year	246			1			8			255
Prior service credit arising during the year	(4		)	—			—			(4		)
Net amortization	(20		)	—			—			(20		)
Total	222			1			8			231
Balance, December 31, 2011	$	669		$	—		$	17		$	686

116



										Accumulated
							Deferred			Other
	Regulatory			Regulatory			Income			Comprehensive
	Asset			Liability			Taxes			Loss			Total
Other Postretirement
Balance, December 31, 2009	$	152		$	(16	)	$	33		$	—		$	169
Net loss (gain) arising during the year	5			(11		)	—			—			(6		)
Prior service credit arising during the year	—			(7		)	—			—			(7		)
Income tax benefits no longer realizable ⁽¹⁾	23			10			(33		)	—			—
Net amortization	(15		)	2			—			—			(13		)
Total	13			(6		)	(33		)	—			(26		)
Balance, December 31, 2010	165			(22		)	—			—			143
Net loss arising during the year	86			12			—			1			99
Prior service credit arising during the year	(61		)	(3		)	—			(1		)	(65		)
Reduction in net transition obligation	(8		)	—			—			—			(8		)
Net amortization	(17		)	1			—			—			(16		)
Total	—			10			—			—			10
Balance, December 31, 2011	$	165		$	(12	)	$	—		$	—		$	153


(1)	Represents adjustments to regulatory assets associated with income tax benefits that will no longer be realized when the net periodic benefit cost is recognized as a result of the healthcare reform legislation.

The net loss, prior service credit and regulatory deferrals that will be amortized in 2012 into net periodic benefit cost are estimated to be as follows (in millions):



	Net		Prior Service			Regulatory
	Loss		Credit			Deferrals			Total

Pension	$	47	$	(7	)	$	(2	)	$	38
Other postretirement	13		(13		)	1			1
Total	$	60	$	(20	)	$	(1	)	$	39

117

Plan Assumptions

Assumptions used to determine benefit obligations and net periodic benefit cost were as follows:



	Pension						Other Postretirement
	2011		2010		2009		2011		2010		2009

Benefit obligations as of December 31:
PacifiCorp-sponsored plans
Discount rate	4.90	%	5.35	%	5.80	%	4.95	%	5.45	%	5.85	%
Rate of compensation increase	3.50	%	3.50	%	3.00	%	N/A		N/A		N/A
MidAmerican Energy-sponsored plans
Discount rate	4.75	%	5.50	%	6.00	%	4.75	%	5.50	%	6.00	%
Rate of compensation increase	3.50	%	3.50	%	3.00	%	N/A		N/A		N/A

Net periodic benefit cost for the years ended December 31:
PacifiCorp-sponsored plans
Discount rate	5.35	%	5.80	%	6.90	%	5.45	%	5.85	%	6.90	%
Expected return on plan assets	7.50	%	7.75	%	7.75	%	7.50	%	7.75	%	7.75	%
Rate of compensation increase	3.50	%	3.00	%	3.50	%	N/A		N/A		N/A
MidAmerican Energy-sponsored plans
Discount rate	5.50	%	6.00	%	6.50	%	5.50	%	6.00	%	6.50	%
Expected return on plan assets	7.50	%	7.50	%	7.50	%	7.50	%	7.50	%	7.50	%
Rate of compensation increase	3.50	%	3.00	%	4.00	%	N/A		N/A		N/A



	2011		2010
Assumed healthcare cost trend rates as of December 31:
PacifiCorp-sponsored plans
Healthcare cost trend rate assumed for next year	8.50	%	8.00	%
Rate that the cost trend rate gradually declines to	5.00	%	5.00	%
Year that the rate reaches the rate it is assumed to remain at	2016		2016
MidAmerican Energy-sponsored plans
Healthcare cost trend rate assumed for next year	7.40	%	8.00	%
Rate that the cost trend rate gradually declines to	5.00	%	5.00	%
Year that the rate reaches the rate it is assumed to remain at	2016		2016

In establishing its assumption as to the expected return on plan assets, the Company utilizes the expected asset allocation and return assumptions for each asset class based on historical performance and forward-looking views of the financial markets.

A one percentage-point change in assumed healthcare cost trend rates would have the following effects (in millions):



	One Percentage-Point
	Increase		Decrease
Increase (decrease) in:
Total service and interest cost	$	3	$	(2	)
Other postretirement benefit obligation	48		(38		)

118

Contributions and Benefit Payments

Employer contributions to the pension and other postretirement benefit plans are expected to be $81 million and $9 million, respectively, during 2012. Funding to the established pension trusts is based upon the actuarially determined costs of the plans and the requirements of the Internal Revenue Code, the Employee Retirement Income Security Act of 1974 and the Pension Protection Act of 2006, as amended. The Company considers contributing additional amounts from time to time in order to achieve certain funding levels specified under the Pension Protection Act of 2006, as amended. The Company's funding policy for its other postretirement benefit plans is to contribute an amount equal to the sum of the net periodic benefit cost.

The expected benefit payments to participants in the Company's pension and other postretirement benefit plans for 2012 through 2016 and for the five years thereafter are summarized below (in millions):



	Projected Benefit Payments
			Other Postretirement
	Pension		Gross		Medicare Subsidy			Net of Subsidy

2012	$	151	$	49	$	—		$	49
2013	156		51		(1		)	50
2014	160		52		(1		)	51
2015	161		53		(1		)	52
2016	167		55		(1		)	54
2017-21	808		294		(9		)	285

Plan Assets

Investment Policy and Asset Allocations

The Company's investment policy for its pension and other postretirement benefit plans is to balance risk and return through a diversified portfolio of debt securities, equity securities and other alternative investments. Maturities for debt securities are managed to targets consistent with prudent risk tolerances. The plans retain outside investment advisors to manage plan investments within the parameters outlined by each plan's Pension and Employee Benefits Plans Administrative Committee. The investment portfolio is managed in line with the investment policy with sufficient liquidity to meet near-term benefit payments. The return on assets assumption for each plan is based on a weighted-average of the expected historical performance for the types of assets in which the plans invest.

The target allocations (percentage of plan assets) for the Company's pension and other postretirement benefit plan assets are as follows as of December 31, 2011 :



		Other
	Pension ⁽¹⁾	Postretirement ⁽¹⁾
	%	%
PacifiCorp:
Debt securities ⁽²⁾	33-37	33-37
Equity securities ⁽²⁾	53-57	61-65
Limited partnership interests	8-12	1-3
Other	0-1	0-1

MidAmerican Energy:
Debt securities ⁽²⁾	20-30	25-35
Equity securities ⁽²⁾	65-75	60-80
Real estate funds	0-10	0
Other	0-5	0-5

119

(1)

PacifiCorp's retirement plan trust includes a separate account that is used to fund benefits for the other postretirement plan. In addition to this separate account, the assets for the other postretirement benefit plans are held in two Voluntary Employees' Beneficiary Association ("VEBA") Trusts, each of which has its own investment allocation strategies. Target allocations for the other postretirement benefit plan include the separate account of the retirement plan trust and the two VEBA trusts.


(2)	For purposes of target allocation percentages and consistent with the plans' investment policy, investment funds have been allocated based on the underlying investments in debt and equity securities.

Fair Value Measurements

The following table presents the fair value of plan assets, by major category, for the Company's defined benefit pension plans (in millions):



	Input Levels for Fair Value Measurements ⁽¹⁾
	Level 1		Level 2		Level 3		Total
As of December 31, 2011
Cash equivalents	$	—	$	18	$	—	$	18
Debt securities:
United States government obligations	27		—		—		27
International government obligations	—		73		—		73
Corporate obligations	—		92		—		92
Municipal obligations	—		12		—		12
Agency, asset and mortgage-backed obligations	—		80		—		80
Equity securities:
United States companies	481		—		—		481
International companies	7		—		—		7
Investment funds ⁽²⁾	180		421		—		601
Limited partnership interests ⁽³⁾	—		—		71		71
Real estate funds	—		—		24		24
Total	$	695	$	696	$	95	$	1,486

As of December 31, 2010
Cash equivalents	$	—	$	19	$	—	$	19
Debt securities:
United States government obligations	29		—		—		29
International government obligations	—		81		—		81
Corporate obligations	—		77		—		77
Municipal obligations	—		7		—		7
Agency, asset and mortgage-backed obligations	—		78		—		78
Equity securities:
United States companies	489		—		—		489
International companies	7		—		—		7
Investment funds ⁽²⁾	182		436		—		618
Limited partnership interests ⁽³⁾	—		—		84		84
Real estate funds	—		—		17		17
Total	$	707	$	698	$	101	$	1,506


(1)	Refer to Note 6 for additional discussion regarding the three levels of the fair value hierarchy.

(2)

Investment funds are comprised of mutual funds and collective trust funds. These funds consist of equity and debt securities of approximately 69% and 31% , respectively, for 2011 and 70% and 30% , respectively, for 2010. Additionally, these funds are invested in United States and international securities of approximately 66% and 34% , respectively, for 2011 and 62% and 38% , respectively, for 2010.


(3)	Limited partnership interests include several funds that invest primarily in buyout, growth equity and venture capital.

120

The following table presents the fair value of plan assets, by major category, for the Company's defined benefit other postretirement plans (in millions):



	Input Levels for Fair Value Measurements ⁽¹⁾
	Level 1		Level 2		Level 3		Total
As of December 31, 2011
Cash equivalents	$	9	$	—	$	—	$	9
Debt securities:
United States government obligations	8		—		—		8
International government obligations	—		5		—		5
Corporate obligations	—		12		—		12
Municipal obligations	—		31		—		31
Agency, asset and mortgage-backed obligations	—		15		—		15
Equity securities:
United States companies	219		—		—		219
International companies	2		—		—		2
Investment funds ⁽²⁾	196		94		—		290
Limited partnership interests ⁽³⁾	—		—		6		6
Total	$	434	$	157	$	6	$	597

As of December 31, 2010
Cash equivalents	$	8	$	1	$	—	$	9
Debt securities:
United States government obligations	5		—		—		5
International government obligations	—		7		—		7
Corporate obligations	—		16		—		16
Municipal obligations	—		28		—		28
Agency, asset and mortgage-backed obligations	—		12		—		12
Equity securities:
United States companies	219		—		—		219
International companies	3		—		—		3
Investment funds ⁽²⁾	192		107		—		299
Limited partnership interests ⁽³⁾	—		—		7		7
Total	$	427	$	171	$	7	$	605


(1)	Refer to Note 6 for additional discussion regarding the three levels of the fair value hierarchy.


(2)	Investment funds are comprised of mutual funds and collective trust funds. These funds consist of equity and debt securities of approximately 56% and 44% , respectively, for 2011 and 56% and 44% , respectively, for 2010. Additionally, these funds are invested in United States and international securities of approximately 67% and 33% , respectively, for both 2011 and 2010.


(3)	Limited partnership interests include several funds that invest primarily in buyout, growth equity and venture capital.

When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value. In the absence of a quoted market price or net asset value of an identical security, the fair value is determined using pricing models or net asset values based on observable market inputs and quoted market prices of securities with similar characteristics. When observable market data is not available, the fair value is determined using unobservable inputs, such as estimated future cash flows, purchase multiples paid in other comparable third-party transactions or other information. Investments in limited partnerships are valued at estimated fair value based on the Plan's proportionate share of the partnerships' fair value as recorded in the partnerships' most recently available financial statements adjusted for recent activity and forecasted returns. The fair values recorded in the partnerships' financial statements are generally determined based on closing public market prices for publicly traded securities and as determined by the general partners for other investments based on factors including estimated future cash flows, purchase multiples paid in other comparable third-party transactions, comparable public company trading multiples and other information. The real estate funds determine fair value of their underlying assets using independent appraisals given there is no current liquid market for the underlying assets.

121

The following table reconciles the beginning and ending balances of the Company's plan assets measured at fair value using significant Level 3 inputs for the years ended December 31 (in millions):



							Other
	Pension						Postretirement-
	Limited			Real			Limited
	Partnership			Estate			Partnership
	Interests			Funds			Interests

Balance, December 31, 2008	$	78		$	27		$	7
Actual return on plan assets still held at December 31, 2009	5			(9		)	1
Purchases, sales, distributions and settlements	(3		)	(3		)	—
Balance, December 31, 2009	80			15			8
Actual return on plan assets still held at December 31, 2010	10			2			—
Purchases, sales, distributions and settlements	(6		)	—			(1		)
Balance, December 31, 2010	84			17			7
Actual return on plan assets still held at December 31, 2011	7			4			1
Purchases, sales, distributions and settlements	(20		)	3			(2		)
Balance, December 31, 2011	$	71		$	24		$	6

Defined Contribution Plans

The Company sponsors defined contribution plans (401(k) plans) covering substantially all employees. The Company's contributions vary depending on the plan, but are based primarily on each participant's level of contribution and cannot exceed the maximum allowable for tax purposes. The Company's contributions to these plans were $60 million, $57 million and $56 million for the years ended December 31, 2011 , 2010 and 2009 , respectively. As previously described, certain participants now receive enhanced benefits in the 401(k) plans and no longer accrue benefits in the noncontributory defined benefit pension plans.

Foreign Operations

Defined Benefit Plan

Certain wholly-owned subsidiaries of Northern Powergrid Holdings participate in the Northern Electric group of the United Kingdom industry-wide Electricity Supply Pension Scheme (the "UK Plan"), which provides pension and other related defined benefits, based on final pensionable pay, to the majority of the employees of Northern Powergrid Holdings. The UK Plan is closed to employees hired after July 23, 1997. Employees hired after that date are covered by defined contribution plans sponsored by certain wholly-owned subsidiaries of Northern Powergrid Holdings.

Net Periodic Benefit Cost

For purposes of calculating the expected return on pension plan assets, a market-related value is used. The market-related value of plan assets is calculated by spreading the difference between expected and actual investment returns over a five-year period beginning after the first year in which they occur.

Net periodic benefit cost for the UK Plan included the following components for the years ended December 31 (in millions):



	2011			2010			2009

Service cost	$	19		$	15		$	13
Interest cost	92			89			84
Expected return on plan assets	(115		)	(102		)	(104		)
Net amortization	37			30			13
Net periodic benefit cost	$	33		$	32		$	6

122

Funded Status

The following table is a reconciliation of the fair value of plan assets for the years ended December 31 (in millions):



	2011			2010

Plan assets at fair value, beginning of year	$	1,633		$	1,523
Employer contributions	79			68
Participant contributions	4			5
Actual return on plan assets	141			156
Benefits paid	(85		)	(68		)
Foreign currency exchange rate changes	(13		)	(51		)
Plan assets at fair value, end of year	$	1,759		$	1,633

The following table is a reconciliation of the benefit obligation for the years ended December 31 (in millions):



	2011			2010

Benefit obligation, beginning of year	$	1,655		$	1,651
Service cost	19			15
Interest cost	92			89
Participant contributions	4			5
Actuarial loss	101			19
Benefits paid	(85		)	(68		)
Foreign currency exchange rate changes	(13		)	(56		)
Benefit obligation, end of year	$	1,773		$	1,655
Accumulated benefit obligation, end of year	$	1,587		$	1,557

The funded status of the UK Plan and the amounts recognized on the Consolidated Balance Sheets as of December 31 are as follows (in millions):



	2011			2010

Plan assets at fair value, end of year	$	1,759		$	1,633
Less - Benefit obligation, end of year	1,773			1,655
Funded status	$	(14	)	$	(22	)

Amounts recognized on the Consolidated Balance Sheets-other long-term liabilities	$	(14	)	$	(22	)

Unrecognized Amounts

The portion of the funded status of the UK Plan not yet recognized in net periodic benefit cost as of December 31 is as follows (in millions):



	2011		2010

Net loss	$	653	$	619
Prior service cost	3		5
Total	$	656	$	624

123

A reconciliation of the amounts not yet recognized as components of net periodic benefit cost, which are included in accumulated other comprehensive loss on the Consolidated Balance Sheets, for the years ended December 31 is as follows (in millions):



	2011			2010

Balance, beginning of year	$	624		$	709
Net loss (gain) arising during the year	74			(35		)
Net amortization	(37		)	(30		)
Foreign currency exchange rate changes	(5		)	(20		)
Total	32			(85		)
Balance, end of year	$	656		$	624

The net loss and prior service cost that will be amortized from accumulated other comprehensive loss in 2012 into net periodic benefit cost are estimated to be $54 million and $1 million, respectively.

Plan Assumptions

Assumptions used to determine benefit obligations and net periodic benefit cost were as follows:



	2011		2010		2009

Benefit obligations as of December 31:
Discount rate	4.80	%	5.50	%	5.70	%
Rate of compensation increase	2.80	%	3.20	%	2.75	%
Rate of future price inflation	2.80	%	3.20	%	3.20	%

Net periodic benefit cost for the years ended December 31:
Discount rate	5.50	%	5.70	%	6.40	%
Expected return on plan assets	6.80	%	6.60	%	7.00	%
Rate of compensation increase	3.20	%	2.75	%	3.25	%
Rate of future price inflation	3.20	%	3.20	%	3.00	%

Contributions and Benefit Payments

Employer contributions to the UK Plan are expected to be £50 million during 2012 . The expected benefit payments to participants in the UK Plan for 2012 through 2016 and for the five years thereafter, using the foreign currency exchange rate as of December 31, 2011 , are summarized below (in millions):



2012	$	81
2013	83
2014	85
2015	87
2016	89
2017-2021	478

124

Plan Assets

Investment Policy and Asset Allocations

The investment policy for the UK Plan is to balance risk and return through a diversified portfolio of debt securities, equity securities and real estate. Maturities for debt securities are managed to targets consistent with prudent risk tolerances. The UK Plan retains outside investment advisors to manage plan investments within the parameters set by the trustees of the UK Plan in consultation with Northern Powergrid Holdings. The investment portfolio is managed in line with the investment policy with sufficient liquidity to meet near-term benefit payments. The return on assets assumption is based on a weighted-average of the expected historical performance for the types of assets in which the UK Plan invests.

The target allocations (percentage of plan assets) for the UK Plan assets are as follows as of December 31, 2011 :



Debt securities ⁽¹⁾	55	%
Equity securities ⁽¹⁾	35
Real estate funds	10


(1)	For purposes of target allocation percentages and consistent with the plans' investment policy, investment funds have been allocated based on the underlying investments in debt and equity securities.

Fair Value Measurements

The following table presents the fair value of the UK Plan assets, by major category, (in millions):



	Input Levels for Fair Value Measurements ⁽¹⁾
	Level 1		Level 2		Level 3		Total
As of December 31, 2011
Cash equivalents	$	9	$	—	$	—	$	9
Debt securities:
United Kingdom government obligations	360		—		—		360
Other international government obligations	—		26		—		26
Corporate obligations	—		139		—		139
Investment funds ⁽²⁾	93		974		—		1,067
Real estate funds	—		—		158		158
Total	$	462	$	1,139	$	158	$	1,759

As of December 31, 2010
Cash equivalents	$	11	$	—	$	—	$	11
Debt securities:
United Kingdom government obligations	298		—		—		298
Other international government obligations	—		14		—		14
Corporate obligations	—		122		—		122
Investment funds ⁽²⁾	90		950		—		1,040
Real estate funds	—		—		148		148
Total	$	399	$	1,086	$	148	$	1,633


(1)	Refer to Note 6 for additional discussion regarding the three levels of the fair value hierarchy.


(2)	Investment funds are comprised of mutual funds and collective trust funds. These funds consist of equity and debt securities of approximately 45% and 55% , respectively, for 2011 and 52% and 48% , respectively, for 2010.

The fair value of the UK Plan's assets are determined similar to the plan assets of the domestic plans as discussed previously in the note.

125

The following table reconciles the beginning and ending balances of the UK Plan assets measured at fair value using significant Level 3 inputs for the years ended December 31 (in millions):



	Real Estate Funds
	2011			2010			2009

Beginning balance	$	148		$	133		$	116
Actual return on plan assets still held at period end	11			19			6
Foreign currency exchange rate changes	(1		)	(4		)	11
Ending balance	$	158		$	148		$	133

(15) Income Taxes

Income tax expense consists of the following for the years ended December 31 (in millions):



	2011			2010			2009
Current:
Federal	$	(820	)	$	(822	)	$	(648	)
State	9			40			(36		)
Foreign	168			126			102
	(643		)	(656		)	(582		)
Deferred:
Federal	1,012			940			842
State	(11		)	(34		)	13
Foreign	(59		)	(46		)	15
	942			860			870

Investment tax credits	(5		)	(6		)	(6		)
Total	$	294		$	198		$	282

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax expense is as follows for the years ended December 31:



	2011		2010		2009

Federal statutory income tax rate	35	%	35	%	35	%
Federal and state income tax credits	(11	)	(10	)	(9	)
State income tax, net of federal income tax benefit	2		3		2
Income tax method changes	(2	)	(4	)	(4	)
Income tax effect of foreign income	(2	)	(4	)	(2	)
Effects of ratemaking	(1	)	(3	)	(2	)
Change in United Kingdom corporate income tax rate	(3	)	(2	)	—
Other, net	—		(1	)	—
Effective income tax rate	18	%	14	%	20	%

Federal and state income tax credits primarily relate to production tax credits at the Utilities. The Utilities' wind-powered generating facilities are eligible for federal renewable electricity production tax credits for 10 years from the date the facilities were placed in service.

126

In 2009 and 2010, MidAmerican Energy changed the method by which it determines current income tax deductions for administrative and general costs ("A&G Deduction") and the Utilities changed the method by which they determine current income tax deductions for repair costs ("Repairs Deduction") related to certain of their regulated utility assets. These changes result in current deductibility for those costs, which are capitalized for book purposes. The Utilities were allowed to retroactively apply the method changes and deduct amounts related to prior years' costs on the tax return that includes the year of change. State utility rate regulation in Iowa requires that the tax effect of certain temporary differences be flowed through immediately to customers. Therefore, amounts that would otherwise have been recognized in income tax expense have been included as changes in regulatory assets. This treatment of such temporary differences impacts income tax expense and effective tax rates from year to year.

Accordingly, MidAmerican Energy's A&G Deduction computed for tax years prior to 2010 resulted in the recognition of $44 million of net tax benefits in earnings for the year ended December 31, 2010. Additionally, earnings for the year ended December 31, 2010 reflect $17 million of net tax benefits recognized in connection with the Repairs Deduction for tax years prior to 2010 related to MidAmerican Energy's regulated natural gas utility assets and jointly owned regulated electric utility assets. The Repairs Deduction for prior tax years related to the majority of MidAmerican Energy's regulated electric utility assets resulted in the recognition of $55 million of net tax benefits in earnings for the year ended December 31, 2009. Additionally, regulatory assets increased $88 million and $95 million for the 2010 and 2009 method changes, respectively, in recognition of MidAmerican Energy's ability to recover increased tax expense when such temporary differences reverse.

In 2011, MidAmerican Energy recognized $35 million of net tax benefits in conjunction with the partial resolution of certain tax issues related to tax positions taken for these income tax method changes. The ongoing impact of these method changes, along with other items recognized currently in income tax expense as the result of ratemaking, is reflected in the effects of ratemaking line above.

127

The net deferred income tax liability consists of the following as of December 31 (in millions):



	2011			2010
Deferred income tax assets:
Regulatory liabilities	$	716		$	685
State and federal carryforwards	314			248
Employee benefits	311			269
AROs	179			153
Foreign carryforwards	152			293
Derivative contracts	175			226
Other	414			294
Total deferred income tax assets	2,261			2,168
Valuation allowances	(14		)	(13		)
Total deferred income tax assets, net	2,247			2,155

Deferred income tax liabilities:
Property related items	(7,638		)	(6,672		)
Regulatory assets	(1,119		)	(917		)
Investments	(177		)	(427		)
Other	(254		)	(377		)
Total deferred income tax liabilities	(9,188		)	(8,393		)
Net deferred income tax liability	$	(6,941	)	$	(6,238	)

Reflected as:
Current assets	$	149		$	103
Current liabilities	(14		)	(43		)
Non-current liabilities	(7,076		)	(6,298		)
	$	(6,941	)	$	(6,238	)

As of December 31, 2011 , the Company has available state carryforwards, principally for net operating losses, totaling $277 million and federal carryforwards totaling $37 million, which expire at various intervals between 2012 and 2031. As of December 31, 2011 , the Company has available $152 million of foreign carryforwards, principally foreign tax credit carryforwards that expire 10 years after the date the foreign earnings are repatriated through actual or deemed dividends and foreign net operating loss carryforwards that expire in 2028. As of December 31, 2011 , the statute of limitation had not begun on the foreign tax credit carryforwards.

The United States Internal Revenue Service has closed examination of the Company's income tax returns through February 2006. In the United Kingdom, each legal entity is subject to examination by HM Revenue and Customs ("HMRC"), the United Kingdom equivalent of the United States Internal Revenue Service. HMRC has closed examination of the Company's income tax returns through 2008. In addition, state jurisdictions have closed examination of the Company's income tax returns through at least February 9, 2006, except for PacifiCorp where the examinations have been closed through 1993 in most cases. The Company's income tax returns in the Philippines, the most significant other foreign jurisdiction, have been closed through at least 2005.

128

A reconciliation of the beginning and ending balances of the Company's net unrecognized tax benefits is as follows for the years ended December 31 (in millions):



	2011			2010

Beginning balance	$	308		$	273
Additions based on tax positions related to the current year	15			3
Additions for tax positions of prior years	15			62
Reductions for tax positions of prior years	(58		)	(19		)
Statute of limitations	(12		)	(14		)
Settlements	—			(4		)
Interest and penalties	(3		)	7
Ending balance	$	265		$	308

As of December 31, 2011 and 2010 , the Company had unrecognized tax benefits totaling $156 million and $189 million , respectively, that, if recognized, would have an impact on the effective tax rate. The remaining unrecognized tax benefits relate to tax positions for which ultimate deductibility is highly certain but for which there is uncertainty as to the timing of such deductibility. Recognition of these tax benefits, other than applicable interest and penalties, would not affect the Company's effective tax rate.

(16) Commitments and Contingencies

Commitments

The Company has the following firm commitments that are not reflected on the Consolidated Balance Sheet. Minimum payments as of December 31, 2011 are as follows (in millions):



											2017 and
	2012		2013		2014		2015		2016		Thereafter		Total
Contract type:
Coal, electricity and natural gas contract commitments	$	1,389	$	1,061	$	897	$	712	$	549	$	3,621	$	8,229
Construction commitments	757		380		86		434		8		52		1,717
Operating leases and easements	89		75		52		42		29		366		653
Maintenance, service and other contracts	73		50		45		29		22		142		361
	$	2,308	$	1,566	$	1,080	$	1,217	$	608	$	4,181	$	10,960

Coal, Electricity and Natural Gas Contract Commitments

The Utilities have fuel supply and related transportation and lime contracts for their coal-fueled and natural gas generating facilities. The Utilities expect to supplement these contracts with additional contracts and spot market purchases to fulfill their future fossil fuel needs. The Utilities acquire a portion of their electricity through long-term purchases and exchange agreements. The Utilities have several power purchase agreements with wind-powered and other generating facilities that are not included in the table above as the payments are based on the amount of energy generated and there are no minimum payments. Included in the purchased electricity payments are any power purchase agreements that meet the definition of an operating lease.

129

Construction Commitments

The Company's firm construction commitments reflected in the table above include the following major construction projects:

•

As part of the March 2006 acquisition of PacifiCorp, MEHC and PacifiCorp made a commitment to the state regulatory commissions in all six states in which PacifiCorp has retail customers to invest in certain transmission and distribution system projects that would enhance reliability, facilitate the receipt of renewable resources and enable further system optimization. As of December 31, 2011 , PacifiCorp had two remaining capital projects to complete associated with this commitment: (a) the 100-mile high-voltage transmission line being built between the Mona substation in central Utah and the Oquirrh substation in the Salt Lake Valley that is expected to be placed in service in 2013 and (b) another segment of the Energy Gateway Transmission Expansion Program that is expected to be placed in service prior to 2021, depending on siting, permitting and construction schedules.


•	PacifiCorp is constructing the 637-megawatt Lake Side 2 combined-cycle combustion turbine natural gas-fueled generating facility ("Lake Side 2"), which is expected to be placed in service in 2014.


•	MidAmerican Energy is constructing 407 megawatts ("MW") of wind-powered generation that it expects to place in service in 2012.


•	MidAmerican Energy has contracts for the construction of emissions control equipment at two of its jointly owned generating facilities to address air quality requirements. MidAmerican Energy's share of the resulting firm commitments is reflected in the table above.

Operating Leases and Easements

The Company has non-cancelable operating leases primarily for office equipment, office space, certain operating facilities, land and rail cars. These leases generally require the Company to pay for insurance, taxes and maintenance applicable to the leased property. Certain leases contain renewal options for varying periods and escalation clauses for adjusting rent to reflect changes in price indices. The Company also has non-cancelable easements for land on which its wind-powered generating facilities are located. Rent expense on non-cancelable operating leases totaled $101 million for 2011 , $88 million for 2010 and $88 million for 2009 .

Maintenance, Service and Other Contracts

The Company has various non-cancelable maintenance, service and other contracts primarily related to turbine and equipment maintenance and various other service agreements.

Environmental Laws and Regulations

The Company is subject to federal, state, local and foreign laws and regulations regarding air and water quality, renewable portfolio standards, emissions performance standards, climate change, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact the Company's current and future operations. The Company believes it is in material compliance with all applicable laws and regulations.

Hydroelectric Relicensing

PacifiCorp's hydroelectric portfolio consists of 44 generating facilities with an aggregate facility net owned capacity of 1,145 MW. The FERC regulates 98% of the net capacity of this portfolio through 15 individual licenses, which have terms of 30 to 50 years. PacifiCorp expects to incur ongoing operating and maintenance expense and capital expenditures associated with the terms of its renewed hydroelectric licenses and settlement agreements, including natural resource enhancements. PacifiCorp's Klamath hydroelectric system is currently operating under annual licenses. Substantially all of PacifiCorp's remaining hydroelectric generating facilities are operating under licenses that expire between 2030 and 2058.

In February 2010, PacifiCorp, the United States Department of the Interior, the United States Department of Commerce, the State of California, the State of Oregon and various other governmental and non-governmental settlement parties signed the Klamath Hydroelectric Settlement Agreement ("KHSA"). Among other things, the KHSA provides that the United States Department of the Interior conduct scientific and engineering studies to assess whether removal of the Klamath hydroelectric system's four mainstem dams is in the public interest and will advance restoration of the Klamath Basin's salmonid fisheries. If it is determined that dam removal should proceed, dam removal is expected to commence no earlier than 2020.

130

Under the KHSA, PacifiCorp and its customers are protected from uncapped dam removal costs and liabilities. For dam removal to occur, federal legislation consistent with the KHSA must be enacted to provide, among other things, protection for PacifiCorp from all liabilities associated with dam removal activities. If Congress does not enact legislation, then PacifiCorp will resume relicensing at the FERC. In November 2011, bills were introduced in both chambers of the United States Congress that, if passed, would enact the KHSA and a companion agreement that seeks to resolve other water-related conflicts and restore habitat in the Klamath basin. PacifiCorp expects that congressional hearings on the legislation may begin in early 2012.

In addition, the KHSA limits PacifiCorp's contribution to dam removal costs to no more than $200 million, of which up to $184 million would be collected from PacifiCorp's Oregon customers with the remainder to be collected from PacifiCorp's California customers. An additional $250 million for dam removal costs is expected to be raised through a California bond measure or other appropriate State of California financing mechanism. If dam removal costs exceed $200 million and if the State of California is unable to raise the additional funds necessary for dam removal costs, sufficient funds would need to be provided by an entity other than PacifiCorp in order for the KHSA and dam removal to proceed.

PacifiCorp has begun collection of surcharges from Oregon customers for their share of dam removal costs, as approved by the Oregon Public Utility Commission ("OPUC"), and is depositing the proceeds in a trust account maintained by the OPUC. PacifiCorp will begin collection of surcharges from California customers for their share of dam removal costs, as approved by the California Public Utilities Commission ("CPUC"), upon the establishment of two trust accounts. In January 2012, the CPUC notified PacifiCorp that the necessary trust accounts had been established to allow PacifiCorp to begin collecting the dam removal surcharge from California customers. PacifiCorp is authorized to collect the surcharge over the next nine years.

As of December 31, 2011 , PacifiCorp's property, plant and equipment, net included $124 million of costs associated with the Klamath hydroelectric system's four mainstem dams and the associated relicensing and settlement costs. PacifiCorp has received approvals from the OPUC, the CPUC and the Wyoming Public Service Commission to depreciate the Klamath hydroelectric system's four mainstem dams and the associated relicensing and settlement costs through the expected dam removal date. The depreciation rate changes were effective January 1, 2011 and will allow for full depreciation of the assets by December 2019 for those jurisdictions. PacifiCorp filed for consistent ratemaking treatment in the last Idaho general rate case, which was settled in January 2012. PacifiCorp expects to seek similar approval in Washington. As part of the July 2011 Utah general rate case settlement that was approved by the Utah Public Service Commission in August 2011, PacifiCorp and the other parties to the settlement agreed to defer a decision regarding the acceleration of the depreciation rates for the Klamath hydroelectric system's four mainstem dams to a future rate proceeding, at which time Utah's $34 million share of associated relicensing and settlement costs would be addressed.

Legal Matters

The Company is party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. The Company does not believe that such normal and routine litigation will have a material impact on its consolidated financial results.

Guarantees

The Company has entered into guarantees as part of the normal course of business and the sale of certain assets. These guarantees are not expected to have a material impact on the Company's consolidated financial results.


(17)	MEHC Shareholders' Equity

Common Stock

On March 14, 2000, and as amended on December 7, 2005, MEHC's shareholders entered into a Shareholder Agreement that provides specific rights to certain shareholders. One of these rights allows certain shareholders the ability to put their common shares back to MEHC at the then current fair value dependent on certain circumstances controlled by MEHC.

In March 2010, MEHC purchased 250,000 shares of common stock for $225 per share, or $56 million, from Mr. Scott (along with family members and related entities).

131

Common Stock Options

During 2009, 703,329 common stock options were exercised having an exercise price of $35.05 per share, or $25 million. Also in 2009, MEHC purchased the shares issued from the options exercised for $148 million. As a result, the Company recognized $125 million of stock-based compensation expense, including the Company's share of payroll taxes, for the year ended December 31, 2009, which is included in operating expense on the Consolidated Statements of Operations. As of December 31, 2009, there are no common stock options outstanding.

Restricted Net Assets

In connection with the 2006 acquisition of PacifiCorp by MEHC, MEHC and PacifiCorp have made commitments to the state commissions that limit the dividends PacifiCorp can pay to either MEHC or MEHC's wholly owned subsidiary, PPW Holdings LLC. As of December 31, 2011 , the most restrictive of these commitments prohibits PacifiCorp from making any distribution to PPW Holdings LLC or MEHC without prior state regulatory approval to the extent that it would reduce PacifiCorp's common stock equity below 44% of its total capitalization, excluding short-term debt and current maturities of long-term debt. The terms of this commitment treat 50% of PacifiCorp's remaining balance of preferred stock in existence prior to the acquisition of PacifiCorp by MEHC as common equity. As of December 31, 2011 , PacifiCorp's actual common stock equity percentage, as calculated under this measure, exceeded the minimum threshold.

These commitments also restrict PacifiCorp from making any distributions to either PPW Holdings LLC or MEHC, if PacifiCorp's unsecured debt rating is BBB- or lower by Standard & Poor's Rating Services or Fitch Ratings or Baa3 or lower by Moody's Investor Service, as indicated by two of the three rating services. As of December 31, 2011 , PacifiCorp's unsecured debt rating was A- by Standard & Poor's Rating Services, BBB+ by Fitch Ratings and Baa1 by Moody's Investor Service.

In conjunction with the March 1999 acquisition of MidAmerican Energy by MEHC, MidAmerican Energy committed to the IUB to use commercially reasonable efforts to maintain an investment grade rating on its long-term debt and to maintain its common equity level above 42% of total capitalization unless circumstances beyond its control result in the common equity level decreasing to below 39% of total capitalization. MidAmerican Energy must seek the approval from the IUB of a reasonable utility capital structure if MidAmerican Energy's common equity level decreases below 42% of total capitalization, unless the decrease is beyond the control of MidAmerican Energy. MidAmerican Energy is also required to seek the approval of the IUB if MidAmerican Energy's common equity level decreases to below 39%, even if the decrease is due to circumstances beyond the control of MidAmerican Energy. As of December 31, 2011 , MidAmerican Energy's common equity ratio exceeded the minimum threshold computed on a basis consistent with its commitment.

As a result of these regulatory commitments, MEHC had restricted net assets of $7.346 billion as of December 31, 2011 .


(18)	Preferred Securities of Subsidiaries

The total outstanding preferred stock of PacifiCorp, which does not have mandatory redemption requirements, is $41 million as of December 31, 2011 and 2010 , is included in noncontrolling interests on the Consolidated Balance Sheets and accrues annual dividends at varying rates between 4.52% to 7.0%. Generally, this preferred stock is redeemable at stipulated prices plus accrued dividends, subject to certain restrictions. In the event of voluntary liquidation, all preferred stock is entitled to stated value or a specified preference amount per share plus accrued dividends. Upon involuntary liquidation, all preferred stock is entitled to stated value plus accrued dividends. Dividends on all preferred stock are cumulative. Holders also have the right to elect members to the PacifiCorp Board of Directors in the event dividends payable are in default in an amount equal to four full quarterly payments.

The total outstanding cumulative preferred securities of MidAmerican Energy are not subject to mandatory redemption requirements, may be redeemed at the option of MidAmerican Energy at prices which, in the aggregate, totaled $28 million as of December 31, 2011 and 2010 , and is included in noncontrolling interests on the Consolidated Balance Sheets. The securities accrue annual dividends at varying rates between 3.30% to 4.80%. The aggregate total the holders of all preferred securities outstanding as of December 31, 2011 and 2010 were entitled to upon involuntary bankruptcy was $27 million plus accrued dividends.

The total outstanding 8.061% cumulative preferred securities of a subsidiary of Northern Powergrid Holdings, which are redeemable in the event of the revocation of the subsidiary's electricity distribution license by the Secretary of State, was $56 million as of December 31, 2011 and 2010 and is included in noncontrolling interests on the Consolidated Balance Sheets.

132

(19) Components of Accumulated Other Comprehensive Loss, Net

Accumulated other comprehensive loss attributable to MEHC, net consists of the following components as of December 31 (in millions):



	2011			2010

Unrecognized amounts on retirement benefits, net of tax of $(182) and $(172)	$	(491	)	$	(461	)
Foreign currency translation adjustment	(307		)	(297		)
Unrealized gains on available-for-sale securities, net of tax of $96 and $375	142			561
Unrealized gains on cash flow hedges, net of tax of $10 and $15	15			23
Total accumulated other comprehensive loss attributable to MEHC, net	$	(641	)	$	(174	)

(20) Other, Net

Other, net, as shown on the Consolidated Statements of Operations, for the years ending December 31 consists of the following (in millions):



	2011			2010		2009

Allowance for equity funds used during construction	$	72		$	89	$	68
Loss on redemption of MEHC subordinated debt	(40		)	—		—
Corporate-owned life insurance income	9			17		24
Gain on Constellation Energy Group, Inc. investment	—			—		37
Other	10			4		17
Total other, net	$	51		$	110	$	146

(21) Supplemental Cash Flows Information

The summary of supplemental cash flows information for the years ending December 31 is as follows (in millions):



	2011		2010		2009

Interest paid, net of amounts capitalized	$	1,136	$	1,128	$	1,179
Income taxes received, net ⁽¹⁾	$	575	$	305	$	288

Supplemental disclosure of non-cash investing transactions:
Accounts payable related to property, plant and equipment additions	$	406	$	305	$	341
Deferred payments on equipment purchased for wind-powered generation at MidAmerican Energy ⁽²⁾	$	647	$	—	$	—
Issuance of note payable to acquire noncontrolling interest	$	—	$	35	$	—


(1)	Includes $734 million , $433 million and $360 million of income taxes received from Berkshire Hathaway in 2011 , 2010 and 2009 , respectively.


(2)	In conjunction with the construction of wind-powered generating facilities, MidAmerican Energy has accrued as property, plant and equipment, net certain amounts for which it is not contractually obligated to pay until December 2013. Refer to Note 12 for additional information.

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(22) Segment Information

MEHC's reportable segments were determined based on how the Company's strategic units are managed. Effective December 31, 2011, the Company changed its reportable segments. Northern Natural Gas and Kern River have been aggregated in the reportable segment called MidAmerican Energy Pipeline Group, and CalEnergy Philippines and MidAmerican Renewables, LLC (formerly CalEnergy U.S.) have been aggregated in the reportable segment called MidAmerican Renewables. Prior year amounts have been changed to conform to the current presentation. The Company's reportable segments with foreign operations include Northern Powergrid Holdings, whose business is principally in Great Britain, and MidAmerican Renewables, whose business includes operations in the Philippines. Intersegment eliminations and adjustments, including the allocation of goodwill, have been made. Income tax expense reflects the impact of tax method changes discussed in Note 15. Information related to the Company's reportable segments is shown below (in millions):



	Years Ended December 31,
	2011			2010			2009
Operating revenue:
PacifiCorp	$	4,586		$	4,432		$	4,457
MidAmerican Funding	3,503			3,815			3,699
MidAmerican Energy Pipeline Group	977			981			1,061
Northern Powergrid Holdings	1,014			802			825
MidAmerican Renewables	161			137			178
HomeServices	992			1,020			1,037
MEHC and Other ⁽¹⁾	(60		)	(60		)	(53		)
Total operating revenue	$	11,173		$	11,127		$	11,204

Depreciation and amortization:
PacifiCorp	$	623		$	572		$	558
MidAmerican Funding	337			345			336
MidAmerican Energy Pipeline Group	184			173			164
Northern Powergrid Holdings	169			157			165
MidAmerican Renewables	30			31			31
HomeServices	12			14			18
MEHC and Other ⁽¹⁾	(14		)	(16		)	(16		)
Total depreciation and amortization	$	1,341		$	1,276		$	1,256

Operating income:
PacifiCorp	$	1,099		$	1,055		$	1,079
MidAmerican Funding	428			460			469
MidAmerican Energy Pipeline Group	468			472			558
Northern Powergrid Holdings	615			474			394
MidAmerican Renewables	106			88			128
HomeServices	24			17			11
MEHC and Other ⁽¹⁾	(56		)	(64		)	(174		)
Total operating income	2,684			2,502			2,465
Interest expense	(1,196		)	(1,225		)	(1,275		)
Capitalized interest	40			54			41
Interest and dividend income	14			24			38
Other, net	51			110			146
Total income before income tax expense and equity income	$	1,593		$	1,465		$	1,415

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	Years Ended December 31,
	2011			2010			2009
Interest expense:
PacifiCorp	$	406		$	403		$	412
MidAmerican Funding	183			192			197
MidAmerican Energy Pipeline Group	101			111			116
Northern Powergrid Holdings	151			146			153
MidAmerican Renewables	18			20			20
MEHC and Other ⁽¹⁾	337			353			377
Total interest expense	$	1,196		$	1,225		$	1,275

Income tax expense:
PacifiCorp	$	215		$	212		$	236
MidAmerican Funding	(26		)	(62		)	(43		)
MidAmerican Energy Pipeline Group	152			152			181
Northern Powergrid Holdings	76			51			66
MidAmerican Renewables	36			35			49
HomeServices	16			13			17
MEHC and Other ⁽¹⁾	(175		)	(203		)	(224		)
Total income tax expense	$	294		$	198		$	282

Capital expenditures:
PacifiCorp	$	1,506		$	1,607		$	2,328
MidAmerican Funding	566			338			439
MidAmerican Energy Pipeline Group	289			293			250
Northern Powergrid Holdings	309			349			387
MidAmerican Renewables	4			1			1
HomeServices	7			5			6
MEHC and Other	3			—			2
Total capital expenditures	$	2,684		$	2,593		$	3,413

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	As of December 31,
	2011			2010
Property, plant and equipment, net:
PacifiCorp	$	17,460		$	16,491
MidAmerican Funding	7,935			6,960
MidAmerican Energy Pipeline Group	4,126			3,957
Northern Powergrid Holdings	4,332			4,164
MidAmerican Renewables	413			439
HomeServices	47			51
MEHC and Other	(146		)	(163		)
Total property, plant and equipment, net	$	34,167		$	31,899

Total assets:
PacifiCorp	$	22,364		$	21,410
MidAmerican Funding	12,430			11,134
MidAmerican Energy Pipeline Group	4,854			4,744
Northern Powergrid Holdings	5,690			5,512
MidAmerican Renewables	890			905
HomeServices	649			649
MEHC and Other	841			1,314
Total assets	$	47,718		$	45,668


(1)	The remaining differences between the segment amounts and the consolidated amounts described as "MEHC and Other" relate principally to intersegment eliminations for operating revenue and, for the other items presented, to (a) corporate functions, including administrative costs, interest expense, corporate cash and investments and related interest income and (b) intersegment eliminations.

The following table shows the change in the carrying amount of goodwill by reportable segment for the years ended December 31, 2011 and 2010 (in millions):



					MidAmerican
					Energy			Northern
			MidAmerican		Pipeline			Powergrid			MidAmerican		Home-
	PacifiCorp		Funding		Group			Holdings			Renewables		Services		Total

Balance, December 31, 2009	$	1,126	$	2,102	$	257		$	1,130		$	71	$	392	$	5,078
Foreign currency translation	—		—		—			(29		)	—		—		(29		)
Other	—		—		(26		)	—			—		2		(24		)
Balance, December 31, 2010	1,126		2,102		231			1,101			71		394		5,025
Foreign currency translation	—		—		—			(4		)	—		—		(4		)
Other	—		—		(26		)	—			—		1		(25		)
Balance, December 31, 2011	$	1,126	$	2,102	$	205		$	1,097		$	71	$	395	$	4,996

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(23) Subsequent Events — Acquisitions

In January 2012, MEHC, through a wholly-owned subsidiary, acquired Topaz Solar Farms LLC ("Topaz") and its 550-MW solar project (the "Topaz Project") in California from a subsidiary of First Solar, Inc. ("First Solar"). The Topaz Project is expected to cost approximately $2.44 billion, including all interest during construction, and will be completed in 22 blocks with an aggregate tested capacity of 586 MW. The Topaz Project expects to place 45 MW in service in 2012, 236 MW in service in 2013, 252 MW in service in 2014 and 53 MW in service in 2015. The Topaz Project is being constructed pursuant to a fixed price, date certain, turn-key engineering, procurement and construction contract with a subsidiary of First Solar. Topaz will sell all the electricity, renewable energy credits and other environmental attributes produced by the project to Pacific Gas and Electric Company ("PG&E") pursuant to a 25 year power purchase agreement. A subsidiary of First Solar will operate and maintain the project under a 25 year, fixed-fee operating and maintenance agreement.

MEHC has committed to provide Topaz with equity to fund the costs of the Topaz Project in an amount up to $2.44 billion less, among other things, the gross proceeds of long-term debt issuances, project revenue prior to completion and the total equity contributions made by MEHC or its subsidiaries. If MEHC does not maintain a minimum credit rating from two of the following three ratings agencies of at least BBB- from Standard & Poor's Ratings Services or Fitch Ratings or Baa3 from Moody's Investors Service, MEHC's obligations under the equity commitment agreement would be supported by cash collateral or a letter of credit issued by a financial institution that meets certain minimum criteria specified in the financing documents. Upon reaching the final commercial operation date of the Topaz Project, MEHC will have no further obligation to make any equity contribution and any unused equity contribution obligations will be canceled.

In connection with the offering, Topaz entered into a letter of credit and reimbursement facility in an aggregate principal amount of $345 million. Letters of credit issued under the letter of credit facility will be used to (a) provide security under the power purchase agreement and large generator interconnection agreements, (b) fund the debt service reserve requirement and the operation and maintenance debt service reserve requirement, (c) provide security for our remediation and mitigation liabilities, and (d) provide security in respect of our conditional use permit sales tax obligations.

In January 2012, MEHC, through a wholly-owned subsidiary, acquired from NRG Energy, Inc. a 49 percent equity interest in Agua Caliente Solar, LLC ("Agua Caliente"), the owner of a 290-MW solar project (the "Agua Caliente Project") in Arizona. The Agua Caliente Project is expected to cost approximately $1.8 billion and will be completed in 12 blocks with an aggregate tested capacity of 310 MW. The first 30-MW block of the Agua Caliente Project was placed in service in January 2012 and the Agua Caliente Project expects to place 112 additional MW in service in 2012, 136 MW in service in 2013 and 32 MW in service in 2014. The project is being constructed pursuant to a fixed price, date certain, turn-key engineering, procurement and construction contract with a subsidiary of First Solar. Agua Caliente will sell all the electricity, renewable energy credits and other environmental attributes produced by the project to PG&E pursuant to a 25 year power purchase agreement. A subsidiary of First Solar will operate and maintain the project under a 25 year, fixed-fee operating and maintenance agreement. Construction costs are expected to be funded with equity contributions from MEHC and NRG Energy, Inc. and proceeds from a $967 million secured loan maturing in 2037 from an agency of the United States government as part of the United States Department of Energy loan guarantee program. Funding requests are submitted on a monthly basis and the approved loans accrue interest at a fixed rate based on the current average yield of comparable maturity United States Treasury rates plus a spread of 0.375%.

Pursuant to an equity funding and contribution agreement, MEHC has committed to provide Agua Caliente with funding for (a) base equity contributions of up to an aggregative amount of $303 million for the construction of the project, and (b) transmission upgrade costs. In January 2012, MEHC entered into a $303 million letter of credit facility related to its funding commitments. The equity funding and contribution agreement and the letter of credit commitment decreases as equity is contributed to the Agua Caliente Project.

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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.


Item 9A.	Controls and Procedures

Disclosure Controls and Procedures

At the end of the period covered by this Annual Report on Form 10-K, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Chief Executive Officer (principal executive officer) and the Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended). Based upon that evaluation, the Company's management, including the Chief Executive Officer (principal executive officer) and the Chief Financial Officer (principal financial officer), concluded that the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to management, including the Company's Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There has been no change in the Company's internal control over financial reporting during the quarter ended December 31, 2011 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Management's Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Under the supervision and with the participation of the Company's management, including the Chief Executive Officer (principal executive officer) and the Chief Financial Officer (principal financial officer), the Company's management conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of December 31, 2011 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, the Company's management used the criteria set forth in the framework in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation conducted under the framework in "Internal Control - Integrated Framework," the Company's management concluded that the Company's internal control over financial reporting was effective as of December 31, 2011 .

MidAmerican Energy Holdings Company

February 27, 2012


Item 9B.	Other Information

None.

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PART III


Item 10.	Directors, Executive Officers and Corporate Governance

MEHC is a consolidated subsidiary of Berkshire Hathaway. Each director was elected based on individual responsibilities, experience in the energy industry and functional expertise. MEHC's Board of Directors appoints executive officers annually. There are no family relationships among the executive officers, nor, except as set forth in employment agreements, any arrangements or understandings between any executive officer and any other person pursuant to which the executive officer was appointed. Set forth below is certain information, as of January 31, 2012 , with respect to the current directors and executive officers of MEHC:

GREGORY E. ABEL , 49, Chairman of the Board of Directors since 2011, Chief Executive Officer since 2008, director since 2000, and President since 1998. Mr. Abel joined MEHC in 1992 and has extensive executive management experience in the energy industry. Mr. Abel is also a director of PacifiCorp.

PATRICK J. GOODMAN , 45, Senior Vice President and Chief Financial Officer since 1999. Mr. Goodman joined MEHC in 1995. Mr. Goodman is also a director of PacifiCorp and a Manager of MidAmerican Funding, LLC.

DOUGLAS L. ANDERSON , 53, Senior Vice President, General Counsel and Corporate Secretary since 2001. Mr. Anderson joined MEHC in 1993. Mr. Anderson is also a director of PacifiCorp and a Manager of MidAmerican Funding, LLC.

MAUREEN E. SAMMON , 48, Senior Vice President and Chief Administrative Officer since 2007. Ms. Sammon has been employed by MEHC and its predecessor companies since 1986 and has held several positions, including Vice President, Human Resources and Insurance.

WARREN E. BUFFETT , 81, Director. Mr. Buffett has been a director of MEHC since 2000 and has been Chairman of the Board of Directors and Chief Executive Officer of Berkshire Hathaway for more than five years. Mr. Buffett previously served as a director of The Washington Post Company and The Coca-Cola Company. Mr. Buffett has significant experience as Chairman and Chief Executive Officer of Berkshire Hathaway.

WALTER SCOTT, JR. , 80, Director. Mr. Scott has been a director of MEHC since 1991 and has been Chairman of the Board of Directors of Level 3 Communications, Inc., a successor to certain businesses of Peter Kiewit & Sons', Inc., for more than five years. Mr. Scott is also a director of Peter Kiewit & Sons', Inc., Berkshire Hathaway and Valmont Industries, Inc. and previously served as a director of Burlington Resources, Inc. and Commonwealth Telephone Enterprises, Inc. Mr. Scott has significant experience and financial expertise as a past chief executive officer and as a director of both public and private corporations and as chairman of a major charitable foundation.

MARC D. HAMBURG , 62, Director. Mr. Hamburg has been a director of MEHC since 2000 and has been Chief Financial Officer of Berkshire Hathaway for more than five years. Mr. Hamburg was a Vice President of Berkshire Hathaway between 1992 and 2008 and since 2008 has been a Senior Vice President. Mr. Hamburg was Berkshire Hathaway's Treasurer from 1987-2010. Mr. Hamburg has significant financial experience, including expertise in mergers and acquisitions; accounting; treasury; and tax functions.

Board's Role in the Risk Oversight Process

MEHC's Board of Directors is comprised of a combination of MEHC senior management, Berkshire Hathaway senior executives and MEHC owners who have responsibility for the management and oversight of risk. MEHC's Board of Directors has not established a separate risk management and oversight committee.

Audit Committee and Audit Committee Financial Expert

The audit committee of the Board of Directors is comprised of Mr. Marc D. Hamburg. The Board of Directors has determined that Mr. Hamburg qualifies as an "audit committee financial expert," as defined by SEC rules, based on his education, experience and background. Based on the standards of the New York Stock Exchange LLC, on which the common stock of MEHC's majority owner, Berkshire Hathaway, is listed, MEHC's Board of Directors has determined that Mr. Hamburg is not independent because of his employment by Berkshire Hathaway.

139

Code of Ethics

MEHC has adopted a code of ethics that applies to its principal executive officer, its principal financial and accounting officer, or persons acting in such capacities, and certain other covered officers. The code of ethics is incorporated by reference in the exhibits to this Annual Report on Form 10-K.


Item 11.	Executive Compensation

Compensation Discussion and Analysis

Compensation Philosophy and Overall Objectives

We believe that the compensation paid to each of our Chairman, President and Chief Executive Officer, or Chairman and CEO, our Chief Financial Officer, or CFO, and our other most highly compensated executive officers, to whom we refer collectively as our Named Executive Officers, or NEOs, should be closely aligned with our overall performance, and each NEO's contribution to that performance, on both a short- and long-term basis, and that such compensation should be sufficient to attract and retain highly qualified leaders who can create significant value for our organization. Our compensation programs are designed to provide our NEOs meaningful incentives for superior corporate and individual performance. Performance is evaluated on a subjective basis within the context of both financial and non-financial objectives that we believe contribute to our long-term success, among which are customer service, operational excellence, financial strength, employee commitment and safety, environmental respect and regulatory integrity.

How is Compensation Determined

Our Compensation Committee is comprised of Messrs. Warren E. Buffett and Walter Scott, Jr. The Compensation Committee is responsible for the establishment and oversight of our compensation policy. Approval of compensation decisions for our NEOs is made by the Compensation Committee, unless specifically delegated. Although the Compensation Committee reviews each NEO's complete compensation package at least annually, it has delegated to the Chairman and CEO authority to approve off-cycle pay changes, performance awards and participation in other employee benefit plans and programs for the other NEOs.

Our criteria for assessing executive performance and determining compensation in any year is inherently subjective and is not based upon specific formulas or weighting of factors. We do not specifically use other companies as benchmarks when establishing our NEOs' compensation. Subsequently, the Compensation Committee reviews peer company data when making annual base salary and incentive recommendations for the Chairman and CEO. The peer companies for 2011 were American Electric Power Company, Inc., Consolidated Edison, Inc., Dominion Resources, Inc., Edison International, Energy Future Holdings Corp., Entergy Corporation, Exelon Corporation, FirstEnergy Corp., NextEra Energy, Inc., PG&E Corporation, Progress Energy, Inc., Public Service Enterprise Group Incorporated, Sempra Energy, The Southern Company and Xcel Energy Inc.

We engage the compensation practice of Towers Watson & Co., or Towers Watson, to research and document the peer company data to be reviewed by the Compensation Committee when making annual base salary and incentive recommendations for the Chairman and CEO. The fee paid to Towers Watson for this service was $7,874 in 2011 . We also engage Towers Watson to provide other services unrelated to executive compensation, including actuarial and consulting services related to our retirement plans. These services are approved by senior management and the aggregate fees paid to Towers Watson for these services were $1,074,186 in 2011 . Our Board of Directors is not involved in the selection or approval of Towers Watson for these services.

Discussion and Analysis of Specific Compensation Elements

Base Salary

We determine base salaries for all of our NEOs by reviewing our overall performance and each NEO's performance, the value each NEO brings to us and general labor market conditions. While base salary provides a base level of compensation intended to be competitive with the external market, the annual base salary adjustment for each NEO is determined on a subjective basis after consideration of these factors and is not based on target percentiles or other formal criteria.

140

In late 2010, the former Chairman of the Board of Directors and the current Chairman and CEO (then the CEO) together made recommendations regarding the other NEOs' base salaries. The former Chairman made recommendations regarding the current Chairman and CEO's base salary, and the Compensation Committee set the former Chairman's base salary. Following the former Chairman's resignation in April 2011, the Chairman and CEO makes recommendations regarding the other NEOs' base salaries, and the Compensation Committee sets the Chairman and CEO's base salary. All merit increases are approved by the Compensation Committee and take effect on January 1 of each year. An increase or decrease in base salary may also result from a promotion or other significant change in a NEO's responsibilities during the year. In 2011, base salaries for all NEOs increased on average by 1.8% effective January 1, 2011. There were no other base salary changes for our NEOs during the year after the January 1, 2011 merit increase.

Short-Term Incentive Compensation

The objective of short-term incentive compensation is to reward the achievement of significant annual corporate goals while also providing NEOs with competitive total cash compensation.

Performance Incentive Plan

Under our Performance Incentive Plan, or PIP, all NEOs are eligible to earn an annual discretionary cash incentive award, which is determined on a subjective basis and is not based on a specific formula or cap. A variety of factors are considered in determining each NEO's annual incentive award including the NEO's performance, our overall performance and each NEO's contribution to that overall performance. An individual NEO's performance is evaluated using financial and non-financial principles, including customer service; operational excellence; financial strength; employee commitment and safety; environmental respect; and regulatory integrity, as well as the NEO's response to issues and opportunities that arise during the year. No factor was individually material to the determination of the amounts paid to each NEO under the PIP for 2011 . The Chairman and CEO recommends annual incentive awards for the other NEOs to the Compensation Committee prior to the last committee meeting of each year, held in the fourth quarter. The Compensation Committee determines the Chairman and CEO's award. If approved by the Compensation Committee, awards are paid prior to year-end.

Performance Awards

In addition to the annual awards under the PIP, we may grant cash performance awards periodically during the year to one or more NEOs to reward the accomplishment of significant non-recurring tasks or projects. These awards are discretionary and are approved by the Chairman and CEO, as delegated by the Compensation Committee. In December 2011, awards were granted to Messrs. Goodman and Anderson in recognition of their efforts related to certain acquisition activities. Although Mr. Abel is eligible for performance awards, he has not been granted an award in the past five years.

Long-Term Incentive Compensation

The objective of long-term incentive compensation is to retain NEOs, reward their exceptional performance and motivate them to create long-term, sustainable value. Our current long-term incentive compensation program is cash-based. We have not issued stock options or other forms of equity-based awards since March 2000. All stock options previously held by Messrs. Abel and Sokol have been exercised and are no longer outstanding.

Long-Term Incentive Partnership Plan

The MidAmerican Energy Holdings Company Long-Term Incentive Partnership Plan, or LTIP, is designed to retain key employees and to align our interests and the interests of the participating employees. Messrs. Goodman and Anderson and Ms. Sammon, as well as 90 other employees, participate in this plan, while our Chairman and CEO does not. Our former Chairman did not participate in the plan. Our LTIP provides for annual discretionary awards based upon significant accomplishments by the individual participants and the achievement of the financial and non-financial objectives previously described. The goals are developed with the objective of being attainable with a sustained, focused and concerted effort and are determined and communicated in January of each plan year. Participation is discretionary and is determined by the Chairman and CEO who recommends awards to the Compensation Committee annually in the fourth quarter. Except for limited situations of extraordinary performance, awards are capped at 1.5 times base salary and finalized in the first quarter of the following year. These cash-based awards are subject to mandatory deferral and equal annual vesting over a five-year period starting in the performance year. Participants allocate the value of their deferral accounts among various investment alternatives. Gains or losses may be incurred based on investment performance. Participating NEOs may elect to defer all or a part of the award or receive payment in cash after the five-year mandatory deferral and vesting period. Vested balances (including any investment gains or losses thereon) of terminating participants are paid at the time of termination.

141

Incremental Profit Sharing Plan

The Incremental Profit Sharing Plan, or IPSP, is designed to align our interests and the interests of the Chairman and CEO. The IPSP provides for a cash award based upon our achievement of a specified adjusted diluted earnings per share, or EPS, target for any calendar year. The EPS targets to achieve the award were established by the Compensation Committee in 2009 and are to be achieved no later than calendar year end 2013. The individual profit sharing award that may be earned is $12 million if our EPS is greater than $23.14 per share, but less than or equal to $24.24 per share, $25 million if our EPS is greater than $24.24 per share, but less than $25.37 per share, or $40 million if our EPS is greater than $25.37 per share. Following his resignation, Mr. Sokol is no longer eligible to receive awards under the IPSP. Messrs. Goodman and Anderson and Ms. Sammon do not participate in this plan.

Other Employee Benefits

Supplemental Executive Retirement Plan

The MidAmerican Energy Company Supplemental Executive Retirement Plan for Designated Officers, or SERP, provides additional retirement benefits to participants. We include the SERP as part of the participating NEO's overall compensation in order to provide a comprehensive, competitive package and as a key retention tool. Messrs. Abel, Goodman and Sokol participate in the SERP, and we have no plans to add new participants in the future. The SERP provides annual retirement benefits of up to 65% of a participant's total cash compensation in effect immediately prior to retirement, subject to an annual $1 million maximum retirement benefit. Total cash compensation means (a) the highest amount payable to a participant as monthly base salary during the five years immediately prior to retirement multiplied by 12, plus (b) the average of the participant's annual awards under an annual incentive bonus program during the three years immediately prior to the year of retirement and (c) special, additional or non-recurring bonus awards, if any, that are required to be included in total cash compensation pursuant to a participant's employment agreement or approved for inclusion by the Board of Directors. All participating NEOs have met the five-year service requirement under the plan. Mr. Goodman's SERP benefit will be reduced by the amount of his regular retirement benefit under the MidAmerican Energy Company Retirement Plan, his actuarially equivalent benefit under the fixed 401(k) contribution option and ratably for retirement between ages 55 and 65.

Deferred Compensation Plan

The MidAmerican Energy Holdings Company Executive Voluntary Deferred Compensation Plan, or DCP, provides a means for all NEOs to make voluntary deferrals of up to 50% of base salary and 100% of short-term incentive compensation awards. We include the DCP as part of the participating NEO's overall compensation in order to provide a comprehensive, competitive package. The deferrals and any investment returns grow on a tax-deferred basis. Amounts deferred under the DCP receive a rate of return based on the returns of any combination of eight investment options offered under the DCP and selected by the participant. The plan allows participants to choose from three forms of distribution. The plan permits us to make discretionary contributions on behalf of participants; however, we have not made contributions to date.

Financial Planning and Tax Preparation

We reimburse NEOs for financial planning and tax preparation services. The value of the benefit is included in the NEO's taxable income. It is offered both as a competitive benefit itself and also to help ensure our NEOs best utilize the other forms of compensation we provide to them.

Executive Life Insurance

We provide universal life insurance to Messrs. Abel and Goodman, and formerly to Mr. Sokol, having a death benefit of two times annual base salary during employment, reducing to one times annual base salary in retirement. The value of the benefit is included in the NEO's taxable income. We include the executive life insurance as part of the participating NEO's overall compensation in order to provide a comprehensive, competitive package.

Potential Payments Upon Termination

Certain NEOs are entitled to post-termination payments in the event their employment is terminated under certain circumstances. We believe these post-termination payments are an important component of the competitive compensation package we offer to these NEOs.

142

Compensation Committee Report

The Compensation Committee, consisting of Messrs. Buffett and Scott, has reviewed and discussed the Compensation Discussion and Analysis with management and, based on this review and discussion, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

Warren E. Buffett

Walter Scott, Jr.

Summary Compensation Table

The following table sets forth information regarding compensation earned by each of our NEOs during the years indicated:



								Change in
								Pension
								Value and
						Non-Equity		Nonqualified
Name and						Incentive		Deferred		All
Principal		Base				Plan		Compensation		Other
Position	Year	Salary		Bonus ⁽¹⁾		Compensation		Earnings ⁽²⁾		Compensation ⁽³⁾		Total ⁽⁴⁾

Gregory E. Abel, Chairman, President	2011	$	1,000,000	$	7,000,000	$	—	$	1,726,000	$	187,391	$	9,913,391
and Chief Executive Officer	2010	1,000,000		6,000,000		—		1,093,000		352,642		8,445,642
	2009	1,000,000		5,000,000		—		890,000		266,699		7,156,699

Patrick J. Goodman, Senior Vice	2011	360,000		1,351,859		—		508,000		36,208		2,256,067
President and Chief Financial	2010	340,000		1,360,900		—		320,000		38,622		2,059,522
Officer	2009	340,000		1,292,543		—		203,000		58,667		1,894,210

Douglas L. Anderson, Senior Vice	2011	310,000		784,316		—		5,000		28,030		1,127,346
President and General Counsel	2010	308,000		905,687		—		4,000		48,329		1,266,016
	2009	308,000		922,618		—		5,000		51,650		1,287,268

Maureen E. Sammon, Senior Vice	2011	226,000		436,045		—		5,000		27,401		694,446
President and Chief	2010	221,000		569,333		—		5,000		38,723		834,056
Administrative Officer	2009	221,000		524,790		—		5,000		37,495		788,285

David L. Sokol, former Chairman of	2011	231,250		—		—		10,134,000		18,649		10,383,899
the Board of Directors ⁽⁵⁾	2010	750,000		—		—		1,199,000		50,836		1,999,836
	2009	750,000		6,000,000		—		980,000		252,926		7,982,926


(1)	Consists of annual cash incentive awards earned pursuant to the PIP for our NEOs, performance awards earned related to non-routine projects, and the vesting of LTIP awards and associated vested earnings. The breakout for 2011 is as follows:



					LTIP
			Performance		Vested		Vested
	PIP		Award		Awards		Earnings		Total

Gregory E. Abel	$	7,000,000	$	—	$	—	$	—	$	—
Patrick J. Goodman	425,000		150,000		677,500		99,359		776,859
Douglas L. Anderson	300,000		125,000		352,450		6,866		359,316
Maureen E. Sammon	180,000		—		228,757		27,288		256,045
David L. Sokol	—		—		—		—		—

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The ultimate payouts of LTIP awards are undeterminable as the amounts to be paid out may increase or decrease depending on investment performance. Net income, the net income target goal and the matrix below were used in determining the gross amount of the LTIP award available to the participants. Net income for determining the award and the award itself are subject to discretionary adjustment by the Chairman and CEO and Compensation Committee. In 2011, the gross award and per-point value were determined based on the overall achievement of our financial and non-financial objectives.



Net Income		Award

Less than or equal to net income target goal		None
Exceeds net income target goal by 0.01% - 6.50%		25% of excess
Exceeds net income target goal by more than 6.50%		25% of the first 6.50% excess; and
		35% of excess over 6.50%

Points are allocated among plan participants either as initial points or year-end performance points. A nominating committee recommends the point allocation, subject to approval by the Chairman and CEO, based upon a discretionary evaluation of individual achievement of financial and non-financial goals previously described herein. A participant's award equals the participants allocated points multiplied by the final per-point value, capped at 1.5 times base salary except in extraordinary circumstances.

(2)

Amounts are based upon the aggregate increase in the actuarial present value of all qualified and nonqualified defined benefit plans, which include our cash balance and SERP, as applicable. Amounts are computed using assumptions consistent with those used in preparing the related pension disclosures in our Notes to Consolidated Financial Statements in Item 8 of this Form 10-K and are as of December 31, 2011. No participant in our DCP earned “above-market” or “preferential” earnings on amounts deferred.

(3)

Amounts consist of vacation payouts and 401(k) contributions we paid on behalf of the NEOs, as well as perquisites and other personal benefits related to life insurance premiums, the personal use of corporate aircraft and financial planning and tax preparation that we paid on behalf of Messrs. Abel, Goodman, Anderson and Sokol. The personal use of corporate aircraft represents our incremental cost of providing this personal benefit determined by applying the percentage of flight hours used for personal use to our variable expenses incurred from operating our corporate aircraft. All other compensation is based upon amounts paid by us.

Items required to be reported and quantified are as follows: Mr. Abel - personal use of corporate aircraft of $149,785 and 401(k) contributions of $11,638; Mr. Goodman - 401(k) contributions of $27,563; Mr. Anderson - 401(k) contributions of $27,563; and Ms. Sammon - 401(k) contributions of $27,401.


(4)	Any amounts voluntarily deferred by the NEO, if applicable, are included in the appropriate column in the summary compensation table.


(5)	Mr. Sokol resigned effective April 21, 2011, at which time Mr. Abel, then President and Chief Executive Officer, was appointed Chairman, President and Chief Executive Officer.

Pension Benefits

The following table sets forth certain information regarding the defined benefit pension plan accounts held by each of our NEOs as of December 31, 2011 :

Number of

years

Present value

Payments

credited

of accumulated

during last

Name

Plan name

service ⁽¹⁾

benefit ⁽²⁾

fiscal year ⁽³⁾

Gregory E. Abel

SERP

n/a

7,717,000

—

MidAmerican Energy Company Retirement Plan

n/a

264,000

—

Patrick J. Goodman

SERP

17 years

1,438,000

—

MidAmerican Energy Company Retirement Plan

10 years

212,000

—

Douglas L. Anderson

MidAmerican Energy Company Retirement Plan

10 years

218,000

—

Maureen E. Sammon

MidAmerican Energy Company Retirement Plan

22 years

245,000

—

David L. Sokol

SERP

n/a

16,912,000

750,000

MidAmerican Energy Company Retirement Plan

n/a

—

301,687

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(1)

The pension benefits for Messrs. Abel and Sokol do not depend on their years of service, as both have already reached their maximum benefit levels based on their respective ages and previous triggering events described in their employment agreements. Mr. Goodman's credited years of service, for purposes of the SERP only, includes 13 years of service with us and four additional years of imputed service from a predecessor company.

(2)

Amounts are computed using assumptions consistent with those used in preparing the related pension disclosures in our Notes to Consolidated Financial Statements in Item 8 of this Form 10-K and are as of December 31, 2011, which is the measurement date for the plans. The present value of accumulated benefits for the SERP was calculated using the following assumptions: (1) Mr. Abel - a 100% joint and survivor annuity; (2) Mr. Goodman - a 66 2/3% joint and survivor annuity; and (3) Mr. Sokol - a 100% joint and survivor annuity. The present value of accumulated benefits for the MidAmerican Energy Company Retirement Plan was calculated using a lump sum payment assumption. The present value assumptions used in calculating the present value of accumulated benefits for both the SERP and the MidAmerican Energy Company Retirement Plan were as follows: a cash balance interest crediting rate of 0.81% in 2012 and 4.00% thereafter; a cash balance conversion rate of 4.75% in 2012 and thereafter; a discount rate of 4.75%; an expected retirement age of 65; postretirement mortality as prescribed by Internal Revenue Code Section 430(h)(3)(A) tables, separated by annuitant and non-annuitants; and cash balance conversion mortality using the Notice 2008-85 tables.


(3)	Mr. Sokol's post-termination SERP benefit is $1 million annually, paid in monthly installments. He elected a one-time lump sum payment of his MidAmerican Energy Company Retirement Plan benefit of $301,687, which was paid to him on May 1, 2011.

The SERP provides annual retirement benefits up to 65% of a participant's total cash compensation in effect immediately prior to retirement, subject to an annual $1 million maximum retirement benefit. Total cash compensation means (i) the highest amount payable to a participant as monthly base salary during the five years immediately prior to retirement multiplied by 12, plus (ii) the average of the participant's awards under an annual incentive bonus program during the three years immediately prior to the year of retirement and (iii) special, additional or non-recurring bonus awards, if any, that are required to be included in total cash compensation pursuant to a participant's employment agreement or approved for inclusion by the Board of Directors. Mr. Goodman's SERP benefit will be reduced by the amount of his regular retirement benefit under the MidAmerican Energy Company Retirement Plan, his actuarially equivalent benefit under the fixed 401(k) contribution option and ratably for retirement between ages 55 and 65. A survivor benefit is payable to a surviving spouse under the SERP. Benefits from the SERP will be paid out of general corporate funds; however, through a Rabbi trust, we maintain life insurance on participants in amounts expected to be sufficient to fund the after-tax cost of the projected benefits. Deferred compensation is considered part of the salary covered by the SERP.

Under the MidAmerican Energy Company Retirement Plan, each NEO has an account, for record-keeping purposes only, to which credits are allocated annually based upon a percentage of the NEO's base salary and incentive paid in the plan year. In addition, all balances in the accounts of NEOs earn a fixed rate of interest that is credited annually. The interest rate for a particular year is based on the one-year constant maturity Treasury yield plus seven-tenths of one percentage point. Each NEO is vested in the MidAmerican Energy Company Retirement Plan. At retirement, or other termination of employment, an amount equal to the vested balance then credited to the account is payable to the NEO in the form of a lump sum or an annuity.

In 2008, non-union employee participants in the MidAmerican Energy Company Retirement Plan were offered the option to continue to receive pay credits in the MidAmerican Energy Company Retirement Plan or receive equivalent fixed contributions to the MidAmerican Energy Company Retirement Savings Plan, or 401(k) plan, with any such election becoming effective January 1, 2009. Messrs. Goodman and Anderson and Ms. Sammon elected the equivalent fixed 401(k) contribution option and, therefore, no longer receive pay credits in the MidAmerican Energy Company Retirement Plan; however, they each continue to receive interest credits.

145

Nonqualified Deferred Compensation

The following table sets forth certain information regarding the nonqualified deferred compensation plan accounts held by each of our NEOs at December 31, 2011 :



											Aggregate
	Executive		Registrant		Aggregate			Aggregate			balance as of
	contributions		contributions		earnings			withdrawals/			December 31,
Name	in 2011 ⁽¹⁾		in 2011		in 2011			distributions			2011 ⁽²⁾⁽³⁾

Gregory E. Abel	$	350,000	$	—	$	(9,445	)	$	—		$	1,977,363

Patrick J. Goodman	—		—		(3,613		)	—			1,007,302

Douglas L. Anderson	588,790		—		(34,906		)	(55,763		)	2,370,016

Maureen E. Sammon	276,538		—		(6,897		)	—			1,370,026

David L. Sokol	—		—		—						—

(1)

The contribution amount shown for Mr. Abel is included in the 2011 total compensation reported for him in the Summary Compensation Table and is not additional earned compensation. The contribution amounts shown for Mr. Anderson and Ms. Sammon include $397,111 and $189,471, respectively, earned toward their 2007 LTIP awards prior to 2011. Therefore, these amounts are not included in the 2011 total compensation reported for Mr. Anderson and Ms. Sammon, respectively, in the Summary Compensation Table.


(2)	The aggregate balance as of December 31, 2011 shown for Messrs. Abel and Anderson and Ms. Sammon includes $300,000, $278,682 and $173,467, respectively, of compensation previously reported in 2010 in the Summary Compensation Table, and $250,000, $245,233 and $194,118, respectively, of compensation previously reported in 2009 in the Summary Compensation Table.


(3)	Excludes the value of 10,041 shares of our common stock reserved for issuance to Mr. Abel. Mr. Abel deferred the right to receive the value of these shares pursuant to a legacy nonqualified deferred compensation plan.

Eligibility for our DCP is restricted to select management and highly compensated employees. The plan provides tax benefits to eligible participants by allowing them to defer compensation on a pretax basis, thus reducing their current taxable income. Deferrals and any investment returns grow on a tax-deferred basis, thus participants pay no income tax until they receive distributions. The DCP permits participants to make a voluntary deferral of up to 50% of base salary and 100% of short-term incentive compensation awards. All deferrals are net of social security taxes. Amounts deferred under the DCP receive a rate of return based on the returns of any combination of eight investment options offered by the plan and selected by the participant. Gains or losses are calculated daily, and returns are posted to accounts based on participants' fund allocation elections. Participants can change their fund allocations as of the end of any day on which the market is open.

The DCP allows participants to maintain three accounts based upon when they want to receive payments: retirement account, in-service account and education account. Both the retirement and in-service accounts can be distributed as lump sums or in up to 10 annual installments. The education account is distributed in four annual installments. If a participant leaves employment prior to retirement (age 55) all amounts in the participant's account will be paid out in a lump sum as soon as administratively practicable. Participants are 100% vested in their deferrals and any investment gains or losses recorded in their accounts.

Participants in our LTIP also have the option of deferring all or a part of those awards after the five-year mandatory deferral and vesting period. The provisions governing the deferral of LTIP awards are similar to those described for the DCP above.

Potential Payments Upon Termination

We have entered into employment agreements with Messrs. Abel, Goodman and Sokol that provide for payments following termination of employment under various circumstances, which do not include change-in-control provisions.

A termination of employment of either Messrs. Abel or Goodman will occur upon his resignation (with or without good reason), permanent disability, death, or termination by us with or without cause. Mr. Sokol's employment terminated upon his resignation in April 2011.

146

The employment agreements for Messrs. Abel and Sokol also include provisions specific to the calculation of their respective SERP benefits.

Neither Mr. Anderson nor Ms. Sammon has an employment agreement. Where a NEO does not have an employment agreement, or in the event that the agreements for Messrs. Abel, Goodman and Sokol do not address an issue, payments upon termination are determined by the applicable plan documents and our general employment policies and practices as discussed below.

The following discussion provides further detail on post-termination payments.

Gregory E. Abel

Mr. Abel's employment agreement entitles him to receive two years base salary continuation and payments in respect of average bonuses for the prior two years in the event we terminate his employment other than for cause. The payments are to be paid as a lump sum with no discount for present valuation.

In addition, if Mr. Abel's employment is terminated due to death, permanent disability or other than for cause, he is entitled to continuation of his senior executive employee benefits (or the economic equivalent thereof) for two years. If Mr. Abel resigns, we must pay him any accrued but unpaid base salary, unless he resigns for good reason, in which case he will receive the same benefits as if he were terminated other than for cause.

Payments made in accordance with the employment agreement are contingent on Mr. Abel complying with the confidentiality and post-employment restrictions described therein. The term of the agreement effectively expires on August 6, 2016, and is extended automatically for additional one year terms thereafter subject to Mr. Abel's election to decline renewal at least 365 days prior to the August 6 that is four years prior to the current expiration date (or by August 6, 2012 for the agreement not to extend to August 6, 2017).

The following table sets forth the estimated enhancements to payments pursuant to the termination scenarios indicated. Payments or benefits that are not enhanced in form or amount upon the occurrence of a particular termination scenario, which include 401(k) and nonqualified deferred compensation account balances and those portions of life insurance benefits and cash balance pension amounts that would have otherwise been paid, are not included herein. All estimated payments reflected in the table below assume termination on December 31, 2011 , and are payable as lump sums unless otherwise noted.



	Cash				Life				Benefits		Excise and
Termination Scenario	Severance ⁽¹⁾		Incentive		Insurance ⁽²⁾		Pension ⁽³⁾		Continuation ⁽⁴⁾		Other Taxes ⁽⁵⁾

Retirement, Voluntary and Involuntary	$	—	$	—	$	—	$	10,980,000	$	—	$	—
With Cause

Involuntary Without Cause, Disability and	15,000,000		—		—		10,980,000		54,244		—
Voluntary With Good Reason

Death	15,000,000		—		1,923,475		10,432,000		54,244		—


(1)	The cash severance payments are determined in accordance with Mr. Abel's employment agreement.


(2)	Life insurance benefits are equal to two times base salary, as of the preceding June 1, less the benefits otherwise payable in all other termination scenarios, which are equal to the total cash value of the policies less cumulative premiums paid by us.

(3)

Pension values represent the excess of the present value of benefits payable under each termination scenario over the amount already reflected in the Pension Benefits Table. Mr. Abel's death scenario is based on a 100% joint and survivor with 15-year certain annuity commencing immediately. Mr. Abel's other termination scenarios are based on a 100% joint and survivor annuity commencing immediately.

(4)

Includes health and welfare, life insurance and financial planning and tax preparation benefits for two years. The health and welfare benefit amounts are estimated using the rates we currently charge employees terminating employment but electing to continue their medical, dental and vision insurance after termination. These amounts are grossed-up for taxes and then reduced by the amount Mr. Abel would have paid if he had continued his employment. The life insurance benefit amounts are based on the cost of individual policies offering benefits equivalent to our group coverage and are grossed-up for taxes. These amounts also assume benefit continuation for the entire two year period, with no offset by another employer. We will also continue to provide financial planning and tax preparation reimbursement, or the economic equivalent thereof, for two years or pay a lump sum cash amount to keep Mr. Abel in the same economic position on an after-tax basis. The amount included is based on an annual estimated cost using the most recent three-year average annual reimbursement. If it is determined that benefits paid with respect to the extension of medical and dental benefits to Mr. Abel would not be exempt from taxation under the Internal Revenue Code, we shall pay to Mr. Abel a lump sum cash payment following separation from service to allow him to obtain equivalent medical and dental benefits and which would put him in the same after-tax economic position.

147

(5)

As provided in Mr. Abel's employment agreement, should it be deemed under Section 280G of the Internal Revenue Code that termination payments constitute excess parachute payments subject to an excise tax, we will gross up such payments to cover the excise tax and any additional taxes associated with such gross-up. Based on computations prescribed under Section 280G and related regulations, we do not believe that any of the termination scenarios are subject to any excise tax.

Patrick J. Goodman

Mr. Goodman's employment agreement entitles him to receive two years base salary continuation and payments in respect of average bonuses for the prior two years in the event we terminate his employment other than for cause. The payments are to be paid as a lump sum with no discount for present valuation.

In addition, if Mr. Goodman's employment is terminated due to death, permanent disability or other than for cause, he is entitled to continuation of his senior executive employee benefits (or the economic equivalent thereof) for one year. If Mr. Goodman resigns, we must pay him any accrued but unpaid base salary, unless he resigns for good reason, in which case he will receive the same benefits as if he were terminated other than for cause.

Payments made in accordance with the employment agreement are contingent on Mr. Goodman complying with the confidentiality and post-employment restrictions described therein. The term of the agreement expires on April 21, 2013, but is extended automatically for additional one year terms thereafter subject to Mr. Goodman's election to decline renewal at least 365 days prior to the then current expiration date or termination.

The following table sets forth the estimated enhancements to payments pursuant to the termination scenarios indicated. Payments or benefits that are not enhanced in form or amount upon the occurrence of a particular termination scenario, which include 401(k) and nonqualified deferred compensation account balances and those portions of long-term incentive payments, life insurance benefits and cash balance pension amounts that would have otherwise been paid, are not included herein. All estimated payments reflected in the table below assume termination on December 31, 2011 , and are payable as lump sums unless otherwise noted.



	Cash				Life				Benefits		Excise and
Termination Scenario	Severance ⁽¹⁾		Incentive ⁽²⁾		Insurance ⁽³⁾		Pension ⁽⁴⁾		Continuation ⁽⁵⁾		Other Taxes ⁽⁶⁾

Retirement and Voluntary	$	—	$	—	$	—	$	983,000	$	—	$	—

Involuntary With Cause	—		—		—		—		—		—

Involuntary Without Cause and Voluntary	3,095,000		—		—		983,000		16,952		—
With Good Reason

Death	3,095,000		1,452,616		697,747		3,815,000		16,952		—

Disability	3,095,000		1,452,616		—		2,576,000		16,952		—


(1)	The cash severance payments are determined in accordance with Mr. Goodman's employment agreement.


(2)	Amounts represent the unvested portion of Mr. Goodman's LTIP account, which becomes 100% vested upon his death or disability.


(3)	Life insurance benefits are equal to two times base salary, as of the preceding June 1, less the benefits otherwise payable in all other termination scenarios, which are equal to the total cash value of the policies less cumulative premiums paid by us.

(4)

Pension values represent the excess of the present value of benefits payable under each termination scenario over the amount already reflected in the Pension Benefits Table. Mr. Goodman's voluntary termination, retirement, involuntary without cause, and change in control termination scenarios are based on a 66 2/3% joint and survivor annuity commencing at age 55 (reductions for termination prior to age 55 and commencement prior to age 65). Mr. Goodman's disability scenario is based on a 66 2/3% joint and survivor annuity commencing at age 55 (no reduction for termination prior to age 55, reduced for commencement prior to age 65). Mr. Goodman's death scenario is based on a 15-year certain only annuity commencing immediately (no reduction for termination prior to age 55 and commencement prior to age 65).

(5)

Includes health and welfare, life insurance and financial planning and tax preparation benefits for one year. The health and welfare benefit amounts are estimated using the rates we currently charge employees terminating employment but electing to continue their medical, dental and vision insurance after termination. These amounts are grossed-up for taxes and then reduced by the amount Mr. Goodman would have paid if he had continued his employment. The life insurance benefit amounts are based on the cost of individual policies offering benefits equivalent to our group coverage and are grossed-up for taxes. These amounts also assume benefit continuation for the entire one year period, with no offset by another employer. We will also continue to provide financial planning and tax preparation reimbursement, or the economic equivalent thereof, for one year or pay a lump sum cash amount to keep Mr. Goodman in the same economic position on an after-tax basis. The amount included is based on an annual estimated cost using the most recent three-year average annual reimbursement.

148

(6)

As provided in Mr. Goodman's employment agreement, should it be deemed under Section 280G of the Internal Revenue Code that termination payments constitute excess parachute payments subject to an excise tax, we will gross up such payments to cover the excise tax and any additional taxes associated with such gross-up. Based on computations prescribed under Section 280G and related regulations, we do not believe that any of the termination scenarios are subject to any excise tax.

Douglas L. Anderson

The following table sets forth the estimated enhancements to payments pursuant to the termination scenarios indicated. Payments or benefits that are not enhanced in form or amount upon the occurrence of a particular termination scenario, which include 401(k) and nonqualified deferred compensation account balances and those portions of long-term incentive payments and cash balance pension amounts that would have otherwise been paid, are not included herein. All estimated payments reflected in the table below assume termination on December 31, 2011 , and are payable as lump sums unless otherwise noted.



	Cash				Life				Benefits		Excise and
Termination Scenario	Severance		Incentive ⁽¹⁾		Insurance		Pension ⁽²⁾		Continuation		Other Taxes

Retirement, Voluntary and Involuntary With or	$	—	$	—	$	—	$	26,000	$	—	$	—
Without Cause

Death and Disability	—		606,451		—		26,000		—		—


(1)	Amounts represent the unvested portion of Mr. Anderson's LTIP account, which becomes 100% vested upon his death or disability.


(2)	Pension values represent the excess of the present value of benefits payable under each termination scenario over the amount already reflected in the Pension Benefits Table.

Maureen E. Sammon

The following table sets forth the estimated enhancements to payments pursuant to the termination scenarios indicated. Payments or benefits that are not enhanced in form or amount upon the occurrence of a particular termination scenario, which include 401(k) and nonqualified deferred compensation account balances and those portions of long-term incentive payments and cash balance pension amounts that would have otherwise been paid, are not included herein. All estimated payments reflected in the table below assume termination on December 31, 2011 , and are payable as lump sums unless otherwise noted.



	Cash				Life				Benefits		Excise and
Termination Scenario	Severance		Incentive ⁽¹⁾		Insurance		Pension ⁽²⁾		Continuation		Other Taxes

Retirement, Voluntary and Involuntary With or	$	—	$	—	$	—	$	40,000	$	—	$	—
Without Cause

Death and Disability	—		434,837		—		40,000		—		—


(1)	Amounts represent the unvested portion of Ms. Sammon's LTIP account, which becomes 100% vested upon her death or disability.


(2)	Pension values represent the excess of the present value of benefits payable under each termination scenario over the amount already reflected in the Pension Benefits Table.

David L. Sokol

Mr. Sokol resigned effective April 21, 2011. In accordance with the terms of his employment agreement, no cash severance, incentive payment or continuation of benefits was owed to him. He elected to cash out his executive life insurance policy and was paid $97,686 on November 1, 2011, following our release of the collateral assignment. His post-termination SERP benefit is $1 million annually, paid in monthly installments. He elected a one-time lump sum payment of his MidAmerican Energy Company Retirement Plan benefit in the amount of $301,687, which was paid to him on May 1, 2011.

Director Compensation

Our directors are not paid any fees for serving as directors. All directors are reimbursed for their expenses incurred in attending Board of Directors meetings.

149

Compensation Committee Interlocks and Insider Participation

Mr. Buffett is the Chairman of the Board of Directors and Chief Executive Officer of Berkshire Hathaway, our majority owner. Mr. Scott is a former officer of ours. Based on the standards of the New York Stock Exchange LLC, on which the common stock of our majority owner, Berkshire Hathaway, is listed, our Board of Directors has determined that Messrs. Buffett and Scott are not independent because of their ownership of our common stock. None of our executive officers serves as a member of the compensation committee of any company that has an executive officer serving as a member of our Board of Directors. None of our executive officers serves as a member of the board of directors of any company that has an executive officer serving as a member of our Compensation Committee. See also Item 13 of this Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Beneficial Ownership

We are a consolidated subsidiary of Berkshire Hathaway. The balance of our common stock is owned by Mr. Scott (along with family members and related entities) and Mr. Abel. The following table sets forth certain information regarding beneficial ownership of our shares of common stock held by each of our directors, executive officers and all of our directors and executive officers as a group as of January 31, 2012 :



Name and Address of Beneficial Owner ⁽¹⁾	Number of Shares Beneficially Owned ⁽²⁾	Percentage Of Class ⁽²⁾

Berkshire Hathaway ⁽³⁾	67,035,061	89.85	%
Walter Scott, Jr. ⁽⁴⁾	4,200,000	5.63	%
Gregory E. Abel	595,940	0.80	%
Douglas L. Anderson	—	—
Warren E. Buffett ⁽⁵⁾	—	—
Patrick J. Goodman	—	—
Marc D. Hamburg ⁽⁵⁾	—	—
Maureen E. Sammon	—	—
All directors and executive officers as a group (7 persons)	4,795,940	6.43	%


(1)	Unless otherwise indicated, each address is c/o MidAmerican Energy Holdings Company at 666 Grand Avenue, 29th Floor, Des Moines, Iowa 50309.


(2)	Includes shares of which the listed beneficial owner is deemed to have the right to acquire beneficial ownership under Rule 13d-3(d) under the Securities Exchange Act, including, among other things, shares which the listed beneficial owner has the right to acquire within 60 days.


(3)	Such beneficial owner's address is 1440 Kiewit Plaza, Omaha, Nebraska 68131.


(4)	Excludes 2,778,000 shares held by family members and family controlled trusts and corporations, or Scott Family Interests, as to which Mr. Scott disclaims beneficial ownership. Mr. Scott's address is 1000 Kiewit Plaza, Omaha, Nebraska 68131.


(5)	Excludes 67,035,061 shares of common stock held by Berkshire Hathaway as to which Messrs. Buffett and Hamburg disclaim beneficial ownership.

150

The following table sets forth certain information regarding beneficial ownership of Class A and Class B shares of Berkshire Hathaway's common stock held by each of our directors, executive officers and all of our directors and executive officers as a group as of January 31, 2012 :



Name and Address of Beneficial Owner ⁽¹⁾	Number of Shares Beneficially Owned ⁽²⁾	Percentage Of Class ⁽²⁾

Walter Scott, Jr. ⁽³⁾⁽⁴⁾
Class A	100	*
Class B	—	—
Gregory E. Abel ⁽⁴⁾
Class A	5	*
Class B	2,289	*
Douglas L. Anderson
Class A	4	*
Class B	300	*
Warren E. Buffett ⁽⁵⁾
Class A	350,000	37.3	%
Class B	26,153,883	2.5	%
Patrick J. Goodman
Class A	4	*
Class B	660	*
Marc D. Hamburg
Class A	—	—
Class B	—	—
Maureen E. Sammon
Class A	—	—
Class B	3,102	*
All directors and executive officers as a group (7 persons)
Class A	350,113	37.3	%
Class B	26,160,234	2.5	%

* Less than 1%


(1)	Unless otherwise indicated, each address is c/o MidAmerican Energy Holdings Company at 666 Grand Avenue, 29th Floor, Des Moines, Iowa 50309.


(2)	Includes shares which the listed beneficial owner is deemed to have the right to acquire beneficial ownership under Rule 13d-3(d) under the Securities Exchange Act, including, among other things, shares which the listed beneficial owner has the right to acquire within 60 days.


(3)	Does not include 10 Class A shares owned by Mr. Scott's wife. Mr. Scott's address is 1000 Kiewit Plaza, Omaha, Nebraska 68131.

(4)

In accordance with a shareholders agreement, as amended on December 7, 2005, based on an assumed value for our common stock and the closing price of Berkshire Hathaway common stock on January 31, 2012, Mr. Scott and the Scott Family Interests and Mr. Abel would be entitled to exchange their shares of our common stock for either 15,089 and 1,289, respectively, shares of Berkshire Hathaway Class A stock or 22,704,989 and 1,939,067, respectively, shares of Berkshire Hathaway Class B stock. Assuming an exchange of all available MEHC shares into either Berkshire Hathaway Class A shares or Berkshire Hathaway Class B shares, Mr. Scott and the Scott Family Interests would beneficially own 1.6% of the outstanding shares of Berkshire Hathaway Class A stock or 2.1% of the outstanding shares of Berkshire Hathaway Class B stock, and Mr. Abel would beneficially own less than 1% of the outstanding shares of either class of stock.


(5)	Mr. Buffett's address is 1440 Kiewit Plaza, Omaha, Nebraska 68131.

Other Matters

Pursuant to a shareholders' agreement, as amended on December 7, 2005, Mr. Scott or any of the Scott Family Interests and Mr. Abel are able to require Berkshire Hathaway to exchange any or all of their respective shares of our common stock for shares of Berkshire Hathaway common stock. The number of shares of Berkshire Hathaway common stock to be exchanged is based on the fair market value of our common stock divided by the closing price of the Berkshire Hathaway common stock on the day prior to the date of exchange.

151


Item 13.	Certain Relationships and Related Transactions, and Director Independence

Certain Relationships and Related Transactions

The Berkshire Hathaway Inc. Code of Business Conduct and Ethics and the MEHC Code of Business Conduct, or the Codes, which apply to all of our directors, officers and employees and those of our subsidiaries, generally govern the review, approval or ratification of any related-person transaction. A related-person transaction is one in which we or any of our subsidiaries participate and in which one or more of our directors, executive officers, holders of more than five percent of our voting securities or any of such persons' immediate family members have a direct or indirect material interest.

Under the Codes, all of our directors and executive officers (including those of our subsidiaries) must disclose to our legal department any material transaction or relationship that reasonably could be expected to give rise to a conflict with our interests. No action may be taken with respect to such transaction or relationship until approved by the legal department. For our chief executive officer and chief financial officer, prior approval for any such transaction or relationship must be given by Berkshire Hathaway's audit committee. In addition, prior legal department approval must be obtained before a director or executive officer can accept employment, offices or board positions in other for-profit businesses, or engage in his or her own business that raises a potential conflict or appearance of conflict with our interests. Transactions with Berkshire Hathaway require the approval of our Board of Directors.

As of December 31, 2011 and 2010 , Berkshire Hathaway and its affiliates held 11% mandatorily redeemable preferred securities due from certain of our wholly owned subsidiary trusts with liquidation preferences of $22 million and $165 million, respectively. Principal repayments and interest expense on these securities totaled $143 million and $13 million, respectively, during 2011 .

Director Independence

Based on the standards of the New York Stock Exchange LLC, on which the common stock of our majority owner, Berkshire Hathaway, is listed, our Board of Directors has determined that none of our directors are considered independent because of their employment by Berkshire Hathaway or us or their ownership of our common stock.

152


Item 14.	Principal Accountant Fees and Services

The following table shows the Company's fees paid or accrued for audit and audit-related services and fees paid for tax and all other services rendered by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, the "Deloitte Entities") for each of the last two years (in millions):



	2011		2010

Audit fees ⁽¹⁾	$	4.5	$	4.4
Audit-related fees ⁽²⁾	0.7		0.6
Tax fees ⁽³⁾	0.2		0.2
All other fees	—		—
Total	$	5.4	$	5.2


(1)	Audit fees include fees for the audit of the Company's consolidated financial statements and interim reviews of the Company's quarterly financial statements, audit services provided in connection with required statutory audits of certain of MEHC's subsidiaries and comfort letters, consents and other services related to SEC matters.


(2)	Audit-related fees primarily include fees for assurance and related services for any other statutory or regulatory requirements, audits of certain subsidiary employee benefit plans and consultations on various accounting and reporting matters.


(3)	Tax fees include fees for services relating to tax compliance, tax planning and tax advice. These services include assistance regarding federal, state and international tax compliance, tax return preparation and tax audits.

The audit committee has considered whether the non-audit services provided to the Company by the Deloitte Entities impaired the independence of the Deloitte Entities and concluded that they did not. All of the services performed by the Deloitte Entities were pre-approved in accordance with the pre-approval policy adopted by the audit committee. The policy provides guidelines for the audit, audit-related, tax and other non-audit services that may be provided by the Deloitte Entities to the Company. The policy (a) identifies the guiding principles that must be considered by the audit committee in approving services to ensure that the Deloitte Entities' independence is not impaired; (b) describes the audit, audit-related and tax services that may be provided and the non-audit services that are prohibited; and (c) sets forth pre-approval requirements for all permitted services. Under the policy, requests to provide services that require specific approval by the audit committee will be submitted to the audit committee by both MEHC's independent auditor and its Chief Financial Officer. All requests for services to be provided by the independent auditor that do not require specific approval by the audit committee will be submitted to MEHC's Chief Financial Officer and must include a detailed description of the services to be rendered. The Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the audit committee. The audit committee will be informed on a timely basis of any such services rendered by the independent auditor.

153

PART IV


Item 15.	Exhibits and Financial Statement Schedules



(a)	Financial Statements and Schedules

	(i)	Financial Statements

		Consolidated Financial Statements are included in Item 8.	80

	(ii)	Financial Statement Schedules

		See Schedule I.	155
		See Schedule II.	159

		Schedules not listed above have been omitted because they are either not applicable, not required or the information required to be set forth therein is included on the Consolidated Financial Statements or notes thereto.

(b)	Exhibits

	The exhibits listed on the accompanying Exhibit Index are filed as part of this Annual Report.		162

(c)	Financial statements required by Regulation S-X, which are excluded from the Annual Report by Rule 14a-3(b).

	Not applicable.

154

Schedule I

MidAmerican Energy Holdings Company

Parent Company Only

Condensed Balance Sheets

As of December 31, 2011 and 2010

(Amounts in millions)



	2011			2010
ASSETS
Current assets:
Cash and cash equivalents	$	13		$	18
Accounts receivable	3			25
Accounts receivable - affiliate	—			10
Income taxes receivable	127			—
Other current assets	13			13
Total current assets	156			66

Investments in subsidiaries	19,483			18,841
Other investments	588			1,276
Goodwill	1,289			1,289
Other assets	548			195

Total assets	$	22,064		$	21,667

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and other current liabilities	$	163		$	140
Short-term debt	108			284
Current portion of senior debt	742			—
Current portion of subordinated debt	22			143
Total current liabilities	1,035			567

Senior debt	4,621			5,371
Subordinated debt	—			172
Notes payable - affiliate	1,963			1,841
Other long-term liabilities	346			478
Total liabilities	7,965			8,429

Equity:
MEHC shareholders' equity:
Common stock - 115 shares authorized, no par value, 75 shares issued and outstanding	—			—
Additional paid-in capital	5,423			5,427
Retained earnings	9,310			7,979
Accumulated other comprehensive loss, net	(641		)	(174		)
Total MEHC shareholders' equity	14,092			13,232
Noncontrolling interest	7			6
Total equity	14,099			13,238

Total liabilities and equity	$	22,064		$	21,667

The accompanying notes are an integral part of this financial statement schedule.

155

Schedule I

MidAmerican Energy Holdings Company

Parent Company Only (continued)

Condensed Statements of Operations

For the three years ended December 31, 2011

(Amounts in millions)



	2011			2010			2009

Operating costs and expenses:
General and administration	35			42			172
Depreciation and amortization	—			—			1
Total costs and expenses	35			42			173

Operating loss	(35		)	(42		)	(173		)

Other income (expense):
Interest expense	(396		)	(425		)	(449		)
Interest and dividend income	2			12			5
Other, net	(40		)	11			10
Total other income (expense)	(434		)	(402		)	(434		)

Loss before income tax benefit and equity income	(469		)	(444		)	(607		)
Income tax benefit	(194		)	(220		)	(253		)
Equity income	1,607			1,462			1,511
Net income	1,332			1,238			1,157
Net income attributable to noncontrolling interest	1			—			—
Net income attributable to MEHC	$	1,331		$	1,238		$	1,157

The accompanying notes are an integral part of this financial statement schedule.

156

Schedule I

MidAmerican Energy Holdings Company

Parent Company Only (continued)

Condensed Statements of Cash Flows

For the three years ended December 31, 2011

(Amounts in millions)



	2011			2010			2009

Cash flows from operating activities	$	792		$	(47	)	$	285

Cash flows from investing activities:
Investments in subsidiaries	(157		)	(214		)	(202		)
Notes receivable from affiliate, net	(217		)	240			(195		)
Purchases of available-for-sale securities	(38		)	(15		)	(253		)
Proceeds from sale of available-for-sale securities	33			20			8
Other, net	(6		)	—			(1		)
Net cash flows from investing activities	(385		)	31			(643		)

Cash flows from financing activities:
Proceeds from senior debt	—			—			250
Repayments of subordinated debt	(334		)	(281		)	(734		)
Net (repayments of) proceeds from short-term debt	(176		)	234			(166		)
Notes payable to affiliate, net	106			120			1,144
Net purchases of common stock	—			(56		)	(123		)
Other, net	(8		)	—			(2		)
Net cash flows from financing activities	(412		)	17			369

Net change in cash and cash equivalents	(5		)	1			11
Cash and cash equivalents at beginning of year	18			17			6
Cash and cash equivalents at end of year	$	13		$	18		$	17

The accompanying notes are an integral part of this financial statement schedule.

157

Schedule I

MIDAMERICAN ENERGY HOLDINGS COMPANY

NOTES TO CONDENSED FINANCIAL STATEMENTS

Incorporated by reference are MEHC and Subsidiaries Consolidated Statements of Changes in Equity for the three years ended December 31, 2011 in Part II, Item 8.

Basis of Presentation - The condensed financial information of MidAmerican Energy Holdings Company's ("MEHC") investments in subsidiaries are presented under the equity method of accounting. Under this method, the assets and liabilities of subsidiaries are not consolidated. The investments in subsidiaries are recorded in the Condensed Balance Sheets. The income from operations of subsidiaries is reported on a net basis as equity income in the Condensed Statements of Operations.

Other investments - MEHC's investment in BYD Company Limited ("BYD") common stock is accounted for as an available-for-sale security with changes in fair value recognized in AOCI. As of December 31, 2011 and 2010 , the fair value of MEHC's investment in BYD common stock was $488 million and $1.182 billion , respectively, which resulted in a pre-tax unrealized gain of $256 million and $950 million as of December 31, 2011 and 2010 , respectively.

Dividends and distributions from subsidiaries - Cash dividends paid to MEHC by its subsidiaries for the years ended December 31, 2011 , 2010 and 2009 were $1.088 billion, $433 million and $495 million, respectively. In January and February 2012, MEHC received cash dividends from its subsidiaries totaling $252 million.

General and administration - In March 2009, 703,329 common stock options were exercised having an exercise price of $35.05 per share, or $25 million. Also in March 2009, MEHC purchased the shares issued from the options exercised for $148 million. As a result, MEHC recognized $125 million of stock-based compensation expense, including MEHC's share of payroll taxes, for the year ended December 31, 2009.

Guarantees

MEHC has issued a limited guarantee of a specified portion of the final scheduled principal payment on December 15, 2019 on the Cordova Funding Corporation senior secured bonds in an amount up to a maximum of $37 million.

See the notes to the consolidated MEHC financial statements in Part II, Item 8 for other disclosures.

158

Schedule II

MIDAMERICAN ENERGY HOLDINGS COMPANY

CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

FOR THE THREE YEARS ENDED DECEMBER 31, 2011

(Amounts in millions)



	Column B		Column C							Column E
	Balance at		Charged							Balance
Column A	Beginning		to		Acquisition		Column D			at End
Description	of Year		Income		Reserves		Deductions			of Year

Reserves Deducted From Assets To Which They
Apply:

Reserve for uncollectible accounts receivable:
Year ended 2011	$	27	$	19	$	—	$	(25	)	$	21
Year ended 2010	25		24		—		(22		)	27
Year ended 2009	24		28		1		(28		)	25

Reserves Not Deducted From Assets ⁽¹⁾ :
Year ended 2011	$	8	$	4	$	—	$	(4	)	$	8
Year ended 2010	9		4		—		(5		)	8
Year ended 2009	9		4		—		(4		)	9

The notes to the consolidated MEHC financial statements are an integral part of this financial statement schedule.


(1)	Reserves not deducted from assets relate primarily to estimated liabilities for losses retained by MEHC for workers compensation, public liability and property damage claims.

159

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 27th day of February 2012 .



	MIDAMERICAN ENERGY HOLDINGS COMPANY

	/s/ Gregory E. Abel*
	Gregory E. Abel
	Chairman, President and Chief Executive Officer
	(principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Signature	Title	Date

/s/ Gregory E. Abel*	Chairman, President and Chief	February 27, 2012
Gregory E. Abel	Executive Officer
	(principal executive officer)

/s/ Patrick J. Goodman*	Senior Vice President and	February 27, 2012
Patrick J. Goodman	Chief Financial Officer
	(principal financial and accounting
	officer)

/s/ Walter Scott, Jr.*	Director	February 27, 2012
Walter Scott, Jr.

/s/ Marc D. Hamburg*	Director	February 27, 2012
Marc D. Hamburg

/s/ Warren E. Buffett*	Director	February 27, 2012
Warren E. Buffett

*By: /s/ Douglas L. Anderson	Attorney-in-Fact	February 27, 2012
Douglas L. Anderson

160

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT

No annual report to security holders covering MidAmerican Energy Holdings Company's last fiscal year or proxy material has been sent to security holders.

161

EXHIBIT INDEX



Exhibit No.	Description

3.1	Second Amended and Restated Articles of Incorporation of MidAmerican Energy Holdings Company effective March 2, 2006 (incorporated by reference to Exhibit 3.1 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2005).

3.2	Amended and Restated Bylaws of MidAmerican Energy Holdings Company (incorporated by reference to Exhibit 3.2 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2005).

4.1	Indenture, dated as of October 4, 2002, by and between MidAmerican Energy Holdings Company and The Bank of New York, Trustee, relating to the 5.875% Senior Notes due 2012 (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Holdings Company Registration Statement No. 333-101699 dated December 6, 2002).

4.2	First Supplemental Indenture, dated as of October 4, 2002, by and between MidAmerican Energy Holdings Company and The Bank of New York, Trustee, relating to the 5.875% Senior Notes due 2012 (incorporated by reference to Exhibit 4.2 to the MidAmerican Energy Holdings Company Registration Statement No. 333-101699 dated December 6, 2002).

4.3	Second Supplemental Indenture, dated as of May 16, 2003, by and between MidAmerican Energy Holdings Company and The Bank of New York, Trustee, relating to the 3.50% Senior Notes due 2008 (incorporated by reference to Exhibit 4.3 to the MidAmerican Energy Holdings Company Registration Statement No. 333-105690 dated May 23, 2003).

4.4	Third Supplemental Indenture, dated as of February 12, 2004, by and between MidAmerican Energy Holdings Company and The Bank of New York, Trustee, relating to the 5.00% Senior Notes due 2014 (incorporated by reference to Exhibit 4.4 to the MidAmerican Energy Holdings Company Registration Statement No. 333-113022 dated February 23, 2004).

4.5	Fourth Supplemental Indenture, dated as of March 24, 2006, by and between MidAmerican Energy Holdings Company and The Bank of New York Trust Company, N.A., Trustee, relating to the 6.125% Senior Bonds due 2036 (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated March 28, 2006).

4.6	Fifth Supplemental Indenture, dated as of May 11, 2007, by and between MidAmerican Energy Holdings Company and The Bank of New York Trust Company, N.A., Trustee, relating to the 5.95% Senior Bonds due 2037 (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated May 11, 2007).

4.7	Sixth Supplemental Indenture, dated as of August 28, 2007, by and between MidAmerican Energy Holdings Company and The Bank of New York Trust Company, N.A., Trustee, relating to the 6.50% Senior Bonds due 2037 (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated August 28, 2007).

4.8	Seventh Supplemental Indenture, dated as of March 28, 2008, by and between MidAmerican Energy Holdings Company and The Bank of New York Trust Company, N.A., as Trustee, relating to the 5.75% Senior Notes due 2018 (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated March 28, 2008).

4.9	Eighth Supplemental Indenture, dated as of July 7, 2009, by and between MidAmerican Energy Holdings Company and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 3.15% Senior Notes due 2012 (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated July 7, 2009).

162



Exhibit No.	Description

4.10	Indenture, dated as of October 15, 1997, by and between MidAmerican Energy Holdings Company and IBJ Schroder Bank & Trust Company, Trustee (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated October 23, 1997).

4.11	Form of Second Supplemental Indenture, dated as of September 22, 1998 by and between MidAmerican Energy Holdings Company and IBJ Schroder Bank & Trust Company, Trustee, relating to the 8.48% Senior Notes in the principal amount of $475,000,000 due 2028 (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated September 17, 1998).

4.12	Indenture, dated as of March 12, 2002, by and between MidAmerican Energy Holdings Company and the Bank of New York, Trustee (incorporated by reference to Exhibit 4.11 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2001).

4.13	Amended and Restated Declaration of Trust of MidAmerican Capital Trust II, dated as of March 12, 2002 (incorporated by reference to Exhibit 4.15 to the MidAmerican Energy Holdings Company Registration Statement No. 333-101699 dated December 6, 2002).

4.14	Indenture and First Supplemental Indenture, dated March 11, 1999, by and between MidAmerican Funding, LLC and IBJ Whitehall Bank & Trust Company, Trustee, relating to the $700 million Senior Notes and Bonds (incorporated by reference to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 1998).

4.15	Form of Indenture, by and between MidAmerican Energy Company and The Bank of New York, Trustee (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Company Registration Statement No. 333-59760 dated January 31, 2002).

4.16	First Supplemental Indenture, dated as of February 8, 2002, by and between MidAmerican Energy Company and The Bank of New York, Trustee (incorporated by reference to Exhibit 4.3 to the MidAmerican Energy Company Annual Report on Form 10-K for the year ended December 31, 2004, Commission File No. 333-15387).

4.17	Second Supplemental Indenture, dated as of January 14, 2003, by and between MidAmerican Energy Company and The Bank of New York, Trustee (incorporated by reference to Exhibit 4.2 to the MidAmerican Energy Company Annual Report on Form 10-K for the year ended December 31, 2004, Commission File No. 333-15387).

4.18	Third Supplemental Indenture, dated as of October 1, 2004, by and between MidAmerican Energy Company and The Bank of New York, Trustee (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Company Annual Report on Form 10-K for the year ended December 31, 2004, Commission File No. 333-15387).

4.19	Fourth Supplemental Indenture, dated November 1, 2005, by and between MidAmerican Energy Company and the Bank of New York Trust Company, NA, Trustee (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Company Annual Report on Form 10-K for the year ended December 31, 2005).

4.20	Fiscal Agency Agreement, dated as of October 15, 2002, by and between Northern Natural Gas Company and J.P. Morgan Trust Company, National Association, Fiscal Agent, relating to the $300,000,000 in principal amount of the 5.375% Senior Notes due 2012 (incorporated by reference to Exhibit 10.47 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2003).

4.21	Trust Indenture, dated as of August 13, 2001, among Kern River Funding Corporation, Kern River Gas Transmission Company and JP Morgan Chase Bank, Trustee, relating to the $510,000,000 in principal amount of the 6.676% Senior Notes due 2016 (incorporated by reference to Exhibit 10.48 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2003).

4.22	Third Supplemental Indenture, dated as of May 1, 2003, among Kern River Funding Corporation, Kern River Gas Transmission Company and JPMorgan Chase Bank, Trustee, relating to the $836,000,000 in principal amount of the 4.893% Senior Notes due 2018 (incorporated by reference to Exhibit 10.49 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2003).

163



Exhibit No.	Description

4.23	Trust Deed, dated December 15, 1997 among CE Electric UK Funding Company, AMBAC Insurance UK Limited and The Law Debenture Trust Corporation, p.l.c., Trustee (incorporated by reference to Exhibit 99.1 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated March 30, 2004).

4.24	Insurance and Indemnity Agreement, dated December 15, 1997 by and between CE Electric UK Funding Company and AMBAC Insurance UK Limited (incorporated by reference to Exhibit 99.2 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated March 30, 2004).

4.25	Supplemental Agreement to Insurance and Indemnity Agreement, dated September 19, 2001, by and between CE Electric UK Funding Company and AMBAC Insurance UK Limited (incorporated by reference to Exhibit 99.3 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated March 30, 2004).

4.26	Fiscal Agency Agreement, dated as of July 15 2008, by and between Northern Natural Gas Company and The Bank New York Mellon Trust Company, National Association, Fiscal Agent, relating to the $200,000,000 in principal amount of the 5.75% Senior Notes due 2018 (incorporated by reference to Exhibit 4.32 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2008).

4.27	Fiscal Agency Agreement, dated as of April 20, 2011, by and between Northern Natural Gas Company and The Bank of New York Mellon Trust Company, N.A., Fiscal Agent, relating to the $200,000,000 in principal amount of the 4.25% Senior Notes due 2021.

4.28	Trust Indenture, dated as of September 10, 1999, by and between Cordova Funding Corporation and Chase Manhattan Bank and Trust Company, National Association, Trustee, relating to the $225,000,000 in principal amount of the 8.75% Senior Secured Bonds due 2019 (incorporated by reference to Exhibit 10.71 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2004).

4.29	Trust Deed, dated as of February 4, 1998 among Yorkshire Power Finance Limited, Yorkshire Power Group Limited and Bankers Trustee Company Limited, Trustee, relating to the £200,000,000 in principal amount of the 7.25% Guaranteed Bonds due 2028 (incorporated by reference to Exhibit 10.74 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2004).

4.30	First Supplemental Trust Deed, dated as of October 1, 2001, among Yorkshire Power Finance Limited, Yorkshire Power Group Limited and Bankers Trustee Company Limited, Trustee, relating to the £200,000,000 in principal amount of the 7.25% Guaranteed Bonds due 2028 (incorporated by reference to Exhibit 10.75 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2004).

4.31	Third Supplemental Trust Deed, dated as of October 1, 2001, among Yorkshire Electricity Distribution plc, Yorkshire Electricity Group plc and Bankers Trustee Company Limited, Trustee, relating to the £200,000,000 in principal amount of the 9.25% Bonds due 2020 (incorporated by reference to Exhibit 10.76 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2004).

4.32	Indenture, dated as of February 1, 2000, among Yorkshire Power Finance 2 Limited, Yorkshire Power Group Limited and The Bank of New York, Trustee (incorporated by reference to Exhibit 10.78 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2004).

4.33	First Supplemental Trust Deed, dated as of September 27, 2001, among Northern Electric Finance plc, Northern Electric plc, Northern Electric Distribution Limited and The Law Debenture Trust Corporation p.l.c., Trustee, relating to the £100,000,000 in principal amount of the 8.875% Guaranteed Bonds due 2020 (incorporated by reference to Exhibit 10.81 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2004).

4.34	Trust Deed, dated as of January 17, 1995, by and between Yorkshire Electricity Group plc and Bankers Trustee Company Limited, Trustee, relating to the £200,000,000 in principal amount of the 9 1/4% Bonds due 2020 (incorporated by reference to Exhibit 10.83 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2004).

164



Exhibit No.	Description

4.35	Master Trust Deed, dated as of October 16, 1995, by and between Northern Electric Finance plc, Northern Electric plc and The Law Debenture Trust Corporation p.l.c., Trustee, relating to the £100,000,000 in principal amount of the 8.875% Guaranteed Bonds due 2020 (incorporated by reference to Exhibit 10.70 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2004).

4.36	Fiscal Agency Agreement, dated April 14, 2005, by and between Northern Natural Gas Company and J.P. Morgan Trust Company, National Association, Fiscal Agent, relating to the $100,000,000 in principal amount of the 5.125% Senior Notes due 2015 (incorporated by reference to Exhibit 99.1 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated April 18, 2005).

4.37	Trust Deed dated May 5, 2005 among Northern Electric Finance plc, Northern Electric Distribution Limited, Ambac Assurance UK Limited and HSBC Trustee (C.I.) Limited (incorporated by reference to Exhibit 99.1 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2005).

4.38	Reimbursement and Indemnity Agreement dated May 5, 2005 among Northern Electric Finance plc, Northern Electric Distribution Limited and Ambac Assurance UK Limited (incorporated by reference to Exhibit 99.2 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2005).

4.39	Trust Deed, dated May 5, 2005 among Yorkshire Electricity Distribution plc, Ambac Assurance UK Limited and HSBC Trustee (C.I.) Limited (incorporated by reference to Exhibit 99.3 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2005).

4.40	Reimbursement and Indemnity Agreement, dated May 5, 2005 between Yorkshire Electricity Distribution plc and Ambac Assurance UK Limited (incorporated by reference to Exhibit 99.4 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2005).

4.41	Supplemental Trust Deed, dated May 5, 2005 among CE Electric UK Funding Company, Ambac Assurance UK Limited and The Law Debenture Trust Corporation plc (incorporated by reference to Exhibit 99.5 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2005).

4.42	Second Supplemental Agreement to Insurance and Indemnity Agreement, dated May 5, 2005 by and between CE Electric UK Funding Company and Ambac Assurance UK Limited (incorporated by reference to Exhibit 99.6 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2005).

4.43	Shareholders Agreement, dated as of March 14, 2000 (incorporated by reference to Exhibit 4.19 to the MidAmerican Energy Holdings Company Registration Statement No. 333-101699 dated December 6, 2002).

4.44	Amendment No. 1 to Shareholders Agreement, dated December 7, 2005 (incorporated by reference to Exhibit 4.17 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2005).

4.45	Equity Commitment Agreement, dated as of March 1, 2006, by and between Berkshire Hathaway Inc. and MidAmerican Energy Holdings Company (incorporated by reference to Exhibit 10.72 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2005).

4.46	Amendment No. 1 to Equity Commitment Agreement, dated March 23, 2010, by and between Berkshire Hathaway Inc. and MidAmerican Energy Holdings Company (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated March 23, 2010).

4.47	Fiscal Agency Agreement, dated February 12, 2007, by and between Northern Natural Gas Company and Bank of New York Trust Company, N.A., Fiscal Agent, relating to the $150,000,000 in principal amount of the 5.80% Senior Bonds due 2037 (incorporated by reference to Exhibit 99.1 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated February 12, 2007).

165



Exhibit No.	Description

4.48	Indenture, dated as of October 1, 2006, by and between MidAmerican Energy Company and the Bank of New York Trust Company, N.A., Trustee (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Company Quarterly Report on Form 10-Q for the quarter ended September 30, 2006).

4.49	First Supplemental Indenture, dated as of October 6, 2006, by and between MidAmerican Energy Company and the Bank of New York Trust Company, N.A., Trustee (incorporated by reference to Exhibit 4.2 to the MidAmerican Energy Company Quarterly Report on Form 10-Q for the quarter ended September 30, 2006).

4.50	Second Supplemental Indenture, dated June 29, 2007, by and between MidAmerican Energy Company and The Bank of New York Trust Company, N.A., Trustee (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Company Current Report on Form 8-K dated June 29, 2007).

4.51	Third Supplemental Indenture, dated March 25, 2008, by and between MidAmerican Energy Company and The Bank of New York Trust Company, Trustee, relating to the 5.3% Notes due 2018 (incorporated by reference to Exhibit 4.1 to MidAmerican Energy Company Current Report on Form 8-K dated March 25, 2008).

4.52	£119,000,000 Finance Contract, dated July 2, 2010, by and between Northern Electric Distribution Limited and the European Investment Bank (incorporated by reference to Exhibit 4.1 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2010).

4.53	Guarantee and Indemnity Agreement, dated July 2, 2010, by and between CE Electric UK Funding Company and the European Investment Bank (incorporated by reference to Exhibit 4.2 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2010).

4.54	£151,000,000 Finance Contract, dated July 2, 2010, by and between Yorkshire Electricity Distribution plc and the European Investment Bank (incorporated by reference to Exhibit 4.3 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2010).

4.55	Guarantee and Indemnity Agreement, dated July 2, 2010, by and between CE Electric UK Funding Company and the European Investment Bank (incorporated by reference to Exhibit 4.4 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2010).

4.56	Indenture, dated as of February 24, 2012, by and between Topaz Solar Farms LLC and The Bank of New York Mellon Trust Company, N.A., as Trustee.

166



Exhibit No.	Description

4.57	Mortgage and Deed of Trust dated as of January 9, 1989, between PacifiCorp and The Bank of New York Mellon Trust Company, N.A., Trustee, incorporated by reference to Exhibit 4-E, Form 8-B, File No. 1-5152, as supplemented and modified by 25 Supplemental Indentures, each incorporated by reference, as follows:



Exhibit Number	PacifiCorp File Type	File Date	File Number

(4)(b)	SE	November 2, 1989	33-31861
(4)(a)	8-K	January 9, 1990	1-5152
4(a)	8-K	September 11, 1991	1-5152
4(a)	8-K	January 7, 1992	1-5152
4(a)	10-Q	Quarter ended March 31, 1992	1-5152
4(a)	10-Q	Quarter ended September 30, 1992	1-5152
4(a)	8-K	April 1, 1993	1-5152
4(a)	10-Q	Quarter ended September 30, 1993	1-5152
(4)b	10-Q	Quarter ended June 30, 1994	1-5152
(4)b	10-K	Year ended December 31, 1994	1-5152
(4)b	10-K	Year ended December 31, 1995	1-5152
(4)b	10-K	Year ended December 31, 1996	1-5152
4(b)	10-K	Year ended December 31, 1998	1-5152
99(a)	8-K	November 21, 2001	1-5152
4.1	10-Q	Quarter ended June 30, 2003	1-5152
99	8-K	September 8, 2003	1-5152
4	8-K	August 24, 2004	1-5152
4	8-K	June 13, 2005	1-5152
4.2	8-K	August 14, 2006	1-5152
4	8-K	March 14, 2007	1-5152
4.1	8-K	October 3, 2007	1-5152
4.1	8-K	July 17, 2008	1-5152
4.1	8-K	January 8, 2009	1-5152
4.1	8-K	May 12, 2011	1-5152
4.1	8-K	January 6, 2012	1-5152



Exhibit No.	Description

10.1	Amended and Restated Employment Agreement, dated February 25, 2008, by and between MidAmerican Energy Holdings Company and Gregory E. Abel (incorporated by reference to Exhibit 10.3 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2007).

10.2	Incremental Profit Sharing Plan, dated February 10, 2009, by and between MidAmerican Energy Holdings Company and Gregory E. Abel (incorporated by reference to Exhibit 10.6 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2008).

10.3	Amended and Restated Employment Agreement, dated February 25, 2008, by and between MidAmerican Energy Holdings Company and Patrick J. Goodman (incorporated by reference to Exhibit 10.5 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2007).

167



Exhibit No.	Description

10.4	Amended and Restated Casecnan Project Agreement, dated June 26, 1995, between the National Irrigation Administration and CE Casecnan Water and Energy Company Inc. (incorporated by reference to Exhibit 10.1 to the CE Casecnan Water and Energy Company, Inc. Registration Statement on Form S-4 dated January 25, 1996).

10.5	Supplemental Agreement, dated as of September 29, 2003, by and between CE Casecnan Water and Energy Company, Inc. and the Philippines National Irrigation Administration (incorporated by reference to Exhibit 98.1 to the MidAmerican Energy Holdings Company Current Report on Form 8-K dated October 15, 2003).

10.6	CalEnergy Company, Inc. Voluntary Deferred Compensation Plan, effective December 1, 1997, First Amendment, dated as of August 17, 1999, and Second Amendment effective March 14, 2000 (incorporated by reference to Exhibit 10.50 to the MidAmerican Energy Holdings Company Registration Statement No. 333-101699 dated December 6, 2002).

10.7	MidAmerican Energy Holdings Company Executive Voluntary Deferred Compensation Plan restated effective as of January 1, 2007 (incorporated by reference to Exhibit 10.9 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2007).

10.8	MidAmerican Energy Company First Amended and Restated Supplemental Retirement Plan for Designated Officers dated as of May 10, 1999 amended on February 25, 2008 to be effective as of January 1, 2005 (incorporated by reference to Exhibit 10.10 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2007).

10.9	MidAmerican Energy Holdings Company Long-Term Incentive Partnership Plan as Amended and Restated January 1, 2007 (incorporated by reference to Exhibit 10.11 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2007).

10.10	Amended and Restated Credit Agreement, dated as of July 6, 2006, by and among MidAmerican Energy Holdings Company, as Borrower, The Banks and Other Financial Institutions Parties Hereto, as Banks, JPMorgan Chase Bank, N.A., as L/C Issuer, Union Bank of California, N.A., as Administrative Agent, The Royal Bank of Scotland PLC, as Syndication Agent, and ABN Amro Bank N.V., JPMorgan Chase Bank, N.A. and BNP Paribas as Co-Documentation Agents (incorporated by reference to Exhibit 99.1 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).

10.11	First Amendment, dated as of April 15, 2009, to the Amended and Restated Credit Agreement, dated as of July 6, 2006, by and among MidAmerican Energy Holdings Company, as Borrower, The Banks and Other Financial Institutions Parties Hereto, as Banks, JPMorgan Chase Bank, N.A., as L/C Issuer, Union Bank of California, N.A., as Administrative Agent, The Royal Bank of Scotland PLC, as Syndication Agent, and ABN Amro Bank N.V., JPMorgan Chase Bank, N.A. and BNP Paribas as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2009).

10.12	Amended and Restated Credit Agreement, dated as of July 6, 2006, among MidAmerican Energy Company, the Lending Institutions Party Hereto, as Banks, Union Bank of California, N.A., as Syndication Agent, JPMorgan Chase Bank, N.A., as Administrative Agent, and The Royal Bank of Scotland plc, ABN AMRO Bank N.V. and BNP Paribas as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to the MidAmerican Energy Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).

10.13	First Amendment, dated as of April 15, 2009, to the Amended and Restated Credit Agreement, dated as of July 6, 2006, by and among MidAmerican Energy Company, the Lending Institutions Party Hereto, as Banks, Union Bank of California, N.A., as Syndication Agent, JPMorgan Chase Bank, N.A., as Administrative Agent, and The Royal Bank of Scotland plc, ABN AMRO Bank N.V. and BNP Paribas as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to the MidAmerican Energy Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2009).

10.14	$700,000,000 Credit Agreement dated as of October 23, 2007 among PacifiCorp, The Banks Party thereto, The Royal Bank of Scotland plc, as Syndication Agent, and Union Bank of California, N.A., as Administrative Agent (incorporated by reference to Exhibit 99 to the PacifiCorp Quarterly Report on Form 10-Q for the quarter ended September 30, 2007).

168



Exhibit No.	Description

10.15	First Amendment, dated as of April 15, 2009, to the $700,000,000 Credit Agreement dated as of October 23, 2007 among PacifiCorp, The Banks Party thereto, The Royal Bank of Scotland plc, as Syndication Agent, and Union Bank of California, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the PacifiCorp Quarterly Report on Form 10-Q for the quarter ended March 31, 2009).

10.16	$800,000,000 Amended and Restated Credit Agreement dated as of July 6, 2006 among PacifiCorp, The Banks Party thereto, The Royal Bank of Scotland plc, as Syndication Agent, and JP Morgan Chase Bank, N.A., as Administrative Agent (incorporated by Reference to Exhibit 99 to the PacifiCorp Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).

10.17	First Amendment, dated as of April 15, 2009, to the $800,000,000 Amended and Restated Credit Agreement dated as of July 6, 2006 among PacifiCorp, The Banks Party thereto, The Royal Bank of Scotland plc, as Syndication Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to the PacifiCorp Quarterly Report on Form 10-Q for the quarter ended March 31, 2009).

10.18	Second Amendment dated as of January 6, 2012, amends that certain Amended and Restated Credit Agreement, dated as of July 6, 2006, among PacifiCorp, the banks listed on the signature pages thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Issuing Bank, and the Royal Bank of Scotland plc, as Syndication Agent (incorporated by reference to Exhibit 10.11 to the PacifiCorp Annual Report on Form 10-K for the year ended December 31, 2011).

10.19	£150,000,000 Facility Agreement, dated March 26, 2010, among CE Electric UK Funding Company, Yorkshire Electricity Distribution plc and Northern Electric Distribution Limited, as Borrowers, and Abbey National Treasury Services plc, Lloyds TSB Bank plc and The Royal Bank of Scotland plc, as Original Lenders (incorporated by reference to Exhibit 10.1 to the MidAmerican Energy Holdings Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2010).

10.20	$500,000,000 Revolving Loan Agreement, dated January 6, 2012, between MidAmerican Energy Holdings Company and BH Finance LLC.

10.21	Summary of Key Terms of Compensation Arrangements with MidAmerican Energy Holdings Company Named Executive Officers and Directors.

14.1	MidAmerican Energy Holdings Company Code of Ethics for Chief Executive Officer, Chief Financial Officer and Other Covered Officers (incorporated by reference to Exhibit 14.1 to the MidAmerican Energy Holdings Company Annual Report on Form 10-K for the year ended December 31, 2003).

21.1	Subsidiaries of the Registrant.

23.1	Consent of Deloitte & Touche LLP.

24.1	Power of Attorney.

31.1	Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

95	Coal Mine Safety Disclosures Required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

169



Exhibit No.	Description

101	The following financial information from MidAmerican Energy Holdings Company's Annual Report on Form 10-K for the year ended December 31, 2011 is formatted in XBRL (eXtensible Business Reporting Language) and included herein: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Comprehensive Income and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text.

170

EXHIBIT 4.27

FISCAL AGENCY AGREEMENT

Between

NORTHERN NATURAL GAS COMPANY,

as Issuer

and

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Fiscal Agent

__________

Dated as of April 20 , 2011

__________

4.25 % Senior Notes due 2021



TABLE OF CONTENTS
		Page

1. The Securities		1

(a) General		1
(b) Form of Securities; Denominations of Securities		1
(c) Temporary Securities		4
(d) Legends		4
(e) Book-Entry Provisions		4

2. Fiscal Agent; Other Agents		5

3. Authentication		6

4. Payment and Cancellation.		6

(a) Payment		6
(b) Cancellation		7

5. Transfer and Exchange of Securities		7

(a) Transfers of Global Securities as Such		7
(b) Exchanges of Global Securities for Definitive Securities		7
(c) Beneficial Interests		8
(d) Special Provisions Regarding Transfer of Beneficial Interests
in a Regulation S Global Security		8
(e) Special Provisions Regarding Transfer of Beneficial Interests
in a Rule 144A Global Security		10
(f) Special Provisions Regarding Transfer of Restricted Definitive Securities		12

6. Mutilated, Destroyed, Stolen or Lost Securities		14

7. Register; Record Date for Certain Actions		15

8. Delivery of Certain Information		16

(a) Non-Reporting Issuer		16
(b) Information After One Year		16
(c) Periodic Reports		16



9. Conditions of Fiscal Agent's Obligations		17

(a) Compensation and Indemnity		17
(b) Agency		17
(c) Advice of Counsel		18
(d) Reliance		18
(e) Interest in Securities, etc		18
(f) Certifications		18
(g) No Implied Obligations		18
(h) No Liability		18
(i) No Inquiry		18
(j) Agents		19
(k) Directors, Officers		19

10. Resignation and Appointment of Successor		19

(a) Fiscal Agent and Paying Agent		19
(b) Resignation		19
(c) Successors		19
(d) Acknowledgment		20
(e) Merger, Consolidation, etc.		20

11. Payment of Taxes		20

12. Amendments		20

(a) Approval		20
(b) Binding Nature of Amendments, Notice, Notations, etc.		21
(c) “Outstanding” Defined		22

13. GOVERNING LAW		22

14. Notices		22

15. Defeasance (Legal and Covenant)		22

(a) Issuer's Option to Effect Defeasance or Covenant Defeasance		22
(b) Defeasance and Discharge		23
(c) Covenant Defeasance		23
(d) Conditions to Defeasance and Covenant Defeasance		23
(e) Deposit in Trust; Miscellaneous		25
(f) Reinstatement		25

16. Headings		26

17. Counterparts		26



18. Successors and Assigns		26

19. Separability Clause		26

20. Waiver of Jury Trial.		26

21. Force Majeure.		26

FISCAL AGENCY AGREEMENT (this “ Agreement ”), dated as of April 20 , 2011, between NORTHERN NATURAL GAS COMPANY, a corporation duly organized under the laws of the State of Delaware (the “ Issuer ”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association, as Fiscal Agent (as defined in Section 2 hereof).

RECITALS OF THE ISSUER

The Issuer has duly authorized the creation of an issue of its 4.25% Senior Notes due December 1, 2021 (the “ Securities ”) of substantially the tenor and amount hereinafter set forth, and to provide therefor the Issuer has duly authorized the execution and delivery of this Agreement.

All things necessary to make the Securities, when executed by the Issuer and authenticated and delivered hereunder and duly issued by the Issuer, the valid and legally binding obligations of the Issuer, and to make this Agreement a valid and legally binding agreement of the Issuer, in accordance with their and its terms, have been done.

1. The Securities .

(a) General . The initial aggregate principal amount of Securities issued under this Agreement will be $200,000,000. The aggregate principal amount of Securities which may be authenticated and delivered under this Agreement is unlimited, including without limitation, Securities authenticated and delivered upon registration of transfer, or in exchange for, or in lieu of other Securities pursuant to the provisions of this Agreement or the Securities. The Securities and any additional Securities subsequently issued under this Agreement will be treated as a single class for all purposes under this Agreement.

The Securities shall be known and designated as the “4.25% Senior Notes due 2021” of the Issuer. The Securities will be unsecured, direct, unconditional and general obligations of the Issuer and will rank pari passu with all other unsecured and unsubordinated indebtedness of the Issuer.

(b) Form of Securities; Denominations of Securities . The Securities will be issued in registered form without coupons in substantially the form, and including the terms, provided for herein and on Exhibit A . The Securities shall be executed manually or in facsimile on behalf of the Issuer by its Chairman of the Board, President or a Vice President and by its Secretary or an Assistant Secretary (the “ Authorized Officers ”), notwithstanding that such officers, or any one of them, shall have ceased, for any reason, to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. The Securities may also have such additional provisions, omissions, variations or substitutions as are not inconsistent with the provisions of this Agreement 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 any law or with any rules made pursuant thereto or with the rules of any securities exchange or governmental agency or as may, consistently herewith, be determined by the Authorized Officers of the Issuer executing such Securities, as conclusively evidenced by their execution of such Securities. All of the Securities shall be otherwise substantially identical except as to denominations of Securities and as provided herein.

Except as otherwise set forth in this Agreement, the Securities offered and sold in their initial resale distribution to a qualified institutional buyer (as defined in Rule 144A (“ Rule 144A ”) under the Securities Act of 1933, as amended (the “ Act ”), each a “ QIB ”) in reliance on Rule 144A (“ Rule 144A Securities ”) shall initially be issued in the form of one or more Global Securities (as defined in Section 1(e) hereof) in definitive, fully registered form, substantially in the

form set forth on Exhibit A , with such applicable legends as are provided for herein and on Exhibit A , and in minimum denominations of $2,000 and in integral multiples of $1,000 in excess of $2,000. Such Global Securities shall be duly executed by the Issuer and authenticated by the Fiscal Agent as hereinafter provided, and deposited with the U.S. Depository (as defined in Section 1(e) hereof). Until such time as the Holding Period (as defined below) shall have terminated, each such Security shall be referred to as a “ Rule 144A Global Security .” The aggregate principal amount of any Rule 144A Global Security may be adjusted by endorsements to Schedule A on the reverse thereof in any situation where adjustment is permitted or required by this Agreement or provided for on Exhibit A . Unless the Issuer determines otherwise in accordance with applicable law, the legend setting forth transfer restrictions shall be removed or deemed removed from a Rule 144A Security in accordance with the procedures set forth in Section 1(d) after such time as the applicable Holding Period shall have terminated, and each such Security shall thereafter be held as an unrestricted Security. As used herein, the term “ Holding Period ,” with respect to Rule 144A Securities, means the period referred to in Rule 144(d) under the Act or any successor provision thereto (“ Rule 144(d) ”) and as may be amended or revised from time to time, beginning from the later of (i) the original issue date of such Securities or (ii) the last date on which the Issuer or any affiliate of the Issuer was the beneficial owner of such Securities (or any predecessor thereof).

(i)

Except as otherwise set forth in this Agreement, Securities offered and sold in reliance on Regulation S under the Act (“ Regulation S ”) will be issued initially in the form of one or more temporary Global Securities in the form provided for herein and on Exhibit A , with such applicable legends as are provided for herein and on Exhibit A , and in minimum denominations of $2,000 and in integral multiples of $1,000 in excess of $2,000 equal to the outstanding principal amount of the Securities initially sold in reliance on Rule 903 of Regulation S under the Act (the “ Regulation S Temporary Global Securities ”). The Regulation S Temporary Global Securities, which will be deposited on behalf of the purchasers of the Securities represented thereby with the Fiscal Agent, as custodian for the U.S. Depository, and registered in the name of the U.S. Depository or the nominee of the U.S. Depository for the accounts of designated agents holding on behalf of Euroclear Bank S.A./N.V., as operator of the Euroclear System (“ Euroclear ”), or Clearstream Banking, S.A. (“ Clearstream ”), shall be duly executed by the Issuer and authenticated by the Fiscal Agent as hereinafter provided. Following the termination of the Distribution Compliance Period (as defined below) and upon the receipt by the Fiscal Agent of:

a. a written certificate from the U.S. Depository, together with copies of certificates from Euroclear and Clearstream, certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Securities (except to the extent of any beneficial owners thereof who acquired an interest therein during the Distribution Compliance Period pursuant to another exemption from registration under the Act and who will take delivery of a beneficial ownership interest in a Rule 144A Global Security or a Restricted Definitive Security (as defined below), all as contemplated by Section 5(d) hereof); and

b. a certificate signed by the Authorized Officers (“ Officers' Certificate ”),

beneficial interests in the Regulation S Temporary Global Securities will be exchanged for beneficial interests in a permanent global Security in the form provided for herein and on Exhibit A , issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global

Securities (the “ Regulation S Permanent Global Securities ”) pursuant to the rules and regulations of the U.S. Depository, Euroclear or Clearstream, as applicable, in each case pertaining to beneficial interests in Global Securities (“ Applicable Procedures ”). Simultaneously with the authentication of the Regulation S Permanent Global Securities, the Fiscal Agent will cancel the Regulation S Temporary Global Securities. As used herein, “ Regulation S Global Securities ” means the Regulation S Temporary Global Securities or the Regulation S Permanent Global Securities, as applicable.

The aggregate principal amount of the Regulation S Temporary Global Securities and the Regulation S Permanent Global Securities may be adjusted by endorsements to Schedule A on the reverse thereof in any situation where adjustment is permitted or required by this Agreement. As used herein, the term “ Distribution Compliance Period ,” with respect to Regulation S Securities, means the period of 40 consecutive days beginning on and including the later of (i) the date on which interests in such Securities are offered to Persons (as defined below) other than distributors (as defined in Regulation S) and (ii) the original issue date of such Securities. Except as otherwise provided in this Agreement, no Regulation S Global Security shall be issued except as provided in this paragraph to evidence Securities offered and sold in reliance on Regulation S. Unless the Issuer determines otherwise in accordance with applicable law, the legend setting forth transfer restrictions shall be removed or deemed removed from a Regulation S Security in accordance with the procedures set forth in Section 1(d) hereof, and each such Security shall thereafter be held as an unrestricted Security. As used herein, “ Person ” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “General Terms and Conditions of Clearstream Banking” and “Customer Handbook” of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Temporary Global Securities and the Regulation S Permanent Global Securities that are held by Agent Members (as defined in Section 1(e) ) through Euroclear or Clearstream.

(ii)

Except as otherwise provided in this Agreement, Securities offered and sold in their initial resale distribution to purchasers who are institutional “accredited investors” as described in Rule 501(a)(1), (2), (3) or (7) under the Act and who are not QIBs shall be issued in the form of fully registered, definitive, physical certificates, substantially in the form set forth herein and on Exhibit A , with such applicable legends as are provided for on Exhibit A , and in minimum denominations of $200,000 and in integral multiples of $1,000 in excess of $200,000 (such securities are herein referred to as “ Restricted Definitive Securities ”). Unless the Issuer determines otherwise in accordance with applicable law, the legend setting forth transfer restrictions shall be removed or deemed removed from a Restricted Definitive Security in accordance with the procedures set forth in Section 1(d) after such time as the applicable Holding Period shall have terminated, and each such Security shall thereafter be held as an unrestricted Security. As used herein, the term “ Holding Period ,” with respect to Restricted Definitive Securities, means the period referred to in Rule 144(d) or any successor provision thereto and as may be amended or revised from time to time, beginning from the later of (i) the original issue date of such Securities or (ii) the last date on which the Issuer or any affiliate of the Issuer was the beneficial owner of such Securities (or any predecessor thereof).

(c) Temporary Securities. Until definitive Securities are prepared, the Issuer may execute, and there shall be authenticated and delivered in accordance with the provisions of Section 3 hereof (in lieu of definitive printed Securities), temporary Securities. Such temporary Securities may be in registered global form. Such temporary Securities shall be subject to the same limitations and conditions and entitled to the same rights and benefits as definitive Securities, except as provided herein or therein. Temporary Securities shall be exchangeable for definitive Securities, when such definitive Securities are available for delivery; and upon the surrender for exchange of such temporary Securities, the Issuer shall execute and there shall be authenticated and delivered, in accordance with the provisions of Sections 6 and 7 hereof, in exchange for such temporary Securities, a like aggregate principal amount of definitive Securities of like tenor. The Issuer shall pay all charges, including (without limitation) stamp and other taxes and governmental charges, incident to any exchange of temporary Securities for definitive Securities. All temporary Securities shall be identified as such and shall describe the right of the holder thereof to effect an exchange for definitive Securities and the manner in which such an exchange may be effected.

(d) Legends . Securities shall be stamped or otherwise be imprinted with the legends set forth on the face of the text of the Securities attached as Exhibit A , including any legend provided for pursuant to Section 1(e) hereof. The legends so provided on the face of the text of the Securities may be removed from any Security, upon written order signed in the name of the Issuer by the Authorized Officers and delivered to the Fiscal Agent (“ Order ”), (i) one year from the later of issuance of the Security or the date such Security (or any predecessor) was last acquired from an “affiliate” of the Issuer within the meaning of Rule 144 (“ Rule 144 ”) under the Act or (ii) in connection with a sale made pursuant to the volume (and other restrictions) of Rule 144 following one year from such time, provided that, if the legend is removed and the Security is subsequently held by such an affiliate of the Issuer, the legend shall be reinstated. Any legends provided pursuant to Section 1(e) hereof may be removed in the event the applicable Global Securities cease to be Global Securities in accordance with Section 5 hereof.

(e) Book-Entry Provisions . Subject to the other provisions of this Section 1, the Securities may be issued initially in the form of one or more registered global Securities (“ Global Securities ”) deposited with or on behalf of a depository located in the United States, which initially shall be The Depository Trust Company together with its nominee Cede & Co. (the “ U.S. Depository ”), that (i) shall be registered in the name of the U.S. Depository for such Global Security or Securities or the nominee of such U.S. Depository, (ii) shall be delivered by the Fiscal Agent to such U.S. Depository or pursuant to such U.S. Depository's instruction and (iii) shall bear a legend substantially similar to the following:

“THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE FISCAL AGENCY AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE U.S. DEPOSITORY OR A NOMINEE OF THE U.S. DEPOSITORY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE U.S. DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE FISCAL AGENCY AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE U.S. DEPOSITORY TO A NOMINEE OF THE U.S. DEPOSITORY OR BY A NOMINEE OF THE U.S. DEPOSITORY TO THE U.S. DEPOSITORY OR ANOTHER NOMINEE OF THE U.S. DEPOSITORY OR BY THE U.S. DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR U.S. DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR U.S. DEPOSITORY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE U.S. DEPOSITORY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,

EXCHANGE OR PAYMENT, AND ANY CERTIFICATE IS ISSUED IN THE NAME OR NAMES AS DIRECTED IN WRITING BY THE U.S. DEPOSITORY, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED HOLDER HEREOF, THE U.S. DEPOSITORY, HAS AN INTEREST HEREIN.”

Members of, or direct or indirect participants in, the U.S. Depository (“ Agent Members ”) shall have no rights under this Agreement with respect to any Global Security held on their behalf by the U.S. Depository or under the Global Security, and such U.S. Depository may be treated by the Issuer, the Fiscal Agent, and any agent of the Issuer or the Fiscal Agent as the owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Fiscal Agent, or any agent of the Issuer or the Fiscal Agent from giving effect to any written certification, proxy or other authorization furnished by the U.S. Depository or impair, as between the U.S. Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Security.

So long as the U.S. Depository or its nominee is the registered holder of the Securities, the U.S. Depository or such nominee will for all purposes of the Securities and this Agreement be considered the sole owner or holder of such Securities. Until such time as definitive Securities may be issued, beneficial owners of Securities will not be entitled to have Securities registered in their names, will not receive or be entitled to receive physical delivery of Securities in definitive form, and will not be considered the owners or holders thereof under this Agreement for any purpose.

The Issuer initially appoints the Fiscal Agent to serve as custodian for the Global Securities.

This Section 1(e) shall apply only to Global Securities deposited with or on behalf of the U.S. Depository.

2. Fiscal Agent; Other Agents . The Issuer hereby appoints The Bank of New York Mellon Trust Company, N.A., acting through its corporate trust office in Chicago, Illinois (the “ Corporate Trust Office ”), as fiscal agent of the Issuer in respect of the Securities, upon the terms and subject to the conditions herein set forth, and The Bank of New York Mellon Trust Company, N.A. hereby accepts such appointment. The Bank of New York Mellon Trust Company, N.A. and any successor or successors as such fiscal agent qualified and appointed in accordance with Section 10 hereof, are herein called the “ Fiscal Agent .” The Fiscal Agent shall have the powers and authority granted to and conferred upon it in the Securities and hereby and such further powers and authority to act on behalf of the Issuer as may be mutually agreed upon by the Issuer and the Fiscal Agent. All of the terms and provisions with respect to such powers and authority contained in the Securities are subject to and governed by the terms and provisions hereof.

The Issuer may appoint one or more agents (a “ Paying Agent ” or “ Paying Agents ”) for the payment (subject to applicable laws and regulations) of the principal of and interest on the Securities, and one or more agents (a “ Transfer Agent ” or “ Transfer Agents ”) for the transfer and exchange of securities, at such place or places as the Issuer may determine; provided , however , the Issuer shall at all times maintain a Paying Agent or agent thereof and Transfer Agent or agent thereof in the Borough of Manhattan, The City of New York (which Paying Agent and Transfer Agent may be the Fiscal Agent or any of its affiliates). The Issuer initially appoints the Fiscal Agent, acting through its offices in the Borough of Manhattan, The City of New York, as Paying Agent and Transfer Agent. The Issuer shall promptly notify the Fiscal Agent of the name and address of each Paying Agent and Transfer Agent appointed, and will notify the Fiscal Agent of the resignation or termination of any Paying Agent or Transfer Agent. Subject to the provisions of Section 10(c) hereof, the Issuer may vary or terminate the appointment of any such Paying Agent or Transfer Agent at any time and from time to time upon giving not less than 90 days' notice to such Paying Agent or Transfer

Agent, as the case may be, and to the Fiscal Agent.

The Issuer shall cause notice of any resignation, termination or appointment of any Paying Agent or Transfer Agent or of the Fiscal Agent and of any change in the office through which any such Agent will act to be given to registered holders of the Securities.

3. Authentication . The Fiscal Agent is authorized, upon receipt of Securities duly executed on behalf of the Issuer for the purposes of the original issuance of the Securities, (i) to authenticate said Securities in an aggregate principal amount of $200,000,000 and to deliver said Securities in accordance with an Order or Orders and thereafter to authenticate such additional Securities for which it has received subsequent Orders and (ii) thereafter to authenticate and deliver said Securities in accordance with the provisions hereinafter set forth.

The Fiscal Agent may, with the consent of the Issuer, appoint by an instrument or instruments in writing one or more agents (which may include itself) for the authentication of Securities and, with such consent, vary or terminate any such appointment upon written notice and approve any change in the office through which any authenticating agent acts. The Issuer (by written notice to the Fiscal Agent and the authenticating agent whose appointment is to be terminated) may also terminate any such appointment at any time. The Fiscal Agent hereby agrees to acknowledge written acceptances from the entities concerned (in form and substance satisfactory to the Issuer) of such appointments. In its acceptance of such appointment, each such authenticating agent shall agree to act as an authenticating agent pursuant to the terms and conditions of this Agreement.

4. Payment and Cancellation .

(a) Payment . Subject to the following provisions, the Issuer shall provide to the Fiscal Agent in funds available on or prior to each date on which a payment of principal of or any interest on the Securities shall become due, as set forth in the text of the Securities, such amount, in such coin or currency, as is necessary to make such payment, and the Issuer hereby authorizes and directs the Fiscal Agent from funds so provided to it to make or cause to be made payment of the principal of and interest on, as the case may be, the Securities set forth herein and in the text of the Securities. The Fiscal Agent shall arrange directly with any Paying Agent who may have been appointed pursuant to the provisions of Section 2 hereof for the payment from funds so paid by the Issuer of the principal of and interest on the Securities as set forth herein and in the text of the Securities. Notwithstanding the foregoing, the Issuer may provide directly to a Paying Agent funds for the payment of the principal thereof and premium and interest, if any, payable thereon under an agreement with respect to such funds containing substantially the same terms and conditions set forth in this Section 4(a) and in Section 9(b) hereof; and the Fiscal Agent shall have no responsibility with respect to any funds so provided by the Issuer to any such Paying Agent.

Any interest on the Securities shall be paid, unless otherwise provided in the text of the Securities, to the Persons in whose names such Securities are registered on the register maintained pursuant to Section 7 hereof at the close of business on the record dates designated in the text of the Securities (the “ registered holders ”). Payments of principal of Securities shall be payable against surrender thereof at the Corporate Trust Office or office of an agent of the Fiscal Agent and at the offices of such other Paying Agents as shall have been appointed pursuant to Section 2 hereof. Payments of principal shall be made against surrender of Securities, and payments of interest on Securities shall be made, in accordance with the foregoing and subject to applicable laws and regulations, by check mailed on or before the due date for such payment to the Person entitled thereto at such Person's address appearing on the register of the Securities maintained pursuant to Section 7 hereof, or, in the case of payments of principal, to such other address as the registered

holder shall provide in writing at the time of such surrender; provided , however , that such payments may be made, in the case of a registered holder of greater than $1,000,000 aggregate principal amount of Securities, by transfer to an account maintained by the payee with a bank if such registered holder so elects by giving notice to the Fiscal Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept at its discretion) prior to the date of the payments to be obtained, of such election and of the account to which payment is to be made.

(b) Cancellation . All Securities delivered to the Fiscal Agent (or any other Agent appointed pursuant to Section 2 hereof) for payment, registration of transfer or exchange as herein or in the Securities provided shall be forwarded to the Fiscal Agent by the Agent to which they are delivered. All such Securities shall be canceled and disposed of by the Fiscal Agent or such other Person as may be jointly designated by the Issuer and the Fiscal Agent, which shall thereupon furnish certificates of such disposal to the Issuer upon the Issuer's request.

5. Transfer and Exchange of Securities .

(a) Transfers of Global Securities as Such . Except as otherwise expressly set forth in this Agreement or any amendment hereto, a Global Security representing all or a portion of the Securities may not be transferred in global form, except as a whole (i) by the U.S. Depository to a nominee of such U.S. Depository, (ii) by a nominee of such U.S. Depository to such U.S. Depository or another nominee of such U.S. Depository or (iii) by such U.S. Depository or any such nominee to a successor U.S. Depository or a nominee of such successor U.S. Depository.

(b) Exchanges of Global Securities for Definitive Securities . A Global Security shall be exchangeable, in whole but not in part, for definitive Securities if (a) the U.S. Depository notifies the Issuer that it is unwilling or unable to continue to hold book-entry interests in such Global Security or the U.S. Depository at any time ceases to be a “clearing agency” registered as such under the Exchange Act of 1934, as amended (the “ Exchange Act ”), and, in either case, a successor is not appointed by the Issuer within 120 days, (b) while a Global Security is a restricted Security the book-entry interests in such Global Security cease to be eligible for the U.S. Depository's services because the Securities are neither (i) rated in one of the top four categories by a nationally recognized statistical rating organization nor (ii) included within a Self-Regulatory Organization system approved by the Securities and Exchange Commission (the “ Commission ”) for the reporting of quotation and trade information of securities eligible for transfer pursuant to Rule 144A, such as the PORTAL system, (c) the U.S. Depository for Securities notifies the Issuer that it is unwilling or unable to continue as U.S. Depository with respect to such Global Security and no successor is appointed within 120 days or (d) the Issuer in its sole discretion executes and delivers to the Fiscal Agent an Officers' Certificate providing that such Global Security shall be so exchangeable; provided , however , that in no event shall the Regulation S Temporary Global Securities be exchanged by the Issuer for definitive Securities prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Transfer Agent of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Act. Securities so issued in exchange for any such Global Security shall have the same interest rate, if any, and maturity and have the same terms as such Global Security, in authorized denominations and in the aggregate having the same principal amount as such Global Security and registered in such names as the U.S. Depository for such Global Security shall direct. Upon such exchange, the surrendered Global Security shall be cancelled by the Fiscal Agent.

A Global Security shall be exchangeable, in whole or in part, for definitive registered Securities if there shall have occurred and be continuing an event of default (as set forth in paragraph 7 of the Securities)

and the registered holder, in such circumstances, shall have requested in writing that all or a part of the Global Security be exchanged for one or more definitive Securities (an “ Optional Definitive Security Request ”), provided , however , that in no event shall the Regulation S Temporary Global Securities be exchanged by the Issuer for definitive registered Securities prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Transfer Agent of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Act. Upon any such surrender, (i) the Issuer shall execute and the Fiscal Agent shall authenticate and deliver without charge to each Person specified by the U.S. Depository, in exchange for such Person's beneficial interest in the Global Security, a new Security or Securities in definitive registered form having the same interest rate, if any, and maturity and having the same terms as such Global Security, in any authorized denomination requested by such Person and in an aggregate principal amount equal to such Person's beneficial interest in the Global Security, and (ii) if the Global Security is being exchanged (x) as a whole, then the surrendered Global Security shall be cancelled by the Fiscal Agent, or (y) in part, then the principal amount of the surrendered Global Security shall be reduced by an endorsement on Schedule A thereto in the appropriate amount.

Unless otherwise provided by the Issuer, definitive Securities issued in exchange for a Global Security pursuant to this Section 5(b) shall be issued only in registered form and shall be registered in such names and in such authorized denominations as the U.S. Depository for such Global Security, pursuant to instructions of its Agent Members or otherwise, shall instruct the Fiscal Agent. The Fiscal Agent shall deliver such Securities to the Persons in whose names such Securities are so registered.

(c) Beneficial Interests. Subject to the provisions herein, beneficial interests in a Global Security may be transferred in any manner consistent with the Applicable Procedures.

(d) Special Provisions Regarding Transfer of Beneficial Interests in a Regulation S Global Security . The transfer of beneficial interests in a Regulation S Global Security shall be effected in a manner not inconsistent with the following provisions:

(i)

Transfer Through a Rule 144A Global Security . If the holder of a beneficial interest in a Regulation S Global Security 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 Rule 144A Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(d)(i) , provided , however , that prior to the expiration of the Distribution Compliance Period, transfers of beneficial interests in the Regulation S Temporary Global Securities may not be made to a U.S. person (as defined under Regulation S) or for the account or benefit of a U.S. person (other than an initial purchaser). Upon receipt by the U.S. Depository of the instructions, order and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the U.S. Depository to cause to be credited to a specified Agent Member's account a beneficial interest in the Rule 144A Global Security equal to that of the beneficial interest in the Regulation S Global Security 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 held for Euroclear or Clearstream to be debited for, such

beneficial interest, and (3) a certificate substantially in the form set forth in or contemplated by Exhibit B given by the transferor of such beneficial interest, the Transfer Agent, shall (A) reduce the principal amount of the Regulation S Global Security, and increase the principal amount of the Rule 144A Global Security, in each case by an amount equal to the principal amount of the beneficial interest in the Regulation S Global Security to be so transferred, as evidenced by appropriate endorsements on Schedule A of the respective Global Securities, and (B) instruct the U.S. Depository, (x) to make corresponding reductions and increases in the amounts represented by the respective Global Securities and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Security having a principal amount equal to the amount by which the principal amount of the Regulation S Global Security was reduced upon such transfer.

Delivery of a beneficial interest in the Regulation S Global Security may not be taken in the form of a beneficial interest in the Rule 144A Global Security if immediately prior to the contemplated transfer no Rule 144A Global Security is then Outstanding (as defined in Section 12(c) hereof).


(ii)	Interests in Regulation S Global Security Initially to be Held Through Euroclear or Clearstream . Beneficial interests in a Regulation S Temporary Global Security may be held only through Agent Members acting for and on behalf of Euroclear or Clearstream.

(iii)

Transfer Through Restricted Definitive Security . If the holder of a beneficial interest in a Regulation S Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a Restricted Definitive Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(d)(iii) , provided , however , that in no event shall the Regulation S Temporary Global Securities be exchanged by the Issuer for Restricted Definitive Securities prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Transfer Agent of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Act. Upon receipt by the U.S. Depository of the instructions and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the U.S. Depository to cause to be issued a Restricted Definitive Security to such Person in a principal amount equal to that of the beneficial interest in the Global Security to be so transferred and (2) a certificate substantially in the form set forth in or contemplated by Exhibit C given by the transferor of such beneficial interest, the Transfer Agent shall (A) reduce the principal amount of the Regulation S Global Security by an amount equal to the principal amount of the beneficial interest in the Regulation S Global Security to be so transferred, as evidenced by appropriate endorsement on Schedule A of the Regulation S Global Security and (B) cause to be issued a Restricted Definitive Security to such Person in a principal amount equal to the amount by which the principal amount of the Regulation S Global Security

was reduced upon such transfer.

(iv)

Transfer Through an Unrestricted Global Security . If the holder of a beneficial interest in a Regulation S Global Security 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 an unrestricted Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(d)(iv) . Upon receipt by the U.S. Depository of the instructions, order and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the U.S. Depository to cause to be credited to a specified Agent Member's account a beneficial interest in the unrestricted Global Security equal to that of the beneficial interest in the Regulation S Global Security to be so transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Member, and the Euroclear or Clearstream account for which such Agent Member's account is held, to be credited with, and the account of the Agent Members to be debited for, such beneficial interest, and (3) a certificate substantially in the form set forth in or contemplated by Exhibit D given by the transferor of such beneficial interest, the Transfer Agent shall (A) reduce the principal amount of the Regulation S Global Security, and increase the principal amount of the unrestricted Global Security, in each case by an amount equal to the principal amount of the beneficial interest in the Regulation S Global Security to be so transferred, as evidenced by appropriate endorsements on Schedule A of the respective Global Securities and (B) instruct the U.S. Depository, (x) to make corresponding reductions and increases to the transferor's beneficial interests in the respective Global Securities and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the unrestricted Global Security having a principal amount equal to the amount by which the principal amount of the Regulation S Global Security was reduced upon such transfer.

(v)

Beneficial Interests in Regulation S Temporary Global Securities to Definitive Securities . Notwithstanding the foregoing, a beneficial interest in a Regulation S Temporary Global Security may not be exchanged for a definitive Security or transferred to a Person who takes delivery thereof in the form of a definitive Security prior to (A) the expiration of the Distribution Compliance Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Act other than Rule 903 or Rule 904.


(e)	Special Provisions Regarding Transfer of Beneficial Interests in a Rule 144A Global Security

. The transfer of beneficial interests in a Rule 144A Global Security shall be effected in a manner not inconsistent with the following provisions:

(i)

Transfer Through a Regulation S Global Security . If the holder of a beneficial interest in a Rule 144A Global Security 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 Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(e)(i) . Upon receipt by the U.S. Depository of the instructions, order and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the U.S. Depository to cause to be credited to a specified Agent Member's account a beneficial interest in the Regulation S Global Security equal to that of the beneficial interest in the Rule 144A Global Security to be so transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Members held for Euroclear to be credited with, and the account of the Agent Members to be debited for, such beneficial interest, and (3) a certificate substantially in the form set forth in or contemplated by Exhibit E given by the transferor of such beneficial interest, the Transfer Agent shall (A) reduce the principal amount of the Rule 144A Global Security, and increase the principal amount of the Regulation S Global Security, in each case by an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Security to be so transferred, as evidenced by appropriate endorsements on Schedule A of the respective Global Securities and (B) instruct the U.S. Depository, (x) to make corresponding reductions and increases to the amounts represented by the respective Global Securities and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Regulation S Global Security having a principal amount equal to the amount by which the principal amount of the Rule 144A Global Security was reduced upon such transfer.

Delivery of a beneficial interest in the Rule 144A Global Security may not be taken in the form of a beneficial interest in the Regulation S Global Security if immediately prior to the contemplated transfer no Regulation S Global Security is then Outstanding.

(ii)

Transfer Through Restricted Definitive Security . If the holder of a beneficial interest in a Rule 144A Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a Restricted Definitive Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(e)(ii) . Upon receipt by the U.S. Depository of the instructions and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the U.S. Depository to cause to be issued a Restricted Definitive Security to such Person in a principal amount equal to that of the beneficial interest in the Rule 144A Global Security to be so transferred and (2) a certificate substantially in the form set forth in or contemplated by Exhibit F given by the transferor

of such beneficial interest, the Transfer Agent shall (A) reduce the principal amount of the Rule 144A Global Security by an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Security to be so transferred, as evidenced by appropriate endorsement on Schedule A of the Rule 144A Global Security and cause to be issued a Restricted Definitive Security to such Person in a principal amount equal to the amount by which the principal amount of the Rule 144A Global Security was reduced upon such transfer and (B) instruct the U.S. Depository to make a corresponding reduction to the transferor's beneficial interest in the Rule 144A Global Security.

(iii)

Transfer Through an Unrestricted Global Security . If the holder of a beneficial interest in a Rule 144A Global Security 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 an unrestricted Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(e)(iii) . Upon receipt by the U.S. Depository of the instructions, order and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the U.S. Depository to cause to be credited to a specified Agent Member's account a beneficial interest in the unrestricted Global Security equal to that of the beneficial interest in the Rule 144A Global Security to be so transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Members to be credited with, and the account of the Agent Members to be debited for, such beneficial interest, and (3) a certificate substantially in the form set forth in or contemplated by Exhibit G given by the transferor of such beneficial interest, the Transfer Agent shall (A) reduce the principal amount of the Rule 144A Global Security, and increase the principal amount of the unrestricted Global Security, in each case by an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Security to be so transferred, as evidenced by appropriate endorsements on Schedule A of the respective Global Securities and (B) instruct the U.S. Depository, (x) to make corresponding reductions and increases to the transferor's beneficial interests in the respective Global Securities and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the unrestricted Global Security having a principal amount equal to the amount by which the principal amount of the Rule 144A Global Security was reduced upon such transfer.

(f) Special Provisions Regarding Transfer of Restricted Definitive Securities . Unless expressly provided otherwise in this Agreement, whenever any Restricted Definitive Security is presented or surrendered for registration of transfer, such Restricted Definitive Security must be accompanied by a certificate in substantially the form set forth in or contemplated by Exhibit H (which may be attached to or set forth in the Restricted Definitive Security), appropriately completed, dated the date of such surrender and signed by the holder of such Restricted Definitive Security, as to compliance with such restrictions on transfer, unless the Issuer shall have notified the Fiscal Agent that there is an effective registration statement under the Act with respect to such Restricted Definitive Security. The Transfer Agent shall not be required to accept

for such registration of transfer or exchange any Restricted Definitive Security not so accompanied by a properly completed certificate. The transfer of Restricted Definitive Securities shall be effected in a manner not inconsistent with the following provisions:

(i)

Transfer Through Regulation S Global Security . If the holder of a Restricted Definitive Security 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 Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(f)(i) . Upon receipt by the Transfer Agent at the Corporate Trust Office of (1) written instructions from the transferor directing it to cause the U.S. Depository to cause to be credited to such Person a beneficial interest in the Regulation S Global Security in a principal amount equal to that of the Restricted Definitive Security to be so transferred and (2) a certificate substantially in the form set forth in or contemplated by Exhibit H given by the transferor of such Restricted Definitive Security, the Transfer Agent shall (A) increase the principal amount of the Regulation S Global Security by an amount equal to the principal amount of the beneficial interest in the Regulation S Global Security to be received by such Person, as evidenced by appropriate endorsement on Schedule A of the Regulation S Global Security, and cancel such Restricted Definitive Security, and (B) instruct the U.S. Depository, (x) to make corresponding increases in the amount represented by the Regulation S Global Security and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Regulation S Global Security having a principal amount equal to the principal amount of the Restricted Definitive Security that was cancelled.

(ii)

Transfer Through Rule 144A Global Security . If the holder of a Restricted Definitive Security 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 the Rule 144A Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(f)(ii) . Upon receipt by the Transfer Agent at the Corporate Trust Office of (1) written instructions from the transferor directing it to cause the U.S. Depository to cause to be credited to such Person a beneficial interest in the Rule 144A Global Security in a principal amount equal to that of the Restricted Definitive Security to be so transferred and (2) a certificate substantially in the form set forth in or contemplated by Exhibit H given by the transferor of such Restricted Definitive Security, the Transfer Agent shall (A) increase the principal amount of the Rule 144A Global Security by an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Security to be received by such Person, as evidenced by appropriate endorsement on Schedule A of the Rule 144A Global Security, and cancel such Restricted Definitive Security, and (B) instruct the U.S. Depository, (x) to make corresponding increases in the amount represented by the Rule 144A Global Security and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Security having a principal amount equal to the principal amount of the Restricted Definitive Security that was cancelled.

(iii)

Transfer Through Unrestricted Global Security . If the holder of a Restricted Definitive Security 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 the unrestricted Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(f)(iii) . Upon receipt by the Transfer Agent at the Corporate Trust Office of (1) written instructions from the transferor directing it to cause the U.S. Depository to cause to be credited to such Person a beneficial interest in the unrestricted Global Security in a principal amount equal to that of the Restricted Definitive Security to be so transferred and (2) a certificate substantially in the form set forth in or contemplated by Exhibit H given by the transferor of such Restricted Definitive Security, the Transfer Agent shall (A) increase the principal amount of the unrestricted Global Security by an amount equal to the principal amount of the beneficial interest in the unrestricted Global Security to be received by such Person, as evidenced by appropriate endorsement on Schedule A of the unrestricted Global Security, and cancel such Definitive Security, and (B) instruct the U.S. Depository, (x) to make corresponding increases in the amount represented by the Rule 144A Global Security and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the unrestricted Global Security having a principal amount equal to the principal amount of the Restricted Definitive Security that was cancelled.

(iv)

Transfer Through Restricted Definitive Security . If the holder of a Restricted Definitive Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of another Restricted Definitive Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(f)(iv) . Upon receipt by the U.S. Depository of the instructions and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of a certificate substantially in the form set forth in or contemplated by Exhibit H given by the transferor of such Restricted Definitive Security, the Transfer Agent shall register the transfer of such Restricted Definitive Security.

6. Mutilated, Destroyed, Stolen or Lost Securities . The Fiscal Agent, or its agent duly authorized by the Fiscal Agent, is hereby authorized from time to time in accordance with the provisions of the Securities, Section l(e) , Section 5 and of this Section to authenticate and deliver:


(i)	Securities in exchange for or in lieu of Securities of like tenor and of like form which become mutilated, destroyed, stolen or lost; and


(ii)	registered Securities of authorized denominations in exchange for a like aggregate principal amount of Securities of like tenor and of like form.

The Securities shall be dated the date of their authentication by the Fiscal Agent. Each Security authenticated and delivered upon any transfer or exchange for or in lieu of the whole or any part of any Security shall carry all the rights if any, to interest accrued and unpaid and to accrue which were carried by the whole or such part of such Security.

7. Register; Record Date for Certain Actions . The Fiscal Agent, as agent of the Issuer, shall maintain at its Corporate Trust Office in Chicago, Illinois and at its agent's office in the Borough of Manhattan, The City of New York, a register for the Securities for the registration and registration of transfers of the Securities. Upon presentation for the purpose at the said office of the Fiscal Agent or its agent of any Security, accompanied by a written instrument of transfer in the form approved by the Issuer and the Fiscal Agent (it being understood that, until notice to the contrary is given to holders of Securities, the Issuer and the Fiscal Agent shall each be deemed to have approved the form of instrument of transfer, if any, printed on any definitive Security), executed by the registered holder, in person or by such registered holder's attorney thereunto duly authorized in writing, such Security shall be transferred upon the register for the Securities, and a new Security of like tenor shall be authenticated and issued in the name of the transferee. Transfers and exchanges of Securities shall be subject to Section 1(e) and Section 5 hereof, to such restrictions as shall be set forth in the text of the Securities and to such reasonable regulations as may be prescribed by the Issuer and the Fiscal Agent. Successive registrations and registrations of transfers as aforesaid may be made from time to time as desired and each such registration shall be noted on the Security register. No service charge shall be made for any registration, registration of transfer or exchange of Securities, but, except as otherwise provided herein with respect to the exchange of temporary Securities for definitive Securities, the Fiscal Agent (and any Transfer Agent or authenticating agent appointed pursuant to Section 2 or 3 hereof, respectively) may require payment of a sum sufficient to cover any stamp or other tax or governmental charge in connection therewith and any other amounts required to be paid by the provisions of the Securities.

Any Transfer Agent appointed pursuant to Section 2 hereof shall provide to the Fiscal Agent such information as the Fiscal Agent may reasonably require in connection with the delivery by such Transfer Agent of Securities in exchange for other Securities.

Neither the Fiscal Agent nor any Transfer Agent shall be required to make registrations of transfer or exchange of Securities except as set forth in this Agreement.

Upon receipt by the Fiscal Agent of any written demand, request or notice with respect to any matter on which the holders of Securities are entitled to act under this Agreement, a record date shall be established for determining registered holders of Outstanding Securities entitled to join in such demand, request or notice, which record date shall be at the close of business on the day the Fiscal Agent receives such demand, request or notice. The holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such demand, request or notice, whether or not such holders remain holders after such record date; provided , however , unless the holders of the requisite principal amount of the Outstanding Securities shall have joined in such demand, request or notice prior to the day which is ninety (90) days after such record date, such demand, request or notice shall automatically and without further action by any holder be cancelled and of no further effect. Nothing in this paragraph shall prevent a holder, or a proxy of a holder, from giving, (i) after expiration of such 90-day period, a new demand, request or notice identical to a demand, request or notice which has been cancelled pursuant to the proviso in the preceding sentence or (ii) during any such 90-day period, a new demand, request or notice contrary to or different from such demand, request or notice, in either of which events a new record date shall be established pursuant to the provisions of this paragraph.

The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to or approve any action or waive any term, provision or condition of any covenant of this Agreement. If a record date is fixed, the holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to or approve any such action or waive any such

term, provision, condition or covenant, whether or not such holders remain holders after such record date; provided , however , that unless such consent, waiver or approval is obtained from the requisite principal amount of holders of Outstanding Securities, or their duly designated proxies, prior to the date which is ninety (90) days after such record date, any such consent, waiver or approval previously given shall automatically and without further action by any holder be cancelled and of no further effect.

8. Delivery of Certain Information .

(a) Non-Reporting Issuer . Subject to Section 8(b) , as long as the Issuer is not subject to Section 13 or 15(d) of the Exchange Act, at any time, upon the request of a holder of a Security who is a QIB or, a prospective investor who is a QIB designated by such holder, the Issuer, or the Fiscal Agent upon request by and at the expense of the Issuer, will promptly furnish or cause to be furnished “Rule 144A Information” (as defined below) with respect to the Issuer to such holder or to a prospective purchaser of such Security designated by such holder in order to permit compliance by such holder with Rule 144A under the Act in connection with the resale of such Security by such holder. “ Rule 144A Information ” with respect to the Issuer shall be such information with respect to it as is specified pursuant to Rule 144A(d)(4)(i) under the Act (or any successor provision thereto) which, at the date of this Agreement, consists of (x) a very brief statement of the nature of the business, products and services of the Issuer, as the case may be, (which statement shall be as of a date within 12 months prior to the date of the intended resale) and (y) the most recent financial statements of the Issuer and its financial statements for the two fiscal years preceding the period covered in the most recent financial statements. Such financial statements of the Issuer shall include its balance sheet (as of a date less than 16 months before the date of the intended resale) and its profit and loss and retained earnings statements (for the twelve month period preceding the date of such balance sheet and, if the balance sheet is not as of a date less than six months before the date of the intended resale, the most recent profit and loss and retained earnings statements shall be for the period from the date of such balance sheet to a date less than six months before the date of the intended resale) and shall be audited to the extent reasonably available.

(b) Information After One Year . Neither the Issuer nor the Fiscal Agent shall be required to furnish Rule 144A Information with respect to the Issuer as contemplated by Section 8(a) hereof, (x) to the holder or a prospective purchaser of a Security in connection with any request made on or after the date which is one year from the later of (i) the date such Security (or any predecessor Security) was acquired from the Issuer or (ii) the date such Security (or any predecessor Security) was last acquired from an “affiliate” of the Issuer within the meaning of Rule 144 under the Act or (y) at any time to a prospective purchaser located outside the United States who is not a U.S. person within the meaning of Regulation S under the Act.

(c) Periodic Reports . So long as any Securities are Outstanding, the Issuer, or the Fiscal Agent upon request by and at the expense of the Issuer, will furnish or cause to be furnished to holders of Securities and to the Fiscal Agent, (i) at any time when the Issuer is subject to Section 13 or 15(d) of the Exchange Act, copies of its annual and quarterly reports to stockholders and of each report or definitive proxy statement filed with the Commission under the Exchange Act, such reports or statements to be so furnished within 15 days after the due date for filing with the Commission, and (ii) at any time when the Issuer is not subject to Section 13 or 15(d) of the Exchange Act, (A) its annual financial statements prepared in accordance with generally accepted accounting principles applied consistently (except as otherwise noted therein) with those of the prior years (together with notes thereto and a report thereon by an independent accounting firm of established national reputation), such report to be so furnished as soon as reasonably available and in any event within

120 days after the end of the fiscal year covered thereby, (B) its unaudited comparative financial statements for each of the first three fiscal quarters and the corresponding quarter of the prior year prepared in accordance with generally accepted accounting principles applied consistently (except as otherwise noted therein) with those of the most recent annual financial statements (which unaudited statements and related notes may be condensed to the extent permitted by Form 10-Q under the Exchange Act or any successor form), such statements to be so furnished as soon as reasonably available and in any event within 60 days after the end of the fiscal quarter covered thereby, (C) any other interim reports or financial statements prepared generally for its nonaffiliated investors or lenders, such reports or statements to be so furnished concurrently with their distribution to such investors or lenders, and (D) at each time of delivery of the financial statements in (A), an Officers' Certificate stating whether or not to the best knowledge of the signers thereof the Issuer is in default in the performance and observance of any of the terms, provisions and conditions of the Securities or this Agreement and, if the Issuer shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge; provided that if the Issuer can not reasonably furnish the financial statements specified in clause (i) or (ii)(A) or (B) above within the time periods specified, the Issuer shall have such additional period as required to finish such reports and statements so long as it is diligently pursuing the finishing of such reports and statements.

9. Conditions of Fiscal Agent's Obligations . The Fiscal Agent accepts its obligations herein set forth upon the terms and conditions hereof, including the following, to all of which the Issuer agrees and to all of which the rights of holders from time to time of Securities are subject:

(a) Compensation and Indemnity . The Fiscal Agent shall be entitled to reasonable compensation as agreed with the Issuer for all services rendered by it, and the Issuer agrees promptly to pay such compensation and to reimburse the Fiscal Agent for the reasonable out-of-pocket expenses (including reasonable counsel fees and expenses) incurred by it or its agents in connection with its services hereunder. The Issuer also agrees to indemnify the Fiscal Agent for, and to hold it harmless against, any loss, liability or expense, including, without limitation, damages, claims, fines, suits, actions, demands, penalties, costs, out-of-pocket or incidental expenses, legal fees and expenses, and the allocated costs and expenses of in-house counsel, incurred without gross negligence or willful misconduct, arising out of or in connection with its acting as Fiscal Agent or in any other capacity hereunder, as well as the reasonable costs and expenses of defending against any claim of liability in the premises. The obligations of the Issuer under this Section 9(a) shall survive payment of all the Securities, the termination of this Agreement or the resignation or removal of the Fiscal Agent.

(b) Agency . In acting under this Agreement and in connection with the Securities, the Fiscal Agent is acting solely as agent of the Issuer and does not assume any responsibility for the correctness of the recitals herein or in the Securities (except for the correctness of the statement in its certificate of authentication on the Securities) or any obligation or relationship of agency or trust, for or with any of the owners or holders of the Securities, except that all funds held by the Fiscal Agent for the payment of principal of and any interest on the Securities shall be held in trust for such owners or holders, as the case may be, as set forth herein and in the Securities; provided , however , that monies held in respect of the Securities remaining unclaimed at the end of two years after any principal of or any interest on the Securities shall have become due and payable (whether at maturity or otherwise) and monies sufficient therefor shall have been duly made available for payment shall, together with any interest made available for payment thereon, if any, be repaid to the Issuer upon Order. Upon such repayment, the aforesaid trust with respect to the Securities shall terminate and all liability of the Fiscal Agent and Paying Agents with respect to such funds shall thereupon cease. In the absence of an Order from the Issuer to return unclaimed funds to the Issuer, the Fiscal Agent shall

from time to time deliver all unclaimed funds to or as directed by applicable escheat authorities, as determined by the Fiscal Agent in its sole discretion, in accordance with the customary practices and procedures of the Fiscal Agent.

(c) Advice of Counsel . The Fiscal Agent and any Paying Agent or Transfer Agent appointed by the Issuer pursuant to Section 2 hereof may consult with their respective counsel or other counsel satisfactory to them, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by them hereunder in good faith and without negligence and in accordance with such opinion.

(d) Reliance . The Fiscal Agent and any Paying Agent or Transfer Agent appointed by the Issuer pursuant to Section 2 hereof each may conclusively rely upon and shall be protected and shall incur no liability for or in respect of any action taken or thing suffered by it in reliance upon any Security, notice, direction, consent, certificate, affidavit, statement, or other paper or document believed by it, in good faith and without negligence, to be genuine and to have been passed or signed by the proper party or parties.

(e) Interest in Securities, etc . The Fiscal Agent, any authenticating agent, and any Paying Agent or Transfer Agent appointed by the Issuer pursuant to Section 2 hereof and their respective officers, directors and employees may become the owners of, or acquire any interest in, any Securities, with the same rights that they would have if they were not the Fiscal Agent, such authenticating agent, such other Paying Agent or Transfer Agent or such Person, and may engage or be interested in any financial or other transaction with the Issuer, and may act on, or as depository, trustee or agent for, any committee or body of holders of Securities or other obligations of the Issuer, as freely as if they were not the Fiscal Agent, such authenticating agent, such other Paying Agent or Transfer Agent or such Person. The provisions of this Section 9(e) shall extend to affiliates of the Fiscal Agent, such authenticating agent, any Paying Agent or any Transfer Agent.

(f) Certifications . Whenever in the administration of this Agreement the Fiscal Agent shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Fiscal Agent (unless other evidence be herein specifically prescribed) may, in the absence of willful misconduct or negligence on its part, request and conclusively rely upon a certificate signed by any Authorized Officer of the Issuer and delivered to the Fiscal Agent.

(g) No Implied Obligations . The duties and obligations of the Fiscal Agent shall be determined solely by the express provisions of this Agreement, and the Fiscal Agent shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Fiscal Agent. In no event shall the Fiscal Agent be liable for any lost profits, lost savings or other special, exemplary, indirect, punitive, consequential or incidental damages.

(h) No Liability . The Fiscal Agent shall not be liable for any interest on any funds held by the Fiscal Agent and shall never be required to use, advance or risk its own funds or otherwise incur financial liability in the performance of its duties hereunder. The Fiscal Agent shall not be liable for any actions taken or not taken hereunder, in the absence of its own negligence or willful misconduct.

(i) No Inquiry . The Fiscal Agent shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements of the Securities or other documents on the part of the Issuer or as to the existence of any event of default

thereunder.

(j) Agents . The Fiscal Agent may execute any of its trusts or powers or perform any duties under this Agreement either directly or by or through agents or attorneys, may in all cases pay (with reimbursement from the Issuer) such reasonable compensation as it deems proper to all such agents and attorneys reasonably employed or retained by it, and shall not be responsible for any misconduct or negligence of any agent or attorney appointed with due care by it.

(k) Directors, Officers . The protections from liability provided to the Fiscal Agent hereunder, including the right to indemnification, shall extend to its directors, officers, employees and agents.

10. Resignation and Appointment of Successor .

(a) Fiscal Agent and Paying Agent . The Issuer agrees, for the benefit of the holders from time to time of the Securities, that there shall at all times be a Fiscal Agent hereunder which shall be a bank or trust company organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, in good standing and having an established place of business or agency in the Borough of Manhattan, The City of New York, and authorized under such laws to exercise corporate trust powers until all the Securities authenticated and delivered hereunder (i) shall have been delivered to the Fiscal Agent for cancellation or (ii) become due and payable and monies sufficient to pay the principal of and any interest on the Securities shall have been made available for payment and either paid or returned to the Issuer as provided herein and in such Securities.

(b) Resignation . The Fiscal Agent may at any time resign by giving written notice to the Issuer of such intention on its part, specifying the date on which its desired resignation shall become effective, provided that such date shall not be less than thirty (30) days from the date on which such notice is given, unless the Issuer agrees to accept shorter notice. The Fiscal Agent hereunder may be removed at any time by the filing with it of an instrument in writing signed on behalf of the Issuer and specifying such removal and the date when it shall become effective. Notwithstanding the dates of effectiveness of resignation or removal, as the case may be, to be specified in accordance with the preceding sentences, such resignation or removal shall take effect only upon the appointment by the Issuer of a successor Fiscal Agent (which, to qualify as such, shall be a bank or trust company organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, in good standing and having and acting through an established place of business or agency in the Borough of Manhattan, The City of New York, authorized under such laws to exercise corporate trust powers and having a combined capital and surplus in excess of U.S. $100,000,000) and the acceptance of such appointment by such successor Fiscal Agent. Upon its resignation or removal, the Fiscal Agent shall be entitled to payment by the Issuer pursuant to Section 9 hereof of compensation for services rendered and to reimbursement of reasonable out-of-pocket expenses incurred or any other amounts due hereunder.

(c) Successors . In case at any time the Fiscal Agent or any Paying Agent in respect of the Securities (if such Paying Agent is the only Paying Agent located in a place where, by the terms of the Securities or this Agreement, the Issuer is required to maintain a Paying Agent) shall resign, or shall be removed, or shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or shall file a voluntary petition in bankruptcy or make an assignment for the benefit of its creditors or consent to the appointment of a receiver of all or any substantial part of its property, or shall admit

in writing its inability to pay or meet its debts as they severally mature, or if a receiver of it or of all or any substantial part of its property shall be appointed, or if an order of any court shall be entered approving any petition filed by or against it under the provisions of the Federal Bankruptcy Act or under the provisions of any similar legislation, or if a receiver of it or its property shall be appointed, or if any public officer shall take charge or control of it or of its property or affairs, for the purpose or rehabilitation, conservation or liquidation, a successor Fiscal Agent or Paying Agent, as the case may be, qualified as aforesaid, shall be appointed by the Issuer by an instrument in writing, filed with the successor Fiscal Agent or Paying Agent, as the case may be, and the predecessor Fiscal Agent or Paying Agent, as the case may be. Upon the appointment as aforesaid of a successor Fiscal Agent or Paying Agent, as the case may be, and acceptance by such successor of such appointment, the Fiscal Agent or Paying Agent, as the case may be, so succeeded shall cease to be Fiscal Agent or Paying Agent, as the case may be, hereunder. If no successor Fiscal Agent or other Paying Agent, as the case may be, shall have been so appointed by the Issuer and shall have accepted appointment as hereinafter provided, and, in the case of such other Paying Agent, if such other Paying Agent is the only Paying Agent located in a place where, by the terms of the Securities or this Agreement, the Issuer is required to maintain a Paying Agent, then any holder of a Security who has been a bona fide holder of a Security for at least six (6) months, on behalf of such holder and all others similarly situated, or the Fiscal Agent may petition any court of competent jurisdiction at the expense of the Issuer for the appointment of a successor agent. The Issuer shall give prompt written notice to each other Paying Agent of the appointment of a successor Fiscal Agent.

(d) Acknowledgment . Any successor Fiscal Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Issuer an instrument accepting such appointment hereunder, and thereupon such successor Fiscal Agent, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor with like effect as if originally named as Fiscal Agent hereunder, and such predecessor, upon payment of its charges hereunder, including compensation, and reimbursement of its disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Fiscal Agent shall be entitled to receive, all monies, securities, books, records or other property on deposit with or held by such predecessor as Fiscal Agent hereunder.

(e) Merger, Consolidation, etc. Any corporation into which the Fiscal Agent hereunder may be merged, or any corporation resulting from any merger or consolidation to which the Fiscal Agent shall be a party, or any corporation to which the Fiscal Agent shall sell or otherwise transfer all or substantially all of the corporate trust business of the Fiscal Agent, provided that it shall be qualified as aforesaid, shall be the successor Fiscal Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto.

11. Payment of Taxes . The Issuer will pay all stamp and other duties, if any, which may be imposed by the United States of America or any political subdivision thereof or taxing authority of or in the foregoing with respect to this Agreement or the issuance of the Securities.

12. Amendments .

(a) Approval . With the written consent of the registered holders of not less than a majority in aggregate principal amount of the Securities then Outstanding (or of such other percentage as may be set forth in the text of the Securities with respect to the action being taken), the Issuer and the Fiscal Agent may modify, amend or supplement the terms of the Securities and this Agreement in any way, and the holders of Securities may make, take or give any request, demand, authorization,

direction, notice, consent, waiver or other action provided by this Agreement or the Securities to be made, given or taken by holders of Securities; provided , however , that no such action may, without the consent of the holder of each Security affected thereby, (A) change the due date for the payment of the principal of or any installment of interest on any Security, (B) reduce the principal amount of any Security or the interest rate thereon (C) change the coin or currency in which or the place at which payment with respect to interest or principal in respect of Securities are payable as required by the proviso of the first sentence of the second paragraph of Section 2 hereof, or (D) reduce the proportion of the principal amount of Securities, the consent of the holders of which is necessary to modify, amend or supplement this Agreement or the terms and conditions of the Securities or to make, take or give any request, demand, authorization, direction, notice, consent, waiver or other action provided hereby or thereby to be made, taken or given. The Issuer and the Fiscal Agent may, without the consent of any holder of Securities, amend this Agreement or the Securities for the purpose of (i) adding to the covenants of the Issuer for the benefit of the holders of Securities, (ii) surrendering any right or power conferred upon the Issuer, (iii) securing the Securities pursuant to the requirements of the Securities or otherwise, (iv) evidencing the succession of another corporation to the Issuer and the assumption by any such successor of the covenants and obligations of the Issuer in the Securities or in this Agreement, (v) providing for the issuance of additional Securities in accordance with this Agreement, or (vi) correcting or supplementing any defective provision contained in the Securities or in this Agreement, and in any manner which the Issuer and the Fiscal Agent may determine that shall not be inconsistent with the Securities and shall not adversely affect the interest of any holder of Securities.

It shall not be necessary for the consent of the holders of Securities to approve the particular form of any proposed modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action, but it shall be sufficient if such consent shall approve the substance thereof.

In entering into any amendment hereof, the Fiscal Agent shall receive, and may conclusively rely on, an opinion of counsel that such amendment is authorized or permitted by the terms of this Agreement.

(b) Binding Nature of Amendments, Notice, Notations, etc. Any instrument given by or on behalf of any holder of a Security in connection with any consent to any such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action will be irrevocable once given and will be conclusive and binding on all subsequent holders of such Security or any Security issued directly or indirectly in exchange or substitution therefor or in lieu thereof. Any such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action will be conclusive and binding on all holders of Securities, whether or not they have given such consent, and whether or not notation of such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action is made upon the Securities. Notice of any modification or amendment of, supplement to, or request, demand, authorization, direction, notice, consent, waiver or other action with respect to the Securities or this Agreement (other than for purposes of curing any ambiguity or of curing, correcting or supplementing any defective provision hereof or thereof) shall be given to each holder of Securities affected thereby.

Securities authenticated and delivered after the effectiveness of any such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action may bear a notation in the form approved by the Fiscal Agent and the Issuer as to any matter provided for in such modification, amendment, supplement, request, demand, authorization, direction, notice, consent,

waiver or other action. New Securities modified to conform, in the opinion of the Fiscal Agent and the Issuer, to any such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action may be prepared by the Issuer, authenticated by the Fiscal Agent (or any authenticating agent appointed pursuant to Section 3 hereof) and delivered in exchange for Outstanding Securities.

(c) “Outstanding” Defined . For purposes of the provisions of this Agreement and the Securities, any Security authenticated and delivered pursuant to this Agreement shall, as of any date of determination, be deemed to be “Outstanding,” except :


(i)	Securities theretofore canceled by the Fiscal Agent or delivered to the Fiscal Agent for cancellation or held by the Fiscal Agent for reissuance but not reissued by the Fiscal Agent;


(ii)	Securities which have become due and payable at maturity or otherwise and with respect to which monies sufficient to pay the principal thereof and any interest thereon shall have been made available to the Fiscal Agent;


(iii)	Securities which have been defeased pursuant to Section 15(b) hereof; or


(iv)	Securities in lieu of or in substitution for which other Securities shall have been authenticated and delivered pursuant to this Agreement;

provided , however , that in determining whether the holders of the requisite principal amount of Outstanding Securities have consented to any request, demand, authorization, direction, notice, consent, waiver, amendment, modification or supplement hereunder, Securities owned directly or indirectly by the Issuer or any affiliate of the Issuer shall be disregarded and deemed not to be Outstanding.

13. GOVERNING LAW . THIS AGREEMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.

14. Notices . All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Fiscal Agent shall be delivered, transmitted by facsimile, telexed or telegraphed to it at 2 N. LaSalle Street, Suite 1020, Chicago, Illinois 60602, Attention: Corporate Trust Administration, facsimile no. (312) 827-8542 or if sent to the Issuer shall be delivered, transmitted by facsimile, telexed or telegraphed to it at 1111 South 103rd Street, Omaha, Nebraska 68124, Attention: General Counsel, facsimile no. (402) 398-7426. The foregoing addresses for notices or communications may be changed by written notice given by the addressee to each party hereto, and the addressee's address shall be deemed changed for all purposes from and after the giving of such notice.

If the Fiscal Agent shall receive any notice or demand addressed to the Issuer by the holder of a Security, the Fiscal Agent shall promptly forward such notice or demand to the Issuer.

15. Defeasance (Legal and Covenant) .

(a) Issuer's Option to Effect Defeasance or Covenant Defeasance . The Issuer may at its option, by Order of the Issuer delivered to the Fiscal Agent, elect to have either Section 15(b) or Section 15(c) applied to the Outstanding Securities upon compliance with the conditions set forth

below in this Section 15 .

(b) Defeasance and Discharge . Upon exercise by the Issuer of the option provided in Section 15(a) applicable to this Section 15(b) , the Issuer shall be deemed to have been discharged from its obligations with respect to the Outstanding Securities on the date the conditions set forth below are satisfied (hereinafter, “ Defeasance ”). For this purpose, such Defeasance means that the Issuer shall be deemed to have paid and discharged the entire Indebtedness represented by the Outstanding Securities and to have satisfied all its other obligations under such Securities and this Agreement insofar as the Securities are concerned (and the Issuer and the Fiscal Agent shall execute proper instruments acknowledging the same), except for the following, which shall survive until otherwise terminated or discharged hereunder: (i) the rights of holders of the Securities to receive, solely from the trust fund described in Section 15(d) and as more fully set forth in such Section, payments in respect of the principal of and any interest on the Securities when such payments are due, (ii) the Issuer's obligations with respect to the Securities under Sections 1(d) , 2 , 4(a ), 6 , 7 , 8(a) , 8(b) and 10 of this Agreement and paragraphs 3, 4(a), 6, 10 (insofar as it relates to Sections 8(a) and 8(b) of this Agreement), 11 and 12 of the Securities and (iii) this Section 15 . Subject to compliance with this Section 15 , the Issuer may exercise its option under this Section 15(b) notwithstanding the prior exercise of its option under Section 15(c) .

(c) Covenant Defeasance . Upon the Issuer's exercise of the option provided in Section 15(a) applicable to this Section 15(c) , the Issuer shall be released from its obligations under paragraphs 7(iii), 8, and 9(a)(iii) of the Securities on and after the date the conditions set forth below are satisfied (hereinafter, “ Covenant Defeasance ”). For this purpose, such Covenant Defeasance means that the Issuer may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section, whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of the Issuer's obligations shall be unaffected thereby.

(d) Conditions to Defeasance and Covenant Defeasance . The following shall be the conditions to application of either Section 15(b) or Section 15(c) to the then Outstanding Securities:

(i)

The Issuer shall irrevocably have deposited or caused to be deposited with a trustee, who may be the Fiscal Agent and who shall agree to comply with the provisions of this Section 15 applicable to it (the “ Defeasance Trustee ”), as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the holders of the Securities, (A) money in an amount, or (B) U.S. Government Obligations and/or Eligible Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Defeasance Trustee, to pay and discharge, and which shall be applied by the Defeasance Trustee to pay and discharge, the principal of and each installment of interest on the Securities not later than one day before the stated maturity of such principal or installment of interest in accordance with the terms of this Agreement and of the Securities. For this purpose: “ U.S. Government Obligations ” means securities that are (x)

direct obligations of the United States of America for the payment of which its full faith and credit are pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt; and “ Eligible Obligations ” means interest bearing obligations as a result of the deposit of which the Securities are rated in the highest generic long-term debt rating category assigned to legally defeased debt by one or more nationally recognized rating agencies.

(ii)

In the case of an election under Section 15(b) , the Issuer shall have delivered to the Defeasance Trustee an opinion of counsel stating that (x) the Issuer has received from, or there has been published by, the U.S. Internal Revenue Service a ruling, or (y) since the date of this Agreement there has been a change in the applicable U.S. Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the holders of the Outstanding Securities will not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to U.S. Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred.

(iii)

In the case of an election under Section 15(c) , the Issuer shall have delivered to the Defeasance Trustee an opinion of counsel to the effect that the holders of the Outstanding Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and Covenant Defeasance and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and Covenant Defeasance had not occurred.

(iv)

No event of default under paragraph 7 of the Securities or event which with notice or lapse of time or both would become such an event of default shall have occurred and be continuing on the date of such deposit or, insofar as paragraphs 7(iv) and (v) of the Securities are concerned, at any time during the period ending on the 121st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period).


(v)	Such Defeasance or Covenant Defeasance shall not result in a breach or

violation of or constitute a default under, any other agreement or instrument to which the Issuer is a party or by which it is bound.


(vi)	The Issuer shall have delivered to the Fiscal Agent and the Defeasance Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to either the Defeasance under Section 15(b) or the Covenant Defeasance under Section 15(c) (as the case may be) have been complied with.


(vii)	Such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit constituting an investment company as defined in the Investment Company Act of 1940, as amended, or such trust shall be qualified under such act or exempt from regulation thereunder.

(e) Deposit in Trust; Miscellaneous . All money, U.S. Government Obligations and Eligible Obligations (including the proceeds thereof) deposited with the Defeasance Trustee pursuant to Section 15(d) in respect of the Securities shall be held in trust (which in the case of cash, shall be uninvested) and applied by the Defeasance Trustee, in accordance with the provisions of the Securities and this Agreement, to the payment, either directly or through any Paying Agent as the Defeasance Trustee may determine, to the holders of the Securities, of all sums due and to become due thereon in respect of principal and any interest, but such money need not be segregated from other funds except to the extent required by law. Any money deposited with the Defeasance Trustee for the payment of the principal of or any interest on any Security and remaining unclaimed for two years after such principal or interest has become due and payable shall be paid to the Issuer upon Order; and the holder of such Security shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof and all liability of the Defeasance Trustee with respect to such trust money shall thereupon cease. In the absence of an Order from the Issuer to return unclaimed funds to the Issuer, the Defeasance Trustee shall from time to time deliver all unclaimed funds to or as directed by applicable escheat authorities, as determined by the Defeasance Trustee in its sole discretion, in accordance with the customary practices and procedures of the Defeasance Trustee.

The Issuer shall pay and indemnify the Defeasance Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations or Eligible Obligations deposited pursuant to Section 15(d) 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 Securities.

Anything in this Section 15 to the contrary notwithstanding, the Defeasance Trustee shall deliver or pay to the Issuer from time to time upon the request of the Issuer any money, U.S. Government Obligations or Eligible Obligations held by it as provided in Section 15(d) which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Defeasance Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance.

(f) Reinstatement . If the Defeasance Trustee is unable to apply any money in accordance with Section 15(b) or 15(c) 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 Agreement and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Section 15 until such time as the Defeasance Trustee is permitted to apply all such money in accordance with Section 15(b) or 15(c) ; provided , however , that if the Issuer makes any payment of principal of or interest on any Security following the reinstatement

of its obligations, the Issuer shall be subrogated to the rights of the holders of such Securities to receive such payment from the money held by the Defeasance Trustee.

16. Headings . The section headings herein are for convenience only and shall not affect the construction hereof.

17. Counterparts . This Agreement may be executed in one or more counterparts, and by each party separately on a separate counterpart, and each such counterpart when executed and delivered shall be deemed to be an original. Such counterparts shall together constitute one and the same instrument.

18. Successors and Assigns . All covenants and agreements in this Agreement by the Issuer shall bind its respective successors and assigns, whether so expressed or not.

19. Separability Clause . In case any provision in this Agreement or in the Securities 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.

20. Waiver of Jury Trial . EACH OF THE ISSUER AND THE FISCAL AGENT 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 TRANSACTION CONTEMPLATED HEREBY.

21. Force Majeure . In no event shall the Fiscal Agent be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Fiscal Agent shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

(SIGNATURE PAGE FOLLOWS)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.



	NORTHERN NATURAL GAS COMPANY

	By: /s/ Joesph M. Lillo
	Name: Joseph M. Lillo
	Title: Vice President


	THE BANK OF NEW YORK MELLON TRUST
	COMPANY, N.A.,
	By: /s/ Medita A. Vucic
	Name: Medita A. Vucic
	Title: Vice President

EXHIBIT A

FORM OF SECURITY

[Form of Face

of Security]

[ If this Security is a Global Security, insert -THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE FISCAL AGENCY AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE U.S. DEPOSITORY OR A NOMINEE OF THE U.S. DEPOSITORY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE U.S. DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE FISCAL AGENCY AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE U.S. DEPOSITORY TO A NOMINEE OF THE U.S. DEPOSITORY OR BY A NOMINEE OF THE U.S. DEPOSITORY TO THE U.S. DEPOSITORY OR ANOTHER NOMINEE OF THE U.S. DEPOSITORY OR BY THE U.S. DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR U.S. DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR U.S. DEPOSITORY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE U.S. DEPOSITORY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE IS ISSUED IN THE NAME OR NAMES AS DIRECTED IN WRITING BY THE U.S. DEPOSITORY, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED HOLDER HEREOF, THE U.S. DEPOSITORY, HAS AN INTEREST HEREIN.]

[ If this Security is a Regulation S Temporary Global Security, insert- THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE SECURITIES, ARE AS SPECIFIED IN THE FISCAL AGENCY AGREEMENT (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL SECURITY SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.]

THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ''ACT''), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. BY ITS ACQUISITION OF THIS SECURITY OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:


1.	REPRESENTS THAT (A) IT IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A UNDER THE ACT, (B) IT IS AN ''ACCREDITED INVESTOR'' WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE ACT, OTHER THAN A QUALIFIED INSTITUTIONAL BUYER, OR (C) IT IS NOT A U.S. PERSON AND IT HAS

A-1

ACQUIRED THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE ACT;

AGREES THAT IT WILL OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER, OR ANY OF ITS AFFILIATES WAS THE HOLDER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE ACT, (E) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND, IN EACH OF THE CASES ABOVE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION;


3.	AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; AND


4.	AGREES THAT, BEFORE THE HOLDER OFFERS, SELLS OR OTHERWISE TRANSFERS THIS SECURITY, THE ISSUER MAY REQUIRE THE HOLDER OF THIS SECURITY TO DELIVER A WRITTEN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION THAT IT REASONABLY REQUIRES TO CONFIRM THAT SUCH PROPOSED TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.

AS USED IN THIS SECURITY, THE TERMS ''OFFSHORE TRANSACTION,'' ''U.S. PERSON'' AND ''UNITED STATES'' HAVE THE MEANINGS GIVEN TO THEM WITHIN REGULATION S.

THE FOREGOING LEGENDS MAY BE REMOVED FROM THE SECURITIES ON THE CONDITIONS SPECIFIED IN THE FISCAL AGENCY AGREEMENT.

A-2

NORTHERN NATURAL GAS COMPANY

4.25 % Senior Notes due 2021

$[______________]

CUSIP No. [______________]

No. ___ [ISIN No. [______________]]

NORTHERN NATURAL GAS COMPANY, a corporation duly organized under the laws of the State of Delaware (herein called the “ Issuer ”), for value received, hereby promises to pay to [name of registered holder or its registered assigns] [ if this Security is a Global Security, insert‑ ] the Initial Principal Amount specified on Schedule A hereto (such Initial Principal Amount, as it may from time to time be adjusted by endorsement on Schedule A hereto, is hereinafter referred to as the “ Principal Amount ”)] [ if this Security is not a Global Security, insert‑ the principal sum of ________________ Dollars (the “ Principal Amount ”)] on June 1, 2021 and to pay interest thereon from [ ] or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on June 1 and December 1 in each year, commencing December 1, 2011 (each an “ Interest Payment Date ”), at the rate of [__]% per annum, until the principal hereof is paid or made available for payment and (to the extent that the payment of such interest shall be legally enforceable) at the rate per annum equal to the above rate plus 1% per annum on any overdue principal and on any overdue installment of interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Fiscal Agency Agreement hereinafter referred to, be paid to the person (the “ registered holder ”) in whose name this Security (or one or more predecessor Securities) is registered at the close of business on May 15 or November 15 (whether or not a Business Day), as the case may be (each a “ Regular Record Date ”), next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the registered holder on such Regular Record Date and shall be paid to the person in whose name this Security (or one or more predecessor Securities) is registered at the close of business on a special record date for the payment of such interest to be fixed by the Issuer, notice whereof shall be given to registered holders of Securities not less than 10 days prior to such special record date.

[If this Security is a Regulation S Temporary Global Security, insert-- Until this Regulation S Temporary Global Security is exchanged for one or more Regulation S Permanent Global Securities, the holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Security shall in all other respects be entitled to the same benefits as other Securities under the Fiscal Agency Agreement. ]

Principal of this Security shall be payable against surrender hereof at the corporate trust office or office of an agent of the Fiscal Agent hereinafter referred to or at such other offices or agencies as the Issuer may designate and at the offices of such other Paying Agents as the Issuer shall have appointed pursuant to the Fiscal Agency Agreement. Payments of principal shall be made against surrender of this Security, and payments of interest on this Security shall be made, in accordance with the foregoing and subject to applicable laws and regulations, by check mailed on or before the due date for such payment to the person entitled thereto at such person's address appearing on the aforementioned register or, in the case of payments of principal to such other address as the registered holder may specify upon such surrender; provided , however , that any payments shall be made, in the case of a registered holder of at least $1,000,000 aggregate principal amount of Securities, by transfer to an account maintained by the payee with a bank if such registered holder so elects by giving notice to the Fiscal Agent, not less than 15 days (or such fewer days as the Fiscal Agent

A-3

may accept at its discretion) prior to the date of the payments to be obtained, of such election and of the account to which payments are to be made. The Issuer covenants that until this Security has been delivered to the Fiscal Agent for cancellation, or monies sufficient to pay the principal of and interest on this Security have been made available for payment and either paid or returned to the Issuer as provided herein, it will at all times maintain an established place of business or agency in the Borough of Manhattan, The City of New York for the payment of the principal of and interest on the Securities as herein provided.

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

Unless the certificate of authentication hereon has been executed by the Fiscal Agent by manual signature, this Security shall not be valid or obligatory for any purpose.

A-4

IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.

Date:____________ NORTHERN NATURAL GAS COMPANY

By:

Name:

Title:

Attest:

By:

Name:

Title:

A-5

FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION

This is one of the Securities referred to in the within-mentioned Fiscal Agency Agreement.

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Fiscal Agent

By:

Date of Authentication:_________________

A-6

[Form of reverse of Security]

1. This Security is one of a duly authorized issue of securities of the Issuer designated as its [__]% Senior Notes due 2021 (herein called the “ Securities ”), issued in aggregate principal amount of $200,000,000 and to be issued in accordance with a Fiscal Agency Agreement, dated as of April [_], 2011 (herein called the “ Fiscal Agency Agreement ”), between the Issuer and The Bank of New York Mellon Trust Company, N.A., as Fiscal Agent (herein called the “ Fiscal Agent ,” which term includes any successor fiscal agent under the Fiscal Agency Agreement), copies of which Fiscal Agency Agreement are on file and available for inspection at the corporate trust office of the Fiscal Agent which at the date hereof is at 2 N. LaSalle Street, Suite 1020, Chicago, Illinois 60602.

The Securities are unsecured direct, unconditional and general obligations of the Issuer and will rank equally with all other unsecured and unsubordinated indebtedness of the Issuer.

2. [ If this Security is a Global Security, insert -This Security is issuable only in fully registered form, without coupons, in minimum denominations of U.S. $2,000 and integral multiples of $1,000 in excess of $2,000.] [ If this Security is a Restricted Definitive Security, insert -This Security is issuable only in fully registered form, without coupons, in minimum denominations of U.S. $200,000 and integral multiples of $1,000 in excess of $200,000.]

3. The Issuer shall maintain in the Borough of Manhattan, The City of New York, an established place of business or agency where Securities may be surrendered for registration of transfer or exchange. The Issuer has initially appointed the Fiscal Agent acting through its corporate trust office in Chicago, and at its agent's office in the Borough of Manhattan, The City of New York, as its agent for such purpose and the Issuer has agreed to cause to be kept at such offices a register in which, subject to such reasonable regulations as it may prescribe, the Issuer will provide for the registration of Securities and of transfers of Securities. The Issuer reserves the right to vary or terminate the appointment of the Fiscal Agent as security registrar or of any Transfer Agent or to appoint additional or other registrars or Transfer Agents or to approve any change in the office through which any security registrar or any Transfer Agent acts, provided that there will at all times be a security registrar or agent thereof in the Borough of Manhattan, The City of New York. Registered holders of the Securities will receive notice of any such change.

The transfer of a Security is registrable on the aforementioned register upon surrender of such Security at the corporate trust office of the Fiscal Agent or the office of the agent of the Fiscal Agent or any Transfer Agent duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Fiscal Agent duly executed by, the registered holder thereof or such holder's attorney duly authorized in writing. Upon such surrender of this Security for registration of transfer, the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities, dated the date of authentication thereof of any authorized denominations and of a like aggregate principal amount.

At the option of the registered holder upon request confirmed in writing, Securities may be exchanged for Securities of any authorized denominations and of a like tenor, form and aggregate principal amount upon surrender of the Securities to be exchanged at the office of any Transfer Agent or at the corporate trust office of the Fiscal Agent or agent thereof. Whenever any Securities are so surrendered for exchange, the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver, the Securities which the registered holder making the exchange is entitled to receive. Any registration of transfer or exchange will be effected upon the Transfer Agent or the Fiscal Agent, as the case may be, being satisfied with the documents of title

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and identity of the person making the request and subject to such reasonable regulations as the Issuer may from time to time agree with the Transfer Agent and the Fiscal Agent.

All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Issuer evidencing the same debt, and entitled to the same benefits, as the Securities surrendered upon such registration of transfer or exchange. No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer, the Issuer, the Fiscal Agent and any agent of the Issuer or the Fiscal Agent may treat the person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Issuer, the Fiscal Agent nor any such agent shall be affected by notice to the contrary.

[If this Security is a Regulation S Temporary Global Security, insert-- This Regulation S Temporary Global Security is exchangeable in whole or in part for one or more Global Securities only (i) on or after the termination of the 40-day distribution compliance period (as defined in Regulation S) and (ii) upon presentation of certificates required by Section 5(d) of the Fiscal Agency Agreement. Upon exchange of this Regulation S Temporary Global Security for one or more Global Securities, the Fiscal Agent shall cancel this Regulation S Temporary Global Security. ]

(a) The Issuer shall pay to the Fiscal Agent at its principal office in Chicago, Illinois, on or prior to each Interest Payment Date and the maturity date of the Securities, in such amounts sufficient (with any amounts then held by the Fiscal Agent and available for the purpose) to pay the interest on and the principal of the Securities due and payable on such Interest Payment Date or maturity date, as the case may be, in funds available on such date. The Fiscal Agent shall apply the amounts so paid to it to the payment of such interest and principal in accordance with the terms of the Securities. Any monies paid by the Issuer to the Fiscal Agent for the payment of the principal of or interest on any Securities and remaining unclaimed at the end of two years after such principal or interest shall have become due and payable (whether at maturity or otherwise) shall then be repaid to the Issuer upon its written request, and upon such repayment all liability of the Fiscal Agent with respect thereto shall cease, without, however, limiting in any way any obligation the Issuer may have to pay the principal of and interest on this Security as the same shall become due.

(b) In any case where the due date for the payment of the principal of or interest on any Security shall be at any place of payment on a day on which banking institutions are authorized or obligated by law to close, then payment of principal or interest need not be made on such date at such place but may be made on the next succeeding day at such place which is not a day on which banking institutions are authorized or obligated by law to close, with the same force and effect as if made on the date for such payment, and no interest shall accrue for the period after such date.

5. The Securities are subject to redemption upon not less than 30 or more than 60 days' notice to the registered holders of such Securities, at any time, as a whole or in part, at the election of the Issuer, at a redemption price equal to the greater of: (i) 100% of the Principal Amount of the Securities being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities being redeemed discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus [__] basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities to the Redemption Date.

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The Securities are also subject to redemption upon not less than 30 or more than 60 days' notice to the registered holders of such Securities, at any time on or after March 1, 2021 (which is the date that is three months prior to the maturity date of the Securities), as a whole or in part, at the election of the Issuer, at a redemption price equal to 100% of the Principal Amount of the Securities being redeemed, plus accrued and unpaid interest on the Securities to the Redemption Date.

If fewer than all the Securities are to be redeemed, selection of Securities for redemption will be made by the Fiscal Agent in any manner the Fiscal Agent deems fair and appropriate.

Unless the Issuer defaults in payment of the redemption price, from and after the Redemption Date, the Securities or portions thereof called for redemption will cease to bear interest, and the holders thereof will have no right in respect of such Securities except the right to receive the redemption price thereof.

[ If this Security is a Global Security, insert -In the event of redemption of this Security in part only, the Fiscal Agent will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Principal Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.]

For purposes of the Securities,

“ Business Day ” means any day other than a Saturday, Sunday or a day on which banking institutions in The City of New York or the City of Chicago or at a place of payment are authorized by law, regulation or executive order to remain closed.

“ Comparable Treasury Issue ” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities.

“ Comparable Treasury Price ” means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.

“ Independent Investment Banker ” means an investment banking institution of international standing appointed by the Issuer.

“ Redemption Date ” means any date on which the Issuer redeems all or any portion of the Securities in accordance with the terms hereof.

“ Reference Treasury Dealer ” means a primary U.S. government securities dealer in New York City appointed by the Issuer.

“ Reference Treasury Dealer Quotation ” means, with respect to the Reference Treasury Dealer and any Redemption Date, the average, as determined by the Issuer, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount and quoted in

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writing to the Issuer by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day in New York City preceding such Redemption Date).

“ Treasury Yield ” means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.

6. The Issuer shall pay all stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority of or in the foregoing with respect to the Fiscal Agency Agreement or the issuance of this Security. Except as otherwise provided in this Security, the Issuer shall not be required to make any payment with respect to any tax, assessment or other governmental charge imposed by any government or any political subdivision or taxing authority thereof or therein.

7. In the event of:

(i) default in the payment of any interest on any Security for a period of 30 days after the date when due; or

(ii) default in the payment of the principal of any Security when due (whether at maturity or otherwise); or

(iii) default in the performance or breach of any other covenant or agreement of the Issuer contained in the Securities or in the Fiscal Agency Agreement for a period of 60 days after the date on which written notice of such default requiring the Issuer to remedy the same and stating that such notice is a “Notice of Default” shall first have been given to the Issuer and the Fiscal Agent by the holders of at least 25% in principal amount of the Securities at the time Outstanding (as defined in the Fiscal Agency Agreement); or

(iv) the entry by a court having jurisdiction in the premises of (1) a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (2) a decree or order adjudging the Issuer bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or of any substantial part of the property of the Issuer, or ordering the winding up or liquidation of the affairs of the Issuer, and any such decree or order for relief or any such other decree or order shall continue unstayed and in effect for a period of 60 consecutive days; or

(v) commencement by the Issuer of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Issuer to the entry of a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Issuer, or the filing by the Issuer of a petition or answer or consent seeking reorganization or relief under any such applicable Federal or State law, or the consent by the Issuer to the filing of such petition or to the appointment of or the taking possession by a custodian, receiver, liquidator, assignee, trustee,

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sequestrator or other similar official of the Issuer or of any substantial part of its property, or the making by the Issuer of an assignment for the benefit of creditors, or the taking of action by the Issuer in furtherance of any such action;

the registered holders of this Security may, at such holder's option, declare the principal of this Security and the interest accrued hereon to be due and payable immediately by written notice to the Issuer and the Fiscal Agent at its corporate trust office, and unless all such defaults shall have been cured by the Issuer prior to receipt of such written notice, the principal of the Security and the interest accrued thereon shall become and be immediately due and payable. For purposes of the Securities, “ Subsidiary ” of the Issuer means a corporation all of the outstanding voting stock of which is owned, directly or indirectly, by the Issuer and/or one or more Subsidiaries of the Issuer. For the purposes of this definition, “ voting stock ” means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.

8. So long as any of the Securities are Outstanding, the Issuer will not pledge, mortgage or hypothecate, or permit to exist, and will not cause, suffer or permit any Subsidiary of it to pledge, mortgage or hypothecate, or permit to exist, except in favor of the Issuer or any Subsidiary of it, any mortgage, pledge or other lien upon, any Principal Property (as hereinafter defined) at any time owned by it, to secure any Indebtedness (as hereinafter defined) of it, without making effective provision whereby the Outstanding Securities shall be equally and ratably secured with any and all such Indebtedness of the Issuer and with any other Indebtedness of it similarly entitled to be equally and ratably secured; provided , however , that this restriction shall not apply to or prevent the creation or existence of:

(i) undetermined or inchoate liens and charges incidental to construction, maintenance, development or operation;

(ii) any liens of taxes and assessments for the then current year;

(iii) any liens of taxes and assessments not at the time delinquent;

(iv) any liens of specified taxes and assessments which are delinquent but the validity of which is being contested in good faith at the time by the Issuer or any Subsidiary of it;

(v) any liens reserved in leases for rent and for compliance with the terms of the lease in the case of leasehold estates;

(vi) any obligations or duties, affecting the property of the Issuer or any Subsidiary of it, to any municipality or public authority with respect to any franchise, grant, license, permit or similar arrangement;

(vii) the liens of any judgments or attachments in an aggregate amount not in excess of $10,000,000, or the lien of any judgment or attachment the execution or enforcement of which has been stayed or which has been appealed and secured, if necessary, by the filing of an appeal bond;

(viii) any mortgage, pledge, lien or encumbrance on any property held or used by the Issuer or any Subsidiary of it in connection with the exploration for, development of or production of oil, gas, natural gas (including liquefied gas and storage gas), other hydrocarbons, helium, coal, metals, minerals, steam, timber, geothermal or other natural resources or synthetic fuels, such properties to

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include, but not be limited to, the interest of the Issuer or such Subsidiary in any mineral fee interests, oil, gas or other mineral leases, royalty, overriding royalty or net profits interests, production payments and other similar interests, wellhead production equipment, tanks, field gathering lines, leasehold or field separation and processing facilities, compression facilities and other similar personal property and fixtures;

(ix) any mortgage, pledge, lien or encumbrance on oil, gas, natural gas (including liquefied gas and storage gas), and other hydrocarbons, helium, coal, metals, minerals, steam, timber, geothermal or other natural resources or synthetic fuels produced or recovered from any property, an interest in which is owned or leased by the Issuer or any Subsidiary of it;

(x) mortgages, pledges, liens or encumbrances upon any property heretofore or hereafter acquired, created at the time of acquisition or within 365 days thereafter to secure all or a portion of the purchase price thereof, or existing thereon at the date of acquisition, whether or not assumed by the Issuer or any Subsidiary of it, provided that every such mortgage, pledge, lien or encumbrance shall apply only to the property so acquired and fixed improvements thereon;

(xi) any extension, renewal or refunding, in whole or in part, of any mortgage, pledge, lien or encumbrance permitted by Section (x) above, if limited to the same property or any portion thereof subject to, and securing not more than the amount secured by, the mortgage, pledge, lien or encumbrance extended, renewed or refunded;

(xii) mortgages, pledges, liens or encumbrances upon any property heretofore or hereafter acquired by any corporation that is or becomes such a Subsidiary of the Issuer after the date of the Fiscal Agency Agreement (“ Acquired Entity ”), provided that every such mortgage, pledge, lien or encumbrance (1) shall either (a) exist prior to the time the Acquired Entity becomes such a Subsidiary or (b) be created at the time the Acquired Entity becomes such a Subsidiary or within 365 days thereafter to secure all or a portion of the acquisition price thereof and (2) shall only apply to those properties owned by the Acquired Entity at the time it becomes such a Subsidiary or thereafter acquired by it from sources other than the Issuer or any other Subsidiary of it;

(xiii) the pledge of current assets, in the ordinary course of business, to secure current liabilities;

(xiv) mechanics' or materialmen's liens, any liens or charges arising by reason of pledges or deposits to secure payment of workmen's compensation or other insurance, good faith deposits in connection with tenders, leases of real estate, bids or contracts (other than contracts for the payment of money), deposits to secure duties or public or statutory obligations, deposits to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or similar charges;

(xv) any lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time in connection with the financing of the acquisition or construction of property to be used in the business of the Issuer or any Subsidiary of it or as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable the Issuer or any such Subsidiary to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workmen's compensation, unemployment insurance, old age pensions or other social security, or to share in the privileges or

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benefits required for companies participating in such arrangements;

(xvi) any lien to secure Indebtedness of the Issuer other than Funded Debt (as hereinafter defined);

(xvii) any mortgage, pledge, lien or encumbrance of or upon any office equipment, data processing equipment (including, without limitation, computer and computer peripheral equipment), or transportation equipment (including without limitation, motor vehicles, tractors, trailers, marine vessels, barges, towboats, rolling stock and aircraft);

(xviii) any mortgage, pledge, lien or encumbrance created or assumed by the Issuer or any Subsidiary of it in connection with the issuance of debt securities the interest on which is excludable from gross income of the holder of such security pursuant to the Internal Revenue Code of 1986, as amended, for the purpose of financing, in whole or in part, the acquisition or construction of property to be used by the Issuer or any such Subsidiary;

(xix) the pledge or assignment of accounts receivable, or the pledge or assignment of conditional sales contracts or chattel mortgages and evidences of indebtedness secured thereby, received in connection with the sale by the Issuer or any Subsidiary of it of goods or merchandise to customers of the Issuer or any Subsidiary;

(xx) mortgages, pledges, liens or encumbrances upon any property (i) arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business (provided such Indebtedness is extinguished within five business days of its incurrence), and (ii) in favor of banking institutions arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

(xxi) mortgages, pledges, liens or encumbrances upon any property arising out of conditional sale, title retention, consignment or similar arrangements for the sale or purchase of goods or services or arrangements for the treatment, separation or processing of gas liquids entered into by us or any Subsidiary in the ordinary course of business; or

(xxii) rights reserved to or vested in any Government Authority to use, control or regulate any property of us or any of our Subsidiaries.

In case the Issuer or any Subsidiary of it shall propose to pledge, mortgage or hypothecate any Principal Property at any time owned by it to secure any of its Indebtedness, other than as permitted by subdivisions (i) to (xxii) , inclusive, of this Paragraph 8 , the Issuer will prior thereto give written notice thereof to the Fiscal Agent, and the Issuer will, or will cause such Subsidiary to, prior to or simultaneously with such pledge, mortgage or hypothecation, effectively secure all the Securities equally and ratably with such Indebtedness.

Notwithstanding the foregoing provisions of this Paragraph 8 , the Issuer or any Subsidiary of it may incur, assume or guarantee indebtedness secured by a mortgage which would otherwise be subject to the foregoing restrictions in an aggregate amount which, together with all other Indebtedness of the Issuer or a Subsidiary of it secured by a mortgage which (if originally issued, assumed or guaranteed at such time) would otherwise be subject to the foregoing restrictions (not including Indebtedness permitted to be secured under clauses (i) through (xix) above), does not at the time exceed 10% of the Consolidated Net Tangible

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Assets of the Issuer as shown on its audited consolidated financial statements as of the end of the fiscal year preceding the date of determination.

For purposes of the Securities,

“ Consolidated Net Tangible Assets ” of any corporation means total assets less (a) total current liabilities (excluding Indebtedness due within 365 days) and (b) goodwill, patents and trademarks, all as reflected in such corporation's audited consolidated balance sheet preceding the date of a determination under the immediately preceding paragraph of this Paragraph 8 .

“ Funded Debt ” as applied to any corporation means all Indebtedness incurred, created, assumed or guaranteed by such corporation, or upon which it customarily pays interest charges; provided , however , that the term “Funded Debt” shall not include (i) Indebtedness incurred in the ordinary course of business representing borrowings, regardless of when payable, of such corporation from time to time against, but not in excess of the face amount of, its installment accounts receivable for the sale of appliances and equipment sold in the regular course of business or (ii) advances for construction and security deposits received by such corporation in the ordinary course of business.

“ Government Authority ” means any nation or government, any state, province, territory or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative function of or pertaining to government.

“ Indebtedness ” as applied to any corporation, means bonds, debentures, notes and other instruments representing obligations created or assumed by any such corporation for the repayment of money borrowed (other than unamortized debt discount or premium). All Indebtedness secured by a lien upon property owned by any corporation and upon which Indebtedness any such corporation customarily pays interest, although any such corporation has not assumed or become liable for the payment of such Indebtedness, shall for all purposes of the Securities be deemed to be Indebtedness of any such corporation. All Indebtedness for money borrowed or incurred by other persons which is directly guaranteed as to payment of principal by any corporation shall for all purposes of the Securities be deemed to be Indebtedness of such corporation, but no other contingent obligation of such corporation in respect of Indebtedness incurred by other persons shall for any purpose be deemed Indebtedness of such corporation. Indebtedness of any corporation shall not include: (i) amounts which are payable only out of all or a portion of the oil, gas, natural gas, helium, coal, metal, mineral, steam, timber, hydrocarbons, or geothermal or other natural resources produced, derived or extracted from properties owned or developed by such corporation; (ii) any amount representing capitalized lease obligations; (iii) any indebtedness incurred to finance oil, gas, natural gas, helium, coal, metals, minerals, steam, timber, hydrocarbons or geothermal or other natural resources or synthetic fuel exploration or development, payable with respect to principal and interest, solely out of proceeds of oil, gas, natural gas, helium, coal, metals, minerals, steam, timber, hydrocarbons or geothermal or other natural resources or synthetic fuel to be produced, sold and/or delivered by any such corporation; (iv) indirect guarantees or other contingent obligations in connection with the Indebtedness of others, including agreements, contingent or otherwise, with such other persons or with third persons with respect to, or to permit or ensure the payment of, obligations of such other persons, including, without limitation, agreements to purchase or repurchase obligations of such other persons, agreements to advance or supply funds to or to invest in such other persons, or agreements to pay for property, products or services of such other persons (whether or not conferred, delivered or rendered), and any demand charge, throughput, take-or-pay, keep-well, make-whole, cash deficiency, maintenance of working capital or earnings or similar agreements; and (v) any guarantees with respect to lease or other similar periodic payments to be made by other persons.

“ Principal Property ” of the Issuer means any oil or gas pipeline, gas processing plant or

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chemical plant located in the United States, except any such pipeline, facility, station or plant that in the opinion of the Board of Directors of the Issuer is not of material importance to the total business conducted by the Issuer or its Subsidiaries. “Principal Property” shall not include any oil or gas property or the production or any proceeds of production from an oil or gas producing property or the production or any proceeds of production of gas processing plants or oil or gas or petroleum products in any pipeline. “Principal Property” shall also include any gas storage facility or gas compressor station located in the United States, except any such facility or station that in the opinion of the Board of Directors of the Issuer is not of material importance to the total business conducted by the Issuer or its Subsidiaries, and “Principal Property” shall not include any liquefied natural gas plants and related storage facilities or any natural gas liquids processing plants.

(a) The Issuer shall not consolidate with or merge into any other person or convey, transfer or lease its properties and assets substantially as an entirety to any person, and the Issuer shall not permit any person to consolidate with or merge into the Issuer or convey, transfer or lease its properties and assets substantially as an entirety to the Issuer unless:

(i) (i) in case the Issuer shall consolidate with or merge into another person or convey, transfer or lease its properties and assets substantially as an entirety to any person, the person formed by such consolidation or into which the Issuer is merged or the person which acquires by conveyance or transfer, or which leases, the properties and assets of the Issuer substantially as an entirety shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia (the “ Successor Person ”) and shall expressly assume, by amendment to the Fiscal Agency Agreement signed by the Issuer and such Successor Person and delivered to the Fiscal Agent, the due and punctual payment of the principal of and interest on at the Securities and the performance or observance of every covenant hereof and of the Fiscal Agency Agreement on the part of the Issuer to be performed or observed;

(ii) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Issuer or any Subsidiary of it as a result of such transaction as having been incurred by the Issuer or any such Subsidiary at the time of such transaction, no event of default (as set forth in Paragraph 7 ), and no event which, with notice or lapse of time or both, would become such an event of default, shall have happened and be continuing;

(iii) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Issuer or any Subsidiary of it would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by Paragraph 8 hereof, the Issuer, or the Successor Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all Indebtedness secured by such mortgage, pledge, lien, security interest or other encumbrance; and

(iv) the Issuer has delivered to the Fiscal Agent an Officers' Certificate and a written opinion or opinions of counsel satisfactory to the Fiscal Agent (who may be counsel to the Issuer), stating that such consolidation, merger, conveyance, transfer or lease and such amendment to the Fiscal Agency Agreement comply with this Paragraph 9 and that all conditions precedent herein provided for relating to such transaction have been complied with.

(b) Upon any such consolidation or merger, or any conveyance, transfer or lease of the properties and assets of the Issuer substantially as an entirety in accordance with Paragraph 9(a) , the Successor Person shall succeed to, and be substituted for, and may exercise every right and

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power of, the Issuer under the Fiscal Agency Agreement and the Securities with the same effect as if the Successor Person had been named as the Issuer in the Fiscal Agency Agreement and the Securities, and thereafter the Issuer, except in the case of a lease of its properties and assets, shall be released from its liability as obligor on any of the Securities and under the Fiscal Agency Agreement.

10. Section 8 of the Fiscal Agency Agreement, which requires the Issuer to provide registered holders of Securities or, in the case of clauses (a) and (b) thereof, designated prospective purchasers of Securities with certain information and an Officers' Certificate, is hereby incorporated mutatis mutandis by reference herein.

11. Until the date that is one year from the date of original issuance of the Securities, the Issuer will not, and will not permit any of its “affiliates” (as defined under Rule 144 under the Act or any successor provision thereto) to, resell any Securities which constitute “restricted securities” under Rule 144 that have been reacquired by any of them.

12. If any mutilated Security is surrendered to the Fiscal Agent, the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver in exchange therefor, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding.

If there be delivered to the Issuer and the Fiscal Agent (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of each of them harmless, then, in the absence of notice to the Issuer or the Fiscal Agent that such Security has been acquired by a bona fide purchaser, the Issuer shall execute, and upon its request the Fiscal Agent shall authenticate and deliver in lieu of any such destroyed, lost or stolen Security a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding.

Upon the issuance of any new Security under this Paragraph 12 , 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 the expenses of the Fiscal Agent) connected therewith.

Every new Security issued pursuant to this Paragraph 12 in lieu of any destroyed, lost or stolen Security, shall constitute an original additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone.

Any new Security delivered pursuant to this Paragraph 12 shall be so dated that neither gain nor loss in interest shall result from such exchange.

The provisions of this Paragraph 12 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 Securities.

13. Section 12 of the Fiscal Agency Agreement, which Section is hereby incorporated mutatis mutandis by reference herein, provides that, with certain exceptions as therein provided and by written consent of a majority in the principal amount of all Outstanding Securities, the Issuer and the Fiscal Agent may modify, amend or supplement the Fiscal Agency Agreement or the terms of the Securities or may give consents or waivers or take other actions with respect thereto. Any such modification, amendment, supplement, consent, waiver or other action shall be conclusive and binding on the holder of this Security and on all future holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange heretofore or in lieu hereof, whether or not notation thereof is made upon this Security. The

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Fiscal Agency Agreement and the terms of the Securities may be modified or amended by the Issuer and the Fiscal Agent, without the consent of any holders of Securities, for the purpose of (i) adding to the covenants of the Issuer for the benefit of the holders of Securities, or (ii) surrendering any right or power conferred upon the Issuer, or (iii) securing the Securities pursuant to the requirements of the Securities or otherwise, or (iv) evidencing the succession of another corporation to the Issuer and the assumption by any such successor of the covenants and obligations of the Issuer in the Securities or in the Fiscal Agency Agreement pursuant to Paragraph 9 hereof, (v) providing for the issuance of additional Securities in accordance with the Fiscal Agency Agreement, or (vi) correcting or supplementing any defective provision contained in the Securities or in the Fiscal Agency Agreement, to all of which each holder of any Security, by acceptance thereof, consents.

14. No reference herein to the Fiscal Agency Agreement and no provision of this Security or of the Fiscal Agency Agreement shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

15. This Security is subject to the provisions of Section 15 of the Fiscal Agency Agreement (which are incorporated mutatis mutandis by reference herein) which provide for the defeasance at any time of (i) the entire indebtedness of this Security or (ii) certain covenants and events of default, in each case upon compliance with certain conditions set forth therein.

16. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer will cause CUSIP numbers to be printed on the Securities as a convenience to the holders of the Securities. This Security will also bear an ISIN number. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon.

17. THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

A-17

[IF THIS SECURITY IS A GLOBAL SECURITY, INSERT AS A SEPARATE PAGE]

Schedule A

SCHEDULE OF ADJUSTMENTS

Initial Principal Amount: U.S. $___________________



Date adjustment made	Principal amount increase	Principal amount decrease	Principal amount following adjustment	Notation made on behalf of the Transfer Agent

A-1

EXHIBIT B

FORM OF TRANSFER CERTIFICATE

FOR TRANSFER OR EXCHANGE FROM REGULATION S

GLOBAL SECURITY TO RULE 144A GLOBAL SECURITY

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration


Re :	NORTHERN NATURAL GAS COMPANY

4.25 % Senior NOTES due 2021

Reference is hereby made to the Fiscal Agency Agreement, dated as of April [20], 2011 (the “ Fiscal Agency Agreement ”), between Northern Natural Gas Company and The Bank of New York Mellon Trust Company, N.A., as Fiscal Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Fiscal Agency Agreement.

This letter relates to U.S. $_________ principal amount of Securities which are evidenced by one or more Regulation S Global Securities in fully registered form (CUSIP No. [______]; ISIN No. [ ]) and held with the U.S. Depository by means of a book-entry interest through Euroclear or Clearstream in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Regulation S Global Security to a Person that will take delivery thereof (the “ Transferee ”) in the form of any equal principal amount of Securities evidenced by one or more Rule 144A Global Securities (CUSIP No. [______]).

In connection with such request and in respect of such Securities, the Transferor does hereby certify that the interests in the Regulation S Global Security are being transferred pursuant to and in accordance with Rule 144A under United States Securities Act of 1933, as amended (the “ Act ”), and, accordingly, the Transferor does hereby further certify that the interests in the Regulation S Global Security are being transferred to a Person that the Transferor reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States.

B-1

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the underwriters and initial purchasers of the Securities being transferred.

[Insert Name of Transferor]

By:

Name:

Title:

Dated: __________

cc: NORTHERN NATURAL GAS COMPANY

Signature Guaranty:_____________________

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“ STAMP ”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

B-2

EXHIBIT C

FORM OF TRANSFER CERTIFICATE FOR

TRANSFER OR EXCHANGE FROM REGULATION S GLOBAL

SECURITY TO RESTRICTED DEFINITIVE SECURITY

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration


Re :	NORTHERN NATURAL GAS COMPANY

4.25 % SENIOR NOTES DUE 2021

This letter relates to U.S. $___________ principal amount of Securities which are evidenced by one or more Regulation S Global Securities in fully registered form (CUSIP No. [_____]; ISIN No. [ ]) and held with the U.S. Depository by means of a book-entry interest through Euroclear or Clearstream in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Regulation S Global Security to a Person that will take delivery thereof (the “ Transferee ”) in the form of an equal principal amount of Securities evidenced by a Restricted Definitive Security.

In connection with such request and in respect of such Securities, the Transferor does hereby certify that the interests in the Regulation S Global Security are being transferred to a Person that the Transferor reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is an institutional “accredited investor” as described in Rule 501(a)(1), (2), (3) or (7) under the Unites States Securities Act of 1933, as amended (the “ Act ”), and is purchasing such Securities for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Act, in a transaction in accordance with any applicable securities laws of the United States or any state thereof.

C-1

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the underwriters and initial purchasers of the Securities being transferred.

[Insert Name of Transferor]

By:

Name:

Title:

Dated:____________

cc: NORTHERN NATURAL GAS COMPANY

C-2

EXHIBIT D

FORM OF TRANSFER CERTIFICATE

FOR EXCHANGE OR TRANSFER FROM REGULATION S GLOBAL

SECURITY TO UNRESTRICTED GLOBAL SECURITY

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration


Re:	NORTHERN NATURAL GAS COMPANY

4.25 % Senior NOTES due 2021

This letter relates to U.S.$ _________ principal amount of Securities which are evidenced by one or more Regulation S Global Securities (CUSIP No. [_____]; ISIN No. [ ]) and held with the U.S. Depository by means of a book-entry interest through Euroclear or Clearstream in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Securities to a Person who will take delivery thereof in the form of an equal principal amount of Securities evidenced by one or more unrestricted Global Securities (CUSIP No. _____________).

In connection with such request and in respect of such Securities, the Transferor does hereby certify that such transfer has been effected pursuant to and in accordance with either Rule 903, Rule 904 or Rule 144 under the Unites States Securities Act of 1933, as amended (the “ Act ”), and accordingly the Transferor does hereby further certify that:


(1)	if the transfer has been effected pursuant to Rule 903 or Rule 904:


(a)	the offer of the Securities was not made to a Person in the United States;

(b) either:

(i) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any Person acting on its

D-1

behalf reasonably believed that the transferee was outside the United States, or

(ii) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;

(c) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and

(d) the transaction is not part of a plan or scheme to evade the registration requirements of the Act; or

(2) if the transfer has been effected pursuant to Rule 144, the Securities have been transferred in a transaction permitted by Rule 144.

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the underwriters and initial purchasers, if any, of the Securities being transferred. Terms used in this certificate and not otherwise defined in the Fiscal Agency Agreement have the meanings set forth in Regulation S under the Act.

[Insert Name of Transferor]

By:

Name:

Title:

Dated: _____________

cc: NORTHERN NATURAL GAS COMPANY

D-2

EXHIBIT E

FORM OF TRANSFER CERTIFICATE

FOR EXCHANGE OR TRANSFER FROM RULE 144A GLOBAL

SECURITY TO REGULATION S GLOBAL SECURITY

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration


Re:	NORTHERN NATURAL GAS COMPANY

4.25 % SENIOR NOTES DUE 2021

This letter relates to U.S.$ ________ principal amount of Securities which are evidenced by one or more Rule 144A Global Securities (CUSIP No. [______]) and held through the U.S. Depository in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Securities to a non-U.S. person who will take delivery thereof in the form of an equal principal amount of Securities evidenced by one or more Regulation S Global Securities (CUSIP No. [______]; ISIN No. [ ]), which amount, immediately after such transfer, is to be held with the U.S. Depository through Euroclear or Clearstream (Common Code _______).

In connection with such request and in respect of such Securities, the Transferor does hereby certify that such transfer has been effected pursuant to and in accordance with Rule 903 or Rule 904 under the Unites States Securities Act of 1933, as amended (the “ Act ”), and accordingly the Transferor does hereby further certify that:


(1)	the offer of the Securities was not made to a Person in the United States;

(2) either:

a. at the time the buy order was originated, the transferee was outside the United States or the Transferor and any Person acting on its behalf reasonably believed that the transferee was outside the United States, or

b. the transaction was executed in, on or through the facilities

E-1

of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;

(3) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;

(4) the transaction is not part of a plan or scheme to evade the registration requirements of the Act; and

(5) upon completion of the transaction, the beneficial interest being transferred as described above is to be held with the U.S. Depository through Euroclear or Clearstream (Common Code ___________).

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the underwriters or initial purchasers, if any, of the initial offering of such Securities being transferred. Terms used in this certificate and not otherwise defined in the Fiscal Agency Agreement have the meanings set forth in Regulation S under the Act.

[Insert Name of Transferor]

By:

Name:

Title:

Dated: ________________

cc: NORTHERN NATURAL GAS COMPANY

Signature Guaranty:____________________

E-2

EXHIBIT F

FORM OF TRANSFER CERTIFICATE

FOR EXCHANGE OR TRANSFER FROM RULE 144A GLOBAL

SECURITY TO RESTRICTED DEFINITIVE SECURITY

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration


Re:	NORTHERN NATURAL GAS COMPANY

4.25 % SENIOR NOTES DUE 2021

This letter relates to U.S.$ _________ principal amount of Securities which are evidenced by one or more Rule 144A Global Securities (CUSIP No. [______]) and held through the U.S. Depository in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Securities to a Person who will take delivery thereof in the form of an equal principal amount of Securities evidenced by a Restricted Definitive Security.

In connection with such request and in respect of such Securities, the Transferor does hereby certify that the interests in the Rule 144A Global Security are being transferred to a Person that the Transferor reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is an institutional “accredited investor” as described in Rule 501(a)(1), (2), (3) or (7) under the Unites States Securities Act of 1933, as amended (the “ Act ”), and is purchasing such Securities for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Act, in a transaction in accordance with any applicable securities laws of the United States or any state thereof.

F-1

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the underwriters and initial purchasers, if any, of the Securities being transferred.

[Insert Name of Transferor]

By:

Name:

Title:

Dated: ____________

cc: NORTHERN NATURAL GAS COMPANY

F-2

EXHIBIT G

FORM OF TRANSFER CERTIFICATE

FOR EXCHANGE OR TRANSFER FROM RULE 144A GLOBAL

SECURITY TO UNRESTRICTED GLOBAL SECURITY

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration


Re:	NORTHERN NATURAL GAS COMPANY

4.25 % SENIOR NOTES DUE 2021

This letter relates to U.S.$ _________ principal amount of Securities which are evidenced by one or more Rule 144A Global Securities (CUSIP No. [_______]) and held through the U.S. Depository in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Securities to a Person who will take delivery thereof in the form of an equal principal amount of Securities evidenced by one or more unrestricted Global Securities (CUSIP No._________).

(1) if the transfer has been effected pursuant to Rule 903 or Rule 904:


a.	the offer of the Securities was not made to a Person in the United States;

b. either:

i. at the time the buy order was originated, the transferee was outside the United States or the Transferor and any Person acting on its behalf reasonably believed that the transferee was outside the United States, or

G-1

ii. the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;

c. no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and

d. the transaction is not part of a plan or scheme to evade the registration requirements of the Act; or

(2) if the transfer has been effected pursuant to Rule 144, the Securities have been transferred in a transaction permitted by Rule 144.

[Insert Name of Transferor]

By:

Name:

Title:

Dated: _____________

cc: NORTHERN NATURAL GAS COMPANY

G-2

EXHIBIT H

FORM OF TRANSFER CERTIFICATE

FOR TRANSFER AND EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration


Re:	NORTHERN NATURAL GAS COMPANY

4.25 % SENIOR NOTES DUE 2021

This letter relates to U.S. $________________ principal amount of Securities presented or surrendered on the date hereof (the “ Surrendered Securities ”) which are registered in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such Surrendered Securities registered in the name of a Person (the “ Transferee ”) other than the Transferor (each such transaction being referred to herein as a “transfer”).

In connection with such request and in respect of such Surrendered Securities, the Transferor does hereby certify that:

[CHECK ONE]

H-1



	(1)	the Surrendered Securities are being transferred to the Issuer or an Affiliate thereof;
	(2)	the Surrendered Securities are being transferred pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the “Act”) and, accordingly, the Transferor does hereby further certify that the Surrendered Securities are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States;
	(3)	the Surrendered Securities are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Securities for its own account or for one or more accounts with respect to which such Person exercise sole investment discretion, and such Person and each such account is an institutional “accredited investor” as described in Rule 501(a)(1), (2), (3) or (7) under the Act and is purchasing such Surrendered Securities for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Act in a transaction in accordance with any applicable securities laws of the United States or any state thereof.
		or
	(4)	the Surrendered Securities are being transferred pursuant to and in accordance with Regulation S and:

a. the offer of the Surrendered Securities was not made to a Person in the United States;

b. either:

c. no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and

d. the transaction is not part of a plan or scheme to evade the registration requirements of the Act;



	(5)	the Surrendered Securities are being transferred in a transaction permitted by Rule 144.

H-2

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the underwriters and initial purchasers of the Securities being transferred.

[Insert Name of Transferor]

By:

Name:

Title:

Dated:________________

cc: NORTHERN NATURAL GAS COMPANY

Signature Guaranty:_____________________

H-3

EXHIBIT 4.56

TOPAZ SOLAR FARMS LLC

5.75% SERIES A SENIOR SECURED NOTES DUE 2039

INDENTURE

Dated as of February 24, 2012

The Bank of New York Mellon Trust Company, N.A.

As Trustee



TABLE OF CONTENTS
		Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE

Section 1.01	Definitions	1
Section 1.02	Other Definitions	26
Section 1.03	Rules of Construction	27

ARTICLE 2
THE NOTES

Section 2.01	Form and Dating	27
Section 2.02	Execution and Authentication	28
Section 2.03	Registrar and Paying Agent	29
Section 2.04	Paying Agent to Hold Money in Trust	29
Section 2.05	Holder Lists	29
Section 2.06	Transfer and Exchange	30
Section 2.07	Replacement Notes	38
Section 2.08	Outstanding Notes	39
Section 2.09	Treasury Notes	39
Section 2.10	Temporary Notes	39
Section 2.11	Cancellation	39
Section 2.12	Defaulted Interest	39
Section 2.13	Additional Notes	40
Section 2.14	CUSIP Numbers.	40

ARTICLE 3
REDEMPTION AND PREPAYMENT

Section 3.01	Notices to Trustee	41
Section 3.02	Selection of Notes to Be Redeemed or Purchased	41
Section 3.03	Notice of Redemption	41
Section 3.04	Effect of Notice of Redemption	42
Section 3.05	Deposit of Redemption or Purchase Price	42
Section 3.06	Notes Redeemed or Purchased in Part	43
Section 3.07	Optional Redemption	43
Section 3.08	Sinking Fund	43
Section 3.09	Mandatory Redemption	43
Section 3.10	Capacity Reduction	44
Section 3.11	Redemption Upon Foreclosure on the Collateral	44



ARTICLE 4
COVENANTS

Section 4.01	Payment of Notes	45
Section 4.02	Maintenance of Office or Agency	45
Section 4.03	Financial Information; Reporting Requirements	45
Section 4.04	Compliance Certificate	47
Section 4.05	Taxes	47
Section 4.06	Stay, Extension and Usury Laws	47
Section 4.07	Restricted Payments	47
Section 4.08	Use of Note Proceeds; Letters of Credit	49
Section 4.09	Incurrence of Indebtedness and Issuance of Preferred Stock	49
Section 4.10	Leases	51
Section 4.11	Limitations on Transactions with Affiliates	51
Section 4.12	Limitation on Liens	51
Section 4.13	Conduct of Business; Maintenance of Properties, Etc.	51
Section 4.14	Maintenance of Existence	51
Section 4.15	Change of Control; Offer to Repurchase Upon Change of Control	51
Section 4.16	Separate Existence	53
Section 4.17	Maintenance of Books and Records, Inspection	53
Section 4.18	Annual Operating Budget	53
Section 4.19	Insurance	53
Section 4.20	Perfection and Maintenance of Security Interests	54
Section 4.21	Maintenance of Priority of the Notes	54
Section 4.22	Maintenance of Rights in Project Property	54
Section 4.23	Compliance with Laws and Agreements; Maintenance of Permits	54
Section 4.24	Limitation on Nature of Business	54
Section 4.25	Limitation on Termination or Amendments to Major Project Contracts	55
Section 4.26	Organizational Documents	55
Section 4.27	Fundamental Changes; Asset Dispositions and Acquisitions	56
Section 4.28	Hedging Agreements	56
Section 4.29	Investments in Other Persons	56
Section 4.30	Capital Expenditures	56
Section 4.31	Subsidiaries	57
Section 4.32	Accounts	57
Section 4.33	Performance of Major Project Contracts	57
Section 4.34	Exercise of Rights	57
Section 4.35	Consent and Agreement	57
Section 4.36	Replacement Project Contracts	58
Section 4.37	Rating	58
Section 4.38	Funding of Equity Contributions	58
Section 4.39	Loss Event	58
Section 4.40	Loss Events and Events of Taking	58
Section 4.41	Title Events	59
Section 4.42	Performance Liquidated Damages	59
Section 4.43	Project Contract Termination	60



Section 4.44	Accumulation of Amounts in Distribution Suspense Account	61
Section 4.45	Construction of the Project	62
Section 4.46	Payments for Consent	62
Section 4.47	Further Assurances	62
Section 4.48	Energy Regulatory Status	62
Section 4.49	Land Transfer	63
Section 4.50	Fiscal Year, Name, Location and EIN	63
Section 4.51	Hazardous Materials	63

ARTICLE 5
[RESERVED]

ARTICLE 6
DEFAULTS AND REMEDIES

Section 6.01	Events of Default	63
Section 6.02	Acceleration	65
Section 6.03	Other Remedies	66
Section 6.04	Waiver of Past Defaults	66
Section 6.05	Control by Majority	66
Section 6.06	Limitation on Suits	66
Section 6.07	Rights of Holders to Receive Payment	67
Section 6.08	Collection Suit by Trustee	67
Section 6.09	Trustee May File Proofs of Claim	67
Section 6.10	Priorities	67
Section 6.11	Undertaking for Costs.	68

ARTICLE 7
TRUSTEE

Section 7.01	Duties of Trustee	68
Section 7.02	Rights of Trustee	69
Section 7.03	Individual Rights of Trustee	70
Section 7.04	Trustee's Disclaimer	70
Section 7.05	Notice of Defaults	70
Section 7.06	Reports by Trustee to Holders	70
Section 7.07	Compensation and Indemnity	71
Section 7.08	Replacement of Trustee	71
Section 7.09	Successor Trustee by Merger, etc.	72
Section 7.10	Eligibility; Disqualification	72

ARTICLE 8
LEGAL DEFEASANCE AND CONVENANT DEFEASANCE

Section 8.01	Option to Effect Legal Defeasance or Covenant Defeasance	72
Section 8.02	Legal Defeasance and Discharge	72

iii



Section 8.03	Covenant Defeasance	73
Section 8.04	Conditions to Legal or Covenant Defeasance	73
Section 8.05	Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions	74
Section 8.06	Repayment to Company	74
Section 8.07	Reinstatement	75

ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01	Without Consent of Holders	75
Section 9.02	With Consent of Holders	76
Section 9.03	[Reserved]	77
Section 9.04	Revocation and Effect of Consents	77
Section 9.05	Notation on or Exchange of Notes	77
Section 9.06	Trustee to Sign Amendments, etc.	77

ARTICLE 10
COLLATERAL AND SECURITY

Section 10.01	Security Documents	77
Section 10.02	Recording and Opinions	78
Section 10.03	Release of Collateral	78
Section 10.04	Opinion of Counsel	79
Section 10.05	Certificates of the Trustee	79
Section 10.06	Authorization of Actions to Be Taken by the Trustee Under the Security Documents	79
Section 10.07	Authorization of Receipt of Funds by the Trustee Under the Security Documents	80
Section 10.08	Termination of Security Interest	80

ARTICLE 11
SATISFACTION AND DISCHARGE

Section 11.01	Satisfaction and Discharge	80
Section 11.02	Application of Trust Money	81

ARTICLE 12
MISCELLANEOUS

Section 12.01	[Reserved]	81
Section 12.02	Notices	81
Section 12.03	[Reserved]	83
Section 12.04	Certificate and Opinion as to Conditions Precedent	83
Section 12.05	Statements Required in Certificate or Opinion	83
Section 12.06	Rules by Trustee and Agents	83
Section 12.07	No Personal Liability of Directors, Officers, Employees and Equityholders	83
Section 12.08	Governing Law	83
Section 12.09	Submission to Jurisdiction	84



Section 12.10	Waiver of Jury Trial	84
Section 12.11	No Adverse Interpretation of Other Agreements	84
Section 12.12	Successors	84
Section 12.13	Severability	84
Section 12.14	Counterpart Originals	84
Section 12.15	Table of Contents, Headings, etc.	84
Section 12.16	Force Majeure.	85

EXHIBITS

Exhibit A1	FORM OF NOTE
Exhibit A2	FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B	FORM OF CERTIFICATE OF TRANSFER
Exhibit C	FORM OF CERTIFICATE OF EXCHANGE
Exhibit D	BASE CASE PROJECTIONS

INDENTURE dated as of February 24, 2012 between Topaz Solar Farms LLC, a Delaware limited liability company, and The Bank of New York Mellon Trust Company, N.A., as trustee.

RECITALS OF THE COMPANY

The Company has authorized the execution and delivery of this Indenture to provide for the issuance of its 5.75% Series A Senior Secured Notes due 2039 (the “ Series A Notes ”) and the issuance from time to time of additional senior secured notes (collectively with the Series A Notes, the “ Notes ”), to be issued in one or more series as in this Indenture provided.

All things necessary to make this Indenture a legal, valid and binding agreement of the Company, in accordance with its terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Notes or series thereof, as follows:

ARTICLE 1

DEFINITIONS AND INCORPORATION

BY REFERENCE

Section . Definitions .

“144A Global Note” means a Global Note substantially in the form of Exhibit A1 hereto (or the form of Exhibit A1 to any Supplemental Indenture in the case of Notes issued after the Issue Date) bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.

“Accounts ” means, collectively, the Project Accounts and each cash collateral account referred to in any Note Document in which the Company has an interest, including any sub‑accounts within such accounts, which Project Accounts and cash collateral accounts shall each be subject to a first priority Lien (subject to Permitted Liens) in favor of the Collateral Agent (for the benefit of the Secured Parties).

“ Actual Knowledge ” means the actual knowledge of the president, chief financial officer or general counsel of the Company (or individuals serving in functionally equivalent positions after the Issue Date).

“Additional Insureds Endorsements” means any endorsement to each of the Company's existing owner's policies of title insurance with respect to (a) Option Property and (b) mitigation lands.

“Additional Notes” means additional Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02, 2.13 and 4.09 hereof, as part of the same series as the Initial Notes.

“ Affected Property ” means, with respect to any Loss Event, the property of the Company which has been lost, destroyed, damaged, condemned, taken or otherwise adversely affected as a result of such Loss Event.

“Affiliate” of any specified Person means any other Person directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.

“Agent” means any Registrar, co-registrar, Paying Agent or additional paying agent.

“ Agent Fees ” means any fees due and payable to any trustee, agent, or other Person acting in a representative or administrative capacity pursuant to any Financing Document.

“ Alternative LC ” means any letter of credit provided to the Company by any bank that is secured by the Collateral equally and ratably with the Secured Parties.

“ Annual Operating Budget ” means the operating plan and budget the Company shall adopt, on or prior to 60 days prior to the Project Completion Date and on or prior to 60 days prior to the end of each subsequent fiscal year, for the following calendar year with respect to the operation and maintenance of the Project, detailed by month, of anticipated revenues, anticipated revenue allocations under all waterfall levels set forth in the applicable section of the Depositary Agreement and anticipated expenditures, such budget to include debt service, proposed distributions, reserves and all anticipated O&M Costs (including reasonable allowance for contingencies and including Capital Expenditures), in each case, applicable to the Project for the period, to the conclusion of such Fiscal Year, and for the corresponding periods with respect to each subsequent annual operating budget in customary form.

“Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

“ Asset Sale ” means the sale, lease, conveyance or other disposition of any assets or rights by the Company; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company will be governed by Section 4.15 hereof.

Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale (each a “ Permitted Asset Sale ”):

(1) any single transaction or series of related transactions that involves assets having a Fair Market Value of less than $5.0 million;

(2) the sale, lease or other transfer of products, services or accounts receivable in the ordinary course of business and any sale or other disposition of damaged, worn-out or obsolete assets in the ordinary course of business (including the abandonment or other disposition of intellectual property that is, in the reasonable judgment of the Company, no longer economically practicable to maintain or useful in the conduct of the business of the Company);

(3) licenses and sublicenses by the Company of software or intellectual property in the ordinary course of business;

(4) any surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims in the ordinary course of business;

(5) the granting of Liens not prohibited by Section 4.12 hereof;

(6) the sale or other disposition of Permitted Investments in the ordinary course; and

(7) a Restricted Payment that does not violate Section 4.07 hereof.

“ Bankruptcy Event ” shall be deemed to occur with respect to any Person if (a) such Person shall institute a voluntary case seeking liquidation or reorganization under the Bankruptcy Law, or shall consent to the institution of an involuntary case thereunder against it; or (b) such Person shall file a similar petition or shall otherwise institute any similar proceeding under any other applicable federal or state law, or shall consent thereto; or (c) such Person shall apply for the appointment, or by consent or acquiescence there shall be an appointment, of a receiver, liquidator, sequestrator, trustee or other officer or custodian with similar powers for itself or any substantial part of its property or

assets; or (d) such Person shall make an assignment for the benefit of its creditors; or (e) such Person shall become insolvent, or admit in writing its inability to pay its debts generally as they become due; or (f) an involuntary case shall be commenced seeking liquidation or reorganization of such Person under the Bankruptcy Law or any similar proceedings shall be commenced against such Person under any other applicable federal or state law and (i) the petition commencing the involuntary case is not timely controverted, or (ii) the petition commencing the involuntary case is not dismissed within 60 days of its filing, or (iii) an interim trustee is appointed to take possession of all or a material portion of the property, and/or to operate all or any material part of the business, of such Person and such appointment is not vacated within 60 days, or (iv) an order for relief shall have been issued or entered therein; (g) a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee or other officer having similar powers of such Person or all or a material part of its property shall have been entered; or (h) any other similar relief shall be granted against such Person under any applicable Bankruptcy Law.

“ Bankruptcy Law ” means the U.S. Bankruptcy Code and any other state or federal insolvency, reorganization, moratorium or similar law for the relief of debtors.

“ Base Case Projections ” means the base case projections of the Company's operating results for the Project set forth on Exhibit D attached hereto.

“ 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;

(3) with respect to a limited liability company, the managing member or members or board of managers of 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.

“ Board of Managers” means the managers of the Company.

“ Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed.

“ Capital Expenditures ” mean expenditures made by the Company to acquire or construct fixed assets, plant and equipment which, in accordance with GAAP, are or should be included in “purchase of property and equipment” or similar items reflected in the consolidated statement of cash flows of the Company (including renewals, improvements and replacements thereto, but, notwithstanding the foregoing, excluding any such expenditures that are paid out of Loss Proceeds).

“ Capital Lease Obligations ” means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet prepared in accordance with GAAP, and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty.

“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, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

“ Cash Flow Available for Debt Service ” means, for any period, the excess (if any) of (a) Project Revenues for such period over (b) the sum of (i) O&M Costs paid pursuant to Section 3.2(b)(i) or 3.2(c)(i) of the Depositary Agreement (and, for the avoidance of doubt, not paid out of the O&M Reserve Account) plus (ii) transfers to the O&M Reserve Account in satisfaction of the O&M Reserve Requirement, in each case during such period.

“ Change in Law ” means (a) the adoption or taking effect of any law, rule, treaty or regulation by any Governmental Authority after the Issue Date or (b) any change in law, rule, treaty or regulation or in the administration, interpretation, implementation or application thereof by any Governmental Authority after the Issue Date.

“ Change of Control ” means the consummation of any transaction or series of transactions as a result of which the Sponsor shall cease to collectively own and control, directly or indirectly, at least 51% of both the voting power of the Voting Stock and economic interests of the Company; provided that no Change of Control shall be deemed to occur if, after the Project Completion Date, (a) a Person that has substantial experience as an owner or operator of at least 500 MW of electric-generating facilities, directly or indirectly, controls the Company as a result of such transaction and (b) if a Ratings Reaffirmation has been obtained in connection therewith.

“Clearstream” means Clearstream Banking, S.A. (or any successor securities clearing agency).

“ Collateral” has the meaning assigned to it in the Security Documents.

“ Collateral Agent ” means The Bank of New York Mellon Trust Company, N.A., in its capacity as “Collateral Agent” under the Intercreditor Agreement and the Security Documents, and any successor thereto in such capacity.

“ Collection Expenses ” means all reasonable out-of-pocket costs or expenses (if any) and, if applicable, reasonable transaction costs (including reasonable legal and accounting fees and expenses, and taxes paid or payable as a result thereof), incurred or reasonably anticipated to be incurred by the Company in connection with the collection, enforcement, negotiation, consummation, settlement, proceedings, administration or other activity related to the receipt or collection of the relevant proceeds, as applicable.

“ Company” means Topaz Solar Farms LLC, and any and all successors thereto.

“ Comparable Treasury Issue ” means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of such Notes.

“ Comparable Treasury Price ” means, with respect to any redemption date (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotation or (2) if the Quotation Agent obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

“ Consents ” means (a) the consent and agreement, estoppel certificate or notice of assignment, as applicable, with respect to each Major Project Contract (other than the Option Contracts) in effect as of the Issue Date, in form and substance reasonably satisfactory to the LC Facility Administrative Agent and the Collateral Agent and (b) with respect to any replacement agreement relating to a Major Project Contract, a consent and agreement of each party to such replacement agreement (in each case, other than the Company) substantially in the form of the consent

delivered with respect to such agreement being replaced, with such modifications as may be reasonably acceptable to the LC Facility Administrative Agent and the Collateral Agent.

“ Construction Account ” means the Construction Account so designated, established and created by the Depositary Agent pursuant to the Depositary Agreement.

“ Construction Budget ” means a budget setting forth all expected Project Costs through Final Completion, as may be modified from time to time in accordance with the Financing Documents.

“continuing” means, with respect to any Default or Event of Default, that such Default or Event of Default has not been cured or waived.

“ Control Agreement ” means any account control agreement entered into to establish “control” (within the meaning of the UCC) over any account established by the Company as permitted by the Financing Documents and required to be subject to the Lien of the Collateral Agent pursuant to the Financing Documents, in form and substance reasonably satisfactory to the Collateral Agent.

“Corporate Trust Office of the Trustee” will be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company.

“CUP Financial Obligations Agreement” means the Agreement for Design and Funding of California Valley Land Acquisition Program under Conditional Use Permit DRC2008-00009 for Topaz Solar Farm Project, effective as of September 5, 2011, by and between the Company and SLO County.

“Custodian” means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto.

“ Debt Service ” means, for the Company and for any period, all obligations for principal and interest payments and any fees, expenses or other charges, including fees and Agent Fees, due or payable in respect of all Indebtedness for borrowed money in such period.

“ Debt Service Coverage Ratio ” means, for any period, the ratio of (a) Cash Flow Available for Debt Service for such period to (b) Debt Service for such period.

“ Debt Service Reserve Account ” means the Debt Service Reserve Account so designated, established and created by the Depositary Agent pursuant to the Depositary Agreement.

“ Debt Service Reserve Requirement ” means, as of each Quarterly Date after the Project Account Funding Date, an amount equal to the highest total six consecutive months of Debt Service scheduled to be due and payable under the Financing Documents to occur within three years after such Quarterly Date.

“ Deed of Trust ” means the Deed of Trust, Assignment of Leases, Rents and Profits, Security Agreement and Fixture Filing, to be dated as of the Issue Date, by the Company to the Trustee named therein for the benefit of the Collateral Agent (for the benefit of the Secured Parties), as the same may be replaced or modified as permitted under the Financing Documents.

“ Deed of Trust Site ” shall have the meaning assigned to the term “Site” in the Deed of Trust.

“ Default ” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A1 hereto (or the form of Exhibit A1 to any Supplemental Indenture in the case of Notes issued after the Issue Date) except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto.

“ Delayed Revenue LD Proceeds ” mean the net cash proceeds received by the Company of any “Delay Liquidated Damages,” “Block Capacity Liquidated Damages,” “Partial Completion Milestone Delay Liquidated Damages” and “Construction Start Delay Liquidated Damages” (each as defined in the EPC Contract) and refunds of “Daily Delay Damages” paid to the Company under the PPA to the extent not paid or payable to the EPC Contractor under the EPC Contract.

“Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

“ Depositary Agent ” means the depositary agent, bank and securities intermediary under the Depositary Agreement, together with its successors and permitted assigns in such capacities.

“ Depositary Agreement ” means the Depositary Agreement, dated as of the Issue Date, among the Company, the LC Facility Administrative Agent, the Trustee, the Collateral Agent, the Depositary Agent and each other Person party thereto from time to time.

“ Discretionary Capital Expenditures ” means any Capital Expenditures (other than Required Capital Expenditures, Emergency Capital Expenditures and Capital Expenditures financed with the proceeds of voluntary equity contributions made to the Company) permitted to be made by the Company pursuant to the Financing Documents.

“ Disqualified Stock ” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof. The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Indenture will be the maximum amount that the Company may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends.

“ Distribution Suspense Account ” means the Distribution Suspense Account so designated, established and created by the Depositary Agent pursuant to the Depositary Agreement.

“ DTC ” means The Depository Trust Company and its successors.

“ Emergency Capital Expenditures ” means those Capital Expenditures believed by the Company in its good faith judgment (as confirmed by the Independent Engineer) to be required to be expended as a result of the occurrence of an unanticipated event in order to prevent or mitigate an emergency situation involving endangerment of life, human health, safety or the environment or damage to Property; provided that such expenditures shall be in an aggregate amount not to exceed $10.0 million in any 12-month period.

“ Eminent Domain Proceeds ” means all Net Available Amount in respect of any Event of Eminent Domain.

“ Energy” means electric energy measured in MWh and net of auxiliary loads and station electrical uses (unless otherwise specified).

“ Environment ” means ambient and indoor air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata or sediment, natural resources such as flora and fauna or as otherwise defined in any Environmental Law.

“ Environmental Law ” means, collectively, all federal, state or local laws, including common law, statutes, ordinances, regulations, rules, codes, orders, judgments or other requirements or rules of law governing (a) the prevention, abatement or elimination of pollution, or the protection of the Environment, natural resources or human health (to the extent relating to exposure to Hazardous Materials), or natural resource damages and (b) the use, generation, handling, treatment, storage, Release, transportation or regulation of, or human exposure to, Hazardous Materials, including the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq. , the Endangered Species Act, 16 U.S.C. §§ 1531 et seq. , the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq. , the Clean Air Act, 42 U.S.C. §§ 7401 et seq. , the Clean Water Act, 33 U.S.C. §§ 1251 et seq. , the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq. , the Emergency Planning and Community Right to Know Act, 42 U.S.C. §§ 11001 et seq. , each as amended, and their state or local counterparts or equivalents.

“ EPC Contract ” means the Engineering, Procurement and Construction Agreement, dated as of January 31, 2012, by and between the Company and the EPC Contractor.

“ EPC Contractor ” means First Solar Electric (California), Inc., a Delaware corporation.

“ EPC Guaranty ” means the First Solar Parent Guaranty, dated as of January 31, 2012, by and between the Company and the First Solar Parent, in respect of the EPC Contractor's obligations under the EPC Contract.

“ Equity Contribution ” means any amount contributed as equity to the Company by the Sponsor or Topaz Holding or any Affiliate thereof.

“ Equity Contribution Agreement ” means the Equity Contribution Agreement, to be dated as of the Issue Date, by and among the Sponsor, the Company and the Collateral Agent.

“ Equity Interests ” means, for any Person, any and all shares, interests, rights to purchase, warrants, options, participation or other equivalents of or interests in (however designated) equity of such Person, including any preferred equity interests, any limited or general partnership interest and any limited liability company membership interest.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Affiliate ” means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

“Euroclear” means Euroclear Bank, S.A./N.V., as operator of the Euroclear system (or any successor securities clearing agency).

“ Event of Abandonment ” means (i) the Company shall willfully and voluntarily cause a permanent suspension or cessation of the development, construction or operation of the Project, or (ii) the development, construction or operation of the Project shall be permanently suspended or ceased for a period of at least 30 consecutive days for any reason (other than force majeure ); provided that, in each case, none of (A) scheduled maintenance of the Project, (B) repairs to the Project, whether or not scheduled, or (C) a forced outage or scheduled outage of the Project shall constitute abandonment or suspension of the Project so long as the Company is diligently attempting to end such suspension.

“ Event of Default ” has the meaning specified in Section 6.01 hereof.

“ Event of Eminent Domain ” means any (a) compulsory transfer or taking by condemnation, eminent domain or exercise of a similar power or a transfer under threat of such compulsory transfer or taking by any Governmental Authority of all or any material portion of the Collateral or the Project or (b) action (or series of related actions) by which such Governmental Authority assumes custody or control of (i) all or any portion of the Project, (ii) the business operations of the Company or (iii) any Equity Interests in the Company, in each case, that is reasonably anticipated to last for more than 60 consecutive days.

“ Event of Taking ” means any taking, seizure, confiscation, requisition, exercise of rights of eminent domain, public improvement, condemnation or similar action of or proceeding by any Governmental Authority relating to all or any part of the Project or other Property of the Company unless such taking, seizure, confiscation, requisition, exercise of rights of eminent domain, public improvement, condemnation or similar action is (a) reasonably expected to last less than 90 days (and does not in fact last longer than 90 days) or (b) diligently contested in good faith by the Company and during the period of such contest, the enforcement of any contested item is effectively stayed.

“EWG” means an “exempt wholesale generator” as such term is defined in Section 1262 of PUHCA.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“ Extraordinary Proceeds Account ” means the Extraordinary Proceeds Account so designated, established and created by the Depositary Agent pursuant to the Depositary Agreement.

“ Fair Market Value ” means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the Board of Managers of the Company (unless otherwise provided in this Indenture).

“FERC” means the Federal Energy Regulatory Commission and its successors.

“ Final Completion” means the conditions for final completion set forth in the EPC Contract have been achieved.

“ Final Completion Date ” means the date when the various conditions precedent to final completion set forth in the EPC Contract have been fulfilled.

“ Financial Officer ” means, for any Person, the chief financial officer, principal accounting officer, treasurer, assistant treasurer or controller of such Person.

“ Financing Documents ” mean (a) the LC Facility Documents or documents evidencing a Replacement LC Facility, as applicable, and (b) the Note Documents.

“ First Solar Parent ” means First Solar, Inc., a Delaware corporation.

“ Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

“ Fiscal Year ” means the fiscal year of the Company ending on December 31 of each calendar year.

“ Fitch ” means Fitch Ratings and its successors and assigns.

“ Funding Date ” means any Business Day of each month occurring after the Issue Date, as determined by the Company in the applicable Withdrawal Certificate; provided that (a) there shall only be a single Funding Date for any month and (b) if no earlier date is so determined for any month, the Funding Date shall be the last day of such month; provided further that, in any event, if such day is not a Business Day, the Funding Date shall be the immediately preceding Business Day.

“ 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.

“Global Note Legend” means the legend set forth in Section 2.06(g)(2) hereof, which is required to be placed on all Global Notes issued under this Indenture.

“Global Notes” means, individually and collectively, each of the Restricted Global Notes and the Unrestricted

Global Notes deposited with or on behalf of and registered in the name of the Depositary or its nominee, substantially in the form of Exhibit A1 and A2 hereto (or the form of Exhibit A1 and A2 to any Supplemental Indenture in the case of Notes issued after the Issue Date) and that bears the Global Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note” attached thereto, issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2) or 2.06(f) hereof.

“ Government Securities ” means direct obligations of or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States is pledged and which have a remaining weighted average life to maturity of not more than 18 months from the date of Investment therein.

“ Governmental Authority ” means any federal, state or local court or governmental agency, authority, instrumentality or regulatory or legislative body.

“ Governmental Rule ” means with respect to any Person, any law, rule, regulation, ordinance, order, code, treaty, judgment, decree, directive, guideline, policy or similar form of decision of any Governmental Authority binding on such Person.

“ Grantor ” means the Company, each Pledgor and each other Person that may from time to time hereafter execute and deliver a Security Document as a “grantor” or “pledgor” (or the equivalent thereof).

“ Green Attributes ” means any and all credits, benefits, emissions reductions, offsets, and allowances, howsoever entitled, attributable to the generation from the Project, and its displacement of conventional Energy generation. Green Attributes include but are not limited to Renewable Energy Credits, as well as: (1) any avoided emissions of pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen oxides (NOx), carbon monoxide (CO) and other pollutants; (2) any avoided emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride and other greenhouse gases (GHGs) that have been determined by the United Nations Intergovernmental Panel on Climate Change, or otherwise by law, to contribute to the actual or potential threat of altering the Earth's climate by trapping heat in the atmosphere; and (3) the reporting rights to these avoided emissions, such as Green Tag Reporting Rights. Green Tag Reporting Rights are the right of a Green Tag Purchaser to report the ownership of accumulated Green Tags in compliance with federal or state law, if applicable, and to a federal or state agency or any other party at the Green Tag Purchaser's discretion, and include without limitation those Green Tag Reporting Rights accruing under Section 1605(b) of The Energy Policy Act of 1992 and any present or future federal, state, or local law, regulation or bill, and international or foreign emissions trading program. Green Tags are accumulated on a MWh basis and one Green Tag represents the Green Attributes associated with one (1) MWh of Energy. Green Attributes do not include (i) any energy, capacity, reliability or other power attributes from the Project, (ii) production tax credits associated with the construction or operation of the Project and other financial incentives in the form of credits, reductions, or allowances associated with the project that are applicable to a state or federal income taxation obligation, (iii) fuel-related subsidies or "tipping fees" that may be paid to the Company to accept certain fuels, or local subsidies received by the generator for the destruction of particular preexisting pollutants or the promotion of local environmental benefits, or (iv) emission reduction credits encumbered or used by the Project for compliance with local, state, or federal operating and/or air quality permits.

“ Guarantee ” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise).

“ Hazardous Materials ” means all pollutants, contaminants, wastes, chemicals, materials, substances and constituents, including explosive or radioactive substances or petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls or radon gas, of any nature, in each case to the extent subject to regulation or for which liability can be imposed under any Environmental Law.

“ Hedging Obligations ” means, with respect to any specified Person, the obligations of such Person under:


(1)	interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;


(2)	other agreements or arrangements designed to manage interest rates or interest rate risk; and


(3)	other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.

“Holder” means, with respect to any Note, the Person in whose name such Note is registered in the securities register; provided that Topaz Holding or any Affiliate thereof shall not be deemed a Holder hereunder or in any other Note Document, with respect to the vote of Holders.

“ Indebtedness ” means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables), whether or not contingent:

(1) in respect of borrowed money;

(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

(3) in respect of banker's acceptances;

(4) representing Capital Lease Obligations;

(5) representing the balance deferred and unpaid of the purchase price of any property or services due more than 60 days after such property is acquired or such services are completed; or

(6) representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person. Indebtedness shall be calculated without giving effect to the effects of Statement of Financial Accounting Standards No. 133 and related interpretations to the extent such effects would otherwise increase or decrease an amount of Indebtedness for any purpose under this Indenture as a result of accounting for any embedded derivatives created by the terms of such Indebtedness.

“Indenture” means this Indenture, as amended, supplemented or otherwise modified from time to time.

“ Independent Auditors ” means Deloitte & Touche LLP, or another nationally recognized accounting firm.

“ Independent Engineer ” means Black & Veatch Corporation, or another nationally recognized engineering consultant.

“ Independent Investment Banker ” means one of the Reference Treasury Dealers appointed by the Company.

“Indirect Participant” means a Person who holds a beneficial interest in a Global Note through a Participant.

“Initial Amortization Payment Date ” means September 30, 2015.

“Initial Notes” means the $850 million aggregate principal amount of Series A Notes issued under this Indenture on the Issue Date.

“ Initial Purchasers ” means Barclays Capital Inc., Citigroup Global Markets Inc., RBS Securities Inc., Lloyds

Securities Inc., Mitsubishi UFJ Securities (USA), Inc., Mizuho Securities USA Inc. and RBC Capital Markets, LLC.

“ Insurance Proceeds ” means all Net Available Proceeds in respect of any property insurance policy (other than proceeds of business interruption insurance) covering the Project.

“ Interconnection Agreements ” means, collectively, (a) the First Amended Standard Large Generator Interconnection Agreement, dated as of October 19, 2011, by and among the Company, PG&E and CAISO, and referring to Carrizo Plain Solar Project, CAISO Queue Position Number 194, (b) the Standard Large Generator Interconnection Agreement, dated as of August 19, 2009, by and among the Company (as successor to First Solar Development, Inc., formerly known as Optisolar Inc.), PG&E and CAISO, and (c) the Large Generator Interconnection Agreement, dated as of April 20, 2011, by and among, the Company, PG&E and CAISO, and referring to Project: Desert Topaz PV2 (Q#242).

“ Intercreditor Agreement ” means the Collateral Agency and Intercreditor Agreement dated as of the Issue Date among the Company, Topaz Holding, the LC Facility Administrative Agent, the Trustee, the Collateral Agent and the other Persons party thereto from time to time.

“ Investment ” by any Person means any direct or indirect loan, advance or other extension of credit or capital contribution to (by means of transfers of cash or other Property to others or payments for Property or services for the account or use of others, or otherwise), or purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of Indebtedness issued by, any other Person, and any Capital Expenditures.

“ Issue Date ” means February 24, 2012, the first date of issuance of Series A Notes under this Indenture.

“ LC Disbursement ” shall have the meaning assigned to such term in the Reimbursement Agreement or any Replacement LC Facility Agreement, as applicable.

“ LC Facility ” means the $345.0 million letter of credit facility and reimbursement facility under the LC Facility Documents, as each may be amended, restated, supplemented, waived, replaced, restructured, repaid, refunded, refinanced or otherwise modified from time to time.

“ LC Facility Administrative Agent ” means the administrative agent under the LC Facility, together with its permitted successors in such capacity.

“ LC Facility Documents ” means the Reimbursement Agreement and the “Reimbursement Documents” (as defined in the Reimbursement Agreement).

“ LC Facility Obligations ” means all obligations of the Company under the LC Facility Documents.

“ LC Facility Pro Rata Share ” means, as of any date of determination, the amount (expressed as a percentage) of LC Facility Obligations or Replacement LC Facility Obligations, as applicable, outstanding at such time relative to the aggregate amount of all Secured Obligations outstanding at such time.

“ LC Loan ” shall have the meaning assigned to such term in the Reimbursement Agreement or any Replacement LC Facility Agreement, as applicable.

“ Legal Requirements ” means, as to any Person, any requirement under a Permit and any Governmental Rule, in each case applicable to or binding upon such Person or any of its properties or to which such Person or any of its properties is subject.

“ Lenders ” shall have the meaning assigned to such term in the Reimbursement Agreement or any Replacement LC Facility, as applicable.

“ Letters of Credit ” means the letters of credit issued under any LC Facility.

“ LGIA ” means each of the large generator interconnection agreements among the Company, PG&E and CAISO.

“ Lien ” means, with respect to any asset, (a) any mortgage, deed of trust, lien, hypothecation, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset, and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. For certainty, “Lien” shall not include any netting or set-off arrangements under any contract, agreement or other undertaking that is otherwise permitted to be entered into by the Company in accordance with the Financing Documents.

“ Local Account ” means one or more “local checking account(s)” or similar account(s) to be established by the Company at its election, which account(s) shall be subject to the Lien of the Collateral Agent pursuant to the Security Agreement (and covered by a Control Agreement) but to which the Company shall have at all times, other than during a Trigger Event, full access and signing authority for the purpose of writing checks or wiring funds for the payment of O&M Costs between Funding Dates; provided that the aggregate amount on deposit in all Local Accounts at any time shall not exceed $3.5 million.

“ Loss Event ” means any Notes Casualty Event or Event of Eminent Domain, as the context requires.

“ Loss Proceeds ” mean, individually and collectively, Insurance Proceeds and Eminent Domain Proceeds.

“ Loss Proceeds Account ” means the Loss Proceeds Account, so designated, established and created by the Depositary Agent pursuant to the Depositary Agreement.

“Major Project Contracts” mean each Option Contract, the EPC Contract, the EPC Guaranty, the O&M Agreement, the O&M Guaranty, the PPA, each Interconnection Agreement, the Module Warranty Agreement, the Module Warranty Guaranty and any Replacement Project Contract executed in replacement of all or any portion of such Major Project Contract with a term greater than one year.

“Material Adverse Effect” means a material adverse change in or a material adverse effect on (a) the business, operations, properties, assets or condition (financial or otherwise) of the Company, (b) the ability of any Grantor to fully and timely perform its obligations under the Financing Documents to which it is a party, (c) the legality, validity, binding effect or enforceability against any Grantor of the Financing Documents to which it is a party or (d) the rights and remedies available to, or conferred upon, any Secured Party under the Financing Documents.

“ Maturity Date ” means September 30, 2039.

“ MBR Authority ” means an order of FERC pursuant to Section 205 of the Federal Power Act (a) authorizing the Company to sell electric energy, capacity and specified ancillary services at negotiated (market-based) rates, (b) accepting the Company's market-based rate tariff under Section 205 of the Federal Power Act and (c) granting the Company regulatory waivers and blanket authorizations as are customarily granted by FERC to persons with market-based rate authority, including blanket authorization under Section 204 of the Federal Power Act to issue securities and assume liabilities.

“ Module Warranty Agreement ” means that certain Module Degradation Warranty Agreement, dated as of January 31, 2012, by and between the Company and the EPC Contractor.

“ Module Warranty Guaranty ” means the First Solar Parent Guaranty, dated as of January 31, 2012, by and among the Company and the First Solar Parent in respect of the EPC Contractor's obligations under the Module Warranty Agreement.

“ Moody's ” means Moody's Investors Service, Inc., a Delaware corporation, and its successors.

“ Multiemployer Plan ” means any employee benefit plan of the type described in Section 4001(a)(3) of

ERISA, to which the Company or any ERISA Affiliate makes or is obligated to make contributions.

“ Necessary Project Permit ” means, as of any date of determination, any Permit (including any environmental, regulatory or other Permit) that is necessary under Legal Requirements applicable to the Company, or that is otherwise necessary under any of the Financing Documents and the Major Project Contracts, to be obtained by or on behalf of the Company at such time, in light of the stage of ownership or operation of the Project, in each case in order for the Company to operate, maintain, repair, own or use the Project as contemplated by the Financing Documents and the Major Project Contracts, including the ability to sell Power from or procure fuel for the Project or deliver inputs to the Project, or for the Company to consummate and/or perform any of the Major Project Contracts or any obligation contemplated in any of the Financing Documents or any of the Major Project Contracts.

“ Net Available Amount ” mean, with respect to any proceeds received by the Company, such proceeds net of the related Collection Expenses.

“Non-U.S. Person” means a Person who is not a U.S. Person.

“ Note Documents ” means the Notes, this Indenture and the Security Documents.

“ Note Pro Rata Share ” means, as of any date of determination, the amount (expressed as a percentage) of Note Obligations at such time relative to the aggregate amount of all Secured Obligations outstanding at such time.

“ Note Redemption Account ” means the Note Redemption Account so designated, established and created by the Depositary Agent pursuant to the Depositary Agreement.

“Notes” has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes and any Additional Notes.

“ Notes Casualty Event ” means an event (or series of events) which causes (or cause) all or any material portion of the Collateral or the Project to be damaged, destroyed or rendered unfit for its intended use for any reason whatsoever, other than an Event of Eminent Domain or a Title Event.

“ Obligation ” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“ Offering Memorandum” means the confidential offering memorandum, dated February 16, 2012, relating to the initial offering of the Series A Notes.

“Officer” means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Vice-President or any other officer of such Person that serves a similar function to any of the foregoing.

“ Officer's Certificate ” means a certificate signed on behalf of the Company by an Officer of the Company, who must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company or any other officer that serves a similar function to any of the foregoing.

“ O&M Agreement ” means the Operating and Maintenance Agreement, dated as of December 6, 2011, by and between the Company and the EPC Contractor.

“ O&M Guaranty ” shall mean the First Solar Parent Guaranty, dated as of December 6, 2011, by and among the Company and the First Solar Parent, in respect of the EPC Contractor's obligations under the O&M Agreement.

“ O&M Costs ” means all actual cash operation, maintenance and administrative costs relating to the Project or any portion thereof, or required in connection with satisfying a Legal Requirement (but only such costs as are required to satisfy such Legal Requirement), incurred or payable by the Company in any particular calendar or fiscal year or

other period to which said term is applicable, including:

(a) amounts payable by the Company under the Project Contracts (including any delay liquidated damages payable by the Company under the PPA and amounts payable with Pass-Through Amounts (if not paid directly to the applicable counterparty with such Pass-Through Amounts) but excluding all amounts payable by the Company under Project Contracts with amounts on deposit in another Project Account (other than the Operating Account or the O&M Reserve Account) pursuant to the Depositary Agreement), site leasing and preparation costs and transportation costs incurred in connection with the sale of products or otherwise to satisfy obligations under the PPA or any other Project Contract;

(b) Taxes other than those based upon the Company's income, including franchise and excise taxes; provided that, in the event that the Company becomes directly liable for the payment of taxes based upon its income solely as a result of any Change in Law, then such income taxes shall constitute O&M Costs;

(d) costs incurred to procure insurance, consumables, spare parts, equipment, materials, utilities, repair and maintenance services and payments under any parts agreement;

(e) reasonable general administrative costs, including legal, accounting and consulting fees and expenses, incurred by the Company in connection with the financing, management, operation or maintenance of the Project (other than amounts constituting scheduled Debt Service and voluntary and mandatory redemption and prepayments under the Financing Documents);

(f) fees and costs paid in connection with obtaining, transferring, maintaining or amending any Permits relating to the Project;

(g) reasonable expenses to keep the Collateral free and clear of all Liens (other than Permitted Liens);

(h) Required Capital Expenditures;

(i) Collection Expenses incurred in connection with a Loss Event, to the extent amounts therefor are deposited into the Revenue Account; and

(j) payments to direct or indirect owners of the Company for administrative expenses charged at cost, pursuant to the Services Agreement, or charged at such other amount as required by law or regulation.

Notwithstanding the foregoing, O&M Costs shall not include (i) distributions of any kind to any Affiliate of the Company (other than as described in clause (j) above), (ii) non-cash charges, including depreciation or obsolescence charges or reserves therefor, amortization of intangibles or other bookkeeping entries of a similar nature, (iii) Capital Expenditures other than Required Capital Expenditures and (iv) payments expressly contemplated herein to be made with proceeds on deposit in any Project Account other than the Operating Account or a Local Account.

“ O&M Reserve Account ” means the O&M Reserve Account so designated, established and created by the Depositary Agent pursuant to the Depositary Agreement.

“ O&M Reserve Requirement ” means, as of any Quarterly Date following the Project Account Funding Date, an amount equal to total O&M Costs (other than O&M Costs for insurance and those described in clause (b) of the definition of O&M Costs) scheduled to be due and payable under the then current Annual Operating Budget within six months after such Quarterly Date.

“ Operating Account ” means the O&M Account so designated, established and created by the Depositary Agent pursuant to the Depositary Agreement.

“ Opinion of Counsel ” means a written opinion reasonably acceptable to the Trustee from legal counsel. The counsel may be an employee of or counsel to the Company.

“ Option Contracts ” means those certain option and land transfer agreements described in Part III of Schedule 3.24 of the Reimbursement Agreement.

“ Option Property ” means the real property interests to be acquired by the Company in fee simple title pursuant to an Option Contract.

“Outside Completion Date” has the meaning set forth in the PPA.

“Participant” means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).

“ Pass-Through Amounts ” means any amounts received by the Company under any of the Major Project Contracts in the nature of liquidated damages or similar payments, excluding Performance LD Proceeds.

“ PBGC ” means the Pension Benefit Guaranty Corporation.

“ Performance LD Proceeds ” means the cash proceeds of any performance liquidated damages received by the Company in the nature of lump sum payments under any Project Contract intended to compensate the Company for an expected permanent shortfall in power output or availability or other performance criteria, including any and all “Initial Capacity Liquidated Damages” and “Final Capacity Liquidated Damages” (each as defined in the EPC Contract) received by the Company pursuant to the EPC Contract, to the extent not returned or returnable to the EPC Contractor under the EPC Contract and, without duplication of the foregoing, all liquidated damages paid to the Company in connection with any Project capacity reduction pursuant to Section 3.10 hereof, but excluding, for certainty, any Delayed Revenue LD Proceeds, any Pass-Through Amounts and any “Effective Availability Liquidated Damages” (as defined in Exhibit C to the O&M Agreement).

“ Performance LD Reinvestment Work ” means work on, or payments in respect of, the Project using Performance LD Proceeds to (a) increase the capacity of the Project up to an amount that is not in excess of the Contract Capacity under the PPA or to improve the energy output of the Project, (b) refund “Initial Capacity Liquidated Damages” (as defined in the EPC Contract) as part of the “Final Completion” payment under the EPC Contract to the EPC Contractor as and when required by the EPC Contract or (c) cure or remedy any defect or deficiency in the Project necessary to cause the Project to perform in accordance with Prudent Operating Practices, Legal Requirements or the requirements of any Major Project Contract, including the requirements of the Major Project Contract that gave rise to the applicable Performance LD Proceeds.

“ Permits ” means any and all franchises, licenses, leases, permits, approvals, notifications, certifications, registrations, authorizations, exemptions, qualifications, easements, rights of way, Liens and other rights, privileges and approvals required to be obtained from a Governmental Authority under any Governmental Rule.

“ Permitted Asset Sale ” has the meaning set forth within the definition of “Asset Sale”.

“ Permitted Capacity Reduction ” means any reduction of Project capacity in accordance with Section 3.10 hereof.

“ Permitted Investments ” means:

(a) direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof, in each case with maturities not exceeding two years;

(b) time deposit accounts, certificates of deposit and money market deposit maturing within 90

days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, or any state thereof having capital, surplus and undivided profits in excess of $1.0 billion and whose long-term debt, or whose parent holding company's long-term debt, is rated A (or such similar equivalent rating or higher) by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act);

(c) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above;

(d) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moody's or A-1 (or higher) according to S&P;

(e) money market funds that (i) comply with the criteria set forth in Rule 2a-7 under the Investment Company Act of 1940, (ii) if rated, are rated AA by S&P or Aa2 by Moody's and (iii) have portfolio assets of at least $1.0 billion;

(f) time deposit accounts, certificates of deposit and money market deposits in an aggregate face amount not in excess of 1/2 of 1.00% of the total assets of the Company as of the end of the Company's most recently completed fiscal year;

(g) time deposit accounts, certificates of deposit and money market deposits held with the Depositary Agent;

(h) shares of mutual funds whose investment guidelines restrict 95% of such funds' investments to those satisfying the provisions of clauses (a) through (g) above;

(i) other investments that at the time acquired by the Company were formerly of the type described in clauses (a) through (h) above; provided that such other investment shall cease to be a Permitted Investment at such time as the Company shall have held such investment for a period in excess of 60 days from which such investment was no longer an investment of the type described in clauses (a) through (h) above; and

(j) cash.

“ Permitted Liens ” means:

(1) subject to the terms, conditions and limitations set forth in the Intercreditor Agreement, Liens created pursuant to the Security Documents (including in respect of any Permitted Refinancing Indebtedness);

(2) Liens for any Tax not yet due and payable or to the extent being contested and reserved against in accordance with the Financing Documents;

(3) materialmen's, mechanics', workers', repairmen's, employees' or other like Liens, arising in the ordinary course of business or in connection with the construction, operation and maintenance of the Project, (i) that do not individually or in the aggregate materially detract from the value of the Project or materially impair the use of the Project or (ii) either for amounts not yet due or for amounts being contested in good faith by appropriate proceedings, so long as such proceedings shall not involve any substantial danger of the sale, forfeiture or loss of the Project or the Deed of Trust Site, 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 the Project or the Deed of Trust Site, and (A) a bond or other security has been posted or provided in such manner and amount as to assure that any amounts determined to be due will be promptly paid in full when such contest is determined or (B) adequate

reserves have been provided therefor in accordance with GAAP;

(4) Liens arising out of judgments or awards so long as an appeal or proceeding for review is being prosecuted in good faith and for the payment of which adequate reserves are established in accordance with GAAP or bonds or are fully covered by insurance (other than customary deductibles);

(5) Liens, deposits or pledges to secure statutory obligations or 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 $5.0 million in the aggregate at any time;

(6) involuntary Liens as contemplated by the Financing Documents and the Project Contracts (including a Lien of an attachment, judgment or execution) securing a charge or obligation on the Company property, either real or personal, whether now or hereafter owned in the aggregate sum of less than $5.0 million at any one time outstanding;

(7) all exceptions scheduled in the Survey, the Title Policy, the Additional Insureds Endorsements or the UCC Policy;

(8) survey exceptions, easements, rights of way, restrictions (including zoning restrictions), trackage rights, minor defects or irregularities in title, restrictions on use of real property and other similar encumbrances or liens that, in the aggregate, do not materially interfere with the value or use, or are useful to the operation, of the Property to which such Lien is attached;

(9) rights reserved for or vested in any municipality or Governmental Authority to control or regulate the use of the Real Property or to use the Real Property in any manner, including zoning and land use regulations;

(10) Liens arising by virtue of any statutory or common law provisions relating to bankers' liens, rights of set off or similar rights;

(11) Liens or pledges of deposits of cash securing deductibles, self-insurance, co-payment, co-insurance, retentions or similar obligations to providers or property, casualty or liability insurance in the ordinary course of business;

(12) purchase money Liens upon or in real property or equipment acquired or held by the Company in the ordinary course of business securing the purchase price of such property or equipment or to secure Indebtedness incurred solely for the purpose of financing the acquisition, construction or improvement of any such property or equipment to be subject to such Liens, or Liens existing on any such property or equipment at the time of acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacement of any of the foregoing for the same or a lesser amount; provided that no such Lien shall extend to or cover any property other than the property or equipment being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; provided further that the aggregate principal amount of the Indebtedness secured by Liens permitted by this clause shall not exceed $5.0 million at any time outstanding;

(13) Liens existing on the date of this Indenture;

(14) filing of Uniform Commercial Code financing statements as a precautionary measure in connection with operating leases;

(15) Liens on cash or other property arising in connection with the defeasance, discharge or redemption of Indebtedness;

(16) grants of software and other technology licenses in the ordinary course of business;

(17) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into in the ordinary course of business;

(18) Liens securing Permitted Refinancing Indebtedness, provided that such Liens do not extend to any property or assets other than the property or assets that secure the indebtedness being refinanced; and

(19) Liens not otherwise permitted under this Indenture so long as the aggregate outstanding principal amount of the obligations secured thereby does not exceed $5.0 million at any one time.

“ Permitted Refinancing Indebtedness ” means any Indebtedness of the Company issued in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge other Indebtedness of the Company (other than intercompany Indebtedness); provided that:

(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness renewed, refunded, refinanced, replaced, defeased or discharged (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith);

(2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity that is (a) equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged or (b) more than 90 days after the final maturity date of the notes;

(3) if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged; and

(4) such Indebtedness is incurred either by the Company that was the obligor on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged and is guaranteed only by Persons who were obligors on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged.

“ Person ” means any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company or government, individual or family trusts, or any agency or political subdivision thereof.

“ PG&E ” means Pacific Gas and Electric Company.

“ Plan ” means any employee pension benefit plan (other than a Multiemployer Plan) that is maintained or is contributed to by the Company or any ERISA Affiliate and is covered by Title IV of ERISA or is subject to minimum funding standards under Section 412 of the Code.

“ Pledge Agreement ” means the pledge agreement, dated as of the Issue Date, between the Pledgor and the Collateral Agent.

“ Pledgor ” means Topaz Holding.

“ Power ” means electric energy and related products, including capacity, reactive power and ancillary services; provided, however , that the term “Power” shall specifically exclude any items included in the definition of Green Attributes.

“ PPA ” means the Power Purchase and Sale Agreement, dated as of July 1, 2008, between the Company and PG&E, as amended by the First Amendment to the July 1, 2008 Power Purchase and Sale Agreement, dated as of August 12, 2009, as further amended by the Second Amendment to the July 1, 2008 Power Purchase and Sale Agreement, dated as of November 18, 2011, as further amended by the letter agreement, dated as of December 2, 2011, regarding the Company's PPA (PG&E log number 33R056).

“Private Placement Legend” means the legend set forth in Section 2.06(g)(1) hereof to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture.

“ Project ” means an approximately 550 MW solar photovoltaic electric-generating facility (as may be modified after giving effect to any Project capacity reduction), together with an on-site electrical substation, a 230 kV switching station, certain monitoring and maintenance infrastructure to be sited on approximately 4,000 acres located in northern Carrizo Plain in eastern San Luis Obispo County, California, including the Deed of Trust Site and all ancillary facilities related to or used by the facility located on the Deed of Trust Site and Project Option Property, together with all buildings, structures or improvements erected on the Deed of Trust Site and Project Option Property, all alterations thereto or replacements thereof, all fixtures, attachments, appliances, equipment, machinery and other articles attached thereto or used in connection therewith and all parts which may from time to time be incorporated or installed in or attached thereto, including all Project Contracts, all leases of real or personal property related thereto, all other real and tangible and intangible personal property owned by the Company and placed upon the Deed of Trust Site and Project Option Property (or used in connection with the solar photovoltaic generation facility located thereon), the Deed of Trust Site and Project Option Property, the Permits required in connection with (or otherwise related to) the Project, any electrical interconnections owned by the Company, and to the extent not included in the foregoing, all Collateral.

“ Project Accounts ” shall have the meaning assigned to such term in the Depositary Agreement.

“ Project Account Funding Date ” means the date that is the earlier of (a) the Initial Amortization Payment Date and (b) the Project Completion Date.

“ Project Completion Date ” means the first date when at least all the following conditions precedent have been achieved or waived by the Trustee and the LC Facility Administrative Agent: (a) completion of all Work required for Substantial Completion (as such terms are defined in the EPC Contract) and payment of all amounts due under the EPC Contract through Substantial Completion; (b) occurrence of Substantial Completion; (c) commencement of deliveries of electric energy under the PPA and occurrence of the Commercial Operation Date (as defined in the PPA); (d) receipt of all Equity Contributions required to be made through such date; (e) delivery of any additional Major Project Contracts; (f) delivery of a title insurance date down endorsement; (g) receipt of permits required to have been obtained by such date; (h) funding of reserve accounts; (i) no Default or Event of Default has occurred and is continuing; (j) accuracy of representations and warranties under the LC Facility; (k) receipt of customary certifications from the Independent Engineer and the insurance consultant; (l) effectiveness of insurance; (m) receipt of customary lien waivers; and (n) payment of liquidated damages due and payable, under Major Project Contracts, if any.

“ Project Contracts ” mean the Major Project Contracts, the CUP Financial Obligations Agreement and each other contract or agreement related to the operation, maintenance, management, administration, ownership or use of the Project, the sale of power or environmental attributes therefrom, the provision of electricity, interconnection and other services therefor and Real Property rights and interests relating to the Project, in each case, entered into by, or assigned to, the Company.

“ Project Contract Replacement Work ” means the reinvestment of Project Contract Termination Proceeds in the Project or the application of such Project Contract Termination Proceeds in connection with the replacement of the applicable Project Contract, including making payments to, or deposits with, the counterparty under the replacement Project Contract, in any case, in accordance with the conditions therefor (including timing parameters) set forth in the Financing Documents.

“ Project Contract Termination Proceeds ” means the Net Available Amount of any termination payments

pursuant to any Project Contract.

“ Project Costs ” means all costs and expenses incurred by the Company prior to the Project Completion Date in connection with the acquisition, ownership, development, design, engineering, procurement, construction, equipping, assembly, inspection, testing, completion, start-up and financing of the Project, including (without duplication):

(1) amounts payable by the Company under the EPC Contract and the other Project Contracts (including any delay liquidated damages payable by the Company under the PPA but excluding all amounts payable by the Company under Project Contracts with amounts on deposit in another Project Account pursuant to the Depositary Agreement) including adequate contingency, any contractor bonuses, site leasing and preparation costs, costs related to acquisition, development and construction of facilities to transport or deliver electricity and other outputs from the Project;

(2) financing, advisory, legal and all other fees, expenses and all other transaction costs and expenses including, but not limited to, all fees commissions, discounts and expenses of the Initial Purchasers , Trustee and Collateral Agent that are to be paid by the Company, associated with the Project;

(3) all other costs and expenses, including insurance costs and expenses and costs and expenses of obtaining and renewing any Permits;

(4) interest (including interest during construction), fees, commissions, discounts and other amounts payable under the Financing Documents;

(5) O&M Costs;

(6) Collection Expenses incurred in connection with a Loss Event, to the extent amounts therefor are deposited into the Construction Account; and

(7) the reimbursement to the Sponsor and its applicable Affiliates of costs and expenses of the type described in clauses (1) through (6) above incurred or otherwise paid by the Sponsor and such Affiliates.

“ Project Option Property ” means Option Property that will be part of the Project.

“ Project Revenues ” means all revenues, interest, payments, cash and other proceeds from whatever source received by or on behalf of the Company arising from the operations of the Project including interest income, payments in respect of liquidated damages, other compensation payments or other amounts received under any Project Contract to which the Company is a party or otherwise, including Delayed Revenue LD Proceeds and “Effective Availability Liquidated Damages” (as defined in Exhibit C to the O&M Agreement), business interruption insurance proceeds, service interruption insurance proceeds (including pursuant to any Project Contract other than any such amounts that are not required to be deposited into the Revenue Account pursuant to the Depositary Agreement (it being acknowledged that Loss Proceeds, Performance LD Proceeds, Project Contract Termination Proceeds, Pass-Through Amounts and proceeds of Indebtedness for borrowed money and Equity Contributions shall not be Project Revenues).

“ Projected Debt Service Coverage Ratio ” means as of any date of determination, the average projected Debt Service Coverage Ratio for the fiscal years following such date (including the remainder of the fiscal year during which such date occurs) through the Maturity Date of the Notes.

“ Property ” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

“ Prudent Operating Practices ” means the practices, methods and acts generally engaged in or approved by a significant portion of the solar electric power generation industry during the relevant time period and for the relevant

size, type and location of the facility that, in the exercise of reasonable judgment and actions in light of the applicable manufacturer's recommendations and manufacturer's warranties and the facts known or that reasonably should have been known at the time the decision was made, would reasonably have been expected to accomplish the desired result of safe and reliable maintenance, operation and service at a reasonable cost such that the judgment and actions are consistent with good business practices, reliability, safety, expedition and contractual obligations and in compliance with applicable Governmental Rules and Necessary Project Permits. Prudent Operating Practices are intended to consist of practices, methods or acts generally employed by reputable operators in the region where the Project is located, and are not intended to be limited to the best practices, methods or acts.

“PUHCA” means the Public Utility Holding Company Act of 2005, as amended, and all rules and regulations adopted thereunder.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“ Quarterly Date ” means the Funding Date occurring in the months of March, June, September and December after the Issue Date.

“ Quotation Agent ” means an internationally recognized investment bank, other than Reference Treasury Dealers.

“ Rating ” means the credit rating of the Notes by the Rating Agencies.

“ Rating Agency ” means any of (or each, as the context may require) Fitch, S&P or Moody's; provided that if any of Fitch, S&P or Moody's shall cease to operate as a “rating agency,” or shall cease to maintain a rating on the Notes, then any other nationally recognized rating agency or agencies then maintaining a rating on the Notes.

“ Ratings Reaffirmation ” means, in the case of an event or proposed event, a reaffirmation by any two of the Rating Agencies rating the Notes that the then current Ratings on the Notes will not be lower, after giving effect to the event or proposed event, than the Ratings of the Notes in effect immediately prior to such event or proposed event.

“ Real Property ” means all right, title and interest of the Company in and to any and all parcels of real property (including the Deed of Trust Site) owned, leased or operated by the Company together with all of such Person's interests in all improvements and appurtenant fixtures, equipment, personal property, easements and other property and rights incidental to the ownership, lease or operation thereof.

“ Redemption Date ” means any date for redemption of Notes established pursuant to Article 3.

“ Reference Treasury Dealer ” means Barclays Capital Inc., Citigroup Global Markets Inc., RBC Capital Markets, LLC or any of their respective Affiliates which are primary United States government securities dealers in New York City and not less than two other leading primary United States government securities dealers in New York City reasonably designated by the Company; provided , however , that if any of the foregoing shall cease to be a primary United States government securities dealer in New York City (a “Primary Treasury Dealer”), the Company will substitute therefor another Primary Treasury Dealer.

“ Reference Treasury Dealer Quotation ” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked price for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 3:30 p.m. New York time on the third Business Day preceding such redemption date.

“Regulation S” means Regulation S promulgated under the Securities Act.

“Regulation S Global Note” means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate.

“Regulation S Permanent Global Note” means a permanent Global Note in the form of Exhibit A1 hereto (or the form of Exhibit A1 to any Supplemental Indenture in the case of Notes issued after the Issue Date) bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period.

“Regulation S Temporary Global Note” means a temporary Global Note in the form of Exhibit A2 hereto (or the form of Exhibit A2 to any Supplemental Indenture in the case of Notes issued after the Issue Date) deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S.

“ Reimbursement Agreement ” means the Letter of Credit Reimbursement Agreement dated as of the Issue Date among the Company, the lenders and issuing banks from time to time party thereto, Union Bank, N.A., as administrative agent, the Collateral Agent, Barclays Capital, Citigroup Global Markets Inc. and RBS Securities Inc. as Joint Lead Arrangers and Bookrunners and Barclays Capital, as syndication agent.

“ Reinvestment Certificate ” means an Officer's Certificate certifying that the Company intends to undertake certain Restoration Work, Performance LD Reinvestment Work or Project Contract Replacement Work, as applicable, and certain other conditions to be set forth in the Depositary Agreement.

“ Reinvestment Plan ” means, with respect to any Restoration Work or Performance LD Reinvestment Work described in any Reinvestment Certificate, a plan prepared by the Company (in consultation with the Independent Engineer) describing in reasonable detail the Company's plan for completing such Restoration Work or Performance LD Reinvestment Work, as applicable, including (a) a schedule identifying appropriate milestones and payment requisitions to be made in connection with such Restoration Work or Performance LD Reinvestment Work, as applicable, and (b) a budget identifying all categories and approximate amounts reasonably expected to be incurred in connection with such Restoration Work or Performance LD Reinvestment Work, as applicable, together with a statement of uses of proceeds identifying funds available in the Loss Proceeds Account or Extraordinary Proceeds Account, as applicable, and other committed funds available to complete such Restoration Work or Performance LD Reinvestment Work, as applicable, as such plan (including such schedule and budget) may be modified from time to time with the consent of the Independent Engineer.

“ Release ” means any placing, spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing or migrating in, into, onto or through the Environment.

“ Renewable Energy Credit ” shall have the meaning set forth in California Public Utilities Code Section 399.12(h), as may be amended from time to time or as further defined or supplemented by law.

“ Replacement LC Facility ” means Indebtedness comprising letter of credit reimbursement facilities and/or other similar facilities permitted to be incurred on a pari passu basis with the Secured Obligations in accordance with the applicable provisions of the Financing Documents.

“ Replace LC Facility Obligations ” means, with respect to any Replacement LC Facility, all obligations of the Company under such Replacement LC Facility.

“ Replacement Project Contract ” means one or more contracts or agreements which (i) is entered into by the Company in substitution for any Major Project Contract that has been terminated in accordance with its terms or otherwise or replaced following an event of default thereunder, (ii) has economic and other terms which, taken as a whole, are not materially less favorable to the Company as the Major Project Contract being replaced and (iii) either is with one or more counterparties (or guarantors of such counterparties' obligations) having substantially similar or better creditworthiness (or is otherwise credit supported so that the credit risk of such counterparty is not materially less favorable to the Company than the existing counterparty) and substantially similar or better experience in the industry, in each case, as the counterparty to the Major Project Contract being replaced, or (b) in the case of any Major Project Contract other than the PPA, the Company delivers evidence of a Ratings Reaffirmation.

“ Required Capital Expenditures ” means Capital Expenditures set forth in the Construction Budget or Capital Expenditures set forth in the then current Annual Operating Budget that are reasonably required in order to operate and maintain the Project in accordance with applicable Legal Requirements (excluding, for certainty, any Emergency Capital Expenditures and Capital Expenditures financed with the proceeds of voluntary equity contributions made to the Company).

“ Required Completion Amount ” means an amount equal to the greater of (a) the amount certified by the Company (and confirmed by the Independent Engineer) on the Project Completion Date as necessary to pay the costs to achieve Final Completion and (b) an amount equal to 150% of the aggregate value of the punch list items provided pursuant to the EPC Contract.

“ Required Secured Parties ” means at any time, the holders of more than 50% of the sum of, without duplication, (a) the aggregate outstanding principal amount of all Secured Obligations (other than in respect of any Letter of Credit so included pursuant to clause (b) below) and (b) other than in connection with the exercise of remedies, the aggregate unfunded (and unexpired and uncancelled) Letters of Credit (and, if applicable, outstanding letters of credit under a Replacement LC Facility), including the face amount of outstanding Letters of Credit (and, if applicable, outstanding letters of credit under a Replacement LC Facility) and commitments to extend credit (without duplication of Letters of Credit and Letters of Credit under a Replacement LC Facility and corresponding LC Loans or letter of credit loans under any Replacement LC Facility, as applicable) that are unexpired and uncancelled that, when funded, would constitute Secured Obligations at such time, in each case, with the applicable Secured Parties voting as a class in accordance with the voting procedures set forth in their respective Financing Documents. For purposes of this definition and any other voting matter hereunder, any obligations registered in the name of, or beneficially owned by, any Grantor or any Affiliate of any Grantor will be deemed not to be outstanding.

“ Responsible Officer ” means, for any Person, excluding the Trustee, Collateral Agent and Depositary Agent, any executive officer or financial officer (including the chief financial officer, principal accounting officer, treasurer, assistant treasurer or controller) of such Person and any other officer or similar official thereof responsible for the administration of the obligations of such Person in respect of a Project Contract or Financing Document.

“ Responsible Officer of the Trustee ” means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

“ Restoration Work ” means, with respect to any Affected Property, any action taken by or on behalf of the Company to rebuild, repair, replace, redesign, alter or otherwise restore or complete such Affected Property or any portion thereof, and all activities incidental and necessary for such matters, in order to permit operation of the Project in accordance in all material respects with the Financing Documents, including any redesign, alteration, retesting, re-commissioning and putting into service of the Affected Property, in each case, necessary to compensate for any failure of the Project to satisfy any performance guarantee under any Project Contract.

“Restricted Definitive Note” means a Definitive Note bearing the Private Placement Legend.

“Restricted Global Note” means a Global Note bearing the Private Placement Legend.

“ Restricted Investment ” means an Investment other than (a) a Permitted Investment or (b) a loan by the Company to the Sponsor that is made in compliance with Section 3.1(c) of the Depositary Agreement.

“Restricted Period” means the 40-day distribution compliance period as defined in Regulation S.

“ Revenue Account ” means the Revenue Account so designated, established and created by the Depositary Agent pursuant to the Depositary Agreement.

“Rule 144” means Rule 144 promulgated under the Securities Act.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“Rule 903” means Rule 903 promulgated under the Securities Act.

“Rule 904” means Rule 904 promulgated under the Securities Act.

“SEC” means the Securities and Exchange Commission.

“ Secured Debt Representative ” means (a) the LC Facility Administrative Agent (on behalf of the lenders and issuing banks under the LC Facility) (or any similar agent under a Replacement LC Facility, as applicable) and (b) the Trustee.

“ Secured Obligations ” means, without duplication:

(1) all Indebtedness, loans, advances, debts, liabilities and all other obligations (including the Obligations), howsoever arising, owed by the Company to the Secured Parties of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, pursuant to the terms of the Financing Documents, including the Intercreditor Agreement and any other Security Documents, including all interest, fees (including commitment fees, participation fees and fronting fees), charges, expenses, attorneys' fees and accountants fees chargeable to the Company or payable by the Company thereunder or hereunder;

(2) any and all sums advanced by the Collateral Agent in order to preserve the Collateral or preserve its security interest in the Collateral; and

(3) in the event of any proceeding for the collection or enforcement of the obligations described in clause (1) or (2) above, after a Trigger Event shall have 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 any necessary attorneys' fees and court costs.

“ Secured Party ” means each lender and issuing bank under the LC Facility and any Replacement LC Facility, the Holders, the Trustee, the Collateral Agent, the Depositary Bank and each other Secured Debt Representative.

“Securities Act” means the Securities Act of 1933, as amended.

“ Security Agreement ” means the Security Agreement, dated as of the Issue Date, between the Company and the Collateral Agent.

“ Security Documents ” mean the Intercreditor Agreement, the Consents, the Pledge Agreement, the Security Agreement, the Depositary Agreement, the Deed of Trust, the ECA and each of the security agreements, mortgages, pledge agreements, agency agreements and other instruments and documents executed and delivered pursuant to this Indenture or any of the foregoing, as the same may be amended, supplemented or otherwise modified from time to time and pursuant to which Collateral is pledged, assigned or granted to or on behalf of the Collateral Agent for the ratable benefit of the Secured Parties or notice of such pledge, assignment or grant is given.

“ Senior Debt ” means the LC Facility, any Replacement LC Facility and the Notes.

“ Services Agreement ” means the Intercompany Administrative Services Agreement, dated as of March 31, 2006, between the Sponsor and its direct and indirect Subsidiaries from time to time (including the Company, as of or around the Issue Date).

“ S&P ” means Standard & Poor's Rating Services, a division of The McGraw Hill Companies, Inc., and its successors.

“ SLO County ” means County of San Luis Obispo in the State of California.

“ Sponsor ” means MidAmerican Energy Holdings Company, an Iowa corporation.

“ Stated Maturity ” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness as of the date of this Indenture, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

“ 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 or limited liability company of which (a) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general and limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof, whether in the form of membership, general, special or limited partnership interests or otherwise, and (b) such Person or any Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

“Survey” means the survey of the Deed of Trust Site made by Taney Engineering designated Job No. FRT 09-003, last revised February 10, 2012.

“ Taxes ” mean any and all present or future taxes, and any and all levies, imposts, duties and similar charges or withholdings, in each case, in the nature of a tax, imposed, levied, withheld, collected or assessed by any Governmental Authority and any and all interest, penalties and additions related thereto.

“ Title Event ” means the existence of any defect of title or Lien on the Project (other than Permitted Liens) that entitles the Company or the Collateral Agent to make a claim under any title policies issued in favor of the Company or the Collateral Agent.

“ Title Event Proceeds ” means, in connection with any Title Event, the net available amount payable to the Company or the Collateral Agent (on behalf of the Secured Parties) in connection with such Title Event.

“ Title Policy ” means a lender's A.L.T.A. 2006 extended coverage policy of title insurance.

“ Topaz Holding ” means TPZ Holding, LLC, a Delaware limited liability company, which, on the Issue Date, owns all of the membership interests in the Company.

“ Treasury Rate ” means with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated maturity (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

“ Trigger Event ” means an event of default under a Financing Document that causes the Secured Obligations under such Financing Document to become immediately due and payable, in each case, as notified in writing to the

Collateral Agent.

“Trustee” means The Bank of New York Mellon Trust Company, N.A., until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

“Turnover Date ” means the conditions for turnover set forth in the EPC Contract have been achieved.

“ UCC ” shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided however that, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions.

“UCC Policy” means an “Eagle 9” or equivalent UCC title insurance policy.

“Unrestricted Definitive Note” means a Definitive Note that does not bear and is not required to bear the Private Placement Legend.

“Unrestricted Global Note” means a Global Note that does not bear and is not required to bear the Private Placement Legend.

“U.S. Person” means a U.S. Person as defined in Rule 902(k) promulgated under the Securities Act.

“ Voting Stock ” of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“ Weighted Average Life to Maturity ” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

(2) the then outstanding principal amount of such Indebtedness.

“ Withdrawal Certificate ” means an Officer's Certificate countersigned by the Collateral Agent in the form provided in the Depositary Agreement.


Section .	Other Definitions .



Term	Defined in Section
“Adjusted Senior Note Amount”	3.10
“Authentication Order”	2.02
“Capacity Reduction Payment”	3.10
“Change of Control Offer”	4.15
“Change of Control Payment”	4.15
“Change of Control Payment Date”	4.15
“Covenant Defeasance”	8.03
“Discretionary Capital Expenditures”	4.31
“Distribution Conditions”	4.07
“DTC”	2.03
“Extended Quarterly Dates”	4.44
“incur”	4.09(a)
“Legal Defeasance”	8.02
“Make-Whole Amount”	3.07
“Mandatory Redemption”	3.09
“Mandatory Redemption Amount”	3.09
“Paying Agent”	2.03
“Permitted Indebtedness”	4.09
“Registrar”	2.03
“Restricted Payment”	4.07
“Restricted Payment Date”	4.07


Section .	Rules of Construction .

Unless the context otherwise requires:

(1) a term has the meaning assigned to it;


(2)	an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(3) “or” is not exclusive;

(4) words in the singular include the plural, and in the plural include the singular;

(5) “will” shall be interpreted to express a command;

(6) provisions apply to successive events and transactions;


(7)	references to sections of or rules under the Securities Act will be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time; and


(8)	unless otherwise specified herein, references to any Person shall be to it and any successor in interest thereto and its permitted assigns.

ARTICLE 2

THE NOTES

Section . Form and Dating .

(a) General . The Notes and the Trustee's certificate of authentication will be substantially in the form of Exhibits A1 and A2 hereto (or the form of Exhibit A1 and A2 to any Supplemental Indenture in the case of Notes issued after the Issue Date). The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note will be dated the date of its authentication. The Notes shall be in denominations of $100,000 and integral multiples of $1,000 in excess thereof.

The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

(b) Global Notes . Notes issued in global form will be substantially in the form of Exhibits A1 or A2 hereto (or the form of Exhibit A1 or A2 to any Supplemental Indenture in the case of Notes issued after the Issue Date) (including the Global Note Legend thereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Notes issued in definitive form will be substantially in the form of Exhibit A1 hereto (or the form of Exhibit A1 to any Supplemental Indenture in the case of Notes issued after the Issue Date) (but without the Global Note Legend thereon and without the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Each Global Note will represent such of the outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.

(c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S will be issued initially in the form of the Regulation S Temporary Global Note, which will be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period with respect to any Regulation S Temporary Global Note will be terminated upon the receipt by the Trustee of:

(1) a written certificate from the Depositary, together with copies of certificates from Euroclear and Clearstream certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of such Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(b) hereof); and

(2) an Officer's Certificate from the Company.

Following the termination of the Restricted Period with respect to any Regulation S Temporary Global Note, beneficial interests in such Regulation S Temporary Global Note will be exchanged for beneficial interests in a Regulation S Permanent Global Note pursuant to the Applicable Procedures. Simultaneously with the authentication of the Regulation S Permanent Global Note related to any issuance of Notes hereunder, the Trustee will cancel the related Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided.

(d) Euroclear and Clearstream Procedures Applicable. The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “General Terms and Conditions of Clearstream Banking” and “Customer Handbook” of Clearstream will be applicable to transfers of beneficial interests in any Regulation S Temporary Global Note and the related Regulation S Permanent Global Note that are held by Participants through Euroclear or Clearstream.

Section . Execution and Authentication .

At least one Officer must sign the Notes for the Company by manual or facsimile signature.

If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will nevertheless be valid.

A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive evidence that the Note has been authenticated under this Indenture.

The Trustee will, upon receipt of a written order of the Company signed by two Officers (an “ Authentication Order ”), authenticate Notes for original issue that may be validly issued under this Indenture, including any Additional Notes. The aggregate principal amount of Notes outstanding at any time may not exceed the aggregate principal amount of Notes authorized for issuance by the Company pursuant to one or more Authentication Orders, except as provided in Section 2.07 hereof.

The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company.


Section .	Registrar and Paying Agent .

The Company will maintain an office or agency where Notes may be presented for registration of transfer or for exchange (“ Registrar ”) and an office or agency where Notes may be presented for payment (“ Paying Agent ”). The Registrar will keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar and the term “Paying Agent” includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company will notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company may act as Paying Agent or Registrar.

The Company initially appoints The Depository Trust Company ( “DTC” ) to act as Depositary with respect to the Global Notes.

The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes.

Section . Paying Agent to Hold Money in Trust .

The Company will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium on, if any, or interest, if any, on, the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) will have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee will serve as Paying Agent for the Notes.

Section . Holder Lists .

The Trustee will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders. If the Trustee is not the Registrar, the Company will furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders.


Section .	Transfer and Exchange .

(a) Transfer and Exchange of Global Notes . A Global Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if:

(1) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 90 days after the date of such notice from the Depositary;

(2) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall any Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (A) the expiration of the Restricted Period for such Regulation S Temporary Global Note and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act; or

(3) there has occurred and is continuing a Default or Event of Default with respect to the Notes.

Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note, except that upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b) or (c) hereof.

(b) Transfer and Exchange of Beneficial Interests in the Global Notes . The transfer and exchange of beneficial interests in the Global Notes will be effected through the Depositary in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

(1) Transfer of Beneficial Interests in the Same Global Note . Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however , that prior to the expiration of the Restricted Period for any Regulation S Temporary Global Note, transfers of beneficial interests in such Regulation S Temporary Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1).

(2) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either:

(A) both:

(i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and

(ii) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or

(B) both:

(i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and

(ii) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued pursuant to (A) or (B) upon the transfer or exchange of beneficial interests in any Regulation S Temporary Global Note prior to (A) the expiration of the Restricted Period with respect to such Regulation S Temporary Global Note and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act.

Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof.

(3) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following:

(A) if the transferee will take delivery in the form of a beneficial interest in a 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and

(B) if the transferee will take delivery in the form of a beneficial interest in a Regulation S Temporary Global Note or a Regulation S Permanent Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof.

(4) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note . A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above and:

(A) the Registrar receives the following:

(i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or

(ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (A), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

If any such transfer is effected pursuant to subparagraph (A) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (A) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.

(1) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:

(A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;

(B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

(E) if such beneficial interest is being transferred to the Company, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

(F) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in

whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(2) Beneficial Interests in Regulation S Temporary Global Note to Definitive Notes. Notwithstanding Sections 2.06(c)(1)(A) and (C) hereof, a beneficial interest in a Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (A) the expiration of the Restricted Period with respect to such Regulation S Temporary Global Note and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904.

(3) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if:

(A) the Registrar receives the following:

(i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or

(ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (A), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(4) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee will cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company will execute and the Trustee will authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(4) will be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(4) will not bear the Private Placement Legend.

(d) Transfer and Exchange of Definitive Notes for Beneficial Interests .

(1) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following

documentation:

(A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

(B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

(E) if such Restricted Definitive Note is being transferred to the Company, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

(F) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the appropriate 144A Global Note, in the case of clause (C) above, the appropriate Regulation S Global Note.

(2) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if:

(A) the Registrar receives the following:

(i) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or

(ii) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the appropriate Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (A), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the appropriate Unrestricted Global Note.

(3) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of the appropriate Unrestricted Global Note.

If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (2) or (3) above at a time when an Unrestricted Global Note has not yet been issued, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.

(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e).

(1) Restricted Definitive Notes to Restricted Definitive Notes . Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

(A) if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and

(C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, required by item (3) thereof, if applicable, and such other certification and/or Opinion of Counsel as the Registrar may reasonably request.

(2) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if:

(A) the Registrar receives the following:

(i) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or

(ii) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (A), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions

on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(3) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

(f) [Reserved].

(g) Legends. The following legends will appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.

(1) Private Placement Legend.

(A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

“THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (b) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (c) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF APPLICABLE) OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN CLAUSE (A) ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALE OF THE SECURITY EVIDENCED HEREBY.”

(B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(4), (c)(3), (c)(4), (d)(2), (d)(3), (e)(2) or (e)(3) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) will not bear the Private Placement Legend.

(2) Global Note Legend . Each Global Note will bear a legend in substantially the following form:

“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”

(3) Regulation S Temporary Global Note Legend. Each Regulation S Temporary Global Note will bear a Legend in substantially the following form:

“THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.”

(h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.

(i) General Provisions Relating to Transfers and Exchanges .

(1) To permit registrations of transfers and exchanges, the Company will execute and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrar's request.

(2) No service charge will be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 3.10, 3.11, 4.15, 4.40, 4.41, 4.42, 4.43, 4.44 and 9.05 hereof).

(3) The Registrar will not be required to register the transfer of or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.

(4) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes will be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.

(5) Neither the Registrar nor the Company will be required:

(A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection;

(B) to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or

(C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date.

(6) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.

(7) The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof.

(8) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile or email.

Section . Replacement Notes .

If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company will issue and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note.

Every replacement Note is an additional obligation of the Company and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.


Section .	Outstanding Notes .

The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note.

If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser.

If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

If the Paying Agent (other than the Company or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue interest.


Section .	Treasury Notes .

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned will be so disregarded.


Section .	Temporary Notes .

Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary Notes will be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as may be reasonably acceptable to the Trustee. Without unreasonable delay, the Company will prepare and the Trustee will authenticate definitive Notes in exchange for temporary Notes.

Holders of temporary Notes will be entitled to all of the benefits of this Indenture.


Section .	Cancellation .

The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will dispose of canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes will be delivered to the Company upon the request of the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.


Section .	Defaulted Interest .

If the Company defaults in a payment of interest on the Notes, it will pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company

will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company will fix or cause to be fixed each such special record date and payment date; provided that no such special record date may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company and provision by the Company of such notice information, the Trustee in the name and at the expense of the Company) will mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.


Section .	Additional Notes .

(a) Additional Notes may, upon satisfaction of the conditions set forth in this Section 2.13 and Section 4.09(a)(2), be issued in the amounts and for the purposes permitted herein. All Additional Notes shall (i) be secured by the Collateral as set forth in the Security Documents and (ii) rank pari passu with the Initial Notes in all respects. All Additional Notes shall bear such date or dates, bear such interest rate or rates, have such amortization schedule, and redemption premiums, and be issued at such prices as approved in writing by the Company; other than the foregoing the Additional Notes shall have identical terms as the Initial Notes.

(b) Upon (i) satisfaction of the applicable conditions set forth in this Section 2.13 and Section 4.09, (ii) the execution and delivery of an appropriate Supplemental Indenture in compliance with clause (d) of this Section 2.13, (iii) the execution and delivery of appropriate supplements, amendments or modifications to or of the Financing Documents (in respect of which the consent of the Trustee and the Holders shall not be required; provided, however , if such supplements, amendments or modifications change the rights or obligations of the Trustee, as reasonably determined by the Trustee in its sole discretion, the prior written consent of the Trustee shall be required in connection with any such supplements, amendments or modifications) and (iv) receipt by the Trustee of an Officer's Certificate and opinion of counsel from the Company confirming that all conditions precedent to the issuance of Additional Notes or incurrence of Permitted Indebtedness, as applicable, set forth in this Indenture have been satisfied or waived, the Company shall execute Additional Notes and deliver them to the Trustee, and the Trustee, upon the written request of the Company, shall authenticate such Additional Notes and deliver them to the purchasers thereof as may be directed by the Company in writing.

(c) Scheduled principal payments of Additional Notes shall be shown on Schedule 1 to Annex A1 and A2 of the Supplemental Indenture pursuant to which such Additional Notes are issued that is separate from the amortization of previously issued Notes, but the right to payment of such principal when due shall rank pari passu with principal payments due on all other Notes.

(d) Prior to the issuance of Additional Notes hereunder, the following shall be established in one or more Supplemental Indentures:

(i) the title of the Additional Notes issued pursuant to such Supplemental Indenture (which shall distinguish the Additional Notes from all other Notes) and the form or forms of such Additional Notes;

(ii) any limit upon the aggregate principal amount of such Additional Notes that may be authenticated and delivered under this Indenture (except for Additional Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes and except for Additional Notes that are deemed never to have been authenticated and delivered hereunder);

(iii) the date or dates on or as of which such Additional Notes shall be dated;

(iv) the date or dates on which the principal of such Additional Notes 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;

(v) the rate or rates at which such Additional Notes 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 scheduled payment dates on which such interest shall be payable (which shall correspond to the Scheduled Payment Dates set forth herein) and the Regular Record Date for the determination of Holders to whom interest is payable;

(vi) the redemption premium upon which such Additional Notes may be redeemed, in whole or in part, at the option of the Company; and

(vii) any other terms of such Additional Notes (which terms shall not contravene the provisions of this Indenture) including any terms related to the redemption of such Additional Notes; provided that such terms (other than the issue date, issue price, interest rate and amortization schedule) shall be no more favorable to the Holders of such Additional Notes than the corresponding terms contained herein.


Section .	CUSIP Numbers.

The Company in issuing the Notes may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the “CUSIP” numbers.

ARTICLE 3

REDEMPTION AND PREPAYMENT

Section . Notices to Trustee .

If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it must furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officer's Certificate setting forth:

(1) the clause of this Indenture pursuant to which the redemption shall occur;

(2) the redemption date;

(3) the principal amount of Notes to be redeemed; and

(4) the redemption price.

Section . Selection of Notes to Be Redeemed or Purchased .

In the event that less than all of the Notes are to be redeemed at any time, the selection of Notes for redemption will be made by the Trustee in the case of certificated Notes and by DTC in all other cases, in each case, in compliance with the requirements of the principal securities exchange or market, if any, on which the Notes are listed or, if the Notes are not then listed on a securities exchange or market, on a pro rata basis, by lot or by any other method that most nearly approximates a pro rata selection as the Trustee in the case of certificated Notes and by DTC in all other cases, in each case, shall deem fair and appropriate (subject to the procedures of the Depositary) provided that no Notes of an original principal amount of $100,000 or less may be redeemed in part and Notes of an original principal amount in excess of $100,000 may be redeemed in multiples of $1,000 only.

In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased will be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date by the Trustee from the outstanding Notes not previously called for redemption or purchase.

The Trustee will promptly notify the Company in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.


Section .	Notice of Redemption .

Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose

Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 11 hereof.

The notice will identify the Notes to be redeemed and will state:

(1) the redemption date;

(2) the redemption price;

(3) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion thereof (which shall not be less than $100,000, as reduced by any scheduled principal payments on such Note) will be issued upon cancellation of the original Note;

(4) the name and address of the Paying Agent;

(5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

(6) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date;

(7) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and

(8) 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 Notes.

At the Company's request, the Trustee will give the notice of redemption in the Company's name and at its expense; provided, however , that the Company has delivered to the Trustee, at least 45 days prior to the redemption date, an Officer's 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 .	Effect of Notice of Redemption .

Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. Any redemption and notice thereof may not be subject to the satisfaction of any conditions precedent.


Section .	Deposit of Redemption or Purchase Price .

One Business Day prior to the redemption or purchase date, the Company will deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued interest, if any, on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of and accrued interest, if any, on all Notes to be redeemed or purchased.

If the Company complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest will cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the

unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.


Section .	Notes Redeemed or Purchased in Part .

Upon surrender of a Note that is redeemed or purchased in part, the Company will issue and, upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered. In the event of any redemption or purchase of any Note in part, each remaining scheduled principal payment provided in Schedule 1 to Exhibits A1 and A2 (or Schedule 1 to Exhibits A1 and A2 of any Supplemental Indenture in the case of Notes issued after the Issue Date) shall be reduced on a pro rata basis in respect of Notes issued pursuant to this Section 3.06.


Section .	Optional Redemption .

(a) At any time prior to the Maturity Date, the Company will have the right, at its option, to redeem any of the Notes, in whole at any time or in part from time to time prior to their maturity, on at least 30 days' but not more than 60 days' notice, as provided in Section 3.03, at a redemption price equal to the greater of (1) 100% of the principal amount of such Notes being redeemed and (2) the sum of the present value of each remaining scheduled payment of principal and interest thereon (exclusive of interest accrued to the redemption date) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points (the “ Make-Whole Amount ”), plus in each case accrued and unpaid interest, if any, on the principal amount of such Notes being redeemed up to, but not including, the redemption date (subject to the rights of the Holders of record on the relevant record date to receive interest due on the relevant interest payment date).

(b) Except pursuant to Section 3.07(a) hereof and Section 3.10 hereof, the Notes will not be redeemable at the Company's option.

(c) Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

(d) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

Section . Sinking Fund .

The Company is not required to make sinking fund payments with respect to the Notes.


Section .	Mandatory Redemption .

In the event that the Company is required to redeem the Notes, in whole or in part, with any Loss Proceeds, Title Event Proceeds, Performance LD Proceeds, Project Contract Termination Proceeds, Accumulated Distribution Amounts or a Capacity Reduction Payment or otherwise (collectively “ Mandatory Redemption Amounts ”) pursuant to Sections 3.10, 3.11, 4.40, 4.41, 4.42, 4.43 or 4.44 hereof (a “ Mandatory Redemption ”), it will follow the procedures specified below.

Promptly upon the transfer of any Mandatory Redemption Amounts to the Note Redemption Account, the Company shall, with written notice to the Trustee, set a Redemption Date, which Redemption Date shall be within sixty (60) days following the transfer of monies to the Note Redemption Account in respect of the event giving rise to the Notes being subject to redemption.

If the Redemption Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest, if any, will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders whose Notes are purchased pursuant

to such Mandatory Redemption.

If any amount remains in the Note Redemption Account after consummation of such Mandatory Redemption, the Company may use those amounts for any purpose not otherwise prohibited by this Indenture and the Company shall direct the Depositary to transfer such amount to the Construction Account (prior to the Project Account Funding Date) or the Revenue Account (on or after the Project Account Funding Date) pursuant to the terms of the Depositary Agreement.

Upon the commencement of a Mandatory Redemption, the Company will send by first class mail, a notice of redemption to each Holder, with a copy to the Trustee, pursuant to Section 3.03.

On the Redemption Date, the Depositary Agent shall transfer from the Note Redemption Account to the Trustee an amount equal to the purchase price of the Notes to be redeemed pursuant to such Mandatory Redemption. The Trustee, the Depositary or the Paying Agent, as the case may be, will promptly (but in any case not later than five days after the Redemption Date) mail or deliver to each Holder an amount equal to the redemption price of the Notes being redeemed pursuant to such Mandatory Redemption in accordance with the Company's written instructions, and the Company will promptly issue a new Note, and the Trustee, upon written request from the Company, will authenticate and mail or deliver (or cause to be transferred by book entry) such new Note to such Holder, in a principal amount equal to any unredeemed portion of the Note surrendered.

Other than as specifically provided in this Section 3.09, any redemption pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.


Section .	Capacity Reduction .

In the event of any reduction of Project capacity as a result of the Adjusted Energy Performance Test under the EPC Contract or in the event of the occurrence at the Commercial Operation Date of any situation that would otherwise require a Mandatory Redemption pursuant to Section 4.42 hereof, the Project capacity may be reduced on such date in accordance with the terms of the EPC Contract (including in respect of the “Adjusted Energy Performance Test”, as defined therein) and the PPA or as otherwise set forth herein and no breach or default under the Financing Documents or any relevant Major Project Contract shall be deemed to have occurred as a result of such reduction or the events giving rise thereto; provided, that, (a) within 30 days after the effective date of such reduction, the Company shall have delivered to the Collateral Agent and the Independent Engineer a certificate setting forth the aggregate principal amount of Notes (“ Adjusted Senior Note Amount ”) that could have been issued if such Notes had originally been issued with respect to the Project at such reduced capacity, provided that the projected Debt Service Coverage Ratio for each semi-annual period during the projected period calculated after giving effect to such Project capacity reduction and the Adjusted Senior Note Amount, shall equal or exceed the projected minimum Debt Service Coverage Ratios set forth in the Base Case Projections (as certified by the Independent Engineer), (b) within 60 days after the Company's delivery of the certificate set forth in clause (a), the Company shall have redeemed Notes in the aggregate principal amount, if any, by which the then aggregate outstanding principal amount of notes exceeds the Adjusted Senior Note Amount (the “ Capacity Reduction Payment ”), at a price equal to par, plus accrued and unpaid interest to the date of such redemption, if any, without premium or penalty, in accordance with the provisions set forth in Section 3.09, (c) the Major Project Contracts otherwise remain in effect with respect to the Project at such reduced capacity, (d) if applicable, all liquidated damages or other payments required to be paid by the EPC Contractor under the EPC Contract in respect of such reduction in capacity have been paid or an equal amount has been contributed as equity to the Company by an Affiliate and (e) if applicable, all payments required to be paid by the Company under the PPA have been paid.


Section .	Redemption Upon Foreclosure on the Collateral.

If the maturity of the Notes has been accelerated and if the Collateral Agent (or a designee on its behalf) forecloses or otherwise exercises remedies to acquire or transfer substantially all of the Collateral at any time pursuant to the terms of the Intercreditor Agreement, all proceeds realized in connection therewith shall be applied to redeem the Notes pursuant to Section 3.16 of the Depositary Agreement.

ARITCLE 4

COVENANTS

Section . Payment of Notes.

The Company will duly and punctually pay, or cause to be paid, the principal of or premium, if any, interest, Make-Whole Amounts, if any, and all other amounts due and payable on the Notes in accordance with the terms of the Notes, including the Schedule of Principal Payments set forth on Schedule 1 attached thereto, and this Indenture. Principal, premium, if any, Make-Whole Amounts, if any, and interest, if any, will be considered paid on the date due if the Paying Agent, if other than the Company, holds, as of 10:00 a.m. Eastern Time on the due date, money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest, if any, then due.

The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at a rate that is 1% per annum higher than the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest, if any (without regard to any applicable grace period), at the same rate to the extent lawful.


Section .	Maintenance of Office or Agency.

The Company will maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will 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 Company fails to maintain any such required office or agency or fails to 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 Company may also from time to time designate one or more other offices or agencies where the 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 will in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company will 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 Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof.


Section .	Financial Information; Reporting Requirements .

(a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company will furnish to the Trustee and, upon their request, furnish or cause the Trustee to furnish to the Holders:

(1) as soon as available and in any event (for any Fiscal Quarter ended prior to the Final Completion Date) within 60 days after the end of each of the first three quarterly accounting periods of the Company's fiscal year and (for any Fiscal Quarter ended on or after the Final Completion Date) within 60 days after the end of each of the first three quarterly accounting periods of the Company's Fiscal Year, quarterly financial statements of the Company, including unaudited balance sheet as of such quarterly period and the related unaudited statement of income, changes in member's equity and cash flow for such quarterly period and for the portion of such Fiscal Year ending on the last day of such period, all in reasonable detail;

(2) as soon as available and in any event within 120 days after the end of each Fiscal Year of the Company, audited financial statements for such Fiscal Year for the Company, including therein the balance sheet as of the end of such Fiscal Year and the related statement of income, changes in member equity, changes in financial position and cash flows for such year, all in reasonable detail and accompanied by an audit opinion thereon by the Independent Auditors, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the Company at the end of, and for, such Fiscal Year in accordance with GAAP;

(3) at the time of delivery of the financial statements under clauses (1) and (2) above, an Officer's Certificate of the Company certifying that (i) such financial statements fairly present the financial condition and results of operations of the Company on the dates and for the periods indicated in accordance with GAAP, subject in the case of interim financial statements, to the absence of footnotes and normally recurring year-end adjustments and (ii) no Default or Event of Default under this Indenture and no default or event of default (as such terms are defined in any other Financing Documents or any Major Project Contracts, as applicable) under any other Financing Documents or any Major Project Contract, as applicable, exists or if such event or condition exists, the nature of such event or condition and the corrective actions such Person has taken or proposes to take with respect thereto;

(4) as soon as available and in any event within 60 days after the end of each Fiscal Quarter that includes all or a portion of the period prior to the Final Completion Date: (i) a construction progress report for such Fiscal Quarter, (ii) an updated construction schedule and an updated construction budget, reflecting approved changes to the construction budget or schedule, if any, and (iii) a calculation of the Debt Service Coverage Ratio for the most recently ended four Fiscal Quarters and the Projected Debt Service Coverage Ratio for the next four fiscal quarters, in each case, accompanied by an Officer's Certificate of the Company (which shall be countersigned by the Independent Engineer to confirm its satisfaction therewith) certifying that such documents are accurate and complete in all material respects based upon the Company's good faith reasonable estimates of information contained therein;

(5) as soon as possible and in any event within 60 days after the end of each Fiscal Quarter that includes all or a portion of the period subsequent to the Final Completion Date, an operations report for such Fiscal Quarter showing operating data for the previous Fiscal Quarter, focusing on availability, electrical production, capacity, delivery, curtailment, expenses, status of scheduled and unscheduled maintenance performed and Capital Expenditures, force majeure events, planned outages and forced outages (and the reason for such forced outages), casualty losses in excess of $10.0 million for any one casualty or loss or an aggregate of $30.0 million in any Fiscal Year and material changes to insurance coverages, accompanied by an Officers' Certificate of the Company certifying that such operations report is accurate and complete in all material respects and each such other document is based upon the Company's good faith reasonable estimates of information contained therein;

(6) on or before the date that is 60 days prior to the Turnover Date and thereafter 60 days prior to any Fiscal Year, (A) a draft updated operating plan for the next four Fiscal Quarters, detailed by month, and (B) a draft updated operating forecast for the next four Fiscal Quarters, and (ii) on or before the date that is 20 days prior to the Turnover Date and thereafter 20 days prior to any Fiscal Year, (A) a final updated operating plan for the next four Fiscal Quarters, detailed by month, and (B) a final updated operating forecast for the next four Fiscal Quarters, in the case of the foregoing clauses (ii)(A) and (ii)(B), accompanied by an Officers' Certificate of the Company (which shall be countersigned by the Independent Engineer to confirm its satisfaction therewith) certifying that such operating plan is accurate and complete in all material respects based upon the Company's good faith reasonable estimates of information contained therein;

(7) promptly upon the Company's receipt of the same, copies of material notices received by the Company under the Project Contracts; and

(8) such other information with respect to the condition (financial or otherwise), business,

operations, performance, prospects of the Company or the Project as the Trustee or the LC Facility Administrative Agent may from time to time reasonably request.

(b) Notices . A Responsible Officer of the Company will deliver to the Trustee, promptly after Actual Knowledge thereof by the Company, written notice of the occurrence of any Default, Event of Default, breach or default under any Major Project Contract, Change of Control, any Loss Event or any event entitling the Company to receive any Performance LD Proceeds whose cost (or amount, as applicable) is expected to exceed $20.0 million, any Title Event, any Event of Taking with respect to all or a material portion of the Project, the Deed of Trust Site or Real Property, any force majeure event, any material litigation, claim or proceeding or of any event, circumstance, occurrence or condition that has or could reasonably be expected to have a Material Adverse Effect and notice of the breach of any other covenants under this Indenture requiring notice to the Trustee set forth in this Indenture.

(c) Rule 144A Information . The Company shall furnish to Holders, prospective investors, broker-dealers and securities analysts, upon their request, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Notes are not freely transferable under the Securities Act.


Section .	Compliance Certificate.

The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officer's Certificate stating that a review of the activities of the Company during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in Default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of, premium on, if any, or interest, if any, on, the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto.


Section .	Taxes.

The Company will pay all material taxes and assessments required to be paid by it, except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders.


Section .	Stay, Extension and Usury Laws.

The Company covenants (to the extent that it may lawfully do so) that it will 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 this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.


Section .	Restricted Payments .

(a) The Company will not directly or indirectly:

(1) declare or pay any dividend or make any other payment or distribution on account of the Company's Equity Interests (including, without limitation, any payment in connection with any merger or

consolidation involving the Company) or to the direct or indirect holders of the Company's Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company);

(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company;

(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Company that is contractually subordinated to the Notes, except a payment of interest or principal at the Stated Maturity thereof; or

(4) make any Restricted Investment

(all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as “ Restricted Payments ”), unless, at the time of and after giving effect to such Restricted Payment each of the Distribution Conditions described below have been satisfied as of the date of each Restricted Payment and after giving pro forma effect to such Restricted Payment, provided that, a Restricted Investment which is a Capital Expenditure incurred in compliance with Section 4.30 hereof and which is incurred before the Project Completion Date, shall not constitute a “Restricted Payment."

The Company may transfer monies from the Distribution Suspense Account for any use permitted by this Indenture including making Restricted Payments permitted by this Section 4.07 on or within 30 days following any Quarterly Date if, as of such Quarterly Date, the following conditions (such conditions, the “ Distribution Conditions ”) have been satisfied:

(a) the Project Completion Date has occurred;

(b) such Restricted Payment is made only from funds remaining on deposit in the Distribution Suspense Account;

(c) no Default or Event of Default has occurred and is continuing or would occur and be continuing as a consequence of such Restricted Payment;

(d) all amounts required to be on deposit in each of the Accounts are on deposit therein;

(e) the Debt Service Coverage Ratio for the preceding four fiscal quarters based on actual historical figures, measured as of the relevant Quarterly Date, is at least 1.20 to 1.00; provided, however , for purposes of the first four Quarterly Dates after the Project Completion Date, the Debt Service Coverage Ratio as of each such Quarterly Date shall be calculated from the first day after the Project Completion Date through the applicable Quarterly Date;

(f) the Projected Debt Service Coverage Ratio for the ensuing four Fiscal Quarter period is at least 1.20 to 1.00;

(g) no other Restricted Payment has been made during the then-current Fiscal Quarter;

(h) there is no outstanding principal or interest on any LC Loans (whether or not matured) or unreimbursed LC Disbursements; and

(i) the Company shall have delivered to the Trustee (without written objection from it, which objection may only be delivered on the basis that such distribution is in violation of the Depositary Agreement), at least seven Business Days (but not more than 30 Business Days) prior to the date of the proposed Restricted Payment (the “ Restricted Payment Date ”), an Officer's Certificate of the Company dated within 30 days of the Restricted Payment Date:

(1) to the effect that all conditions for a Restricted Payment on the upcoming Restricted Payment Date have been satisfied; and

(2) setting out in reasonable detail the calculations for computing the Debt Service Coverage Ratios for the relevant periods and stating that such calculations were prepared in good faith and were based on reasonable assumptions.

If the Company fails to meet the historical Debt Service Coverage Ratio described in clause (e) of the definition of Distribution Conditions, the Company may use any funds in the Distribution Suspense Account to fund capital expenditures until such historical Debt Service Coverage Ratio has been achieved. In addition, the Company may use funds on deposit in the Distribution Suspense Account to fund any Project Costs to their required levels.

The foregoing provision will not prohibit (a) the payment of any dividend, distribution or other payment on account of, or to the direct or indirect holders of, the Company's Equity Interests within 30 days after the date of declaration thereof, if at said date of declaration would have complied with the provisions of this Indenture, nor (b) the purchase, redemption, defeasance or other acquisition or retirement for value (collectively, a “ redemption ”) of any Indebtedness of the Company that is contractually subordinate to the Notes within 60 days after the notice of such redemption was given if, at the date of such notice such redemption would have complied with the provisions of this Indenture.

For the avoidance of doubt, the Company will not be prohibited from receiving contributions of equity from time to time; provided that the return of such equity, (including any equity contributed prior to the Issue Date will), other than with the proceeds of the Notes, be subject to this Section 4.07.

The preceding provisions will not prohibit payments pursuant to the Services Agreement.


Section .	Use of Note Proceeds; Letters of Credit .

The Company will use the net proceeds from the sale of the Notes on the Issue Date and from the sale of Additional Notes only to fund the Construction Account, reimburse the Sponsor and to pay Project Costs. Letters of Credit issued under the LC Facility will be used to (a) provide security and satisfy certain other requirements under the PPA and the LGIAs, (b) fund the Debt Service Reserve Requirement and the O&M Reserve Requirement, (c) provide security for the Company's remediation and mitigation liabilities and (d) provide security in respect of the Company's conditional use permit sales tax.


Section .	Incurrence of Indebtedness and Issuance of Preferred Stock .

(a) The Company will not, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, “ incur ”) any Indebtedness, and the Company will not issue any Disqualified Stock.

The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, “ Permitted Indebtedness ”):

(1) the incurrence by the Company of Letters of Credit under the LC Facility and/or comprising one or more Alternative LCs in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company thereunder) not to exceed $345.0 million at any time outstanding.

(2) the incurrence by the Company of Indebtedness represented by the Notes, including for the avoidance of doubt any Additional Notes subsequently issued under this Indenture; provided that no issuance of Additional Notes shall be permitted unless (i) the projected Debt Service Coverage Ratio for each semi-annual period will be at least 1.35 to 1.00 (calculated using one-year P90 production assumptions); (ii) there shall be no Default or Event of Default existing at such time under this Indenture or

default or event of default existing at such time under the LC Facility; (iii) the date for Substantial Completion (as defined in the EPC Contract) of the Project is projected to occur on or before December 31, 2016 (as confirmed by the Independent Engineer); (iv) the Independent Engineer shall have certified the projections specified in clause (i) after giving effect to the issuance of such Additional Notes; and (v) at least two Rating Agencies shall have affirmed their initial rating of the Series A Notes;

(3) the incurrence by the Company of Indebtedness represented by mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of design, construction, installation or improvement of property, plant or equipment used in the business of the Company in the ordinary course and in an amount not to exceed $5.0 million at any time outstanding;

(4) the incurrence by the Company of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under clauses (2), (3), (4) or (9) of this Section 4.09;

(5) the incurrence by the Company of Indebtedness in respect of workers' compensation claims, self-insurance obligations, bankers' acceptances, performance and surety bonds in the ordinary course of business;

(6) the incurrence by the Company of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within five Business Days;

(7) contingent obligations arising from indemnities provided under the Financing Documents and the Project Contracts;

(8) Indebtedness arising from netting services, overdraft protection, cash management obligations and otherwise in connection with deposit, securities and commodities accounts in the ordinary course of business; and

(9) Unsecured Indebtedness in an aggregate amount at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (9), not to exceed $10.0 million.

(b) For purposes of determining compliance with this Section 4.09, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (9) above, or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, the Company will be permitted to classify such item of Indebtedness on the date of its incurrence in any manner that complies with this Section 4.09. Indebtedness under the LC Facility outstanding on the date on which Notes are first issued and authenticated under this Indenture will initially be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Indebtedness. All Indebtedness shall be denominated in U.S. dollars.

(1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;

(2) the principal amount of the Indebtedness, in the case of any other Indebtedness; and

(3) in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of:

(A) the Fair Market Value of such assets at the date of determination; and

(B) the amount of the Indebtedness of the other Person.


Section .	Leases .

The Company shall not enter into any agreement or arrangement to lease the use of any Property or equipment of any kind (including by sale-leaseback, operating leases, capital leases or otherwise).


Section .	Limitations on Transactions with Affiliates .

(a) The Company shall not engage in any transactions with Affiliates except:

(1) on terms which are no less favorable to the Company than it would obtain in an arm's-length transaction with a Person that is not an Affiliate of the Company;

(2) reasonable fees and compensation paid to and indemnities provided for or on behalf of officers, directors, employees or consultants of the Company;

(3) the payment of Restricted Payments permitted under this Indenture;

(4) the Services Agreement and any amendments, supplements or other modifications thereto, provided that any such amendment, supplement or modification is not materially less favorable to the Company than the Services Agreement as in effect on the Issue Date; and

(5) a loan by the Company to the Sponsor that is made in compliance with the conditions to the making of such loan pursuant to Section 3.1(c) of the Depositary Agreement.

Prior to entering into any transaction contemplated by clause (1) of this Section 4.11, the Company shall deliver to the Trustee an Officers' Certificate, as reviewed by the Independent Engineer, stating that the requirements of such clause (1) are satisfied.


Section .	Limitation on Liens .

The Company will not, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind securing Indebtedness or trade payables on any asset now owned or hereafter acquired, except Permitted Liens.


Section .	Conduct of Business; Maintenance of Properties, Etc.

The Company shall operate, manage and maintain (or cause to be operated, managed and maintained) the Project in conformity with its obligations under the Major Project Contracts and all Permits, and insurance policies in accordance with Prudent Operating Practices, except where the failure to so operate, manage and maintain the Project would not reasonably be expected to result in a Material Adverse Effect.


Section .	Maintenance of Existence.

Except to the extent permitted by Section 4.27 hereof, the Company will maintain its existence and obtain and maintain, or cause to be obtained or maintained, as the case may be, as and when needed, all material franchises, permits, rights, privileges, licenses or government permissions necessary for the development, construction and operation of the Project and conduct of the Company's business, except where any failure would not reasonably be expected to have a Material Adverse Effect.


Section .	Change of Control; Offer to Repurchase Upon Change of Control .

(a) The Company shall not permit any Change of Control prior to the Project Completion Date.

(b) Upon the occurrence of a Change of Control, each Holder will have the right to require the Company to repurchase all or a portion (equal to $100,000 or an integral multiple of $1,000 in excess thereof) of that Holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount of such Notes repurchased, plus accrued and unpaid interest, if any, on the Notes repurchased to the date of purchase (the “Change of Control Payment” ), (subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date). Within ten (10) days following the date upon which a Change of Control has occurred, the Company will send, by first-class mail a notice (the “ Change of Control Offer ”) to each Holder, with a copy to the Trustee, describing the transaction or transactions that constitute the Change of Control and stating:

(1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment;

(2) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed, other than as may be required by law (the “Change of Control Payment Date” );

(3) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer must accept and not thereafter withdraw, such offer by delivering written notice of acceptance to the Trustee within 30 days following the date of the Change of Control Offer (the “ Offer Period ”), it being understood that each Holder shall have the right to accept such Change of Control Offer prior to the expiration of the applicable Offer Period;

(4) that any Note not tendered will continue to accrue interest;

(5) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date;

(6) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled “Option of Holder to Elect Purchase” attached to the Notes completed, or transfer by book-entry transfer, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(7) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and

(8) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change in Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.15, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.15 by virtue of such compliance.

(1) accept for payment all Notes or portions of Notes properly tendered and not withdrawn pursuant to the terms of the Change of Control Offer;

(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof tendered in accordance with the procedures described in clause (b) of this Section 4.15; and

(3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer's Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

The Paying Agent will promptly mail (but in any case not later than five days after the Change of Control Payment Date) to each Holder that properly tendered Notes the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any. The Company will publicly announce the results of the Change of Control Offer on or as soon practicable after the Change of Control Payment Date.

(d) Notwithstanding anything to the contrary in this Section 4.15, the Company will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given pursuant to Section 3.07 hereof, unless and until there is a default in payment of the applicable redemption price.

(e) Notwithstanding anything to the contrary contained herein, a Change of Control Offer may be made in advance of a Change of Control, conditioned upon the consummation of such Change of Control, if a definitive agreement is in place for the Change of Control at the time the Change of Control Offer is made.


Section .	Separate Existence .

The Company shall (a) maintain entity records and books of account separate from those of any other entity which is an Affiliate of the Company, (b) not commingle its funds or assets with those of any other entity which is an Affiliate of the Company, and (c) provide that its Board of Managers or other analogous governing body will hold all appropriate meetings to authorize and approve the Company's actions, which meetings will be separate from those of other entities.


Section .	Maintenance of Books and Records, Inspection .

The Company will maintain its books, accounts and records in accordance with GAAP. The Company will provide the Trustee and the Independent Engineer with reasonable inspection rights with respect to the Project and its books and records. The Company will not change its Fiscal Year and the Company shall keep books of accounts or records concerning its accounts, contract rights and proceeds at its offices identified in Section 12.02 hereof (as the address may be changed from time to time in accordance with this Indenture).


Section .	Annual Operating Budget .

As soon as available and in any event within 30 days prior to the end of its Fiscal Year, the Company shall deliver to the Trustee a copy of the Annual Operating Budget for the immediately succeeding Fiscal Year and the Company shall use commercially reasonable efforts to comply with such Annual Operating Budget.


Section .	Insurance .

The Company will purchase or provide (or cause to be purchased or provided) and maintain, with responsible and financially sound insurance carriers, customary insurance coverage for the Project in accordance with Prudent Operating Practices.

All insurance must be placed with insurance companies rated “A-VIII” or better by A.M. Best's Insurance Guide and Key Ratings (or equivalent rating by another nationally recognized insurance rating agency of similar standing if A.M. Best's Insurance Guide and Key Ratings is no longer published). The Company must carry and maintain the following insurance coverages: (A) during construction of the Project, (i) comprehensive or commercial general liability (with a per occurrence limit of not less than $1.0 million for injuries or death to one or more persons or damage to property resulting from any one occurrence and a $2.0 million aggregate limit for products or completed operations), (ii) automobile liability, (iii) worker's compensation and employer's liability insurance, (iv) excess umbrella liability insurance of not less than $30.0 million in the aggregate and (v) builder's risk insurance on an “all risks basis” covering all the Project's assets and equipment and materials that are scheduled to go into such Project (including transmission lines), including earthquake insurance on a sub-limited aggregate basis and delay in start-up insurance, written on industry standard builder's all risk policy form; and (B) post-construction of the Project, in addition to those coverages listed in (A)(i) through (A)(iv) above, (i) from and after substantial completion of the Project, “all risk” property insurance covering all the Project's assets and machinery and equipment and any property for which the Project has responsibility to insure, to the full replacement cost or an acceptable loss limit with no deduction for depreciation or coinsurance penalty basis, including earthquake insurance on a sub-limited aggregate basis and business interruption insurance. The Company will not be required to maintain any such insurance to the extent it is not available on commercially reasonable terms in the commercial insurance market.


Section .	Perfection and Maintenance of Security Interests .

The Company shall at its expense, prepare, give, execute, deliver, file and/or record any notice, financing statement, continuation statement, public deed, instrument or agreement necessary to maintain, preserve, continue, perfect or validate a first priority security interest granted under the Security Documents or pursuant to the Security Documents for the benefit of the Holders with respect to such security interest, subject to Permitted Liens. The Company shall, at its expense, furnish the Trustee and Collateral Agent, no later than 120 days following each 4th anniversary of the date of this Indenture, with an Officer's Certificate specifying the action taken or required to be taken by it to comply with the requirements of this Section 4.20 since the date of this Indenture or the last such Officer's Certificate, or stating that no such action is necessary.


Section .	Maintenance of Priority of the Notes .

The Company shall ensure that its payment obligations with respect to the Notes will constitute its direct, unconditional and general senior secured obligations and will rank pari passu with all of its other Senior Debt and senior in priority of payment, in right of security and in all other respects over all of its other Indebtedness, with the exception of Permitted Indebtedness, which shall rank pari passu or subordinate in priority of payment and in right of security to such payment obligations.


Section .	Maintenance of Rights in Project Property .

The Company shall preserve and maintain good and valid title or valid leasehold rights to all properties and assets of the Company related to the Project (subject to no Liens other than Permitted Liens) unless failure to maintain or preserve such title or rights would not reasonably be expected to result in a Material Adverse Effect.


Section .	Compliance with Laws and Agreements; Maintenance of Permits .

The Company will (i) comply with all applicable laws and regulations (including any environmental laws) of any Governmental Authority having jurisdiction over the Company or its business and the operation of the Project and Prudent Operating Practices applicable to the Company's business and operation of the Project and (ii) obtain and maintain in full force and effect all material permits and rights, except, in each case, where the failure to comply would not reasonably be expected to result in a Material Adverse Effect.


Section .	Limitation on Nature of Business .

The Company shall not engage or enter into any business other than the development, construction, financing, ownership, operation, maintenance and administration of the Project and ancillary activities related thereto.


Section .	Limitation on Termination or Amendments to Major Project Contracts .

The Company will not cause or consent to or permit, any amendment, modification, extension, termination, cancellation, assignment, replacement, variance or waiver of timely compliance with any terms or conditions of any Major Project Contract; provided, however, that the Company may cause, consent to or permit such an amendment, modification, extension, termination, cancellation, assignment, replacement, variance or waiver upon satisfying certain conditions, including if (a) such amendment, modification, extension, assignment, replacement, variance or waiver is entered into on commercially reasonable, arm's length terms based on then-current market standards and otherwise would not result in a Material Adverse Effect; (b) in the case of any material amendment, modification, extension, assignment, replacement, variance, waiver or material modification of the PPA that adversely affects Project Revenues by more than $1.0 million annually in the aggregate, when aggregated with all previous amendments or modifications in such calendar year, or $5.0 million in the aggregate, when aggregated with all previous amendments or modifications prior to the Maturity Date of the Notes, the Company delivers evidence of a Ratings Reaffirmation (after giving effect to any required Mandatory Redemption); and (c) with respect to a termination or cancellation, such Major Project Contract is replaced with a Replacement Project Contract. After the execution and delivery of any material amendment, modification, extension, assignment, variance or waiver of timely compliance of any terms or conditions of any Major Project Contract, the Company shall (A) promptly furnish the Trustee, the LC Facility Administrative Agent and the Collateral Agent with certified copies of such new Major Project Contracts and (B) within 90 days furnish, any ancillary contract documents applicable to such material amendment, modification, extension, termination, variance or waiver of timely compliance. Notwithstanding the foregoing, the Company may amend or terminate any Option Contract if the changes to all such Option Contracts in the aggregate would not result in a Material Adverse Effect.

The Company will not amend or modify the construction budget and project schedule relating to the Project in any material respect to reallocate any portion of any line item of such construction budget and project schedule, use the contingency line item in such construction budget and project schedule to pay for Project Costs or enter into any change order under the EPC Contract (except as contemplated in such construction budget and project schedule as a separate line item) without the prior consent of the relevant Lenders under the LC Facility (in consultation with the Independent Engineer), except to (1) reallocate or use up to 50% of the contingency line item to pay for such change orders or otherwise pay other Project Costs or (2) apply cost savings from any line of such construction budget and schedule (which cost savings have been confirmed by the Independent Engineer) to the contingency line item of such construction budget and schedule. The Company may also amend the Construction Budget and project schedule (and the Annual Operating Budget) in order to accelerate any block turnover under the EPC Contract provided such acceleration would not result in any material reduction in the projected Debt Service Coverage Ratio for each semi-annual period from those set forth in the Base Case Projections; provided that the Commercial Operation Date under the PPA will be no earlier than August 18, 2014.

Notwithstanding anything to the contrary in the immediately preceding paragraph or any other provisions of the applicable Major Project Contracts, the Company will not extend the scheduled date of final completion of the Project beyond the Outside Completion Date or agree to any change order otherwise permitted under the immediately preceding paragraph that represents a material change in (i) certain milestone dates under the EPC Contract (other than an acceleration thereof as contemplated by and in accordance with the preceding paragraph) or (ii) any liquidated damages payable under the EPC Contract, in each case without the consent of the relevant Lenders under the LC Facility (in consultation with the Independent Engineer).


Section .	Organizational Documents .

The Company will comply with and not amend or modify any of its organizational documents, including the separateness provisions thereof, or permit or suffer to exist any amendment or modification of any of its organizational documents if any such amendment or modification materially and adversely affects any material rights or remedies of any of the parties under any Major Project Contract or Security Documents.


Section .	Fundamental Changes; Asset Dispositions and Acquisitions .

The Company shall not (in one transaction or a series of transactions) 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 or sell, transfer or otherwise dispose of all or substantially all of its assets to any other Person.

The Company shall not purchase or acquire any assets other than: (i) the purchase of assets reasonably required for the development of the Project as contemplated by the Construction Budget; (ii) the purchase of assets in the ordinary course of business as reasonably required in connection with the operation and maintenance of the Project, including maintenance Capital Expenditures; (iii) Capital Expenditures funded solely from voluntary equity contributions to the Company; (iv) purchase of assets reasonably required by applicable law; and (v) Permitted Investments.

The Company shall not sell, transfer, convey, lease or otherwise dispose of any assets material to the operation of the Project other than Permitted Asset Sales.


Section .	Hedging Agreements .

The Company shall not enter into any Hedge Transaction, foreign currency trading or other speculative transactions.


Section .	Investments in Other Persons .

The Company shall not make any investments of funds (whether by purchase of stocks, bonds, notes or other securities, loan, extension of credit, advance or otherwise) in other Persons other than:

(a) Permitted Investments;

(b) Capital Expenditures permitted under Section 4.30 hereof;

(c) investments consisting of extensions of credit in the nature of deposits, prepayments, accounts receivable, notes receivable or other similar accounts arising from the grant of trade credit in the ordinary course of business;

(d) investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors and other credits to suppliers in the ordinary course of business;

(e) investments in the ordinary course of business consisting of UCC Article 3 endorsements for collection or deposit and UCC Article 4 customary trade arrangements with customers consistent with past practices; and

(f) a loan by the Company to the Sponsor that is made in compliance with the conditions to the making of such loan pursuant to Section 3.1(c) of the Depositary Agreement.


Section .	Capital Expenditures .

The Company shall not make any Capital Expenditures other than:

(a) Required Capital Expenditures;

(b) Emergency Capital Expenditures;

(d) the Company will have the right to make, or cause to be made, any modification, alteration, addition or improvement to the Project that it considers necessary or desirable in the proper conduct of its business, without

expense to or the consent of the Trustee, the LC Facility Administrative Agent or the Collateral Agent, referred to herein as “ Discretionary Capital Expenditures ,” which shall not be permitted if such Discretionary Capital Expenditure (i) will decrease by more than a de minimis amount the then current value, residual value, utility (other than with respect to Discretionary Capital Expenditures for pollution control equipment), or remaining useful life of the Project immediately prior to such Discretionary Capital Expenditure, (ii) will cause the Project to become “limited use property” or (iii) could reasonably be expected to have a Material Adverse Effect. In addition, such Discretionary Capital Expenditure shall only be permitted if:

(1) clauses (a), (c), (d), (e), (f), (h) and (i) of the Distribution Conditions are satisfied, applied as if such Discretionary Capital Expenditure were a Restricted Payment;

(2) the funds applied to such Discretionary Capital Expenditure are available from the funds remaining on deposit in the Revenue Account;

(3) the Company provides to the Trustee, the LC Facility Administrative Agent and the Collateral Agent a written confirmation from the Independent Engineer that such Discretionary Capital Expenditure is not reasonably expected to materially reduce or impair the solar resources available to the Company for the purpose of satisfying the obligations of the PPA; and

(4) the Company shall have received all consents and approvals from any Governmental Authority having jurisdiction.


Section .	Subsidiaries .

The Company shall not create or suffer to exist any Subsidiaries.


Section .	Accounts .

The Company shall not open and/or maintain any bank, brokerage or other account other than the Accounts and Local Accounts, except as permitted under this Indenture, provided such accounts are maintained with the Collateral Agent. The Company will take all actions as may be necessary to cause all revenues received by it from the Project (i) to be deposited in the Accounts as and to the extent required in the Depositary Agreement and this Indenture and (ii) to otherwise be applied in the manner specified by the Depositary Agreement and this Indenture.


Section .	Performance of Major Project Contracts .

The Company will perform and observe the covenants and obligations under each Major Project Contract and other Project Contract and diligently exercise and enforce all of its rights and remedies under each Major Project Contract and other Project Contract, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect.


Section .	Exercise of Rights .

To the extent commercially reasonable under the circumstances in accordance with Prudent Operating Practices, the Company will diligently pursue all rights and remedies under any insurance policy or Project Contract with respect to the receipt of Loss Proceeds or other compensation available to the Company upon the occurrence of a Loss Event, including an Event of Taking.


Section .	Consent and Agreement .

On or prior to the Issue Date, the Company shall give or cause to be given written notice of the security interest in all then existing Major Project Contracts (other than the Option Contracts) to the other parties thereto, and shall obtain from each such party a Consent. Concurrently with or promptly after entering into any Replacement Project Contract after the Issue Date, the Company shall give or cause to be given written notice to the counterparty thereto of

the security interest therein granted under the Security Documents and shall obtain from the counterparty under such Replacement Project Contract, and deliver or cause to be delivered to the Trustee, a Consent.


Section .	Replacement Project Contracts .

The Company will not enter into any Replacement Project Contracts if entering into such document (i) would reasonably be expected to result in a Material Adverse Effect, or (ii) would reasonably be expected to result in the breach of, or conflict with the terms of any other Major Project Contract. In addition, the Company shall provide a perfected first priority security interest pursuant to the Security Documents with respect to each such Replacement Project Contract.


Section .	Rating .

The Company shall use commercially reasonable efforts to cause each of the applicable Rating Agencies to continue to provide a rating on the Notes.


Section .	Funding of Equity Contributions .

The Company shall cause the Sponsor to make Equity Contributions as provided under the ECA at such times as required in order for the Company to pay Project Costs on or before the date such Project Costs are payable.


Section .	Loss Event .

If any material Loss Event shall occur with respect to the Project or any part thereof, the Company shall (i) diligently pursue all of its rights to compensation and remedies against all relevant insurers, reinsurers and governmental authorities, as applicable, in respect of such event, (ii) not, without the written consent of the Collateral Agent, which consent shall not be unreasonably withheld, delayed or conditioned, compromise or settle any claim with respect to any Loss Event involving an amount exceeding the threshold agreed in the Depositary Agreement and (iii) pay or apply all Loss Proceeds (as defined in the applicable Financing Documents) stemming from such event in accordance with the Financing Documents.


Section .	Loss Events and Events of Taking .

If:

(1) all or a portion of the Project is destroyed, condemned, seized or expropriated,

(2) the Company receives Loss Proceeds from insurance, indemnification, condemnation or otherwise as a result of such event noted above in excess of an amount equal to $20.0 million, which amounts shall have been deposited into the Loss Proceeds Account pursuant to Section 3.10 of the Depositary Agreement; and

(3) (a) the Company does not submit a Reinvestment Certificate within the later of (i) 90 days of the occurrence of such Loss Event and (ii) 60 days after the Company receives the applicable Loss Proceeds related to such Loss Event (or promptly upon the Company's determination not to undertake any Restoration Work in connection with such Loss Event), (b) the Company fails to submit an acceptable Reinvestment Plan (as approved by the Independent Engineer) within the same time period set forth in clause (a), (c) the Company fails to undertake any Restoration Work to the extent required in accordance with the applicable Reinvestment Plan, (d) the Company fails to complete such Restoration Work within 270 days following the occurrence of such Loss Event (provided that such period may be extended for an additional 180 days in the event the Company is using commercially reasonable efforts to complete such Restoration Work), or (e) upon completion of such Restoration Work, the amount of excess Loss Proceeds not needed for such purpose is greater than $20.0 million; then, within five (5) Business Days thereof, or any other applicable event described in Section 3.10 of the Depositary Agreement pursuant to which Loss Proceeds are to be deposited into the Note Redemption Account pursuant to Section 3.10(b)(ii), (iii), (v) or 3.10(c)(ii) of the Depositary Agreement, the Company will direct in writing (which written direction shall specify the amounts of the following transfers) the

Depositary Agent to transfer (x) the Note Pro Rata Share of such Loss Proceeds or such excess or remaining Loss Proceeds, as applicable, to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such Loss Proceeds or such excess or remaining Loss Proceeds, as applicable, to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of Notes in accordance with the provisions set forth in Section 3.09 hereof and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the Notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, if any, incurred in connection therewith) that may be redeemed or prepaid out of such Loss Proceeds or excess or remaining Loss Proceeds, as the case may be. The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash. If the aggregate principal amount of Notes and outstanding LC Facility Obligations exceeds the amount of Loss Proceeds or excess or remaining Loss Proceeds, as the case may be, the Notes and outstanding LC Facility Obligations will be redeemed or prepaid, as the case may be, on a pro rata basis, based on the amounts required to be prepaid or redeemed (with such adjustments as may be deemed appropriate by the Company so that only Notes in original principal denominations of $100,000, or an integral multiple of $1,000 in excess thereof, will be redeemed).

If (i) any Loss Proceeds remain after consummation of such prepayment or redemption, (ii) the amount of Loss Proceeds received is $20.0 million or less or (iii) the amount of any Loss Proceeds remaining after completion of such Restoration Work is $20.0 million or less, the Company may use those Loss Proceeds for any purpose not otherwise prohibited by this Indenture and the Company shall transfer such amounts to the Construction Account (prior to the Project Account Funding Date) or the Revenue Account (on or after the Project Account Funding Date).


Section .	Title Events .

If a Title Event occurs, the Company will use Title Event Proceeds to pay or reimburse costs and expenses necessary to remedy the applicable Title Event. Upon the completion of the effort to remedy any Title Event, if the amount of any excess Title Event Proceeds not needed for such purpose is in excess of $20.0 million, the Company will, within five (5) Business Days following its delivery to the Trustee and the Collateral Agent of an Officer's Certificate certifying, among other things, the result of the effort to remedy such Title Event, direct in writing (which written direction shall specify the amounts of the following transfers) the Depositary Agent to transfer (x) the Note Pro Rata Share of such excess Title Event Proceeds to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such excess Title Event Proceeds to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of the Notes in accordance with the provisions set forth in Section 3.09 hereof and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be redeemed or prepaid out of such excess Title Event Proceeds. The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash. If the aggregate principal amount of Notes and outstanding LC Facility Obligations exceeds the amount of excess Title Event Proceeds, the Notes and outstanding LC Facility Obligations will be redeemed or prepaid, as the case may be, on a pro rata basis, based on the amounts required to be prepaid or redeemed (with such adjustments as may be deemed appropriate by the Company so that only notes in original principal denominations of $100,000, or an integral multiple of $1,000 in excess thereof, will be redeemed).

If (i) any Title Event Proceeds remain after consummation of such redemption or prepayment or (ii) the amount of any excess Title Event Proceeds is $20.0 million or less, the Company may use those Title Event Proceeds for any purpose not otherwise prohibited by this Indenture and the Company shall transfer such amounts to the Construction Account (prior to the Project Account Funding Date) or the Revenue Account (on or after the Project Account Funding Date).


Section .	Performance Liquidated Damages .

If:

(1) The Company receives any Performance LD Proceeds in excess of $20.0 million; and

(2)(a) the Company does not submit a Reinvestment Certificate within the 60 days after it receives such Performance LD Proceeds (or promptly upon the Company's determination not to undertake any Performance LD Reinvestment Work with such Performance LD Proceeds), (b) the Company fails to submit an acceptable Reinvestment Plan (as approved by the Independent Engineer) within the same time period set forth in clause (a), (c) the Company fails to complete such Performance LD Reinvestment Work within 90 days following the receipt of such Performance LD Proceeds (provided that such period may be extended for an additional 60 days if the Company is using commercially reasonable efforts to complete such Performance LD Reinvestment Work), or (d) upon completion of any Performance LD Reinvestment Work, the amount of excess Performance LD Proceeds not needed for such purpose is greater than $20.0 million;

then, within five (5) Business Days thereof or any other applicable event described in Section 3.11 of the Depositary Agreement pursuant to which Performance LD Proceeds are to be deposited into the Note Redemption Account pursuant to Section 3.11(b)(ii), (iv) or (vi) of the Depositary Agreement, the Company will direct in writing (which written direction shall specify the amounts of the following transfers) the Depositary Agent to transfer (x) the Note Pro Rata Share of such Performance LD Proceeds or such excess or remaining Performance LD Proceeds, as applicable, to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such Performance LD Proceeds or excess or remaining Performance LD Proceeds, as applicable, to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of Notes in accordance with the provisions set forth in Section 3.09 hereof and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the Notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, if any, incurred in connection therewith) that may be redeemed or prepaid out of such Performance LD Proceeds or excess or remaining Performance LD Proceeds, as the case may be. The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash. If the aggregate principal amount of Notes and outstanding LC Facility Obligations exceeds the amount of Performance LD Proceeds or excess or remaining Performance LD Proceeds, as the case may be, the Notes and outstanding LC Facility Obligations will be redeemed or prepaid, as the case may be, on a pro rata basis, based on the amounts required to be prepaid or redeemed (with such adjustments as may be deemed appropriate by the Company so that only Notes in original principal denominations of $100,000, or an integral multiple of $1,000 in excess thereof, will be redeemed).

If (i) any Performance LD Proceeds remain after consummation of such prepayment or redemption, (ii) the amount of Performance LD Proceeds received is $20.0 million or less or (iii) the amount of Performance LD Proceeds remaining upon completion of such Performance LD Reinvestment Work is $20.0 million or less, the Company may use those Performance LD Proceeds for any purpose not otherwise prohibited by this Indenture and the Company may transfer such amounts to the Construction Account (prior to the Project Account Funding Date) or the Revenue Account (on or after the Project Account Funding Date).

Delayed Revenue LD Proceeds (other than Pass-Through Amounts) will be deposited into the Construction Account and shall not be required to be used to redeem the Notes.

Notwithstanding the foregoing, if on the Commercial Operation Date, the Project is capable of generating at least 500MW of electricity, the Company shall not be obligated to make such Mandatory Redemption or prepayment otherwise required pursuant to this Section 4.42 if it instead elects to be subject to the provisions of a Permitted Capacity Reduction , including the mandatory redemption required thereunder.


Section .	Project Contract Termination .

If:

(1) The Company receives any Project Contract Termination Proceeds in excess of $20.0 million; and

(2)(a) the Company does not submit a Reinvestment Certificate within 60 days after it receives such Project Contract Termination Proceeds (or promptly upon the Company's determination not to undertake any Project Contract Replacement Work with such Project Contract Termination Proceeds) or (b) upon completion of such Project Contract Replacement Work, the amount of excess Project Contract Termination Proceeds not needed for such purposes is greater than $20.0 million; then, within five (5) Business Days thereof or any other applicable event described in Section 3.11 of the Depositary Agreement pursuant to which Project Contract Termination Proceeds are deposited into the Note Redemption Account pursuant to Section 3.11(c)(ii) or (iv) of the Depositary Agreement, the Company will direct in writing (which written direction shall specify the amounts of the following transfers) the Depositary Agent to transfer (x) the Note Pro Rata Share of such Project Contract Termination Proceeds or such excess Project Contract Termination Proceeds, as applicable, to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such Project Contract Termination Proceeds or such excess Project Contract Termination Proceeds, as applicable, to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of Notes in accordance with the provisions set forth under Section 3.09 hereof and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the Notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, if any, incurred in connection therewith) that may be prepaid or redeemed out of such Project Contract Termination Proceeds or excess Project Contract Termination Proceeds, as the case may be. The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash. If the aggregate principal amount of Notes and outstanding LC Facility Obligations exceeds the amount of Project Contract Termination Proceeds or excess Project Contract Termination Proceeds, as the case may be, the Notes and outstanding LC Facility Obligations will be redeemed or prepaid, as the case may be, on a pro rata basis, based on the amounts required to be prepaid or redeemed (with such adjustments as may be deemed appropriate by the Company so that only Notes in original principal denominations of $100,000, or an integral multiple of $1,000 in excess thereof, will be purchased).

If (i) any Project Contract Termination Proceeds remain after consummation of such purchase, prepayment or redemption, (ii) the amount of Project Contract Termination Proceeds received is $20.0 million or less or (iii) the amount of Project Contract Termination Proceeds remaining upon completion of such Project Contract Replacement Work is $20.0 million or less, The Company may use those Project Contract Termination Proceeds for any purpose not otherwise prohibited by this Indenture and the Company may transfer such amounts to the Construction Account (prior to the Project Account Funding Date) or the Revenue Account (on or after the Project Account Funding Date).


Section .	Accumulation of Amounts in Distribution Suspense Account .

In the event that, on any Quarterly Date, the conditions for making a Restricted Payment are not satisfied, remaining monies in the Distribution Suspense Account will not, except as indicated in the following sentences, be distributed therefrom until the conditions for making a Restricted Payment are satisfied. If such amounts have been on deposit in the Distribution Suspense Account longer than four consecutive Quarterly Dates and the Company has not been permitted to make a Restricted Payment because the conditions for making such Restricted Payment have not been satisfied, within five Business Days following the fourth consecutive Quarterly Date (subject to extension in accordance with the following sentence), the Company will direct in writing (which written direction shall specify the amounts of the following transfers) the Depositary Agent to transfer (x) the Note Pro Rata Share of such remaining monies to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such remaining monies to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of Notes in accordance with the provisions set forth in Section 3.09 hereto and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be prepaid or redeemed out of such amounts remaining in the Distribution Suspense Account, provided that the Company shall be entitled to request that any such amounts may be applied instead to the payment of Project Costs, operating expenses or other transaction costs, subject to the Collateral Agent's prior written consent, not to be unreasonably withheld. In the event that the sole reason for the failure to satisfy the Distribution Conditions as of such Quarterly

Date is the result of the failure to satisfy the historical Debt Service Coverage Ratio test contemplated in clause (e) of the definition of Distribution Conditions the four consecutive Quarterly Date period specified above may be extended for up to four additional, consecutive Quarterly Dates (“ Extended Quarterly Dates ”), and the funds shall be held in a sub-account in the Distribution Suspense Account so long as all Distribution Conditions are not met on each Extended Quarterly Date. In the event of a failure to meet all Distribution Conditions on any Extended Quarterly Date, all such funds on deposit in such sub-account shall be subject to the Mandatory Redemption and prepayment provisions set forth above in this Section 4.44. On any Extended Quarterly Date on which all Distribution Conditions are met, the funds relating to that Quarterly Date may be released (but not the funds in the aforementioned sub-account, which may only be released after four consecutive Extended Quarterly Dates in which all Distributions Conditions are met). Amounts may otherwise be distributed once the conditions for making a Restricted Payment are satisfied or may otherwise be applied in accordance with the Depositary Agreement.

The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash. If the aggregate principal amount of Notes and outstanding LC Facility Obligations exceeds the amount of such funds on deposit in such sub-account, the Notes and outstanding LC Facility Obligations will be redeemed or prepaid, as the case may be, on a pro rata basis, based on the amounts required to be prepaid or redeemed (with such adjustments as may be deemed appropriate by the Company so that only Notes in original principal denominations of $100,000, or an integral multiple of $1,000 in excess thereof, will be purchased).


Section .	Construction of the Project .

The Company shall use diligent efforts to construct and complete or cause to be constructed or completed, the Project in accordance with Prudent Industry Practices, the Construction Budget, the terms and conditions of the EPC Contract and the other Major Project Contracts, applicable Governmental rules and Necessary Project Permits.


Section .	Payments for Consent .

The Company will not, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the applicable time frame set forth in the solicitation documents relating to such consent, waiver or agreement.


Section .	Further Assurances .

The Company will, at its own cost and expense, execute and deliver to the Trustee all such documents, instruments and agreements and do all such other acts and things as may be reasonably required, or as may be reasonably requested by the Trustee or the Collateral Agent, to enable the Trustee or the Collateral Agent, as applicable to exercise and enforce its rights in connection with the Collateral provided for in the Security Documents and this Indenture, and take such other actions as reasonably may be necessary to carry out the intent of this Indenture.


Section .	Energy Regulatory Status .

(a) Prior to the Company's first sale of electric energy (including test energy) generated by the Project (the “ MBR Authority Satisfaction Date ”), the Company shall obtain and deliver to the Trustee an order from FERC granting the Company MBR Authority. At all times after the MBR Authority Satisfaction Date, the Company shall take or cause to be taken all necessary actions so that the Company (A) will be in material compliance with the requirements of the Federal Power Act, and (B) has made all necessary filings to remain in material compliance with its MBR Authority.

(b) Prior to the Company's first sale of electric energy (including test energy) generated by the Project, the Company's EWG status under PUHCA shall have become effective by operation of FERC's regulations. After its application being granted by the FERC, the Company shall deliver to the Trustee a letter from the Company indicating

that the Company's EWG status has been granted, and a copy of any additional issuances from FERC concerning the Company's EWG status, including FERC's Notice of Effectiveness of the Company's EWG status. At all times after the Company files with FERC a notice of self-certification of its EWG status, the Company shall take or cause to be taken all necessary actions and make all necessary filings so that the Company maintains its status as an EWG under PUHCA, except where any such failure shall not be reasonably expected to result in a Material Adverse Effect. For purposes of this provision references to sections of or rules under PUHCA regarding EWG status will be deemed to include substitute, replacement or successor sections of or to PUHCA or regulations under PUHCA adopted from time to time.

(c) The Company shall take or cause to be taken all necessary efforts to maintain its exemption from financial, organizational or rate regulation as a public utility under the laws of the State of California as presently constituted and as construed by the courts of California.


Section .	Land Transfer .

The Company shall deliver or cause to be delivered to the Trustee evidence that the close of escrow transferring land pursuant to that certain Land Transfer Agreement, dated April 15, 2011, as amended by the First Amendment, dated September 30, 2011, between the Company and PG&E, has occurred.


Section .	Fiscal Year, Name, Location and EIN .

The Company shall not change (a) its fiscal year, name or federal employer identification number or (b) its jurisdiction of organization, its organization identification number or the location of its principal place of business, in the case of either (a) or (b) without at least 10 days' prior written notice to the Trustee and the Collateral Agent.


Section .	Hazardous Materials .

The Company shall not use or Release any Hazardous Materials in violation of any Environmental Laws, other Legal Requirements or applicable Necessary Project Permits or in a manner that could reasonably be expected to subject the Secured Parties to liability or result in a Material Adverse Effect. In the event of any such Release, the Company shall conduct and complete any investigation, study, sampling and testing, and undertake any corrective, cleanup, removal, response, remedial or other action necessary to identify, report, remove and remediate all such Hazardous Materials Released at, on, in, under or from the Project or applicable Real Property, to the extent required by and in accordance in all respects with the requirements of all Environmental Laws.

ARTICLE 5

[RESERVED]

ARTICLE 6

DEFAULTS AND REMEDIES

Section . Events of Default .

Each of the following is an “ Event of Default ”:

(a) the Company fails to pay interest on any Note in accordance with the terms of this Indenture within five days after the same becomes due and payable;

(b) the Company fails to pay any principal or premium, if any, on any Note after the same becomes due and payable, whether by scheduled maturity, redemption, acceleration or otherwise, or the Company fails to offer to redeem or purchase the Notes when required to do so pursuant to Sections 3.09, 3.10, 3.11, 4.15, 4.40, 4.41, 4.42, 4.43 or 4.44 hereof;

(c) the Company fails to perform or observe any of the other covenants under this Indenture or any Security Document (other than, in the case of any Security Document, covenants, the breach of which would not reasonably be expected to result in a Material Adverse Effect) and not otherwise specifically provided for elsewhere under this Section 6.01 and does not cure such failure within 30 days after the earlier of its receipt of notice by the Trustee or the Holders of at least 25% of aggregate principal amount of the Notes then outstanding as a single class and its Actual Knowledge thereof; provided that such grace period may be extended to 90 days if the Company is taking action reasonably likely to cure such failure to perform;

(d) the Company is involved in a Bankruptcy Event;

(e) the Company shall (a) default in the payment of any principal, interest or other amount when due and the expiration of any applicable grace period, whether by acceleration or otherwise, in respect of any Obligations under the LC Facility or the Replacement LC Facility in principal amount of $10.0 million or more or (b) default in the performance or observance of any obligation or condition with respect to any other Indebtedness in an aggregate principal amount of $25.0 million or more and the effect of such default is to cause the acceleration of such amounts prior to scheduled maturity;

(f) a final judgment or judgments for the payment of money exceeding $25.0 million in the aggregate that are not covered by available insurance as acknowledged in writing by the provider of such insurance or as certified to the Trustee by an insurance consultant shall be entered against the Company by one or more courts, administrative tribunals or other bodies having jurisdiction over us and the same is not paid, discharged or stayed, or for which no bond is posted, for a period of 90 consecutive days after its entry;

(g) the occurrence of an Event of Abandonment continues for more than 30 consecutive days;

(h) subject to clause (i) below, an event of default shall have occurred under any Material Project Contract other than the PPA that could reasonably be expected to have a Material Adverse Effect and such event of default shall continue unremedied for a period equal to 60 days; provided, however, that (a) if (i) such event of default cannot be cured with such 60-day period, (ii) such event of default is reasonably susceptible of cure within 120 days from such event of default, (iii) the defaulting party is proceeding with all requisite diligence and in good faith to cure such failure, (iv) such breach or default is the subject of a good faith dispute between the parties (and such parties are utilizing the appropriate dispute resolution procedures set forth in such Major Project Contract) and (v) an extension of such 60-day cure could not reasonably be expected to have a Material Adverse Effect, then the time within which such failure may be cured shall be extended to such date, not to exceed 90 days after the end of the initial 60-day period (for a total of 150 days), as shall be necessary for such party diligently to cure such failure; provided further, however, that notwithstanding the foregoing, the Company may replace a Material Project Contract other than the PPA with a Replacement Project Contract within 120 days;

(i) (A) notwithstanding clause (h) above, any Major Project Contract other than the PPA shall terminate or otherwise cease to be valid and binding on any party thereto (except upon expiration in accordance with its terms or full performance by such party of its obligations thereunder and other than a termination of one or more LGIAs or the termination of the EPC Contract in connection with which the Company shall have complied with the provisions of Section 3.10 hereof) unless (i) the Company replaces such Major Project Contract with a Replacement Project Contract within 120 days after such termination or cessation and (ii) the Company shall have fully satisfied all of its obligations arising out of such termination or cessation within such 120-day period or (B) any Permit necessary to operate the Project substantially in accordance with the Project Contracts has been revoked or withdrawn where such revocation or withdrawal would reasonably be expected to have a Material Adverse Effect and no replacement Permit has been obtained within 60 days of such revocation or withdrawal; provided that if such replacement Permit cannot be obtained within such 60-day period then the time within which such replacement Permit may be obtained shall be extended to such date, not to exceed 30 days after the end of the initial 60-day period (for a total of 90 days) as long as diligent efforts are undertaken to obtain such replacement Permit;

(j) subject to clause (k) below, an event of default shall have occurred under the PPA that could reasonably

be expected to have a Material Adverse Effect and such event of default shall continue unremedied for a period equal to 30 days; provided, however, that (a) if (i) such event of default cannot be cured with such 30-day period, (ii) such event of default is reasonably susceptible of cure within 90 days from such event of default, (iii) the defaulting party is proceeding with all requisite diligence and in good faith to cure such failure, (iv) such breach or default is the subject of a good faith dispute between the parties (and such parties are utilizing the appropriate dispute resolution procedures set forth in the PPA) and (v) an extension of such 30-day cure could not reasonably be expected to have a Material Adverse Effect, then the time within which such failure may be cured shall be extended to such date, not to exceed 60 days after the end of the initial 30-day period (for a total of 90 days), as shall be necessary for such party diligently to cure such failure; provided further, however, that notwithstanding the foregoing, the Company may replace the PPA with a Replacement Project Contract within 90 days;

(k) notwithstanding clause (j) above, the PPA shall terminate or otherwise cease to be valid and binding on any party thereto (except upon expiration in accordance with its terms or full performance by such party of its obligations thereunder) unless (i) the Company replaces the PPA with a Replacement Project Contract within 90 days after such termination or cessation and (ii) the Company shall have fully satisfied all of its obligations arising out of such termination or cessation within such 90-day period;

(l) the Lien contained in this Indenture or any of the Security Documents ceases to be effective to grant a perfected Lien to the Collateral Agent on any material portion of the Collateral described therein with the priority purported to be created thereby and such effectiveness and perfection priority is not reinstated or the Company has not posted cash collateral to the Collateral Agent equal to the replacement value thereof, in each case within 30 days after the time of discovery thereof by the Company, except to the extent that any such loss of effectiveness results from the failure of the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Security Documents;

(m) this Indenture, the Intercreditor Agreement, the Consents, the Pledge Agreement, the Security Agreement, the Depositary Agreement, the Deed of Trust, the ECA or any other material Security Document is declared unenforceable by a Governmental Authority having jurisdiction over any party thereto or the subject matter thereof;

(n) if, at any time following delivery by the Company of an ERISA Notice, (i) any Plan fails to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under Section 412 of the Code, (ii) a notice of intent to terminate any Plan is or is reasonably expected to be filed with the PBGC or the PBGC institutes proceedings under Section 4042 of ERISA to terminate or appoint a trustee to administer any Plan or the PBGC notifies the Company that a Plan may become a subject of any such proceedings, (iii) the aggregate “amount of unfunded benefit liabilities” (within the meaning of Section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, exceeds $10.0 million, (iv) the Company incurs or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company withdraws from any Multiemployer Plan in a complete withdrawal or a partial withdrawal, or (vi) the Company establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect;

(o) (i) failure by the Sponsor to contribute the Equity Contribution Amount when due and such failure continues for five Business Days or (ii) the Sponsor fails to provide credit support for the obligations under the Equity Contribution Agreement, if required, and such failure continues for 30 days; and

(p) failure to complete construction of generation capacity of at least 500 MW on or before the Outside Completion Date (as defined in the PPA).

Section . Acceleration .

If an Event of Default shall have occurred and be continuing, the Trustee will within five Business Days of

receiving written notice thereof, notify the Holders. The Holders of at least 25% in aggregate principal amount of the outstanding Notes may require the Trustee to accelerate the maturity of all the Notes and exercise all other available remedies.

Notwithstanding the preceding paragraph, upon the occurrence of an Event of Default referred to in Section 6.01(d) hereof all of the principal of and accrued interest on all of the Notes shall become immediately due and payable without any demand or other action by the Trustee or the Holders.

After any such acceleration, but before any sale of all or part of the Collateral, the Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may, on behalf of all of the Holders, rescind an acceleration and its consequences hereunder, if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal of, premium on, if any, or interest, if any, on the Notes that has become due solely because of the acceleration) have been cured or waived.


Section .	Other Remedies .

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of, premium on, if any, or interest, if any, on, the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder 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 .	Waiver of Past Defaults .

The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may, on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under this Indenture, except a continuing Default or Event of Default in the payment of principal of, premium on, if any, or interest, if any, on, the Notes. 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, except as expressly provided therein, no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.


Section .	Control by Majority .

Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it, subject to certain exceptions, including the limitation set forth in the Intercreditor Agreement. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders or that may involve the Trustee in personal liability.


Section .	Limitation on Suits .

No Holder of any Note will have any right to institute any proceeding for a remedy under this Indenture unless (i) such Holder has previously given to the Trustee written notice of the occurrence of an Event of Default, (ii) the Holders of at least 25% in aggregate principal amount of the outstanding notes have made written request to the trustee to institute such proceeding, (iii) the Noteholders have offered to the Trustee security and indemnity satisfactory to the Trustee against costs and liabilities associated with such proceeding, (iv)the Trustee has failed to institute such proceeding within 60 days after the receipt of such notice and (v) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority of the outstanding principal amount of the Notes.

A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority

over another Holder.


Section .	Rights of Holders to Receive Payment .

Notwithstanding any other provision of this Indenture, the right of any Holder, which is absolute and unconditional, to receive payment of the principal of, Make Whole Amounts, if any, and interest, if any, on its Notes, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to institute suit for the enforcement of any such payment on or after such respective dates, or the Company's obligation, which is also absolute and unconditional, to pay the principal of, Make-Whole Amounts, if any, and interest on each of the Notes to the respective Holders at the time and place set forth in the Notes, shall not be impaired or affected without the consent of such Holder.


Section .	Collection Suit by Trustee .

If an Event of Default specified in Section 6.01(a) or (b) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium on, if any, and interest, if any, remaining unpaid on, the Notes and interest on overdue principal and, to the extent lawful, interest 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 .	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 allowed in any judicial proceedings relative to the Company (or any other obligor upon the 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 7.07 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 7.07 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 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 .	Priorities .

Subject to the Intercreditor Agreement, if the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:

First : to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all applicable compensation, expenses and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection;

Second : to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest, if any, respectively; and

Third : to the Company or to such party as a court of competent jurisdiction shall direct.

The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10 and shall notify the Company of such record date.


Section .	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 6.11 does not apply to a suit by the Trustee.

ARTICLE 7

TRUSTEE

Section . Duties of Trustee .

(a) If an Event of Default has occurred and is continuing, the Trustee will 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 person would exercise or use under the circumstances in the conduct of such person's own affairs.

(b) Except during the continuance of an Event of Default:

(1) the duties of the Trustee will 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

(2) 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 will examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01;

(2) the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

(3) the Trustee will 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 7.01.

(e) No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability.

(f) The Trustee will not be liable for interest on any money received by it except as the Trustee may agree

in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

Section . Rights of Trustee .

(a) The Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting in so relying, 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, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine in good faith to make such further inquiry or investigation, it shall be entitled upon reasonable notice during normal business hours to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and the Trustee shall incur no liability of any kind by reason of such inquiry or investigation.

(b) Before the Trustee acts or refrains from acting, it may require an Officer's Certificate or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on such Officer's Certificate or Opinion of Counsel. The Trustee may consult with counsel of its own selection and the advice of such counsel or any Opinion of Counsel will 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 and agents and will not be responsible for the misconduct or negligence of any attorney or agent appointed with due care.

(d) The Trustee will 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 Company will be sufficient if signed by an Officer of the Company.

(f) None of the provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if an indemnity or security reasonably satisfactory to it against such risk or liability is not assured or provide to it.

(g) The Trustee shall not be deemed to have notice or knowledge of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the existence of a Default or Event of Default, the Notes and this Indenture.

(h) In no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(i) The Trustee may request that the Company deliver an Officer's Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officer's Certificate may be signed by any person authorized to sign an Officer's Certificate, including any Person specified as so authorized in any such certificate previously delivered and not superseded.

(j) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

(k) Any request or direction of the Company mentioned herein shall, at the Trustee's request, be sufficiently evidenced by a Company request or Company order and any resolution of the Board of Managers of the Company shall be sufficiently evidenced by a resolution of the Board of Managers.

(l) The permissive right of the Trustee to take the actions permitted by this Indenture shall not be construed as an obligation or duty to do so.

(m) 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 pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

(n) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

Section . Individual Rights of Trustee .

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company 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, or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.


Section .	Trustee's Disclaimer .

The Trustee will not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Notes, the Security Documents or the Intercreditor Agreement, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it will not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.


Section .	Notice of Defaults .

If a Default or Event of Default occurs and is continuing and if it is actually known to the Trustee, the Trustee will mail to the Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of an Event of Default specified in clause (a) or (b) of Section 6.01, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders. Other than with respect to the receipt of the Officer's Certificate pursuant to Section 4.04(a), the Trustee shall have no duty to inquire as to the performance of the covenants of the Company in Article 4. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except: (i) any Event of Default occurring pursuant to Sections 6.01(a) or 6.01(b) (provided it is acting as Paying Agent); and (ii) any Default or Event of Default of which a Responsible Officer of the Trustee shall have received written notification or of which a Responsible Officer of the Trustee has actual knowledge. Delivery of reports, information and documents to the Trustee under Section 4.03 is for informational purposes only and the Trustee's receipt of the foregoing shall not constitute constructive or actual notice of any information contained therein or determinable from information contained therein, including the Issuer's compliance with any of their covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer's Certificates).


Section .	Reports by Trustee to Holders .

Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee will mail to the Holders a brief report dated as of such reporting date that complies with TIA §313(a) (but if no event described in TIA §313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also will comply with TIA §313(b)(2). The Trustee will also transmit by mail all reports as required by TIA §313(c). To the extent that this Indenture is required to be qualified

under the Trust Indenture Act in connection with an issuance of Additional Notes in a registered offering or otherwise, the Trustee shall also comply with Section 313(d). The Company shall promptly notify the Trustee in writing in the event the Notes are listed on any national securities exchange or delisted therefrom. A copy of each report at the time of its mailing to the Holders will be delivered by the Trustee to the Company.


Section .	Compensation and Indemnity .

(a) The Company will pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder as the parties shall agree in writing from time to time. The Trustee's compensation will not be limited by any law on compensation of a trustee of an express trust. The Company will reimburse the Trustee promptly upon request for all reasonable documented disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses will include the reasonable compensation, disbursements and expenses of the Trustee's agents and outside counsel.

(b) The Company will indemnify the Trustee, including its officers, directors, employees and agents, for, and hold each of the Trustee, including its officers, directors, employees and agents, and any predecessor, harmless against any and all damages, losses, liabilities, claims or expenses (including reasonable attorneys' fees and expenses) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture and the Notes against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company, any Holder or any other Person) or liability in connection with the exercise, failure or refusal to exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense is determined by a court of competent jurisdiction to have been caused by its own negligence or willful misconduct. The Trustee will notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company will not relieve the Company of its obligations hereunder. The Company will defend the claim and the Trustee will cooperate in the defense. The Trustee may have separate counsel of its selection and the Company will pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent will not be unreasonably withheld.

(c) The obligations of the Company under this Section 7.07 will survive the satisfaction and discharge of this Indenture.

(d) To secure the payment obligations in this Section 7.07, the Trustee will have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal of, premium on, if any, or interest, if any, on, particular Notes. Such Lien will survive the satisfaction and discharge of this Indenture.

(e) Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(d) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

Section . Replacement of Trustee .

(a) A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08.

(b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in aggregate principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:

(1) the Trustee fails to comply with Section 7.10 hereof;

(2) 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;

(3) a custodian or public officer takes charge of the Trustee or its property; or

(4) 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 Company will promptly appoint a successor Trustee.

(d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the expense of the Company), the Company, or the Holders of at least 10% in aggregate principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

(f) A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee will mail a notice of its succession to Holders. The retiring Trustee will 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 such transfer shall be subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof will continue for the benefit of the retiring Trustee.

Section . 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 will be the successor Trustee.


Section .	Eligibility; Disqualification .

There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100.0 million as set forth in its most recent published annual report of condition.

ARTICLE 8

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section . Option to Effect Legal Defeasance or Covenant Defeasance .

The Company may at any time, at the option of its Board of Managers evidenced by a resolution set forth in an Officer's Certificate, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.


Section .	Legal Defeasance and Discharge .

Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, “ Legal Defeasance ”). For this purpose, Legal Defeasance means that the Company will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which will thereafter be

deemed to be “outstanding” only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same, including the release of the Collateral), except for the following provisions which will survive until otherwise terminated or discharged hereunder:

(1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, Make-Whole Amounts, if any, or interest, if any, on, such Notes when such payments are due from the trust referred to in Section 8.04 hereof;

(2) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof;

(3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith; and

(4) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.


Section .	Covenant Defeasance .

Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of its obligations under the covenants contained in Sections 4.03(a)(4)-(8), Section 4.03(b), Section 4.04 and Sections 4.07 through 4.51 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, “ Covenant Defeasance ”), and the Notes will 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 will continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes will not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and will 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 will not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes will be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(a), (b), (c), (e), (f), (g), (h), (i), (j), (k), (l), (m), (n), (o) and (p) hereof will not constitute Events of Default.


Section .	Conditions to Legal or Covenant Defeasance .

In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof:

(1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, premium on, if any, and interest, if any, on, the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to such stated date for payment or to a particular redemption date;

(2) in the case of Legal Defeasance, the Company must deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of this Indenture, 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 will confirm that, the Holders of the outstanding 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;

(3) in the case of Covenant Defeasance, the Company must deliver to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding 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;

(4) no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit (and any similar concurrent deposit relating to other Indebtedness), and the granting of Liens to secure such borrowings);

(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture and the agreements governing any other Indebtedness being defeased, discharged or replaced) to which the Company is a party or by which the Company is bound;

(6) the Company must deliver to the Trustee an Officer's Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and

(7) the Company must deliver to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Section . Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions .

Subject to Section 8.06 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 8.05, the “ Trustee ”) pursuant to Section 8.04 hereof in respect of the outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, if any, but such money need not be segregated from other funds except to the extent required by law.

The Company will 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 8.04 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 Notes.

Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) 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 .	Repayment to Company .

Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium on, if any, or interest, if any, on, any Note and remaining unclaimed for two years after such principal, premium, if any, or interest, if any, has become due and payable shall be paid to the Company on its request or (if then held by the Company) will be discharged from such trust; and the Holder of such Note will

thereafter be permitted to look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, will 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 Company 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 will not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company.


Section .	Reinstatement .

If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 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 Company's obligations under this Indenture and the Notes will be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however , that, if the Company makes any payment of principal of, premium on, if any, or interest, if any, on, any Note following the reinstatement of its obligations, the Company will be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.

ARTICLE 9

AMENDMENT, SUPPLEMENT AND WAIVER

Section . Without Consent of Holders .

Notwithstanding Section 9.02 of this Indenture, without the consent of any Holder, the Company and the Trustee may amend or supplement this Indenture or the Notes:

(1) to cure any ambiguity, defect or inconsistency;

(2) to provide for uncertificated Notes in addition to or in place of certificated Notes;

(3) to provide for the assumption of the Company's obligations to the Holders in the case of merger or consolidation or sale of all or substantially all of the Company's assets to the extent permitted pursuant to this Indenture;

(4) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights hereunder of any Holder;

(5) to conform the text of this Indenture, the Notes or the Security Documents to any provision of the “Description of Notes” section of the Offering Memorandum to the extent that such provision in this Description of the Notes was intended to be a verbatim recitation of a provision of this Indenture, the Notes or the Security Documents, which intent may be evidenced by an Officer's Certificate to that effect;

(6) to enter into additional or supplemental Security Documents;

(7) to release Collateral in accordance with the terms of this Indenture and the Security Documents;

(8) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date hereof; or

(9) to evidence the succession of a new Trustee hereunder.

Upon the request of the Company accompanied by a resolution of its Board of Managers authorizing the

execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 12.04 hereof, the Trustee will join with the Company in the execution of any amended or supplemental indenture 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 will not be obligated to enter into such amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise.


Section .	With Consent of Holders .

Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including, without limitation, Section 4.15 hereof) and the Notes with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including, without limitation, Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium on, if any, or interest, if any, on, the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes (including, without limitation, Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes).

Upon the request of the Company accompanied by a resolution of its Board of Managers 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 as aforesaid, and upon receipt by the Trustee of the documents described in Section 12.04 hereof, the Trustee will join with the Company in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but will not be obligated to, enter into such amended or supplemental Indenture.

It is not necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it is sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company will mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment, supplement or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):

(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes (except Section 4.15 hereof);

(3) reduce the rate of or change the time for payment of interest, including default interest, on any note;

(4) waive a Default or Event of Default in the payment of principal of, premium on, if any, or interest, if any, on, the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration);

(5) make any Note payable in money other than that stated in the Notes;

(6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of holders of Notes to receive payments of principal of, premium on, if any, or interest, if any, on, the Notes;

(7) waive a redemption payment with respect to any Note (other than a payment required pursuant to Section 4.15 hereof);

(8) release all or substantially all of the Collateral from the Liens created by the Security Documents, except as specifically provided in this Indenture and the Security Documents; and

(9) make any change in the preceding amendment and waiver provisions.

Section . [Reserved] .


Section .	Revocation and Effect of Consents .

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.


Section .	Notation on or Exchange of Notes .

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.

Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver.


Section .	Trustee to Sign Amendments, etc.

The Trustee will sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amended or supplemental indenture until the Board of Managers of the Company approves it. In executing any amended or supplemental indenture, the Trustee will be provided with and (subject to Section 7.01 hereof) will be fully protected in relying upon, in addition to the documents required by Section 12.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture.

ARTICLE 10

COLLATERAL AND SECURITY

Section . Security Documents .

The due and punctual payment of the principal of, Make Whole Amounts, if any, premium on, if any, and interest, if any, on, the Notes when and as the same shall be due and payable, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on the overdue principal of, premium on, if any, and interest, if any (to the extent permitted by law), on the Notes and performance of all other obligations of the Company to the Holders or the Trustee under this Indenture and the Notes, according to the terms hereunder or thereunder,

are secured as provided in the Security Documents which the Company has entered into simultaneously with the execution of this Indenture. Each Holder, by its acceptance hereof, consents and agrees to the terms of the Security Documents (including, without limitation, the provisions providing for foreclosure and release of Collateral (as defined in the Security Documents)) as the same may be in effect or may be amended from time to time in accordance with its terms and authorizes and directs the Collateral Agent to enter into the Security Documents and to perform its obligations and exercise its rights thereunder in accordance therewith. The Company will do or cause to be done all such acts and things as may be reasonably necessary or proper, or as may be required by the provisions of the Security Documents, to assure and confirm to the Trustee and the Collateral Agent the security interest in the Collateral contemplated hereby, by the Security Documents or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Notes secured hereby, according to the intent and purposes herein expressed. The Company will take upon request of the Trustee, any and all actions reasonably required to cause the Security Documents to create and maintain, as security for the Obligations of the Company hereunder, a valid and enforceable perfected first priority Lien in and on all the Collateral, in favor of the Collateral Agent for the benefit of the Holders, superior to and prior to the rights of all third Persons and subject to no other Liens, in each case, other than Permitted Liens.

In the event of any conflict between the provisions set forth in this Indenture or any Security Document and those set forth in the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall supersede and control the terms and provisions of this Indenture or any such other Security Document.

The Collateral Agent is hereby appointed by the Company to be the agent for and representative of the Trustee for the benefit of the Holders with respect to the Security Documents, and each of the Holders hereby authorizes and directs each of the Trustee and the Collateral Agent to execute, deliver and perform each of the Security Documents to which the Trustee or the Collateral Agent, as the case may be, is or is intended to be a party, and each Holder agrees to be bound by all of the agreements of the Trustee and the Collateral Agent contained in the Security Documents. The Collateral Agent is further authorized and directed by the Holders to, and shall, enter into one or more joinder agreements under the Intercreditor Agreement and/or the Depositary Agreement, in any case, pursuant to the terms thereof.


Section .	Recording and Opinions .

(a) The Company will furnish to the Trustee simultaneous with the execution and delivery of this Indenture an Opinion of Counsel either:

(1) stating that, in the opinion of such counsel, all action has been taken with respect to the recording, registering and filing of this Indenture, financing statements or other instruments necessary to make effective the Lien intended to be created by the Security Documents, and reciting with respect to the security interests in the Collateral owned by the Company on the date hereof, the details of such action; or

(2) stating that, in the opinion of such counsel, no such action is necessary to make such Lien effective.

Section . Release of Collateral .

(a) Subject to subsections (b), (c), (d) and (e) of this Section 10.03 and subject to the Intercreditor Agreement, Collateral may be released from the Lien and security interest created by the Security Documents at any time or from time to time in accordance with the provisions of the Security Documents or as provided hereby. In addition, upon the request of the Company pursuant to an Officer's Certificate certifying that all conditions precedent hereunder have been met and (at the sole cost and expense of the Company) the Collateral Agent will release Collateral that is sold, conveyed or disposed of in compliance with the provisions of this Indenture. Upon receipt of such Officer's Certificate the Collateral Agent shall execute, deliver or acknowledge any necessary or proper instruments of termination, satisfaction or release to evidence the release of any Collateral permitted to be released pursuant to this Indenture or the Security Documents.

(b) The Collateral Agent's Liens upon the Collateral will no longer secure the Notes outstanding under this

Indenture or any other Obligations under this Indenture, and the right of the Holders to the benefits and proceeds of the Collateral Agent's Liens on the Collateral will automatically terminate and be unconditionally discharged:

(1) upon satisfaction and discharge of this Indenture pursuant to Article 11 hereof;

(2) upon a defeasance of the Notes pursuant to Article 8 hereof;

(3) upon payment in full and discharge of all Notes outstanding under this Indenture and all Obligations that are outstanding, due and payable under this Indenture at the time the Notes are paid in full and discharged;

(4) in whole or in part, with the consent of the Holders of the requisite percentage of Notes in accordance with Article 9 hereof; or

(5) if any of the Collateral shall be sold or disposed of to any Person in a transaction (i) permitted under the Financing Documents or (ii) consented to pursuant to the Financing Documents, in each case, subject to the Intercreditor Agreement.

(c) No Collateral may be released from the Lien and security interest created by the Security Documents pursuant to the provisions of the Security Documents unless the certificate required by this Section 10.03 has been delivered to the Collateral Agent.

(d) At any time when a Default or Event of Default has occurred and is continuing and the maturity of the Notes has been accelerated (whether by declaration or otherwise) and the Trustee has delivered a notice of acceleration to the Collateral Agent, no release of Collateral pursuant to the provisions of the Security Documents will be effective as against the Holders, other than upon payment in full and discharge of all Notes outstanding under this Indenture.

(e) The release of any Collateral from the terms of this Indenture and the Security Documents will not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Collateral is released pursuant to the terms of the Security Documents.

Section . Opinion of Counsel .

The Company, will furnish to the Trustee and the Collateral Agent, prior to each proposed release of Collateral pursuant to the Security Documents an Opinion of Counsel, which may be rendered by internal counsel to the Company, to the effect that such Collateral may be released in accordance with this Indenture and the Security Documents.

The Trustee shall, to the extent permitted by Sections 7.01 and 7.02 hereof, accept as conclusive evidence of compliance with the foregoing provisions the appropriate statements contained in such documents and such Opinion of Counsel.


Section .	Certificates of the Trustee .

In the event that the Company wishes to release Collateral in accordance with the Security Documents and has delivered the certificates and documents required by the Security Documents and Sections 10.03 and 10.04 hereof, the Trustee, based on the Opinion of Counsel delivered pursuant to Section 10.04 hereof, will deliver a certificate to the Collateral Agent setting forth its determination that the applicable Collateral may be so released.


Section .	Authorization of Actions to Be Taken by the Trustee Under the Security Documents .

Subject to the provisions of Section 7.01 and 7.02 hereof, the Trustee may, in its sole discretion and without the consent of the Holders, direct, on behalf of the Holders, the Collateral Agent to, take all actions it deems necessary or appropriate in order to:

(1) enforce any of the terms of the Security Documents; and


(2)	collect and receive any and all amounts payable in respect of the Obligations of the Company hereunder.

The Trustee will have power to institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts that may be unlawful or in violation of the Security Documents or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Holders or of the Trustee).


Section .	Authorization of Receipt of Funds by the Trustee Under the Security Documents .

The Trustee is authorized to receive any funds for the benefit of the Holders distributed under the Security Documents, and to make further distributions of such funds to the Holders according to the provisions of this Indenture.


Section .	Termination of Security Interest .

Upon the full and final payment and performance of all Obligations of the Company under this Indenture, the Notes and the Security Documents or upon Legal Defeasance, Covenant Defeasance or satisfaction and discharge of this Indenture in accordance with Article 11 hereof, the Trustee will at the request of the Company deliver a certificate to the Collateral Agent stating that such Obligations have been paid in full, and instruct the Collateral Agent to release the Liens pursuant to this Indenture and the Security Documents.

ARTICLE 11

SATIFSFACTION AND DISCHARGE

Section . Satisfaction and Discharge .

This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when:

(1) either:

(a) all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has been deposited in trust and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or

(b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Company has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Notes not delivered to the Trustee for cancellation for principal of, premium on, if any, and interest, if any, on, the Notes to the date of maturity or redemption;

(2) in respect of clause 1(b), no Default or Event of Default has occurred and is continuing on the date of the deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit and any similar deposit relating to other Indebtedness and, in each case, the granting of Liens to secure such borrowings) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which the Company is bound (other than with respect to the borrowing of funds to be applied concurrently to make the deposit required to effect such

satisfaction and discharge and any similar concurrent deposit relating to other Indebtedness, and in each case the granting of Liens to secure such borrowings);

(3) the Company has paid or caused to be paid all sums payable by it under this Indenture; and

(4) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or on the redemption date, as the case may be.

Notwithstanding the foregoing, in the event that an Event of Default has occurred and is continuing and the Company has paid all Notes delivered to the Trustee for payment, this Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder and not so delivered to the Trustee for payment, when the Company has deposited with the Trustee cash in a sufficient amount to redeem all such outstanding Notes in accordance with their terms together with proof that notice of redemption has been given or waived or with an irrevocable order from the Company directing the Trustee to give such notice.

In addition, the Company must deliver an Officer's Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to clause (2) of this Section 11.01, the provisions of Sections 11.02 and 8.06 hereof will survive. In addition, nothing in this Section 11.01 will be deemed to discharge those provisions of Section 7.07 hereof, that, by their terms, survive the satisfaction and discharge of this Indenture.


Section .	Application of Trust Money .

Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 11.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal, premium, if any, and interest, if any, for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.

If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 11.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 11.01 hereof; provided that if the Company has made any payment of principal of, premium on, if any, or interest, if any, on, any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent.

ARTICLE 1

MISCELLANEOUS

Section . [Reserved] .


Section .	Notices .

Any notice or communication by the Company or the Trustee to the other is duly given if in writing and delivered in Person or by first class mail (registered or certified, return receipt requested), facsimile transmission or overnight air courier guaranteeing next day delivery, to the other's address:

If to the Company:

Topaz Solar Farms LLC

10400 Helios Way

Santa Margarita, CA 93453

Facsimile No.: (515) 242-3084

Attention: General Counsel

With a copy to:

Gibson, Dunn & Crutcher LLP

200 Park Avenue

New York, NY

Facsimile No.: (212) 351-6215

Attention: Peter J. Hanlon

If to the Trustee:

The Bank of New York Mellon Trust Company

2 North LaSalle Street, Suite 1020

Chicago, IL 60602

Facsimile No.: (312) 827-8542

Attention: Corporate Trust Administration

The Company or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications.

The Trustee agrees to accept and act upon instructions or directions pursuant to this Indenture sent by unsecured e-mail, pdf, facsimile transmission or other similar unsecured electronic methods, provided, however, that the Trustee shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the Company elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustee's understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction received after such reliance and/or compliance. The Company agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties.

All notices and communications (other than those sent to Holders) will 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 receipt acknowledged, if transmitted by facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

Any notice or communication to a Holder will be mailed by first class mail, certified or registered, return receipt requested, or by overnight courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it will 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 Company mails a notice or communication to Holders, it will mail a copy to the Trustee and each Agent at the same time.


Section .	[Reserved] .


Section .	Certificate and Opinion as to Conditions Precedent .

Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

(1) an Officer's Certificate in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 12.05 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

(2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.

Section . Statements Required in Certificate or Opinion .

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture and must include:

(1) a statement that the Person making such certificate or opinion has read such covenant or condition;

(2) 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;

(3) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and

(4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied.

Section . 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 .	No Personal Liability of Directors, Officers, Employees and Equityholders .

No past, present or future director, officer, employee, incorporator or equityholder of the Company (including any holder of any membership interests in the Company), as such, will have any liability for any obligations of the Company under the Notes, this Indenture, the Security Documents or any other Note Document or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.


Section .	Governing Law .

THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE 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 .	Submission to Jurisdiction .

Each party hereto hereby submits to the exclusive 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. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which 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 court has been brought in an inconvenient forum.


Section .	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.


Section .	No Adverse Interpretation of Other Agreements .

This Indenture may not be used to interpret any other indenture, loan or Indebtedness agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or Indebtedness agreement may not be used to interpret this Indenture.


Section .	Successors .

All agreements of the Company in this Indenture and the Notes will bind its successors. All agreements of the Trustee in this Indenture will bind its successors.


Section .	Severability .

In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.


Section .	Counterpart Originals .

The parties may sign any number of copies of this Indenture. Each signed copy will be an original, but all of them together represent the same agreement.


Section .	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 will in no way modify or restrict any of the terms or provisions hereof.


Section .	Force Majeure.

In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.


Section .	Rights of Agents.

In connection with their acting hereunder, each of the Trustee and the Collateral Agent, as the case may be, is entitled to all rights, privileges, protections, benefits, immunities and indemnities provided to the Trustee or the Collateral Agent, as applicable, under the Financing Documents.

[Signatures on following page]

SIGNATURES

Dated as of February 24, 2012



	TOPAZ SOLAR FARMS LLC, as Issuer

	By: /s/ Paul Caudill
	Name: Paul Caudill
	Title: President


	THE BANK OF NEW YORK MELLON TRUST
	COMPANY, N.A., as Truste

	By: /s/ R. Tarnas
	Name: R. Tarnas
	Title: Vice President

[Face of Note]

CUSIP/CINS ____________

5.75% Series A Senior Secured Notes due 2039

No. ___ $____________

TOPAZ SOLAR FARMS LLC

promises to pay to or registered assigns,

the principal sum of __________________________________________________________ DOLLARS in installments on the dates and in the amounts as set forth in Schedule 1 hereto and made part hereof.

Interest Payment Dates: March 30 and September 30

Record Dates: March 15 and September 15

A[1]-1

Dated: February __, 2012

TOPAZ SOLAR FARMS LLC

By:

Name:

Title:

This is one of the Notes referred to

in the within-mentioned Indenture:

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Trustee

By:

Authorized Signatory

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[Back of Note]

5.75% Series A Senior Secured Notes due 2039

[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]

[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]

Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

(1) Interest . Topaz Solar Farms LLC, a Delaware limited liability company (the “ Company ”), promises to pay or cause to be paid interest on the principal amount of this Note at 5.75% per annum from ________________, ___ until maturity. The Company will pay interest, if any, semi-annually in arrears on March 30 and September 30 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “ Interest Payment Date ”). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that, if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be _____________, _____. The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at a rate that is 1% higher than the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest, if any (without regard to any applicable grace period), at the same rate to the extent lawful.

Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months.

(2) Method of Payment . The Company will pay interest, and will make payments of principal in accordance with Schedule 1 hereto, on the Notes (except defaulted interest), if any, to the Persons who are registered Holders at the close of business on the March 15 or September 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium, if any, and interest, if any, at the office or agency of the Paying Agent and Registrar within the City and State of New York, or, at the option of the Company, payment of interest, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds will be required with respect to principal of, premium on, if any, and interest, if any, on, all Global Notes and all other Notes the Holders of which will have provided wire transfer instructions to the Company or the Paying Agent on or before the relevant record date. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

(3) Paying Agent and Registrar . Initially, The Bank of New York Mellon Trust Company, N.A., the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change the Paying Agent or Registrar without prior notice to the Holders. The Company may act as Paying Agent or Registrar.

(4) Indenture and security documents . The Company issued the Notes under an Indenture dated as of February 24, 2012 (the “ Indenture ”) between the Company and the Trustee. The terms of the Notes include those stated in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are secured obligations of the Company, secured on a first priority basis by a security interest in substantially all of the Company's assets, pursuant to the Security Documents referred to in the Indenture. The Indenture does not limit the aggregate principal amount of Notes that may be issued thereunder.

A[1]-3

(5) Optional Redemption .

(a) At any time prior to the Maturity Date the Company will have the right, at its option, to redeem any of the Notes, in whole at any time or in part from time to time prior to their maturity, on at least 30 days' but not more than 60 days' notice, at a redemption price equal to the greater of (1) 100% of the principal amount of such Notes and (2) the sum of the present value of each remaining scheduled payment of principal and interest thereon (exclusive of interest accrued to the redemption date) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points (the “ Make-Whole Amount ”), plus in each case accrued and unpaid interest, if any, on the principal amount of the Notes up to, but not including, the redemption date (subject to the right of the Holder on the relevant record date to receive interest due on the relevant interest payment date).

(b) Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

(6) Notice of Redemption . At least 30 days but not more than 60 days before a redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of the Indenture pursuant to Articles 8 or 11 thereof. Notes and portions of Notes selected will be in amounts of $100,000 or whole multiples of $1,000 in excess thereof; except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder shall be redeemed or purchased.

(7) No Sinking Fund. The Company is not required to make sinking fund payments with respect to the Notes.

(8) CHANGE OF CONTROL REPURCHASE AT THE OPTION OF HOLDER . Upon the occurrence of a Change of Control, each Holder will have the right to require the Company to repurchase all or a portion (equal to $100,000 or an integral multiple of $1,000 in excess thereof) of that Holder's Notes at a purchase price in cash equal to 101% of the principal amount of such Notes repurchased, plus accrued and unpaid interest, if any, on the Notes repurchased to the date of purchase (the “Change of Control Payment” ), (subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date). Within 10 days following either the date upon which a Change of Control has occurred, the Company will send, by first-class mail a notice describing the transaction or transactions that Constitute the Change of Control and setting forth the procedures governing the Change of Control Offer as required by the Indenture.

(9) Mandatory Redemption .

(a) If:

(1) all or a portion of the Project is destroyed, condemned, seized or expropriated,

(2) the Company receives Loss Proceeds from insurance, indemnification, condemnation or otherwise as a result of such event noted above in excess of an amount equal to $20.0 million, which amount shall have been deposited into the Loss Proceeds Account pursuant to Section 3.10 of the Depositary Agreement; and

A[1]-4

required in accordance with the applicable Reinvestment Plan, (d) the Company fails to complete such Restoration Work within 270 days following the occurrence of such Loss Event (provided that such period may be extended for an additional 180 days in the event the Company is using commercially reasonable efforts to complete such Restoration Work), or (e) upon completion of such Restoration Work, the amount of excess Loss Proceeds not needed for such purpose is greater than $20.0 million;

then, within five (5) Business Days thereof, or any other applicable event described in Section 3.10 of the Depositary Agreement pursuant to which Loss Proceeds are to be deposited into the Note Redemption Account pursuant to Section 3.10(b)(ii), (iii), (v) or 3.10(c)(ii) of the Depositary Agreement, the Company will direct in writing (which written direction shall specify the amounts of the following transfers) the Depositary Agent to transfer (x) the Note Pro Rata Share of such Loss Proceeds or such excess or remaining Loss Proceeds, as applicable, to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such Loss Proceeds or such excess or remaining Loss Proceeds, as applicable, to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of Notes in accordance with the provisions set forth in Section 3.09 of the Indenture and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the Notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, if any, incurred in connection therewith) that may be redeemed or prepaid out of such Loss Proceeds or excess or remaining Loss Proceeds, as the case may be. The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash.

(b) If a Title Event occurs, the Company will use Title Event Proceeds to pay or reimburse costs and expenses necessary to remedy the applicable Title Event. Upon the completion of the effort to remedy any Title Event, if the amount of any excess Title Event Proceeds not needed for such purpose is in excess of $20.0 million, the Company will, within five (5) Business Days following its delivery to the Trustee and the Collateral Agent of an Officer's Certificate certifying, among other things, the result of the effort to remedy such Title Event, direct in writing (which written direction shall specify the amounts of the following transfers) the Depositary Agent to transfer (x) the Note Pro Rata Share of such excess Title Event Proceeds to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such excess Title Event Proceeds to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of the Notes in accordance with the provisions set forth in Section 3.09 of the Indenture and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the Notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be redeemed or prepaid out of such excess Title Event Proceeds. The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash.

(1) The Company receives any Performance LD Proceeds in excess of $20.0 million; and

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Reinvestment Work), or (d) upon completion of any Performance LD Reinvestment Work, the amount of excess Performance LD Proceeds not needed for such purpose is greater than $20.0 million;

then, within five (5) Business Days thereof or any other applicable event described in Section 3.11 of the Depositary Agreement pursuant to which Performance LD Proceeds are to be deposited into the Note Redemption Account pursuant to Section 3.11(b)(ii), (iv) or (vi) of the Depositary Agreement, the Company will direct in writing (which written direction shall specify the amounts of the following transfers) the Depositary Agent to transfer (x) the Note Pro Rata Share of such Performance LD Proceeds or such excess or remaining Performance LD Proceeds, as applicable, to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such Performance LD Proceeds or excess or remaining Performance LD Proceeds, as applicable, to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of Notes in accordance with the provisions set forth in Section 3.09 of the Indenture and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the Notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, if any, incurred in connection therewith) that may be redeemed or prepaid out of such Performance LD Proceeds or excess or remaining Performance LD Proceeds, as the case may be. The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash.

Notwithstanding the foregoing, if on the Commercial Operation Date, the Project is capable of generating at least 500MW of electricity, the Company shall not be obligated to make such Mandatory Redemption or prepayment otherwise required pursuant to this clause (c) if it instead elects to be subject to the provisions of a Permitted Capacity Reduction, including the mandatory redemption required thereunder.

(d) If:

(1) The Company receives any Project Contract Termination Proceeds in excess of $20.0 million; and

then, within five (5) Business Days thereof or any other applicable event described in Section 3.11 of the Depositary Agreement pursuant to which Project Contract Termination Proceeds are deposited into the Note Redemption Account pursuant to Section 3.11(c)(ii) or (iv) of the Depositary Agreement, the Company will direct in writing (which written direction shall specify the amounts of the following transfers) the Depositary Agent to transfer (x) the Note Pro Rata Share of such Project Contract Termination Proceeds or such excess Project Contract Termination Proceeds, as applicable, to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such Project Contract Termination Proceeds or such excess Project Contract Termination Proceeds, as applicable, to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of Notes in accordance with the provisions set forth under Section 3.09 of the Indenture and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the Notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, if any, incurred in connection therewith) that may be prepaid or redeemed out of such Project Contract Termination Proceeds or excess Project Contract Termination Proceeds, as the case may be. The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, and will be

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payable in cash.

(e) In the event that, on any Quarterly Date, the conditions for making a Restricted Payment are not satisfied, remaining monies in the Distribution Suspense Account will not, except as indicated in the following sentences, be distributed therefrom until the conditions for making a Restricted Payment are satisfied. If such amounts have been on deposit in the Distribution Suspense Account longer than four consecutive Quarterly Dates and the Company has not been permitted to make a Restricted Payment because the conditions for making such Restricted Payment have not been satisfied, within five Business Days following the fourth consecutive Quarterly Date (subject to extension in accordance with the following sentence), the Company will direct in writing (which written direction shall specify the amounts of the following transfers) the Depositary Agent to transfer (x) the Note Pro Rata Share of such remaining monies to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such remaining monies to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of Notes in accordance with the provisions set forth in Section 3.09 of the Indenture and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the Notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be prepaid or redeemed out of such amounts remaining in the Distribution Suspense Account, provided that the Company shall be entitled to request that any such amounts may be applied instead to the payment of Project Costs, operating expenses or other transaction costs, subject to the Collateral Agent's prior written consent, not to be unreasonably withheld. In the event that the sole reason for the failure to satisfy the Distribution Conditions as of such Quarterly Date is the result of the failure to satisfy the historical Debt Service Coverage Ratio test contemplated in clause (e) of the definition of Distribution Conditions, the four consecutive Quarterly Date period specified above may be extended for up to four additional consecutive Quarterly Dates (“ Extended Quarterly Dates ”), and the funds shall be held in a sub-account in the Distribution Suspense Account so long as all Distribution Conditions are not met on each Extended Quarterly Date. In the event of a failure to meet all Distribution Conditions on any Extended Quarterly Date, all such funds on deposit in such sub-account shall be subject to the Mandatory Redemption and prepayment provisions set forth in Section 4.44 of the Indenture. On any Extended Quarterly Date on which all Distribution Conditions are met, the funds relating to that Quarterly Date may be released (but not the funds in the aforementioned sub-account, which may only be released after four consecutive Extended Quarterly Dates in which all Distributions Conditions are met). The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash.

(f) In the event of any reduction of Project capacity as a result of the Adjusted Energy Performance Test under the EPC Contract or in the event of the occurrence at the Commercial Operation Date of any situation that would otherwise require a Mandatory Redemption pursuant to Section 4.42 of the Indenture, the Project capacity may be reduced on such date in accordance with the terms of the EPC Contract (including in respect of the “Adjusted Energy Performance Test”, as defined therein) and the PPA or as otherwise set forth herein and no breach or default under the Financing Documents or any relevant Major Project Contract shall be deemed to have occurred as a result of such reduction or the events giving rise thereto; provided, that, (a) within 30 days after the effective date of such reduction, the Company shall have delivered to the Collateral Agent and the Independent Engineer a certificate setting forth the aggregate principal amount of Notes (“ Adjusted Senior Note Amount ”) that could have been issued if such Notes had originally been issued with respect to the Project at such reduced capacity, provided that the projected Debt Service Coverage Ratio for each semi-annual period during the projected period calculated after giving effect to such Project capacity reduction and the Adjusted Senior Note Amount, shall equal or exceed the projected minimum Debt Service Coverage Ratios set forth in the Base Case Projections (as certified by the Independent Engineer), (b) within 60 days after the Company's delivery of the certificate set forth in clause (a), the Company shall have redeemed Notes in the aggregate principal amount, if any, by which the then aggregate outstanding principal amount of Notes exceeds the Adjusted Senior Note Amount (the “ Capacity Reduction Payment ”), at a price equal to par, plus accrued and unpaid interest to the date of such

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redemption, if any, without premium or penalty, in accordance with the provisions set forth in Section 3.09 of the Indenture, (c) the Major Project Contracts otherwise remain in effect with respect to the Project at such reduced capacity, (d) if applicable, all liquidated damages or other payments required to be paid by the EPC Contractor under the EPC Contract in respect of such reduction in capacity have been paid or an equal amount has been contributed as equity to the Company by an Affiliate and (e) if applicable, all payments required to be paid by the Company under the PPA have been paid.

(10) Denominations, Transfer, Exchange . The Notes are in registered form in denominations of $100,000 and integral multiples of $1,000 in excess thereof. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. Holders will be required to pay all taxes due upon transfer, unless the Company or any of its Affiliates is a party to the transfer. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the next succeeding Interest Payment Date.

(11) Persons Deemed Owners . The registered Holder of a Note may be treated as the owner of it for all purposes. Only registered Holders have rights under the Indenture.

(12) Amendment, Supplement and Waiver . Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes including Additional Notes, if any, voting as a single class, and any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium on, if any, or interest, if any, on the Notes, except a payment default resulting from accumulation that has been cured) or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes including Additional Notes, if any, voting as a single class. Without the consent of any Holder, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders by a successor to the Company pursuant to the Indenture, to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any Holder, to conform the text of the Indenture, the Notes, or the Security Documents to any provision of the “Description of the Notes” section of the Company's Offering Memorandum dated February 16, 2012, relating to the initial offering of the Notes, to enter into additional or supplemental Security Documents, to release Collateral in accordance with the terms of the Indenture and the Security Documents, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture or to evidence the succession of a new Trustee under the Indenture.

(13) Defaults and Remedies . Each of the following is an Events of Default: (i) the Company fails to pay interest on any Note in accordance with the terms of this Indenture within five days after the same becomes due and payable; the Company fails to pay any principal or premium, if any, on any Note after the same becomes due and payable, whether by scheduled maturity, redemption, acceleration or otherwise, or the Company fails to offer to redeem or purchase the Notes when required to do so pursuant to Sections 3.09, 3.10, 3.11, 4.15, 4.40, 4.41, 4.42, 4.43 or 4.44 of the Indenture; (iii) the Company fails to perform or observe any of the other covenants under the Indenture or any Security Document (other than, in the case of any Security Document, covenants, the breach of which would not reasonably be expected to result in a Material Adverse Effect) and not otherwise specifically provided for elsewhere in the Indenture and does not cure such failure within 30 days after the earlier of its receipt of notice by the Trustee or the Holders of at least 25% of aggregate principal amount of the Notes then outstanding as a single class and its Actual Knowledge thereof; provided that such grace period may be extended to 90 days if the Company is taking action reasonably likely to cure such failure to perform; (iv) the Company is involved in a Bankruptcy Event; (v) the Company shall (a) default

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in the payment of any principal, interest or other amount when due and the expiration of any applicable grace period, whether by acceleration or otherwise, in respect of any Obligations under the LC Facility or the Replacement LC Facility in principal amount of $10.0 million or more or (b) default in the performance or observance of any obligation or condition with respect to any other Indebtedness in an aggregate principal amount of $25.0 million or more and the effect of such default is to cause the acceleration of such amounts prior to scheduled maturity; (vi) a final judgment or judgments for the payment of money exceeding $25.0 million in the aggregate that are not covered by available insurance as acknowledged in writing by the provider of such insurance or as certified to the Trustee by an insurance consultant shall be entered against the Company by one or more courts, administrative tribunals or other bodies having jurisdiction over the Company and the same is not paid, discharged or stayed, or for which no bond is posted, for a period of 90 consecutive days after its entry; (vii) the occurrence of an Event of Abandonment continues for more than 30 consecutive days; (viii) subject to clause (ix) below, an event of default shall have occurred under any Material Project Contract other than the PPA that could reasonably be expected to have a Material Adverse Effect and such event of default shall continue unremedied for a period equal to 60 days; provided, however, that (a) if (1) such event of default cannot be cured with such 60-day period, (2) such event of default is reasonably susceptible of cure within 120 days from such event of default, (3) the defaulting party is proceeding with all requisite diligence and in good faith to cure such failure, (4) such breach or default is the subject of a good faith dispute between the parties (and such parties are utilizing the appropriate dispute resolution procedures set forth in such Major Project Contract) and (5) an extension of such 60-day cure could not reasonably be expected to have a Material Adverse Effect, then the time within which such failure may be cured shall be extended to such date, not to exceed 90 days after the end of the initial 60-day period (for a total of 150 days), as shall be necessary for such party diligently to cure such failure; provided further, however, that notwithstanding the foregoing, the Company may replace a Material Project Contract other than the PPA with a Replacement Project Contract within 120 days; (ix) (A) notwithstanding clause (viii) above, any Major Project Contract other than the PPA shall terminate or otherwise cease to be valid and binding on any party thereto (except upon expiration in accordance with its terms or full performance by such party of its obligations thereunder and other than a termination of one or more LGIAs or the termination of the EPC Contract in connection with which the Company shall have complied with the provisions of Section 3.10 hereof) unless (1) the Company replaces such Major Project Contract with a Replacement Project Contract within 120 days after such termination or cessation and (2) the Company shall have fully satisfied all of its obligations arising out of such termination or cessation within such 120-day period or (B) any Permit necessary to operate the Project substantially in accordance with the Project Contracts has been revoked or withdrawn where such revocation or withdrawal would reasonably be expected to have a Material Adverse Effect and no replacement Permit has been obtained within 60 days of such revocation or withdrawal; provided that if such replacement Permit cannot be obtained within such 60-day period then the time within which such replacement Permit may be obtained shall be extended to such date, not to exceed 30 days after the end of the initial 60-day period (for a total of 90 days) as long as diligent efforts are undertaken to obtain such replacement Permit; (x) subject to clause (xi) below, an event of default shall have occurred under the PPA that could reasonably be expected to have a Material Adverse Effect and such event of default shall continue unremedied for a period equal to 30 days; provided, however, that (a) if (1) such event of default cannot be cured with such 30-day period, (2) such event of default is reasonably susceptible of cure within 90 days from such event of default, (3) the defaulting party is proceeding with all requisite diligence and in good faith to cure such failure, (4) such breach or default is the subject of a good faith dispute between the parties (and such parties are utilizing the appropriate dispute resolution procedures set forth in the PPA) and (5) an extension of such 30-day cure could not reasonably be expected to have a Material Adverse Effect, then the time within which such failure may be cured shall be extended to such date, not to exceed 60 days after the end of the initial 30-day period (for a total of 90 days), as shall be necessary for such party diligently to cure such failure; provided further, however, that notwithstanding the foregoing, the Company may replace the PPA with a Replacement Project Contract within 90 days; (xi) notwithstanding clause (x) above, the PPA shall terminate or otherwise cease to be valid and binding on any party thereto (except upon expiration in accordance with its terms or full performance by such party of its obligations thereunder) unless (a) the Company replaces the PPA with a Replacement Project Contract within 90 days after such termination or cessation and (b) the Company shall have fully satisfied all of its obligations arising out of such termination or cessation within such 90-day period; (xii) the Lien contained

A[1]-9

in the Indenture or any of the Security Documents ceases to be effective to grant a perfected Lien to the Collateral Agent on any material portion of the Collateral described therein with the priority purported to be created thereby and such effectiveness and perfection priority is not reinstated or the Company has not posted cash collateral to the Collateral Agent equal to the replacement value thereof, in each case within 30 days after the time of discovery thereof by the Company, except to the extent that any such loss of effectiveness results from the failure of the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Security Documents; (xiii) the Indenture or any Security Document is declared unenforceable by a Governmental Authority having jurisdiction over any party thereto or the subject matter thereof; (xiv) if, at any time following delivery by the Company of an ERISA Notice, (a) any Plan fails to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under Section 412 of the Code, (b) a notice of intent to terminate any Plan is or is reasonably expected to be filed with the PBGC or the PBGC institutes proceedings under Section 4042 of ERISA to terminate or appoint a trustee to administer any Plan or the PBGC notifies the Company that a Plan may become a subject of any such proceedings, (c) the aggregate “amount of unfunded benefit liabilities” (within the meaning of Section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, exceeds $10.0 million, (d) the Company incurs or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (e) the Company withdraws from any Multiemployer Plan in a complete withdrawal or a partial withdrawal, or (f) the Company establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company thereunder; and any such event or events described in sub-clauses (xiv)(a) through (f) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect; (xv) (a) failure by the Sponsor to contribute the Equity Contribution Amount when due and such failure continues for five Business Days or (b) the Sponsor fails to provide credit support for the obligations under the Equity Contribution Agreement, if required, and such failure continues for 30 days; and (xvi) failure to complete construction of generation capacity of at least 500 MW on or before the Outside Completion Date (as defined in the PPA).

In the case of an Event of Default arising from a Bankruptcy Event with respect to the Company, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may require the Trustee to declare all the Notes to be due and payable immediately. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal, premium, if any, or interest, if any,) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of all the Holders, rescind an acceleration or waive an existing Default or Event of Default and its respective consequences under the Indenture except a continuing Default or Event of Default in the payment of principal of, premium on, if any, or interest, if any, on, the Notes (including in connection with an offer to purchase). The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

(14) Trustee Dealings with Company . The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.

(15) No Recourse Against Others . No past, present or future director, officer, employee, incorporator or equityholder of the Company (including any owner of any membership interest in the Company), as such, will have any liability for any obligations of the Company under the Notes, the Indenture,

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the Security Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

(16) Authentication . This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

(17) Abbreviations . Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

(18) CUSIP Numbers . Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon.

(19) GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THIS NOTE 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.

The Company will furnish to any Holder upon written request and without charge a copy of the Indenture.

Requests may be made to:

Topaz Solar Farms LLC

10400 Helios Way

Santa Margarita, CA 93453

Facsimile No.: (515) 281-2351

Attention: General Counsel

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Assignment Form

To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:

(Insert assignee's legal name)

(Insert assignee's soc. sec. or tax I.D. no.)

(Print or type assignee's name, address and zip code)

and irrevocably appoint

to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date: _______________

Your Signature: _______________

(Sign exactly as your name appears on the face of this Note)

Signature Guarantee*: _________________________

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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Option Of Holder To Elect Purchase

If you want to elect to have this Note purchased by the Company pursuant to Section 4.15 of the Indenture, check the box below:

If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.15 of the Indenture, state the amount you elect to have purchased:

$_______________

Date: _______________

Your Signature: _______________

(Sign exactly as your name appears on the face of this Note)

Tax Identification No.: _______________

Signature Guarantee*: _________________________

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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Schedule of Exchanges of Interests in the Global Note *

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:



Date of Exchange	Amount of decrease in Principal Amount of this Global Note	Amount of increase in Principal Amount of this Global Note	Principal Amount of this Global Note following such decrease (or increase)	Signature of authorized officer of Trustee or Custodian

* This schedule should be included only if the Note is issued in global form.

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SCHEDULE 1

SCHEDULE OF PRINCIPAL PAYMENTS

The principal of the Notes will be payable in semi-annual installments, commencing September 30, 2015, pro rata to the registered Holders thereof in accordance with the following schedule:



Payment Date	Percentage of Original Principal Amount Payable		Payment Date	Percentage of Original Principal Amount Payable
September 30, 2015	2.8154	%	March 30, 2028	1.3435	%
March 30, 2016	1.2325	%	September 30, 2028	2.7087	%
September 30, 2016	2.8826	%	March 30, 2029	1.3668	%
March 30, 2017	1.2996	%	September 30, 2029	2.7026	%
September 30, 2017	2.9405	%	March 30, 2030	1.3902	%
March 30, 2018	1.3741	%	September 30, 2030	2.6966	%
September 30, 2018	2.9983	%	March 30, 2031	1.4137	%
March 30, 2019	1.4483	%	September 30, 2031	2.6909	%
September 30, 2019	3.0585	%	March 30, 2032	1.4375	%
March 30, 2020	1.5224	%	September 30, 2032	2.6853	%
September 30, 2020	2.6524	%	March 30, 2033	1.4615	%
March 30, 2021	1.124	%	September 30, 2033	2.6801	%
September 30, 2021	2.6957	%	March 30, 2034	1.4859	%
March 30, 2022	1.1646	%	September 30, 2034	2.6752	%
September 30, 2022	2.6509	%	March 30, 2035	1.4624	%
March 30, 2023	1.176	%	September 30, 2035	2.5256	%
September 30, 2023	2.6954	%	March 30, 2036	1.4343	%
March 30, 2024	1.2344	%	September 30, 2036	2.6571	%
September 30, 2024	2.7272	%	March 30, 2037	1.5514	%
March 30, 2025	1.2297	%	September 30, 2037	2.6524	%
September 30, 2025	2.5907	%	March 30, 2038	1.5762	%
March 30, 2026	1.2044	%	September 30, 2038	2.6478	%
September 30, 2026	2.7216	%	March 30, 2039	1.6012	%
March 30, 2027	1.3205	%	September 30, 2039	1.6783	%
September 30, 2027	2.7151	%		%

This Schedule 1 shall be adjusted in the event of any redemption or purchase of the Notes in part.

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[Face of Regulation S Temporary Global Note]

CUSIP/CINS __________

5.75% Series A Senior Secured Notes due 2039

No. ___ $__________

TOPAZ SOLAR FARMS LLC

promises to pay to __________ or registered assigns,

the principal sum of __________________________________________________________ DOLLARS in installments on the dates and in the amounts as set forth in Schedule 1 hereto and made part hereof.

Interest Payment Dates: March 30 and September 30

Record Dates: March 15 and September 15

A2-1

Dated: February__, 2012

TOPAZ SOLAR FARMS LLC

By: _______________

Name: _______________

Title: _______________

This is one of the Notes referred to

in the within-mentioned Indenture:

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Trustee

By: _______________

Authorized Signatory

A2-2

[Back of Regulation S Temporary Global Note]

5.75% Series A Senior Secured Notes due 2039

[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]

[Insert the Regulation S Temporary Global Note Legend, if applicable pursuant provisions of the Indenture]

[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]

Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months.

(1) Method of Payment . The Company will pay interest, and will make payments of principal in accordance with Schedule 1 hereto, on the Notes (except defaulted interest), if any, to the Persons who are registered Holders at the close of business on the March 15 or September 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium, if any, and interest, if any, at the office or agency of the Paying Agent and Registrar within the City and State of New York, or, at the option of the Company, payment of interest, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds will be required with respect to principal of, premium on, if any, and interest, if any, on, all Global Notes and all other Notes the Holders of which will have provided wire transfer instructions to the Company or the Paying Agent on or before the relevant record date. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

(2) Paying Agent and Registrar . Initially, The Bank of New York Mellon Trust Company, N.A., the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change the Paying Agent or Registrar without prior notice to the Holders. The Company may act as Paying Agent or Registrar.

(3) Indenture and security documents . The Company issued the Notes under an Indenture dated as of February 24, 2012 (the “ Indenture ”) between the Company and the Trustee. The terms of the Notes include those stated in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are secured obligations of the Company, secured on a first priority basis by a security interest in substantially all

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of the Company's assets, pursuant to the Security Documents referred to in the Indenture. The Indenture does not limit the aggregate principal amount of Notes that may be issued thereunder.

(4) Optional Redemption .

(b) Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

(5) Notice of Redemption . At least 30 days but not more than 60 days before a redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of the Indenture pursuant to Articles 8 or 11 thereof. Notes and portions of Notes selected will be in amounts of $100,000 or whole multiples of $1,000 in excess thereof; except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder shall be redeemed or purchased.

(6) No Sinking Fund. The Company is not required to make sinking fund payments with respect to the Notes.

(7) CHANGE OF CONTROL REPURCHASE AT THE OPTION OF HOLDER . Upon the occurrence of a Change of Control, each Holder will have the right to require the Company to repurchase all or a portion (equal to $100,000 or an integral multiple of $1,000 in excess thereof) of that Holder's Notes at a purchase price in cash equal to 101% of the principal amount of such Notes repurchased, plus accrued and unpaid interest, if any, on the Notes repurchased to the date of purchase (the “Change of Control Payment” ), (subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date). Within 10 days following either the date upon which a Change of Control has occurred, the Company will send, by first-class mail a notice describing the transaction or transactions that Constitute the Change of Control and setting forth the procedures governing the Change of Control Offer as required by the Indenture.

(8) Mandatory Redemption .

(a) If:

(1) all or a portion of the Project is destroyed, condemned, seized or expropriated,

(2) the Company receives Loss Proceeds from insurance, indemnification, condemnation or otherwise as a result of such event noted above in excess of an amount equal to $20.0 million, which amount shall have been deposited into the Loss Proceeds Account pursuant to Section 3.10 of the Depositary Agreement; and

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undertake any Restoration Work in connection with such Loss Event), (b) the Company fails to submit an acceptable Reinvestment Plan (as approved by the Independent Engineer) within the same time period set forth in clause (a), (c) the Company fails to undertake any Restoration Work to the extent required in accordance with the applicable Reinvestment Plan, (d) the Company fails to complete such Restoration Work within 270 days following the occurrence of such Loss Event (provided that such period may be extended for an additional 180 days in the event the Company is using commercially reasonable efforts to complete such Restoration Work), or (e) upon completion of such Restoration Work, the amount of excess Loss Proceeds not needed for such purpose is greater than $20.0 million; then, within five (5) Business Days thereof, or any other applicable event described in Section 3.10 of the Depositary Agreement pursuant to which Loss Proceeds are to be deposited into the Note Redemption Account pursuant to Section 3.10(b)(ii), (iii), (v) or 3.10(c)(ii) of the Depositary Agreement, the Company will direct in writing (which written direction shall specify the amounts of the following transfers) the Depositary Agent to transfer (x) the Note Pro Rata Share of such Loss Proceeds or such excess or remaining Loss Proceeds, as applicable, to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such Loss Proceeds or such excess or remaining Loss Proceeds, as applicable, to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of Notes in accordance with the provisions set forth in Section 3.09 of the Indenture and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the Notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, if any, incurred in connection therewith) that may be redeemed or prepaid out of such Loss Proceeds or excess or remaining Loss Proceeds, as the case may be. The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash.

(1) The Company receives any Performance LD Proceeds in excess of $20.0 million; and

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Performance LD Proceeds (provided that such period may be extended for an additional 60 days if the Company is using commercially reasonable efforts to complete such Performance LD Reinvestment Work), or (d) upon completion of any Performance LD Reinvestment Work, the amount of excess Performance LD Proceeds not needed for such purpose is greater than $20.0 million;then, within five (5) Business Days thereof or any other applicable event described in Section 3.11 of the Depositary Agreement pursuant to which Performance LD Proceeds are to be deposited into the Note Redemption Account pursuant to Section 3.11(b)(ii), (iv) or (vi) of the Depositary Agreement, the Company will direct in writing (which written direction shall specify the amounts of the following transfers) the Depositary Agent to transfer (x) the Note Pro Rata Share of such Performance LD Proceeds or such excess or remaining Performance LD Proceeds, as applicable, to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such Performance LD Proceeds or excess or remaining Performance LD Proceeds, as applicable, to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of Notes in accordance with the provisions set forth in Section 3.09 of the Indenture and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the Notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, if any, incurred in connection therewith) that may be redeemed or prepaid out of such Performance LD Proceeds or excess or remaining Performance LD Proceeds, as the case may be. The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash. Notwithstanding the foregoing, if on the Commercial Operation Date, the Project is capable of generating at least 500MW of electricity, the Company shall not be obligated to make such Mandatory Redemption or prepayment otherwise required pursuant to this clause (c) if it instead elects to be subject to the provisions of a Permitted Capacity Reduction, including the mandatory redemption required thereunder.

(d) If:

(1) The Company receives any Project Contract Termination Proceeds in excess of $20.0 million; and

(2)(a) the Company does not submit a Reinvestment Certificate within 60 days after it receives such Project Contract Termination Proceeds (or promptly upon the Company's determination not to undertake any Project Contract Replacement Work with such Project Contract Termination Proceeds) or (b) upon completion of such Project Contract Replacement Work, the amount of excess Project Contract Termination Proceeds not needed for such purposes is greater than $20.0 million; then, within five (5) Business Days thereof or any other applicable event described in Section 3.11 of the Depositary Agreement pursuant to which Project Contract Termination Proceeds are deposited into the Note Redemption Account pursuant to Section 3.11(c)(ii) or (iv) of the Depositary Agreement,, the Company will direct in writing (which written direction shall specify the amounts of the following transfers) the Depositary Agent to transfer (x) the Note Pro Rata Share of such Project Contract Termination Proceeds or such excess Project Contract Termination Proceeds, as applicable, to the Note Redemption Account and (y) the LC Facility Pro Rata Share (if any) of such Project Contract Termination Proceeds or such excess Project Contract Termination Proceeds, as applicable, to the LC Facility Prepayment Account, which amounts shall be used to redeem the maximum principal amount of Notes in accordance with the provisions set forth under Section 3.09 of the Indenture and, if required, prepay outstanding LC Facility Obligations (plus all accrued interest on the Notes and outstanding LC Facility Obligations and the amount of all fees and expenses, including premiums, if any, incurred in connection therewith) that may be prepaid or redeemed out of such Project Contract Termination Proceeds or excess Project Contract Termination Proceeds, as the case may be. The redemption price in any such redemption will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders on the relevant

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record date to receive interest due on the relevant interest payment date, and will be payable in cash.

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Reduction Payment ”), at a price equal to par, plus accrued and unpaid interest to the date of such redemption, if any, without premium or penalty, in accordance with the provisions set forth in Section 3.09 of the Indenture, (c) the Major Project Contracts otherwise remain in effect with respect to the Project at such reduced capacity, (d) if applicable, all liquidated damages or other payments required to be paid by the EPC Contractor under the EPC Contract in respect of such reduction in capacity have been paid or an equal amount has been contributed as equity to the Company by an Affiliate and (e) if applicable, all payments required to be paid by the Company under the PPA have been paid.

(9) Denominations, Transfer, Exchange . The Notes are in registered form in denominations of $100,000 and integral multiples of $1,000 in excess thereof. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. Holders will be required to pay all taxes due upon transfer, unless the Company or any of its Affiliates is a party to the transfer. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the next succeeding Interest Payment Date.

(10) Persons Deemed Owners . The registered Holder of a Note may be treated as the owner of it for all purposes. Only registered Holders have rights under the Indenture.

(11) Amendment, Supplement and Waiver . Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes including Additional Notes, if any, voting as a single class, and any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium on, if any, or interest, if any, on the Notes, except a payment default resulting from accumulation that has been cured) or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes including Additional Notes, if any, voting as a single class. Without the consent of any Holder, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders by a successor to the Company pursuant to the Indenture, to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any Holder, to conform the text of the Indenture, the Notes, or the Security Documents to any provision of the “Description of the Notes” section of the Company's Offering Memorandum dated February 16, 2012, relating to the initial offering of the Notes, to enter into additional or supplemental Security Documents, to release Collateral in accordance with the terms of the Indenture and the Security Documents, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture or to evidence the succession of a new Trustee under the Indenture.

(12) Defaults and Remedies . Each of the following is an Events of Default: (i) the Company fails to pay interest on any Note in accordance with the terms of this Indenture within five days after the same becomes due and payable; the Company fails to pay any principal or premium, if any, on any Note after the same becomes due and payable, whether by scheduled maturity, redemption, acceleration or otherwise, or the Company fails to offer to redeem or purchase the Notes when required to do so pursuant to Sections 3.09, 3.10, 3.11, 4.15, 4.40, 4.41, 4.42, 4.43 or 4.44 of the Indenture; (iii) the Company fails to perform or observe any of the other covenants under the Indenture or any Security Document (other than, in the case of any Security Document, covenants, the breach of which would not reasonably be expected to result in a Material Adverse Effect) and not otherwise specifically provided for elsewhere in the Indenture and does not cure such failure within 30 days after the earlier of its receipt of notice by the Trustee or the Holders of at least 25% of aggregate principal amount of the Notes then outstanding as a single class and its Actual Knowledge thereof; provided that such grace period may be extended to 90 days if the Company is taking action reasonably likely to cure

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such failure to perform; (iv) the Company is involved in a Bankruptcy Event; (v) the Company shall (a) default in the payment of any principal, interest or other amount when due and the expiration of any applicable grace period, whether by acceleration or otherwise, in respect of any Obligations under the LC Facility or the Replacement LC Facility in principal amount of $10.0 million or more or (b) default in the performance or observance of any obligation or condition with respect to any other Indebtedness in an aggregate principal amount of $25.0 million or more and the effect of such default is to cause the acceleration of such amounts prior to scheduled maturity; (vi) a final judgment or judgments for the payment of money exceeding $25.0 million in the aggregate that are not covered by available insurance as acknowledged in writing by the provider of such insurance or as certified to the Trustee by an insurance consultant shall be entered against the Company by one or more courts, administrative tribunals or other bodies having jurisdiction over the Company and the same is not paid, discharged or stayed, or for which no bond is posted, for a period of 90 consecutive days after its entry; (vii) the occurrence of an Event of Abandonment continues for more than 30 consecutive days; (viii) subject to clause (ix) below, an event of default shall have occurred under any Material Project Contract other than the PPA that could reasonably be expected to have a Material Adverse Effect and such event of default shall continue unremedied for a period equal to 60 days; provided, however, that (a) if (1) such event of default cannot be cured with such 60-day period, (2) such event of default is reasonably susceptible of cure within 120 days from such event of default, (3) the defaulting party is proceeding with all requisite diligence and in good faith to cure such failure, (4) such breach or default is the subject of a good faith dispute between the parties (and such parties are utilizing the appropriate dispute resolution procedures set forth in such Major Project Contract) and (5) an extension of such 60-day cure could not reasonably be expected to have a Material Adverse Effect, then the time within which such failure may be cured shall be extended to such date, not to exceed 90 days after the end of the initial 60-day period (for a total of 150 days), as shall be necessary for such party diligently to cure such failure; provided further, however, that notwithstanding the foregoing, the Company may replace a Material Project Contract other than the PPA with a Replacement Project Contract within 120 days; (ix) (A) notwithstanding clause (viii) above, any Major Project Contract other than the PPA shall terminate or otherwise cease to be valid and binding on any party thereto (except upon expiration in accordance with its terms or full performance by such party of its obligations thereunder and other than a termination of one or more LGIAs or the termination of the EPC Contract in connection with which the Company shall have complied with the provisions of Section 3.10 hereof) unless (1) the Company replaces such Major Project Contract with a Replacement Project Contract within 120 days after such termination or cessation and (2) the Company shall have fully satisfied all of its obligations arising out of such termination or cessation within such 120-day period or (B) any Permit necessary to operate the Project substantially in accordance with the Project Contracts has been revoked or withdrawn where such revocation or withdrawal would reasonably be expected to have a Material Adverse Effect and no replacement Permit has been obtained within 60 days of such revocation or withdrawal; provided that if such replacement Permit cannot be obtained within such 60-day period then the time within which such replacement Permit may be obtained shall be extended to such date, not to exceed 30 days after the end of the initial 60-day period (for a total of 90 days) as long as diligent efforts are undertaken to obtain such replacement Permit; (x) subject to clause (xi) below, an event of default shall have occurred under the PPA that could reasonably be expected to have a Material Adverse Effect and such event of default shall continue unremedied for a period equal to 30 days; provided, however, that (a) if (1) such event of default cannot be cured with such 30-day period, (2) such event of default is reasonably susceptible of cure within 90 days from such event of default, (3) the defaulting party is proceeding with all requisite diligence and in good faith to cure such failure, (4) such breach or default is the subject of a good faith dispute between the parties (and such parties are utilizing the appropriate dispute resolution procedures set forth in the PPA) and (5) an extension of such 30-day cure could not reasonably be expected to have a Material Adverse Effect, then the time within which such failure may be cured shall be extended to such date, not to exceed 60 days after the end of the initial 30-day period (for a total of 90 days), as shall be necessary for such party diligently to cure such failure; provided further, however, that notwithstanding the foregoing, the Company may replace the PPA with a Replacement Project Contract within 90 days; (xi) notwithstanding clause (x) above, the PPA shall terminate or otherwise cease to be valid and binding on any party thereto (except upon expiration in accordance with its terms or full performance by such party of its obligations thereunder) unless (a) the Company replaces the PPA with a Replacement Project Contract within 90 days after such termination or cessation and (b) the Company shall have fully satisfied all

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of its obligations arising out of such termination or cessation within such 90-day period; (xii) the Lien contained in the Indenture or any of the Security Documents ceases to be effective to grant a perfected Lien to the Collateral Agent on any material portion of the Collateral described therein with the priority purported to be created thereby and such effectiveness and perfection priority is not reinstated or the Company has not posted cash collateral to the Collateral Agent equal to the replacement value thereof, in each case within 30 days after the time of discovery thereof by the Company, except to the extent that any such loss of effectiveness results from the failure of the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Security Documents; (xiii) the Indenture or any Security Document is declared unenforceable by a Governmental Authority having jurisdiction over any party thereto or the subject matter thereof; (xiv) if, at any time following delivery by the Company of an ERISA Notice, (a) any Plan fails to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under Section 412 of the Code, (b) a notice of intent to terminate any Plan is or is reasonably expected to be filed with the PBGC or the PBGC institutes proceedings under Section 4042 of ERISA to terminate or appoint a trustee to administer any Plan or the PBGC notifies the Company that a Plan may become a subject of any such proceedings, (c) the aggregate “amount of unfunded benefit liabilities” (within the meaning of Section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, exceeds $10.0 million, (d) the Company incurs or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (e) the Company withdraws from any Multiemployer Plan in a complete withdrawal or a partial withdrawal, or (f) the Company establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company thereunder; and any such event or events described in sub-clauses (xiv)(a) through (f) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect; (xv) (a) failure by the Sponsor to contribute the Equity Contribution Amount when due and such failure continues for five Business Days or (b) the Sponsor fails to provide credit support for the obligations under the Equity Contribution Agreement, if required, and such failure continues for 30 days; and (xvi) failure to complete construction of generation capacity of at least 500 MW on or before the Outside Completion Date (as defined in the PPA).

(13) Trustee Dealings with Company . The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.

(14) No Recourse Against Others . No past, present or future director, officer, employee, incorporator or equityholder of the Company (including any owner of any membership interest in the

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Company), as such, will have any liability for any obligations of the Company under the Notes, the Indenture, the Security Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

(15) Authentication . This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

(16) Abbreviations . Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

(17) CUSIP Numbers . Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon.

(18) GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THIS NOTE 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.

The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:

Topaz Solar Farms LLC

10400 Helios Way

Santa Margarita, CA 93453

Facsimile No.: (515) 281-2351

Attention: General Counsel

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Assignment Form

To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:

(Insert assignee's legal name)

(Insert assignee's soc. sec. or tax I.D. no.)

(Print or type assignee's name, address and zip code)

and irrevocably appoint

to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date: _______________

Your Signature: _______________

(Sign exactly as your name appears on the face of this Note)

Signature Guarantee*: _________________________

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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Option of Holder to Elect Purchase

If you want to elect to have this Note purchased by the Company pursuant to Section 4.15 of the Indenture, check the box below:

If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.15 of the Indenture, state the amount you elect to have purchased:

$_______________

Date: _______________

Your Signature: _______________

(Sign exactly as your name appears on the face of this Note)

Tax Identification No.: _______________

Signature Guarantee*: _________________________

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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Schedule of Exchanges of Interests in the Regulation S Temporary Global Note

The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note, or exchanges of a part of another Restricted Global Note for an interest in this Regulation S Temporary Global Note, have been made:



Date of Exchange	Amount of decrease in Principal Amount of this Global Note	Amount of increase in Principal Amount of this Global Note	Principal Amount of this Global Note following such decrease (or increase)	Signature of authorized officer of Trustee or Custodian

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SCHEDULE 1

schedule of principal payments

The principal of the Notes will be payable in semi-annual installments, commencing September 30, 2015, pro rata to the registered Holders thereof in accordance with the following schedule:



Payment Date	Percentage of Original Principal Amount Payable		Payment Date	Percentage of Original Principal Amount Payable
September 30, 2015	2.8154	%	March 30, 2028	1.3435	%
March 30, 2016	1.2325	%	September 30, 2028	2.7087	%
September 30, 2016	2.8826	%	March 30, 2029	1.3668	%
March 30, 2017	1.2996	%	September 30, 2029	2.7026	%
September 30, 2017	2.9405	%	March 30, 2030	1.3902	%
March 30, 2018	1.3741	%	September 30, 2030	2.6966	%
September 30, 2018	2.9983	%	March 30, 2031	1.4137	%
March 30, 2019	1.4483	%	September 30, 2031	2.6909	%
September 30, 2019	3.0585	%	March 30, 2032	1.4375	%
March 30, 2020	1.5224	%	September 30, 2032	2.6853	%
September 30, 2020	2.6524	%	March 30, 2033	1.4615	%
March 30, 2021	1.124	%	September 30, 2033	2.6801	%
September 30, 2021	2.6957	%	March 30, 2034	1.4859	%
March 30, 2022	1.1646	%	September 30, 2034	2.6752	%
September 30, 2022	2.6509	%	March 30, 2035	1.4624	%
March 30, 2023	1.176	%	September 30, 2035	2.5256	%
September 30, 2023	2.6954	%	March 30, 2036	1.4343	%
March 30, 2024	1.2344	%	September 30, 2036	2.6571	%
September 30, 2024	2.7272	%	March 30, 2037	1.5514	%
March 30, 2025	1.2297	%	September 30, 2037	2.6524	%
September 30, 2025	2.5907	%	March 30, 2038	1.5762	%
March 30, 2026	1.2044	%	September 30, 2038	2.6478	%
September 30, 2026	2.7216	%	March 30, 2039	1.6012	%
March 30, 2027	1.3205	%	September 30, 2039	1.6783	%
September 30, 2027	2.7151	%		%

This Schedule 1 shall be adjusted in the event of any redemption or purchase of the Notes in part.

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EXHIBIT B

FORM OF CERTIFICATE OF TRANSFER

Topaz Solar Farms LLC

[ ]

[ Registrar address block ]

Re: 5.75% Series A Senior Secured Notes due 2039

Reference is hereby made to the Indenture, dated as of February 24, 2012 (the “ Indenture ”), between Topaz Solar Farms LLC, as issuer (the “ Company ”) and The Bank of New York Mellon Trust Company, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

___________________, (the “ Transferor ”) owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the “ Transfer ”), to ___________________________ (the “ Transferee ”), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

1. ¬ Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Restricted Definitive Note pursuant to Rule 144A . The Transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act of 1933, as amended (the “ Securities Act ”), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A, and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

2. ¬ Check if Transferee will take delivery of a beneficial interest in the Regulation S Temporary Global Note, the Regulation S Permanent Global Note or a Restricted Definitive Note pursuant to Regulation S . The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act [and/,] (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act [and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser)]. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Permanent Global Note, the Regulation S Temporary

B-1

Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

3. ¬ Check and complete if Transferee will take delivery of a beneficial interest in a Restricted Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S . The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):

(a) ¬ such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;

(b) ¬ such Transfer is being effected to the Company or a subsidiary thereof;

(c) ¬ such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act;

4. ¬ Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note .

(a) ¬ Check if Transfer is pursuant to Rule 144 . (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(b) ¬ Check if Transfer is Pursuant to Regulation S . (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

B-2

This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

_______________

[Insert Name of Transferor]

By: _______________

Name:

Title:

Dated: _______________________

B-3

ANNEX A TO CERTIFICATE OF TRANSFER

1. The Transferor owns and proposes to transfer the following:

[CHECK ONE OF (a) OR (b)]

(a) a beneficial interest in the:

(i) ¬ 144A Global Note (CUSIP _________), or

(ii) ¬ Regulation S Global Note (CUSIP _________), or

(b) ¬ a Restricted Definitive Note.

2. After the Transfer the Transferee will hold:

[CHECK ONE]

(a) ¬ a beneficial interest in the:

(i) ¬ 144A Global Note (CUSIP _________), or

(ii) ¬ Regulation S Global Note (CUSIP _________), or

(iv) ¬ Unrestricted Global Note (CUSIP _________); or

(b) ¬ a Restricted Definitive Note; or

in accordance with the terms of the Indenture.

B-4

EXHIBIT C

FORM OF CERTIFICATE OF EXCHANGE

Topaz Solar Farms LLC

[ ]

[ Registrar address block ]

Re: 5.75% Series A Senior Secured Notes due 2039

(CUSIP [ ])

Reference is hereby made to the Indenture, dated as of February 24, 2012 (the “ Indenture ”), between Topaz Solar Farms LLC, as issuer (the “ Company ”) and The Bank of New York Mellon Trust Company, N.A., as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

__________________________, (the “ Owner ”) owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the “ Exchange ”). In connection with the Exchange, the Owner hereby certifies that:

1. Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note

(a) ¬ Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note . In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the Securities Act of 1933, as amended (the “ Securities Act ”), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(b) ¬ Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note . In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(c) ¬ Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note . In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

C-1

(d) ¬ Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note . In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes

(a) ¬ Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.

(b) ¬ Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note . In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] 144A Global Note or Regulation S Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.

This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

_______________

[Insert Name of Transferor]

By: _______________

Name:

Title:

Dated: ______________________

C-2

EXHIBIT D

BASE CASE PROJECTIONS

D-1

EXHIBIT 10.20

REVOLVING LOAN AGREEMENT

This REVOLVING LOAN AGREEMENT is entered into this 6th day of January, 2012 between MidAmerican Energy Holdings Company ("Borrower"), and BH Finance LLC, ("Lender").

1. Revolving Loan Commitment

Lender shall, on the terms and conditions set forth herein, make loans (each such loan, a "Revolving Loan") to Borrower from time to time on any day in which commercial banks are open for business in New York (a "Business Day") until the Maturity Date (as defined below), in an aggregate amount not to exceed $500,000,000. Within such aggregate amount, and subject to the other terms and conditions hereof, Borrower may borrow Revolving Loans, continue such Revolving Loans, prepay such Revolving Loans, and reborrow such Revolving Loans up to the Maturity Date.

2. Procedure for Borrowing.

Each borrowing of Revolving Loans (a "Borrowing") shall be made upon the Borrower's written notice delivered to Lender, which notice shall be received at least one Business Day prior to the requested borrowing date (the "Borrowing Date"), specifying: (a) the amount of the Revolving Loan and (b) the requested Borrowing Date, which shall be a Business Day.

Unless otherwise agreed by Borrower and Lender, the proceeds of the Borrowing will be made available to Borrower by wire transfer in accordance with written instructions provided by Borrower.

3. Prepayment of the Revolving Loans.

Borrower may, from time to time, without penalty or premium, upon notice to Lender, prepay any Revolving Loan in whole or in part prior to the Maturity Date provided: (a) Borrower has given to Lender not less than one Business Day prior written notice of the date and amount of the prepayment; and (b) such prepayment is made together with accrued interest on the amount prepaid calculated up to, but not including, the date of prepayment.

4. Maturity Date.

Borrower shall repay to Lender on June 30, 2012 (the "Maturity Date") the aggregate principal amount of Revolving Loans made to Borrower and outstanding on such date. The Maturity Date may be extended upon mutual agreement between Borrower and Lender.

5. Interest .

Each Revolving Loan shall bear interest for each Interest Period (as defined below) at a rate per annum equal to 1.0% above the LlBO Rate (as defined below).

"Interest Period" shall mean the period commencing on the first day following the last Business Day of the prior Interest Period and ending on the last Business Day of each month; provided that with respect to the initial Interest Period for any Revolving Loan, the Interest Period shall commence on the date such Revolving Loan was made. "LlBO Rate" for each Interest Period shall mean the lowest rate per annum at which dollar deposits are offered in the London interbank market at or about 11:00 a.m., London time, on the first Business Day of such Interest Period, for deposits in an amount approximately equal to the aggregate outstanding Revolving Loans and for a one-month period.

Interest shall be calculated on the basis of a 360-day year, counting the actual number of days elapsed from the date a Revolving Loan was made, and shall be payable on the last Business Day of each month during which any Revolving Loan is outstanding. Any monthly unpaid interest will be added to Revolving Loan as of the first day of the succeeding month.

6. Place and Time of Payment.

All payments of principal and interest shall be made at such bank and account as Lender may designate.

7. Taxes .

Any and all payments by Borrower to Lender under this Agreement shall be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges, and all liabilities with respect hereto. Borrower shall pay all present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies which arises from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, this Agreement.

8. General Provisions .


(a)	This Agreement contains all agreements entered into by the parties on the subject of the Revolving Loan. Amendments and additions to this Agreement must be made in writing and signed by Lender and Borrower.


(b)	This agreement shall be subject to the law of the State of Nebraska.


(c)	Any notices delivered in connection with this Agreement shall be delivered to the addresses listed on the signature page of this Agreement.


(d)	This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and signed as of the day and year first above written.



MidAmerican Energy Holdings Company		BH Finance LLC

/s/ Patrick J. Goodman		/s/ Marc D. Hamburg
Name: Patrick J. Goodman		Name: Marc D. Hamburg
Title: SVP & CFO		Title: President


Address:		Address:
666 Grand Ave		3555 Farnam Street
Des Moines, IA 50309		Omaha, Nebraska 68131

EXHIBIT 10.21

SUMMARY OF KEY TERMS OF COMPENSATION ARRANGEMENTS

WITH MIDAMERICAN ENERGY HOLDINGS COMPANY

NAMED EXECUTIVE OFFICERS AND DIRECTORS

MidAmerican Energy Holdings Company's ("MEHC") continuing named executive officers each receive an annual salary and participate in health insurance and other benefit plans on the same basis as other employees, as well as certain other compensation and benefit plans described in MEHC's Annual Report on Form 10-K.

The named executive officers are also eligible to receive a cash incentive award under MEHC's Performance Incentive Plan ("PIP"). The PIP provides for a discretionary annual cash award that is determined on a subjective basis and paid in December. In addition to the PIP, the named executive officers are eligible to receive discretionary cash performance awards periodically during the year to reward the accomplishment of significant non-recurring tasks or projects. Mr. Gregory E. Abel has not been granted discretionary cash performance awards in the past five years. Messrs. Patrick J. Goodman and Douglas L. Anderson and Ms. Maureen E. Sammon are participants in MEHC's Long-Term Incentive Partnership Plan ("LTIP"). Mr. Abel does not participate in the LTIP. A copy of the LTIP is attached as Exhibit 10.9 to the MEHC Annual Report on Form 10-K. Mr. Abel is a participant in MEHC's Incremental Profit Sharing Plan ("IPSP"). Messrs. Goodman and Anderson and Ms. Sammon do not participate in the IPSP. A copy of Mr. Abel's IPSP is attached as Exhibit 10.2 to the MEHC Annual Report on Form 10-K.

Base salary for continuing named executive officers for MEHC's fiscal year ending December 31, 2012 , is shown in the following table:



Name and Title	Base Salary
Gregory E. Abel Chairman, President and Chief Executive Officer	$	1,000,000
Patrick J. Goodman Senior Vice President and Chief Financial Officer	$	367,500
Douglas L. Anderson Senior Vice President and General Counsel	$	315,000
Maureen E. Sammon Senior Vice President and Chief Administrative Officer	$	230,000

Mr. Abel is a director of MEHC, but does not receive additional compensation for his service as a director other than what he receives as an employee of MEHC. The other members of the MEHC board of directors do not receive compensation for their service as directors.

EXHIBIT 21.1

MIDAMERICAN ENERGY HOLDINGS COMPANY

SUBSIDIARIES AND JOINT VENTURES

Pursuant to Item 601(b)(21)(ii) of Regulation S-K, we have omitted dormant subsidiaries (all of which, when considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of the end of our last fiscal year).



MidAmerican Funding, LLC	Iowa
MHC Inc.	Iowa
MidAmerican Energy Company	Iowa
Century Development, LLC	Iowa
CBEC Railway Inc.	Iowa
Cimmred Leasing Company	South Dakota
MHC Investment Company	South Dakota
MWR Capital Inc.	South Dakota
Midwest Capital Group, Inc.	Iowa
Dakota Dunes Development Company	Iowa
Two Rivers Inc.	South Dakota
MEC Construction Services Co.	Iowa
Northern Powergrid Holdings Company	England
CalEnergy Gas (Holdings) Limited	England
CalEnergy Gas Limited	England
CalEnergy Resources Limited	England
CalEnergy Resources Poland Sp. z.o.o.	Poland
CalEnergy Resources (Australia) Limited	England
CE Electric (Ireland) Limited	Ireland
CE Electric UK Holdings	England
ElectraLink Limited	England
Northern Powergrid Limited	England
CE UK Gas Holdings Limited	England
Integrated Utility Services Limited	England
Integrated Utility Services Limited	Ireland
Northern Electric plc.	England
Northern Powergrid (Northeast) Limited	England
Northern Electric Finance plc.	England
Northern Electric & Gas Limited	England
Northern Electric Properties Limited	England
Northern Transport Finance Limited	England
Vehicle Lease and Service Limited	England
Northern Powergrid (Yorkshire) plc.	England
Yorkshire Electricity Group plc.	England
Yorkshire Power Finance Limited	Grand Cayman
Yorkshire Power Group Limited	England
HomeServices of America, Inc.	Delaware
Arizona Home Services, L.L.C.	Arizona
Caldwell Mill, LLP	Alabama
California Premiere Lending, LLC	Delaware
California Title Company	California
Capitol Title Company	Nebraska



CBSHOME Real Estate Company	Nebraska
CBSHOME Real Estate of Iowa, Inc.	Delaware
CBSHOME Relocation Services, Inc.	Nebraska
CBSHOME Insurance, LLC	Nebraska
Champion Realty, Inc.	Maryland
Chancellor Title Services, Inc.	Maryland
Columbia Title of Florida, Inc.	Florida
CJR Realtors, LLC	Delaware
Edina Financial Services, Inc.	Minnesota
Edina Realty, Inc.	Minnesota
Edina Realty Insurance, LLC	Delaware
Edina Realty Referral Network, Inc.	Minnesota
Edina Realty Relocation, Inc.	Minnesota
Edina Realty Title, Inc.	Minnesota
Esslinger-Wooten-Maxwell, Inc.	Florida
E-W-M Referral Services, Inc.	Florida
FFR, Inc.	Iowa
First Realty, Ltd.	Iowa
For Rent, Inc.	Arizona
Fort Dearborn Land Title Company, LLC	Delaware
HMSV Financial Services, Inc.	Delaware
HN Heritage Title Holdings, LLC	Georgia
HN Insurance Services, LLC	Georgia
HN Real Estate Group, L.L.C.	Georgia
HN Real Estate Group, N.C., Inc.	North Carolina
HN Referral Corporation	Georgia
Home Services Referral Network, LLC	Indiana
HomeServices Financial Holdings, Inc.	Delaware
HomeServices Lending, LLC	Delaware
HomeServices Insurance, Inc.	Nebraska
HomeServices Insurance Agency, LLC	Delaware
HomeServices of Alabama, Inc.	Delaware
HomeServices of California, Inc.	Delaware
HomeServices of Florida, Inc.	Florida
HomeServices of Illinois, LLC	Delaware
HomeServices of Illinois Holdings, LLC	Delaware
HomeServices of Iowa, Inc.	Delaware
HomeServices of Kentucky, Inc.	Kentucky
HomeServices of Kentucky Insurance, LLC	Delaware
HomeServices of Kentucky Real Estate Academy, LLC	Kentucky
HomeServices of Nebraska, Inc.	Delaware
HomeServices of Nebraska Insurance, LLC	Delaware
HomeServices of Oregon, LLC	Delaware
HomeServices of the Carolinas, Inc.	Delaware
HomeServices Relocation, LLC	Delaware
HSR Equity Funding, Inc.	Delaware
Huff Commercial Group, LLC	Kentucky
Huff Realty Insurance, LLC	Delaware
Huff-Drees Realty, Inc.	Ohio
IMO Co., Inc.	Missouri



InsuranceSouth, LLC	Georgia
Iowa Realty Co., Inc.	Iowa
Iowa Realty Insurance Agency, Inc.	Iowa
Iowa Title Company	Iowa
Iowa Title Linn County II, LLC	Iowa
JBRC, Inc.	Kentucky
J. D. Reece Mortgage Company	Kansas
Jim Huff Realty, Inc.	Kentucky
JRHBW Realty, Inc.	Alabama
J. S. White & Associates, Inc.	Alabama
Kansas City Title, Inc.	Missouri
Kentucky Residential Referral Service, LLC	Kentucky
Larabee School of Real Estate and Insurance, Inc.	Nebraska
Lincoln Title Company, LLC	Nebraska
Long Title Agency, LLC	Arizona
Meridian Title Services, LLC	Georgia
Mid-America Referral Network, Inc.	Kansas
Midland Escrow Services, Inc.	Iowa
Nebraska Land Title and Abstract Company	Nebraska
Pickford Escrow Company, Inc.	California
Pickford Holdings LLC	California
Pickford North County L.P.	California
Pickford Real Estate, Inc.	California
Pickford Realty, Ltd.	California
Pickford Services Company	California
Pilot Butte, LLC	Delaware
Plaza Financial Services, L.L.C.	Kansas
Plaza Mortgage Services, L.L.C.	Kansas
Preferred Carolinas Realty, Inc.	North Carolina
Preferred Carolinas Title Agency, L.L.C.	North Carolina
Professional Referral Organization, Inc.	Maryland
Real Estate Links, LLC	Illinois
Real Estate Referral Network, Inc.	Nebraska
Real Referrals, Inc.	Illinois
Reece Commercial, Inc.	Kansas
Reece & Nichols Alliance, Inc.	Kansas
Reece & Nichols Insurance, LLC	Delaware
Reece & Nichols Realtors, Inc.	Kansas
Referral Company of North Carolina, Inc.	North Carolina
Referral Network of IL, LLC	Delaware
RHL Referral Company, L.L.C.	Arizona
Roberts Brothers, Inc.	Alabama
Roy H. Long Realty Company, Inc.	Arizona
San Diego PCRE, Inc.	California
Semonin Realtors, Inc.	Delaware
Southwest Relocation, L.L.C.	Arizona
The Escrow Firm, Inc.	California
The Referral Co.	Iowa
TitleSouth, LLC	Alabama
Township Title Services, LLC	Georgia



Traditions Title Agency, LLC	Ohio
Wahoo Title, LLC	Nebraska
Wm Broughton, LLC	Delaware
CE Generation, LLC	Delaware
CalEnergy Operating Corporation	Delaware
California Energy Development Corporation	Delaware
California Energy Yuma Corporation	Utah
CE Salton Sea Inc.	Delaware
CE Texas Power, L.L.C.	Delaware
CE Texas Resources, L.L.C.	Delaware
CE Turbo LLC	Delaware
Conejo Energy Company	California
Del Ranch Company	California
Desert Valley Company	California
Falcon Power Operating Company	Texas
CE Gen Oil Company	Texas
CE Gen Pipeline Corporation	Texas
CE Gen Power Corporation	Texas
Fish Lake Power LLC	Delaware
FSRI Holdings, Inc.	Texas
Imperial Magma LLC	Delaware
CE Leathers Company	California
Magma Land Company I	Nevada
Magma Power Company	Nevada
Niguel Energy Company	California
North Country Gas Pipeline Corporation	New York
Power Resources, Ltd.	Texas
Salton Sea Brine Processing Company	California
Salton Sea Funding Corporation	Delaware
Salton Sea Power Company	Nevada
Salton Sea Power Generation Company	California
Salton Sea Power L.L.C.	Delaware
Salton Sea Royalty Company	Delaware
San Felipe Energy Company	California
Saranac Energy Company, Inc.	Delaware
Saranac Power Partners, L.P.	Delaware
SECI Holdings, Inc.	Delaware
Selectusonline Limited	England
VPC Geothermal LLC	Delaware
Vulcan Power Company	Nevada
Vulcan/BN Geothermal Power Company	Nevada
Yuma Cogeneration Associates	Utah
BG Energy Holding LLC	Delaware
CalEnergy Generation Operating Company	Delaware
CalEnergy International Services, Inc.	Delaware
CalEnergy Investments C.V.	Netherlands
CalEnergy Minerals LLC	Delaware
CalEnergy Pacific Holdings Corp.	Delaware
CalEnergy U.K. Inc.	Delaware
CE Casecnan Ltd.	Bermuda



CE Casecnan II, Inc.	Philippines
CE Casecnan Water and Energy Company, Inc.	Philippines
CE Electric (NY), Inc.	Delaware
CE Electric, Inc.	Delaware
CE Exploration Company	Delaware
CE Geothermal, Inc.	Delaware
CE Insurance Services Limited	Isle of Man
CE International Investments, Inc.	Delaware
CE Philippines II, Inc.	Philippines
CE Philippines Ltd.	Bermuda
CE Power, Inc.	Delaware
Tongonan Power Investment, Inc.	Philippines
Visayas Geothermal Power Company	Philippines
CE Luzon Geothermal Power Company, Inc.	Philippines
CE Mahanagdong II, Inc.	Philippines
CE Black Rock Holdings LLC	Delaware
CE Butte Energy Holdings LLC	Delaware
CE Butte Energy LLC	Delaware
CE Obsidian Holding LLC	Delaware
CE Obsidian Energy LLC	Delaware
CE Red Island Energy Holdings LLC	Delaware
CE Mahanagdong Ltd.	Bermuda
CE Red Island Energy LLC	Delaware
Cordova Energy Company LLC	Delaware
Cordova Funding Corporation	Delaware
Kern River Funding Corporation	Delaware
Kern River Gas Transmission Company	Texas
KR Acquisition 1, LLC	Delaware
KR Acquisition 2, LLC	Delaware
KR Holding, LLC	Delaware
Magma Netherlands B.V.	Netherlands
M & M Ranch Acquisition Company, LLC	Delaware
Alaska Storage Holding Company, LLC	Delaware
Alaska Gas Pipeline Company, LLC	Delaware
Alaska Gas Transmission Company, LLC	Delaware
Cook Inlet Natural Gas Storage Alaska, LLC	Delaware
Cook Inlet Natural Gas Storage, LLC	Delaware
Black Rock 1, LLC	Delaware
Black Rock 2, LLC	Delaware
Black Rock 3, LLC	Delaware
Black Rock 4, LLC	Delaware
Black Rock 5, LLC	Delaware
Black Rock 6, LLC	Delaware
MEHC Investment, Inc.	South Dakota
MEHC Insurance Services Ltd.	Vermont
MEHC America Transco, LLC	Delaware
MEHC Texas Transco, LLC	Delaware
MidAmerican Capital Trust II	Delaware
Electric Transmission America, LLC	Delaware
Prairie Wind Transmission, LLC	Delaware



Tallgrass Transmission, LLC	Delaware
Electric Transmission Texas, LLC	Delaware
MidAmerican Energy Machining Services LLC	Delaware
NNGC Acquisition, LLC	Delaware
Northern Natural Gas Company	Delaware
PPW Holdings LLC	Delaware
PacifiCorp	Oregon
Energy West Mining Company	Utah
PacifiCorp Investment Management, Inc.	Oregon
Glenrock Coal Company	Wyoming
Interwest Mining Company	Oregon
Pacific Minerals, Inc.	Wyoming
PacifiCorp Environmental Remediation Company	Delaware
FOSSIL ROCK FUELS, LLC	Delaware
Trapper Mining Inc.	Delaware
Bridger Coal Company	Wyoming
Quad Cities Energy Company	Iowa
Salton Sea Minerals Corp.	Delaware
S.W. Hydro, Inc.	Delaware
Wailuku Holding Company, LLC	Delaware
Wailuku River Hydroelectric Power Company, Inc.	Hawaii
Wailuku River Hydroelectric Limited Partnership	Hawaii
Bishop Hill II Holdings, LLC	Delaware
Elmore Company	California
MidAmerican AC Holding, LLC	Delaware
NRG Solar AC Holdings LLC	Delaware
Agua Caliente Solar, LLC	Delaware
MidAmerican Geothermal, LLC	Delaware
MidAmerican Hydro, LLC	Delaware
MidAmerican Renewables, LLC	Delaware
MidAmerican Solar, LLC	Delaware
MidAmerican Transmission, LLC	Delaware
MidAmerican Wind, LLC	Delaware
TPZ Holding, LLC	Delaware
Topaz Solar Farms, LLC	Delaware
Racom Corporation	Delaware
RITELine Transmission Development, LLC	Delaware
RITELine Indiana, LLC	Indiana
RITELine Illinois, LLC	Illinois

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-147957 on Form S-8 of our report dated February 27, 2012 , relating to the consolidated financial statements and financial statement schedules of MidAmerican Energy Holdings Company and subsidiaries, appearing in this Annual Report on Form 10-K of MidAmerican Energy Holdings Company for the year ended December 31, 2011 .

/s/ Deloitte & Touche LLP

Des Moines, Iowa

February 27, 2012

EXHIBIT 24.1

POWER OF ATTORNEY

The undersigned, a member of the Board of Directors or an officer of MIDAMERICAN ENERGY HOLDINGS COMPANY, an Iowa corporation (the "Company"), hereby constitutes and appoints Douglas L. Anderson and Paul J. Leighton and each of them, as his/her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for and in his/her stead, in any and all capacities, to sign on his/her behalf the Company's Annual Report on Form 10-K for the fiscal year ending December 31, 2011 and to execute any amendments thereto and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission and applicable stock exchanges, with the full power and authority to do and perform each and every act and thing necessary or advisable to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Executed as of February 27, 2012



/s/ Gregory E. Abel		/s/ Patrick J. Goodman
GREGORY E. ABEL		PATRICK J. GOODMAN

/s/ Warren E. Buffett		/s/ Marc D. Hamburg
WARREN E. BUFFETT		MARC D. HAMBURG

/s/ Walter Scott, Jr.
WALTER SCOTT, JR.

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Gregory E. Abel, certify that:



1.	I have reviewed this Annual Report on Form 10-K of MidAmerican Energy Holdings Company;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: February 27, 2012	/s/ Gregory E. Abel
	Gregory E. Abel
	Chairman, President and Chief Executive Officer
	(principal executive officer)

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Patrick J. Goodman, certify that:



1.	I have reviewed this Annual Report on Form 10-K of MidAmerican Energy Holdings Company;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: February 27, 2012	/s/ Patrick J. Goodman
	Patrick J. Goodman
	Senior Vice President and Chief Financial Officer
	(principal financial officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Gregory E. Abel, Chairman, President and Chief Executive Officer of MidAmerican Energy Holdings Company (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:



(1	)	the Annual Report on Form 10-K of the Company for the annual period ended December 31, 2011 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2	)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: February 27, 2012	/s/ Gregory E. Abel
	Gregory E. Abel
	Chairman, President and Chief Executive Officer
	(principal executive officer)

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Patrick J. Goodman, Senior Vice President and Chief Financial Officer of MidAmerican Energy Holdings Company (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:



(1	)	the Annual Report on Form 10-K of the Company for the annual period ended December 31, 2011 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2	)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: February 27, 2012	/s/ Patrick J. Goodman
	Patrick J. Goodman
	Senior Vice President and Chief Financial Officer
	(principal financial officer)

EXHIBIT 95

MINE SAFETY VIOLATIONS AND OTHER LEGAL MATTER DISCLOSURES

PURSUANT TO SECTION 1503(a) OF THE DODD-FRANK WALL STREET

REFORM AND CONSUMER PROTECTION ACT

PacifiCorp and its subsidiaries operate certain coal mines and coal processing facilities (collectively, the "mining facilities") that are regulated by the Federal Mine Safety and Health Administration ("MSHA") under the Federal Mine Safety and Health Act of 1977 (the "Mine Safety Act"). MSHA inspects PacifiCorp's mining facilities on a regular basis. The total number of reportable Mine Safety Act citations, orders, assessments and legal actions for the year ended December 31, 2011 are summarized in the table below and are subject to contest and appeal. The severity and assessment of penalties may be reduced or, in some cases, dismissed through the contest and appeal process. Amounts are reported regardless of whether PacifiCorp has challenged or appealed the matter. Coal reserves that are not yet mined and mines that are closed or idled are not included in the information below as no reportable events occurred at those locations during the year ended December 31, 2011. There were no mining-related fatalities during the year ended December 31, 2011.



	Mine Safety Act				Legal Actions
			Total
			Value of
	Section 104		Proposed
	Significant &	Section	MSHA			Instituted	Closed
	Substantial	104(b)	Assessments			During	During
Mining Facilities	Citations ⁽¹⁾	Orders ⁽²⁾	(in thousands)		Pending ⁽³⁾	Period	Period

Deer Creek	18	—	$	38	12	9	14
Bridger (surface)	6	—	10		4	3	5
Bridger (underground)	43	1	155		17	11	11
Cottonwood Preparatory Plant	1	—	—		—	—	—
Wyodak Coal Crushing Facility	—	—	—		—	—	—


(1)	Citations for alleged violations of mandatory health and safety standards that could significantly or substantially contribute to the cause and effect of a safety or health hazard under Section 104 of the Mine Safety Act.


(2)	For alleged failure to totally abate the subject matter of a Mine Safety Act Section 104(a) citation within the period specified in the citation. This order was abated on May 10, 2011.


(3)	Amounts are as of December 31, 2011 and (a) include contests of proposed penalties under Subpart C of the Federal Mine Safety and Health Review Commission's procedural rules and (b) are not exclusive to citations, notices, orders and penalties assessed by MSHA during the reporting period.