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[Draft as of May 8 10, 2001]

Enron North America Corp.
P. O. Box 1188
Houston, TX  77251-1188
Attn:	Mr. Phil DeMoes – Enron North America Corp.
Mr. Les Webber - Enron LNG Marketing LLC

Gentlemen:

	Enron North America Corp. (“ENA”) and Southern Company Services, Inc. (“SCS”) (each individually a “Party” and collectively the “Parties”) have had certain discussions with respect to the possibility of SCS, as agent for the individual entities identified as Buyer under that certain Gas Purchase Agreement dated December 29, 1999 by and between ENA, as Seller, and SCS, as agent for Buyer, purchasing certain quantities of gas, including regassified liquefied natural gas (“LNG”), from ENA for use in a new combined cycle electric generating facility to be developed by SCS or one of its affiliates in the vicinity of McIntosh, Georgia.  The Parties recognize that (i) ENA’s sale of regassified LNG is dependent on Enron LNG Atlantic II, CPA’s receipt of any and all licenses, permits, authorizations, agreements or other approvals necessary to construct, own and operate the Venezuela Facilities (as defined below) and (ii) SCS’s construction of the new combined cycle electric generating facility near Savannah is dependent upon its bid for the sale of power from such facility being accepted in the request for competitive bids for power supply to be conducted by Southern Company in 2001 (the “Southern Company RFP”) and receipt of any and all licenses, permits, authorizations, or other approvals necessary to construct, own and operate such facility.  The Venezuela Facilities shall mean the natural gas liquefaction facilities of Enron LNG Atlantic II, CPA in Venezuela including the liquefaction plant facilities onshore, gas inlet facilities, gas pre-treatment and processing facilities, LNG storage tanks, utility jetty, and LNG berthing and loading facilities, as well as the gas field production facilities used to furnish gas to the Venezuela Facilities, the natural gas pipeline facilities serving the Venezuela Facilities, purchased utilities at the Venezuela Facilities, and the dock and harbor facilities serving the Venezuela Facilities.  

	In light of ENA’s desire to sell regassified LNG to SCS and SCS’s desire to purchase such regassified LNG to fuel its electric generation operations at the McIntosh, Georgia site, the Parties hereto are entering into this letter agreement (“Letter Agreement”) to evidence their mutual agreement to proceed with such a transaction on the terms and conditions set forth in this Letter Agreement and described in Exhibit A attached hereto and incorporated herein.

1.	Binding Commitment to Enter Into Confirmation Letter.  In reliance on the pricing and other terms contained in the attached Exhibit A, SCS shall submit a bid in the forthcoming Southern Company RFP for the sale of energy to be produced from a plant to be developed by SCS or an affiliate thereof near McIntosh, Georgia.  In the event SCS’s bid for the McIntosh site is selected as one of the winning bids, SCS and ENA shall each execute the Confirmation Letter attached hereto as Exhibit A not later than the earlier of December 31, 2001 or fifteen (15) days following execution of a power sales agreement with Southern Company or one of its electric utility affiliates.

2.	Term.  This Letter Agreement shall become effective as of the date first stated above and shall remain in effect until the earlier of:  (i) completion of the Southern Company RFP process and determination that the McIntosh site bid has not been selected as one of the winning bids or (ii) the execution of the Confirmation Letter attached in Exhibit A.  Notwithstanding the foregoing but subject to Paragraph 7 below, ENA shall have the unilateral right to terminate this Letter Agreement if it and its affiliates have not received, any and all licenses, permits, authorizations, or other approvals necessary to construct, own and operate the Venezuelan Facilities and/or to import LNG into the United States in such form and substance as may be acceptable to ENA by the date that is fifteen (15) ten (10) days after the date that the McIntosh site has been selected as one of the winning bids Southern Company announces the short-listed winners in the Southern Company RFP. 
 
3.	Entire Agreement.  The agreements set forth in this Letter Agreement and, the attached Exhibit A and the Gas Purchase Agreement between the Parties referenced therein, constitute the entire agreement between the Parties relating to the subject matter hereof and supersede all prior discussions, agreements or understandings, whether oral or written, relating to such subject matter.  There are no other written or oral agreements or understandings between the Parties.  Any amendment of the agreements set forth herein must be in writing and signed by both Parties.

4.	Governing Law.  Any disputes regarding the interpretation of this Letter Agreement or regarding enforcement of the agreements set forth herein shall be governed by and construed in accordance with the laws of the State of Alabama, without giving effect to conflict of laws principles.

5.	Relationship of the Parties.  The Parties shall not be deemed in a relationship of partners or joint ventures by virtue of this Letter Agreement nor shall either Party be an agent, representative, trustee or fiduciary of the other.  Neither Party shall have any authority to bind the other to any agreement.

6.	Assignment.  This Letter Agreement shall inure to the benefit of the Parties hereto and their respective successors and permitted assigns.  Neither Party may assign its rights or obligations under this Letter Agreement without the prior written consent of the other Parties which consent shall not be unreasonably withheld; provided, however, that each Party shall have the right to assign its rights and obligations hereunder to an affiliate of at least equivalent creditworthiness without prior notice to or consent of the other Party, but no such assignment shall relieve the assigning party of its obligations hereunder.

7.	Assignment of the Elba LNG Agreements:  In the event ENA terminates this Letter Agreement pursuant to the provisions of Paragraph 2 above, Enron LNG Marketing LLC shall, effective at any time on or before July 1, 2002, assign to SCS all of its SCS shall have the right but not the obligation to take assignment of all of Enron LNG Marketing LLC’s (“ELNG”) rights and obligations under those certain letter agreements dated October 13, 1999 with El Paso Merchant Energy-Gas, L.P. and Southern LNG Inc. in connection with the sale of LNG and the redelivery of vaporized LNG at Southern LNG Inc.’s Elba Island LNG terminal, as such may be amended (the “Elba LNG Agreements”) effective as of July 1, 2002.  Such assignment shall be made pursuant to the terms of that certain Assignment and Assumption Agreement attached hereto as Exhibit B.  At any time following the execution of this Letter Agreement SCS shall have the right to request complete copies of the Elba Island Agreements from ELNG under appropriate confidentiality provisions and ELNG shall be obligated to provide the same promptly to SCS.  Notwithstanding the foregoing, in the event ENA and its affiliates have, prior to July 1, 2002, received any and all licenses, permits, authorizations, or other approvals necessary to construct, own and operate the Venezuelan Facilities and/or to import LNG into the United States in such form and substance as may be acceptable to ENA, then ENA shall provide formal notification to this effect to SCS, the Elba LNG Agreements shall not assigned to SCS and ENA and SCS shall each execute the Confirmation Letter attached hereto as Exhibit A within fifteen (15) days of SCS’ receipt of ENA’s formal notification; provided that SCS has executed a power sales agreement with Southern Company or one of its electric utility affiliates providing for the sale of energy from the McIntosh Georgia site.

If the provisions set forth above correctly set forth our binding agreement, please execute each of the enclosed originals of this Letter Agreement in the space provided below.

				Sincerely,

				___________________________________
				
Southern Company Services, Inc.

Accepted and agreed to this ___ day of __________, 2001:

ENRON NORTH AMERICA CORP.

By: _____________________________

Its: _____________________________

ENRON LNG MARKETING LLC

By: _____________________________

Its: _____________________________

EXHIBIT A

CONFIRMATION LETTER

	This Confirmation Letter is made and entered into this ______ day of ________, 2001, by and between ENRON NORTH AMERICA CORP., a Delaware corporation, hereinafter referred to as “Seller,” and SOUTHERN COMPANY SERVICES, INC., (“SCS”) as agent for its affiliated electric utility companies, Mississippi Power Company, Gulf Power Company, Alabama Power Company, Georgia Power Company, Savannah Electric and Power Company and Southern Power Company, such utility companies hereinafter referred to as “Buyer, and collectively known as the “Parties.”

This Confirmation Letter is incorporated into and subject to the terms of that certain Gas Purchase Agreement dated December 29, 1999, by and between SCS as agent for Buyer and Seller (the “Agreement”).  When executed, this Confirmation Letter is binding for the term stated below.

Term:  From the later earlier of June 1, 2005 or the commercial operation date of the gas fired electric generating facility to be constructed by Buyer near McIntosh, Georgia (the “Plant”) as defined in the initial power sales agreement under which Buyer agrees to sell power generated from the Plant but in no event earlier than May 1, 2004 (the “Commencement Date”), through the termination of Enron LNG Marketing LLC’s agreements dated October 13, 1999 with El Paso Merchant Energy-Gas, L.P. in connection with the sale of LNG and the redelivery of vaporized LNG at Southern LNG Inc.’s Elba Island LNG terminal (the “LNG Terminal”), as such agreements may be amended (the “Elba LNG Agreements”) but in no event earlier than the end of the primary term of the initial power sales agreement under which Buyer agrees to sell power generated from the Plant (the “Termination Date”).  The Elba Island Agreements are anticipated to terminate, after maximum extension of their term, on or around September 30, 2023.
 In the event the in-service date of the Plant occurs prior to the commencement of the Term in the preceding sentence and SCS desires to commence taking volumes from Seller, Seller will exercise commercially reasonable efforts to obtain such volumes for Buyer at a price equal to the Contract Price under this Confirmation Letter if such volumes can be obtained by Seller at a cost that is less than or equal to the cost of the volumes to be supplied from and after the commercial operation date.

Contract Quantity:  100,000 MMBtu per day; provided, however, that SCS shall have the right to request an increase in the Contact Quantity from 100,000 MMBtu per day to the total quantities available for redelivery to Enron LNG Marketing LLC under its Elba LNG Agreements (approximately 160,000 MMBtu per day) by providing written notice to Seller of such election not later than December 15, 2001. ENA shall use commercially reasonable efforts to agree to such request by SCS provided such volumes are available for sale at the Delivery Point.
 
 Delivery Point: The Delivery Point shall be at the point of interconnection between the LNG Terminal and any downstream pipeline, as selected by Buyer at any time and from time to time.  

Contract Price:  The Contact Price for each MMBtu of gas delivered hereunder shall be comprised of (i) a Demand Charge of [______________] twenty-five cents ($0.25) per MMBtu for gas delivered at the Delivery Point if the primary term of the initial power sales agreement under which Buyer agrees to sell power generated from the Plant is seven (7) years in duration or _______ cents per MMBtu if the primary term of the initial power sales agreement under which Buyer agrees to sell power generated from the Plant is fifteen (15) years in duration and (ii) a Commodity Charge equal to the “Index” price for “Prices of Spot Gas Delivered to Pipelines” (per MMBtu dry) for Henry Hub, as reported in the first publication of each month of Inside FERC’s Gas Market Report for the applicable month in which deliveries are made hereunder (the “Index”). Buyer shall have no obligation to pay the Demand Charge on any portion of the Contract Quantity that Seller does not deliver unless Buyer should fail, for reasons unexcused by the Agreement, to take gas as required hereunder. 

Price Renegotiation:  Either Party shall have the right to request that the Contract Price set forth above be renegotiated, with any renegotiated Contract Price becoming effective as of the expiration of the term of the initial and any subsequent power sales agreement agreements under which Buyer sells power generated from the Plant (the “Price Renegotiation Effective Date”) Dates”); provided, however, that Price Renegotiation Effective Dates cannot occur any more frequently than once every five (5) years.  As soon as the Price Renegotiation Effective Date becomes Dates become known, Buyer shall be required to provide Seller with written notification of such date dates.  In the event either Party desires to renegotiate the Contract Price, it shall provide the other Party with at least twelve (12) months written notice prior to the applicable Price Renegotiation Effective Date and with its proposal and justification for a renegotiated Contract Price.  Following receipt by the other Party of such notice and proposal, the Parties shall commence good faith negotiations with respect to the renegotiated Contract Price.  In the event the Parties have not reached agreement as to such renegotiated Contract Price by no later than six (6) months prior to the applicable Price Renegotiation Effective Date, unless the Parties otherwise agree, the Contract Price following such Price Renegotiation Effective Date shall be decided pursuant to the Dispute Resolution procedures set forth herein.  In such event Buyer shall continue to pay Seller the existing Contract Price until such time as a new price is established pursuant to the Dispute Resolution procedures, in which case the new Contract Price shall be implemented effective as of the applicable Price Renegotiation Effective Date.  Notwithstanding the foregoing, in no event , shall the renegotiated Contract Price be established pursuant to the Dispute Resolution procedures be (a) less than the following; (i) a Demand Charge of $______fifteen cents ($0.15) per MMBtu and (ii) a Commodity Charge equal to the “Index” price for “Prices of Spot Gas Delivered to Pipelines” (per MMBtu dry) for Henry Hub, as reported in the first publication of each month of Inside FERC’s Gas Market Report for the applicable month in which deliveries are made hereunder (the “Index”), except to the extent the Index price has been converted to an alternate price pursuant to Article 10 of the Agreement, or (b) more than the following; (i) a Demand Charge of thirty-five cents ($0.35) per MMBtu and (ii) a Commodity Charge equal to the “Index” price for “Prices of Spot Gas Delivered to Pipelines” (per MMBtu dry) for Henry Hub, as reported in the first publication of each month of Inside FERC’s Gas Market Report for the applicable month in which deliveries are made hereunder (the “Index”), except to the extent the Index price has been converted to an alternate price pursuant to Article 10 of the Agreement.  

Other Provisions:  

Conditions Precedent: Buyer’s obligations under this Confirmation Letter shall be subject to and conditioned upon its receipt in such form and substance as may be acceptable to Buyer of any and all United States federal, state or local licenses, permits, authorizations, or other approvals necessary to construct, own and operate a combined cycle electric generating facility at the McIntosh, Georgia site by no later than December 15, 2001_________________.  

Seller’s obligations under this Confirmation Letter shall be subject to and conditioned upon ENA and its affiliates having received, by no later than October 1, 2001, any and all licenses, permits, authorizations, or other approvals necessary to construct, own and operate the Venezuelan Facilities and/or to import LNG into the United States in such form and substance as may be acceptable to ENA.

In the event each of the conditions precedent set forth above have not been satisfied or waived by the Party on whose behalf such condition is imposed by the date applicable to such condition, either Party may terminate this Transaction by giving the other Party at least thirty (30) days prior written notice of termination; provided, however, that such termination shall not be effective if during such thirty (30) day period the Party on behalf of whom the condition precedent is imposed satisfies or waives such condition precedent.
 
Liquidated Damages:  For purposes of this Confirmation Letter only, the Parties do hereby agree to amend the Agreement by deleting the existing Sections 7.2 and 7.3 and substituting the following Sections 7.2 and 7.3 therefor:

7.2	In the event Buyer’s actual purchases of Gas under this Confirmation Letter for any Day during the term of this Agreement are less than the applicable Contract Quantity for such Day, unless excused by Force Majeure (as defined in Article 15 below) or by any other provision of this Agreement, including Seller’s failure to deliver the Contract Quantity to or for Buyer’s account, Seller shall determine the amount by which the Contract Quantity for the Day exceeds the actual quantity in MMBtus of Gas purchased by Buyer at the applicable Delivery Point (the “Buyer Deficiency Quantity”).  Seller’s remedy shall be to collect from Buyer for each MMBtu of the Buyer Deficiency Quantity an amount equal to the positive difference, if any, between the Contract Price per MMBtu as set forth on the applicable Confirmation Letter and the highest price reasonably available to Seller under the circumstances at which Seller is able to remarket the Buyer Deficiency Quantity.  In the event Seller elects to remarket the Deficiency Quantity, Seller shall act in good faith to obtain replacement markets at the highest price reasonably available to Seller under the circumstances, taking into account the time constraints involved and the fact that Seller’s LNG terminalling arrangements require consistent gas deliveries.

7.3	In the event Seller’s actual deliveries of Gas under this Confirmation Letter for any Day during the term of this Agreement are less than the applicable Contract Quantity for such Day, unless excused by Force Majeure or by any other provision of this Agreement, including Buyer’s failure to purchase and receive the Contract Quantity, Buyer shall determine the amount by which the Contract Quantity for the Day exceeds the actual quantity in MMBtus of Gas delivered by Seller at the applicable Delivery Point (the “Seller Deficiency Quantity”).  Buyer’s remedy shall be to collect from Seller for each MMBtu of the Seller Deficiency Quantity an amount equal to the positive difference, if any, between Buyer’s Replacement Cost of Fuel per MMBtu and the Contract Price per MMBtu as set forth on the applicable Confirmation Letter.  For purposes of this Section 7.3 Buyer’s Replacement Cost of Fuel shall be equal to (a) the actual cost of gas delivered to Buyer’s electric generating facility in McIntosh, Georgia, that Buyer purchases from a source other than Seller to replace the Seller Deficiency Quantity (including transportation expenses) or (b) to the extent Buyer is unable to purchase gas and instead uses alternate fuel to replace the Seller Deficiency Quantity, the actual delivered cost (per MMBtu equivalent) of the alternate fuel (including transportation expenses) used by Buyer.  Buyer shall act in good faith to obtain replacement gas or alternate fuel at the lowest price reasonably available to Buyer under the circumstances, taking into account the time constraints involved and the fact that Buyer requires the gas in order to generate power for high priority loads.

Force Majeure:  For purposes of this Transaction only, the Parties do hereby agree to amend the Agreement by deleting the existing Article 15 and substituting the following Article 15 therefor:

In the event either Party is rendered unable, wholly or in part, by Force Majeure to carry out its obligations under this Agreement, other than its obligation to make payment due hereunder, it is agreed that upon such Party giving notice in writing as soon as practical, then the obligations of the Party giving notice insofar as performance thereof is prevented by Force Majeure, shall be suspended until such occurrence is remedied.  Force Majeure shall include, without limitation, acts of God, freezing of wells or lines of pipe, fires, floods, washouts, explosions, breakage or accident or necessity of repairs to machinery or equipment, labor disputes, restraints of governments, interruption, curtailment or unavailability, allocation or limitation of applicable firm transportation by Transporter(s), hurricanes, storms, storm warnings, or other similar weather related events that interfere with the ability of LNG tankers to make timely delivery of Seller’s LNG to the LNG Facilities the interruption or curtailment of firm terminalling services by Southern LNG, Inc. under Section 8.3 of the General Terms and Conditions of its FERC Gas Tariff (or any successor provision), inability of an LNG Tanker shipping Seller’s LNG to the LNG Facilities to reach or clear berth once such tanker is in the Savannah River channel, if such event is not within the reasonable control of Seller, or similar occurrences not within the control of the Party claiming suspension preventing performance hereunder.  The Party claiming Force Majeure shall promptly notify the other Party in writing of the Force Majeure event and take all reasonably available steps to remedy the situation with reasonable dispatch; provided however, that the duty to remedy shall not require either Party to settle a labor dispute in a manner inadvisable in the sole opinion of the Party having the difficulty.  Notwithstanding anything to the contrary in this Agreement, Force Majeure specifically excludes the failure of or loss of any specific source of LNG or the availability of better prices from other suppliers or customers, or the interruption of interruptible or secondary firm transportation by Transporter.  

Binding Arbitration:  For purposes of this Transaction only, the Parties do hereby agree to the following arbitration provision: 

All disputes, controversies, or claims arising out or relating to the Agreement, or this Confirmation Letter, shall be submitted to and settled by binding arbitration.  Such arbitration shall be held in Houston, Texas or such other place as may be agreed upon by those involved in the arbitration.  The Commercial Arbitration Rules of the American Arbitration Association shall apply to such arbitration proceedings.  There shall be three arbitrators.  The party demanding or initiating arbitration shall inform the other party of the name of its arbitrator and the other party shall within thirty (30) days thereafter name its arbitrator.  The two arbitrators so designated shall choose a third, who shall be the chairman.  If such other party fails to name an arbitrator within the time specified or if the two arbitrators fail to appoint a third arbitrator, then that arbitrator shall be appointed under the aforementioned Rules.  Judgment on any decision rendered pursuant to arbitration proceedings may be entered in any Court of competent jurisdiction on application made to any such Court for judicial acceptance of the decision and an order for enforcement.  Unless the parties agree to share the costs of arbitration or an apportionment of such costs is provided herein, the arbitrators shall determine what part of the costs and expenses including attorney’s fees incurred in any such proceedings shall be borne by each party.  The parties shall, during the period of such proceedings and pending the making of an arbitral decision, continue to perform their respective obligations under this Agreement insofar as the circumstances reasonably will allow without prejudice to final adjustment in accordance with the arbitral decision.  The arbitrators shall be instructed by the parties to render their decision within forty-five (45) days of the conclusion of the hearing.  The decision of the arbitration shall be final and binding on the parties.

IN WITNESS WHEREOF, duly authorized representatives of the Parties hereto have executed this Agreement in duplicate originals on the day and year first written above.

SOUTHERN COMPANY SERVICES, 	ENRON NORTH AMERICA CORP. INC.					
“Buyer”					“Seller”

By:________________________	By:_________________________

Title:_______________________	Title:________________________

EXHIBIT B

ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption Agreement
	THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered into this ______ day of ________, 2001 effective as of July 1, 2002, by and between Southern Company Services, Inc. (“SCS”) and Enron LNG Marketing LLC (“Enron LNG Marketing”) (each individually a “Party” and collectively the “Parties”)(“ELNG”), as follows:

WITNESSETH

	WHEREAS, ELNG has entered into those certain letter agreements dated October 13, 1999 with El Paso Merchant Energy-Gas L.P. and Southern LNG, Inc. in connection with the sale of LNG and the redelivery of vaporized LNG at Southern LNG Inc.’s Elba Island LNG terminal, as such may be amended from time to time (the “Elba LNG Agreements”); and

	WHEREAS, ELNG now desires to assign all of its rights and obligations under the Elba Island Agreements to SCS and SCS desires to accept such assignment and to assume the rights and obligations of ELNG so assigned;

	NOW, THEREFORE, in consideration of the premises and mutual covenants and promises contained herein, the parties agree as follows:

	1.	Assignment.  ELNG hereby assigns and conveys unto SCS, without reservation, all of ELNG’s rights and obligations under the Elba Island Agreements, together with any and all extensions, modifications and renewals thereof.

	2.	Assumption.  SCS hereby accepts the foregoing assignment and assumes all of the rights and obligations of the Elba Island Agreements and agrees to be bound by the terms and provisions thereof, commencing as of the effective date hereof.

	3.	Miscellaneous.  This agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and shall not be amended or altered in any manner except by a document in writing executed by both parties.

	This Assignment Agreement inures to the benefit of, and shall be binding upon, the successors and permitted assigns of both parties.

	This Assignment Agreement shall be governed by and construed in accordance with the laws of the State of Alabama.

	IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed.

ENRON LNG MARKETING LLC

________________________________

By: _____________________________

Its: _____________________________

SOUTHERN COMPANY SERVICES, INC.

	________________________________

By: _____________________________

Its: _____________________________

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