May 16, 2001

SkyGen Investors LLC
650 Dundee Road, Suite 350
Northbrook, Illinois 60062

Attention:  James T. Murphy

     Re:    Pine Bluff and Mobile Energy Projects

Gentlemen:

      This letter of intent (“LOI”), when executed between SkyGen Investors LLC (“SkyGen”) and InterGen (North America) Inc. (“InterGen”), will evidence the intent of SkyGen and InterGen to negotiate with each other for a possible agreement for the acquisition by SkyGen of InterGen’s interests in Pine Bluff Energy, LLC and Mobile Energy, LLC (collectively, the “Transaction”).  SkyGen and InterGen may be referred to each individually as a “Party” and collectively as the “Parties”.

     The provisions of Part I of this LOI are indicative only and are not binding upon the Parties.  The provisions of Part II of this LOI are binding upon the Parties.  The provisions of Part I of this LOI could only become binding upon the Parties after negotiation and execution of written agreements containing all of the terms and conditions necessary and customary to a transaction of the type contemplated in this LOI, including all lender and regulatory approvals, and after full and complete approval by the board of directors or members of the Parties.  

                                                               PART I
                                                      The Transaction
1.	Transaction.  

(a)	SkyGen (or its affiliate) would acquire the entirety of any equity interests in Pine Bluff Energy, LLC (“Pine Bluff”) and Mobile Energy LLC (“Mobile”) owned by InterGen affiliate Tejas Power Generation, LLC (“Tejas”), for total consideration consisting of (i) a cash payment of Nine Million Five Hundred Sixty-Two Thousand Eight Hundred Seventy-One Dollars and Six Cents ($9,562,871.06) and (ii) forgiveness of the Loan in the amount of One Million Four Hundred Twenty-Three Thousand Seven Hundred Nineteen Dollars and Sixty-Six Cents ($1,423,719.66) described in Section 12 of Part II of this LOI.  To the extent that additional capital contributions are required to made by the Parties to Mobile, the cash consideration would be increased in an amount equal to the pro rata share  of such capital contributions which is funded in cash by Tejas.  The form of the acquisition and allocation of the purchase price between Mobile and Pine Bluff would be within the sole discretion of SkyGen, and InterGen will assist with documentation of such allocation.
(b)	In addition, SkyGen (or its affiliate) would assume all obligations of Tejas Power Generation LLC (“Tejas”) under the equity contribution and/or funding agreements for Pine Bluff and Mobile, respectively.  All prospective obligations of InterGen or Tejas under such agreements would be terminated. 
(c)	Appropriate releases of Tejas and InterGen would be obtained from any and all lenders for Pine Bluff and Mobile.
(d)	Any and all energy management agreements, fuel supply agreements and other agreements between Pine Bluff or Mobile and Coral Power LLC and any of its affiliates (collectively, “Coral”) would be terminated or modified on conditions acceptable to SkyGen and Coral, each in its sole discretion.
(e)	All guaranties or other credit support provided on behalf of InterGen or Tejas would be terminated.  

                                                            PART II
                                                    Binding Provisions

      2.  Conditions Precedent.   In no event could either Party be bound to the other related to any matter set forth in Part I unless and until all conditions precedent necessary or customary to the Transaction are satisfied, which include, but are not limited to, the following:

     (a) Completion of all due diligence to the satisfaction of each Party, each in its sole discretion;
     (b) Receipt of all permits or other approvals, including regulatory approvals, necessary for the viability of the Transaction; 
     (c) All approvals of management and boards of directors of the respective Parties; 
     (d) Negotiation, execution and delivery of definitive agreements to implement the Transaction; and
     (e) Consummation of a transaction terminating or modifying, as applicable, certain energy management agreements, fuel supply agreements and other agreements between Pine Bluff or Mobile and Coral on conditions acceptable to SkyGen and Coral, each in its sole discretion.

       3.  Exclusive Negotiations; Expiration.   SkyGen and InterGen shall have the right to negotiate exclusively with each other toward consummation of the Transaction for a period commencing on the date of this LOI and expiring on May 30, 2001.  Except where expressly provided otherwise herein, and unless terminated earlier in accordance with the provisions hereinbelow, this LOI shall expire of its own terms on May 30, 2001.

       4. Termination of LOI. The provisions of Section 3 notwithstanding, either Party shall have the right to terminate this LOI at any time by written notice to the other Party.  
       
       5.  Confidentiality.  The terms of this LOI as well as the content of the negotiations of the Parties and any information exchanged by the Parties pursuant to this LOI shall be kept confidential by the Parties pursuant to the Confidentiality Agreement set forth as Attachment 1.

     6.  Governing Law.  This LOI shall be governed by the laws of the State of New York, except for conflicts of laws rules or principles.

     7.  No Consequential Damages.  In no event shall either Party be liable to the other under this LOI for any special, indirect, consequential, punitive or exemplary damages of any type, including lost profits, lost revenue, lost opportunity or business interruption, whether arising in contract, tort (including negligence, whether sole, joint or concurrent, or strict liability), indemnity provision or otherwise.

     8.  Entire Agreement.  This LOI represents the entire agreement between the Parties and supercedes all prior agreements between the Parties concerning the subject matter covered by this LOI, whether written or oral, and no other agreements, written or oral, concerning the subject matter covered by this LOI exist between the Parties.

     9.  No Third Party Beneficiaries.  This LOI is intended for the benefit of the Parties hereto and is not intended to and does not confer any benefit to third parties.

     10.  Assignment.  Neither Party shall assign this LOI without the express written consent of the other, which consent shall not be unreasonably withheld, conditioned or delayed; PROVIDED HOWEVER, that either Party may assign this LOI to any subsidiary or affiliate without the consent of the other Party without releasing the assigning Party from any of its obligations hereunder.

     11.  Counterparts.  This LOI may be executed in counterparts, each of which shall have the effect of and be considered as an original of this LOI.
 
     12.     Loans.  The Parties agree that (a) SkyGen made a capital contribution to Mobile in the amount of One Million Four Hundred Twenty-Three Thousand Seven Hundred Nineteen Dollars and Sixty-Six Cents ($1,423,719.66) for Tejas’ pro rata share of construction costs due in January and March 2001, and (b) that this capital contribution shall constitute a loan from SkyGen to Tejas (the “Loan”).  Tejas shall execute a non-recourse promissory note (the “Note”) payable to SkyGen evidencing the Loan, payable solely from distributions due Tejas from Mobile.  In the event that the Transaction is not consummated, then at InterGen’s election, the Parties shall seek lender approval to treat the Loan, as well as the capital contribution of SkyGen for SkyGen’s pro rata share of Mobile construction costs due in January and March 2001 in the amount of Two Million Eight Hundred Forty-seven Thousand Four Hundred Thirty-Nine Dollars and Thirty-Two Cents ($2,847,439.32) representing SkyGen’s share of the total contribution due, as a subordinated loan from SkyGen to Mobile.  If elected by InterGen, the Parties shall seek agreement of the lenders that such loan would bear interest at thirteen percent (13%) per annum, payable quarterly, and would be repayable from cash available to Mobile prior to making any equity distributions to members until the principal and accrued interest is repaid.  In the event that (x) InterGen elects not to seek lender approval, or (y) lender approval cannot be obtained, then Tejas shall cause repayment of the Note payable solely from distributions due Tejas from Mobile together with interest at thirteen (13) percent per annum.  Anything herein to the contrary notwithstanding, the Loan amount and the principal amount of the Note shall be adjusted to reflect the actual amount of the capital contribution of SkyGen to Mobile for Tejas’ pro rata share of construction costs, if different from the amount stated in this Section 12.

                                                                          INTERGEN (NORTH AMERICA) INC.
                                                                       
                                                                          By:  ___________________________
                                                                          Title:  __________________________
                                                                          Date: __________________________
Agreed and accepted this ____
day of __________, 2001.

SKYGEN INVESTORS LLC

By:  ______________________
Title:  _____________________
Date:  _____________________

   

ATTACHMENT 1

CONFIDENTIALITY AGREEMENT

This Confidentiality Agreement (“Agreement”) is entered into as of ______________, 2001, by and between InterGen (North America) Inc., a Delaware corporation with its principal offices at Houston, Texas (“InterGen”) and SkyGen Investors LLC, a Delaware limited liability company, with its principal offices at Northbrook, Illinois ("SkyGen"), referred to collectively as "Parties" and each individually as "Party."

RECITALS

A.	The Parties desire to exchange certain proprietary or confidential information for the purpose set forth in the letter of intent (“LOI”) between the Parties of even date hereof (the “Proposed Transaction”); and

B.	The Parties are willing to provide such information for such purpose in accordance with the terms hereof;

NOW, THEREFORE, SkyGen and InterGen do hereby mutually agree as follows:

1.	Definitions.

a.	"Confidential Information" shall mean all confidential or proprietary written, recorded, electronic or oral information or data (including without limitation research, developmental, engineering, manufacturing, technical, marketing, sales, financial, operating, performance, cost, business and process information or data, know-how, and computer programming and other software and software techniques) to a Party (the “Receiving Party”) by the other Party (the “Disclosing Party”) and where designated by the Disclosing Party as confidential.  

b.	"SkyGen" shall include any of SkyGen's subsidiaries or affiliates.

c.	"InterGen" shall include any of InterGen’s subsidiaries or affiliates.

d.	“Person” shall be broadly interpreted to include, without limitation, any corporation, company, partnership, other entity or individual.

e.	“Representatives” shall mean as to any Person, its directors, officers, employees, agents and advisors (including, without limitation, financial advisors, attorneys and accountants), subsidiaries or affiliates.

2.	Confidentiality and Non-Use.  In consideration of each Party's providing Confidential Information, the Parties agree as follows:

a.	The Receiving Party shall hold confidential and not disclose to any Person, without the prior written consent of the Disclosing Party, all Confidential Information; provided, however, that the Receiving Party may disclose such Confidential Information to its Representatives who are actively and directly participating in its evaluation of the Proposed Transaction or who otherwise need to know the Confidential Information for the purpose of evaluating the Proposed Transaction;

b.	The Receiving Party shall cause all its Representatives to observe the terms of this Agreement and shall be responsible for any breach of the terms of this Agreement by it or its Representatives; and

c.	The Receiving Party shall either, in the sole discretion of the Receiving Party, return or destroy all Confidential Information (including all copies thereof) within thirty (30) days of receipt of a written request therefore from the Disclosing Party.

3.	The Receiving Party shall not use the Confidential Information for any purpose other than in connection with the Proposed Transaction.

4.	Exceptions to the Confidentiality and Non-Use Obligations.  The obligations imposed by Section 2 hereof shall not apply, or shall cease to apply, to any Confidential Information if or when, but only to the extent that, such Confidential Information:

a.	was known to the Receiving Party prior to the receipt of the Confidential Information; or

b.	was, or becomes through no breach of the Receiving Party's obligations hereunder, known to the public; or

c.	becomes known to the Receiving Party from sources other than the Disclosing Party under circumstances not involving any breach of any confidentiality obligation; or

d.	is independently developed by the Receiving Party without reliance upon or reference to the Confidential Information.

It shall not be a breach of the confidentiality obligations hereof for a Receiving Party to disclose Confidential Information where, but only to the extent that, such disclosure is required by law or applicable legal process, provided in such case the Receiving Party shall (i) give the earliest notice possible to the Disclosing Party that such disclosure is or may be required and (ii) cooperate in protecting such confidential or proprietary nature of the Confidential Information which must so be disclosed.

5.	No Further Agreements Hereunder.  Neither SkyGen nor InterGen, nor any parent, subsidiary or affiliate thereof, shall be under any obligation to enter into any further agreements with the other signatory hereto or its respective parents, subsidiaries or affiliates. 

6.	No Representations and Warranties.  Neither Party makes any representations or warranties, express or implied, of any kind to the other Party with respect to the Confidential Information, including without limitation with respect to the accuracy or completeness thereof.  

7.	Termination; Duration of Obligations.  Unless sooner terminated by mutual written agreement of the Parties hereto, this Agreement shall terminate two (2) years from the date hereof. 

8.	Entire Agreement.  This Agreement represents the entire understanding and agreement of the Parties with respect to the confidentiality and non-disclosure of the subject matter hereof and supersedes all prior communications, agreements and understandings between the Parties relating to the confidentiality and non-disclosure of the subject matter hereof.

9.	Waivers; Amendments; Assignment; Counterparts.  This Agreement may not be modified, amended or waived except by a written instrument duly executed by both Parties.  No failure or delay by either Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder.  This Agreement may not be assigned by either Party without the prior written consent of the other, which consent shall not be unreasonably withheld, conditioned or delayed; PROVIDED HOWEVER that this Agreement may be assigned by a Party without the consent of the other to any of the assigning Party’s subsidiaries or affiliates without releasing the assigning Party from any of its obligations hereunder. This Agreement may be signed in two or more counterpart originals, each of which shall constitute an original document.

10.	Governing Law; Disputes.  This Agreement shall be construed under the laws of the State of New York, without giving effect to its principles or rules regarding conflicts of laws.

11.	Remedies.  Without prejudice to the rights and remedies otherwise available to either Party, each Party shall be entitled to equitable relief by way of injunction or otherwise if the Receiving Party or any of its Representatives breach or threaten to breach any of the provisions of this Agreement.  The foregoing notwithstanding, in no event shall either Party be liable to the other for indirect, special, consequential, punitive or exemplary damages of any type, in contract, tort (including negligence, whether sole, joint or concurrent, or strict liability) or indemnity, arising out this Agreement. 

IN WITNESS WHEREOF, each of the Parties have caused this Agreement to be executed by their respective, fully authorized representatives as of the date first written above.

INTERGEN (NORTH AMERICA) INC.
                                                              		SKYGEN INVESTORS LLC

By:	_______________________	            	By: _________________________

Name: _______________________		            Name:  ______________________
 	
Title:	_______________________		            Title: ________________________

Date:	_______________________		            Date: ________________________